Don't punish tax advisers: ICAI

The Institute of Chartered Accountants of India (ICAI) has objected to certain provisions of the proposed section in the Finance Bill, 2004, that makes the advisers to tax evaders liable for imprisonment. The institute has taken up the issue with the finance ministry.

"The main objection is against the explanation attached to the proposed section, where professionals like chartered accountants and tax advocates can be implicated under the section without giving any specifications like the amount evaded," Sunil Goel, president of the Institute of Chartered Accountants of India told Business Standard.

Sunil Goel said the institute had sent a memorandum to the finance ministry asking for withdrawal of the explanation from the proposed section.

The proposed Section 277-A in the Finance Bill, 2004, provides for imprisonment of advisers abetting evasion by the tax payer, while the existing provision 278 specifies penalty for the violation.

"This explanation means that even a 'general intent' to defraud would be sufficient to imprison a person, even if the guilt was not proven," Goel said.

Goel said the institute had received representations from several trade bodies also against this provision as it would cause unnecessary harassment to innocent people also.

The provision could be misused, with wilful evaders simply putting the blame on the professionals handling the accounts.

The memorandum sent to Finance Minister P Chidambaram has also expressed discontent against the Section 277-A, saying that the existing provision was sufficient to check misconduct on the part of the professionals.

Moreover, under the existing section, the prosecution of defaulters happened only after the establishment of guilt, which is required by the criminal law prevailing in the country.

The memorandum has stated that offences like tax evasion were of economic nature and called for financial penalties only.

The Institute of Chartered Accountants of India's memorandum has also stated "the section read with the explanation travels well beyond criminal law, where the onus to prove guilt lies with the prosecution. This might have serious ramification on assessees, their employees, tax consultants, advocates and chartered accountants."