Monday, September 30, 2013

Ex-auditor couldn’t complaint against new auditor if client found no discrepancy in audit report of new auditor


a) 'A', auditor of the company, was replaced by ‘B’. A made a complaint against B levying various allegations against him;

b) The Council, found B prima facie guilty of professional misconduct and, accordingly, referred the matter to the Disciplinary Committee;

c) Disciplinary Committee found B guilty of professional misconduct under sections 21 and 22. The Council made a reference seeking confirmation of removal of B’s name from the register of members of the ICAI.

The High Court held as under:

1) A had no locus standi to make a complaint as the company whose audit report was stated to have been prepared by B contrary to the prescribed norms, had not made any complaint against B;

2) The Disciplinary Committee had not referred to particular portions of the report which were found not in conformity with the prescribed norms;

3) B was not shown to have been served with a notice of hearing by the Disciplinary Committee. The entire proceeding of the Disciplinary Committee was contrary to the settled principles of natural justice;

4) A undisputedly was biased against B, because of his having been replaced as auditor of the aforesaid company. Therefore, case put forth by him could not be accepted in the absence of independent corroboration. Thus, the reference made by council was to be rejected - ICAI v. Vijay Kumar [2013] 37 203 (HC-P&H)

Wife proves to be a lucky mascot; husband gets HRA exemption on rent paid to wife

In the instant case the AO disallowed assessee's claim for HRA exemption on the ground that assessee and his wife were living together and claim of payment of rent by assessee to his wife was made to reduce his tax liability. The CIT(A) confirmed the addition on the ground the tenant (i.e., assessee) landlord (i.e., his wife) were staying together which indicated that the whole arrangement was a colourable device. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) The section 10(13A) provides that exemption would be allowable to an assessee for any allowance granted to him by his employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the him;

2) However, the exemption is not available in case the residential accommodation occupied by the assessee is owned by him or the assessee has not actually incurred expenditure on payment of rent;

3) Admittedly, the AO had given a finding of fact that the assessee and his wife were living together as a family. Therefore, it could be inferred that the house owned by wife of the assessee was occupied by the assessee also;

4) The assessee had submitted the rent receipt(s) and payments had been duly verified. Therefore, the assessee had fulfilled the twin requirements of the provision, i.e., occupation of the house and the payment of rent. Thus, he was entitled to exemption under section 10(13A) - Bajrang Prasad Ramdharani v. ACIT [2013] 37 186 (Ahmedabad - Trib.)