2018 (9) TMI 208 - Other - Income Tax

Disciplinary Proceedings against CA (member of ICAI) - guilty of professional misconduct - failure to make proper disclosure / reporting of the transaction on which no TDS has been deducted - new reporting requirements imposed by the CBDT from 10th August, 2006 - Section 194J r.w.s. 40(a)(ia) - consultation charges paid to doctors from whom no tax was deducted - Held that - As observed that in the Impugned Order, there is reference of Section 40(a) (ia) while discussing the said default under section 194J as well as in terms of the requirements of Guidance Note on Tax Audit. However, no specific finding has been given on the same in this regard in the Order passed by the Disciplinary Committee of the Institute. Additionally, on examination of the complaint, we found that there was no complaint by the complainant about not reporting of transactions falling under Section 40(a)(ia) and also no show cause was given to the Appellant in this regard. No specific charge was framed on this. No specific finding has been given by the Disciplinary Committee on this count, we understand that the same was mentioned for discussion only and the same is not relevant for the purpose of examining final decision of the Disciplinary Committee on the issue of the said default of non-reporting of transactions on which TDS was not deducted u/s 194J as complained by the complainant. Accordingly, we are not giving any finding on the issue. Looking to all we feel that the ends of justice would meet, if the Appellant is awarded punishment to Reprimand . We, accordingly modify the Impugned Order of the Disciplinary Committee to this extent. Though, further, we direct the Appellant to be more cautious in future while dealing with such situations.

Issues:
1. Challenge to impugned order by practicing Chartered Accountant.
2. Allegations of professional misconduct under Clause (7) of Part-I of the Second Schedule.
3. Failure to report contravention of Section 194J of the Income Tax Act.
4. Defense based on non-liability of client for TDS under Section 194J.
5. Delay condonation in filing appeal.
6. Failure to report non-deduction of tax in audit report.
7. Compliance with reporting requirements under Form 3CD.
8. Newness in the profession as a defense.
9. Quantum of punishment and plea for leniency.

Analysis:
1. The Appellant, a practicing Chartered Accountant, challenged the impugned order passed by the Disciplinary Committee of ICAI, holding him guilty under Clause (7) of Part-I of the Second Schedule for professional misconduct. The allegations stemmed from the failure to report contravention of Section 194J of the Income Tax Act in an audit report.

2. The Appellant defended his actions by arguing that the client was not liable for TDS under Section 194J, thus justifying the non-reporting of the same. However, the Committee found the Appellant guilty of professional misconduct for failing to make proper disclosure as required by the Guidance note on tax audit, leading to a violation of Clause (7) of the Chartered Accountants Act.

3. The Appellant sought condonation of the delay in filing the appeal, citing lack of awareness about the process, which was granted after considering the bonafide nature of the contention. The defense of newness in the profession was also raised by the Appellant, emphasizing a lack of understanding of the interpretation of Section 194J.

4. The Disciplinary Committee found that the Appellant did not exercise due diligence in carrying out his professional duties by ignoring the reporting requirements imposed by the CBDT, leading to the upheld decision of professional misconduct. The Committee also noted discrepancies in the audit report regarding the non-deduction of tax, which the Appellant failed to report as required.

5. Ultimately, the Appellant's plea for leniency in punishment was considered, and the Appellant was awarded a modified punishment of reprimand. The decision aimed to meet the ends of justice while directing the Appellant to be more cautious in future dealings. The appeal was disposed of accordingly, with no order as to costs.

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