NFRA Slaps Rs50 Lakh Penalty on CA Pawan Jain for Shoddy Tax Certification

Moneylife Digital Team 05 January 2024

Investor Interest

Holding chartered accountant (CA) Pawan Jain guilty of professional misconduct and issuing reports to Quess Corp Ltd under the Income Tax (I-T) Act without exercising due diligence and obtaining sufficient information, the national financial reporting authority (NFRA) imposed a penalty of Rs50 lakh on the CA.

In an order, the NFRA bench of Dr Ajay Bhushan Prasad Pandey (chairperson), Dr Praveen Kumar Tiwari and Smita Jhingran (full-time members) says, "The CA failed to apply the necessary checks, e.g., verify reorganization of business with various parties, exclude employees whose employee pension scheme (EPS) contribution was paid by the government, correctly report the number of additional employees during FY20-21, verify that payment of additional employee cost was made by account payee cheque, draft or electronic means and verify salary limit of Rs25,000 per month for new employees."

In August 2022, the director general of I-T (investigation) at Bengaluru shared information about the claim of deduction under section 80 JJAA of the I-T Act totalling Rs1,135.41 crore by Quess Corp based on form 10 DA issued by two chartered accountants for FY16-17, FY17-18, FY18-19, FY19-20 and FY20-21. NFRA Suo motu initiated action under section 132(4) of the Companies Act to look into the professional conduct of the CAs and their firms involved in the certification.

NFRA found that CA Pawan Jain issued four reports in form 10DA based on which Quess Corp had claimed a deduction of Rs970.82 crore from its taxable income. "The CA was required to obtain evidence of mergers or amalgamations that took place in Quess Corp and the number of employees brought in there before issuing the report in form 10 DA. The working file for FY19-20 shows that the CA did not obtain such information from Quess Corp."

"The reports issued in form 10 DA under section 80 JJAA of the I-T Act have significant implications for government revenue...This order has detailed the lapses by the CA in issuance of report/certificate in form 10 DA based on which Quess Corp claimed deduction under section 80 JJAA of the I-T Act of Rs113.86 crore, Rs428.80 crore and Rs428.16 crore during FY18-19, FY19-20 and FY20-21 respectively. Thus, the work of the CA has major implications for revenue," NFRA says.

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