Finding violation of tax laws by chartered accountants regulator the Institute of Chartered Accountants of India, which had dubbed accounts fudging in Satyam Computer as 'shameful', the Income Tax authorities have withdrawn tax exemptions given to the body.
A tax assessment panel found violations such as failure to get their accounts signed by auditors, providing loans to partners without guarantee and interest and hiding income from coaching business, following which it decided to impose a penalty on ICAI, a government official said.
As per the tax authority's order dated December 31, the penalty is initiated for non-compliance of notice and for concealment of the particulars of income and furnishing of inaccurate particulars of income, said the official who did not want to be named.
ICAI president Ved Jain said he was not aware of any such order and declined to comment.
The government official, however, said that ICAI has the option of seeking a review at a higher level for waiver of penalty and restoration of exemption.
"Claims of exemption (under section 12a of IT Act) are disallowed to ICAI for violation of income tax laws on five counts," the official told PTI.
Incidentally, ICAI had said it will bar auditors who vetted Satyam's books from practicing for life, if found guilty. ICAI itself may now face penalty, proceedings for which have already been initiated.
In fact , about Rs 33.5-crore (Rs 335-million) income of the institute for the year 2006-07 (the assessment year under consideration) has been held taxable which hints that the income of the institute beyond 2007 will also be taxed.
The institute did not get its audit report signed by the right person, violating the basic rule for getting the tax exemption following which the exemptions were cancelled, the official said.
Further, the accounting regulator had granted loan to its associate body, ICAI Accounting Research Foundation, without charging any interest or taking any guarantee, which is another violation, the official added.
As far as income form coaching classes is concerned, the institute earned Rs 88.45 lakh (Rs 8.84 million) from the classes for CA aspirants which it did not show as income as it never maintained a separate books of accounts for the coaching business, he said.
Institutions registered under Section 12 (A) get tax exemptions as charitable institutions but at the same time the department has a right to withdraw the exemptions if found violating any conditions for the benefit.