ICAI UDIN aims to address concerns of CAs with respect to forgery and fake use of name by Non CAs.

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ICAI have launched Unique Document Identification Number (UDIN) facility which is a unique number, which will be generated by the system for every document certified/ attested by a Chartered Accountant and registered with the UDIN portal available at https://udin.icai.org/ with effect from 1st July 2018.

It has been noticed that financial statements and documents were being certified/attested by third persons, in lieu of Chartered Accountants. As these statements are being relied upon by the authorities as true statements and certificates, UDIN can be generated by a practicing CA by registering his/her documents/ certificates on UDIN Portal for verification.

A practicing Chartered Accountant can generate a UDIN for certificate/ document attested by him either in individual capacity or as a partner.

At present, this facility is recommendatory. But ICAI is mulling to make the same compulsory in near future, so as to curb the menace of fake or forged documents.

No change is possible in the data already registered by a Chartered Accountant in the online system. Therefore, members are requested to thoroughly check the details in preview option before submission of their application.

Information filled in can be edited/ modified any number of times before the submission. But once it is submitted, it cannot be edited.

The UDIN once generated can be withdrawn or cancelled with narration. Hence if any user search for this UDIN, appropriate narration indicated by Member with the date of revoke will be displayed for reference.

 

 

Link: UDIN for Practicing CAs

I-T department bars CAs from valuing shares of closely held firms

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The income tax (I-T) has barred all Chartered Accountants (CAs) from valuing shares of closely-held companies.

Earlier, the fair market value of unlisted equity shares was calculated at the option of the company on either the book value on the valuation date or by the discounted cash flow method. Calculated by a merchant banker or a CA.

However, the Central Board of Direct Taxes has removed the CAs from the list of authorised professionals in this regard. From Thursday, only a merchant banker may do this. This change brings this provision at par with Rule 3 of the I-T Act, which says only a merchant banker may calculate the value of unlisted shares issued under Employee Stock Ownership schemes.

Interestingly valuation of shares may still be done by CAs under the Companies Act.

So, unlisted shares or unlisted companies may be sold or valued by a CA’s valuation but, for I-T purposes, it will require a merchant banker’s valuation report.

It is expected that the government is considering a qualifying course for valuation; only those who clear it may do valuation.

Source: Business Standard

GST data: CBEC orders taxmen to intensify efforts against uncooperative taxpayers

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After receiving ground reports of difficulty faced by tax officials in collecting comparative data from unwilling assessees, the Central Board of Excise and Customs (CBEC) has written to all commissioners urging them to intensify their efforts and challenge the objections raised by taxpayers in sharing information.

After receiving ground reports of difficulty faced by tax officials in collecting comparative data from unwilling assessees, the Central Board of Excise and Customs (CBEC) has written to all commissioners urging them to intensify their efforts and challenge the objections raised by taxpayers in sharing information. As FE reported earlier, CBEC had asked tax commissioners to collect granular data of taxes paid and credit availed by assessees under the goods and services tax (GST) for the July-October period and compare the same with data from the corresponding period of last fiscal. This, the board hopes, will bring out any anomalies in tax payment and utilisation of input tax credits (ITC), including transitional credit, by taxpayers. “When ‘resourceful officers’ are instructed by the special secretary to get the requisite data using their unjustified pressure, he seems to have bureaucratic overreach. Tone and tenor of the letter is such, as if, CBEC has issued an indictment order against chartered accountants on a holiday. Under digital India programme, the government is spending billions to control tax terrorism by eliminating interface of tax officers with taxpayers, here we witness complete negation of such policies,” Rajat Mohan, partner at AMRG & Associates, said.

CBEC has mentioned certain objections raised by the taxpayers in sharing the required information and also suggested ways to counter such resistance. For instance, some assessees have claimed that their chartered accountant (CA) was out of station and hence data couldn’t be shared. In his letter, CBEC member John Joseph said that it was improbable for CAs to go on long leave in the month of December as they would be busy filing I-T returns, hence they should be contacted and data should be collected from them.

“The name of the CAs who are not cooperating with the department along with the name of the name of the companies being handled by them may be intimated to his office,” the board said in the latest missive to field staff.Further, some assessees have said that they come under the jurisdiction of the states’ administration and would not share data with central officials. Responding to this, the letter said: “The list of such assessees who refuse to part with the data, may be indicated and reported to this office. However, it is felt that if the officer is resourceful then he/she should be able to collect the data.”

While CBEC had earlier provided tax filing data collected through the summarised return GSTR-3b with all the commissionerates, it has now also provided them with information on transitional credit claimed by assessees through the TRAN-I forms. “Comparison of data should be possible now as you are being supplied with the GSTN data on trans credit. Please analyse the data, report discrepancies/disputed credit if any along with reasons for the same,” the letter said. Officials tasked with collecting data have said that since assessees are being asked for data informally without being under investigation, the taxpayers are within their right to refuse to share such information. This has presented a twin problem for officials tasked with the exercise, as assessees can’t be forced to share the information while the task itself requires substantial time.

On the basis of data shared with field formations, CBEC wants the top 100 assessees to be selected by each of the commissionerates based on central excise and service tax revenue of FY 17 for revenue analysis. Each official would be given a maximum of two taxpayers for detailed analysis. The analysis would be based on central GST, state GST, integrated GST and compensation cess paid by assessees against pre-GST revenue of the corresponding period. In cases where it is possible, the officials would also take VAT and CST revenue into account. Further, these will include the pattern and quantum of ITC availed and CGST utilised along with transitional credit availed in form TRAN I and its comparison with the pre-GST period. In their analysis, the officials must also note any unusual ITC claimed, which can be detected by comparing the TRAN 1 ITC availed with the average ITC balance during pre-GST. “This analysis should clearly bring out any reason for variation in total duty/tax payable during respective periods,” the official quoted above said.

Additionally, the board has directed the commissioners to collect data only in the excel format, without any change in the format provided by the department. The analysis of the data is to be submitted to the board, which will be taken up for discussion this Saturday when the revenue secretary meets state and central tax officials for a reviewing GST collections. A tax official said that the department wasn’t convinced about the validity of the ITC claims, which was one of the main reasons for lower GST mop-up in October. The department has earlier undertaken verification of large quantum of transitional credit — amounting to Rs.65,000 crore, claimed by assessees.

 

Source: Financial Express

Govt wants early warning system on shell companies

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Qualified accounts can be flagged on the ministry’s portal, thereby, helping regulators to keep a check on suspicious entities

The ministry of corporate affairs (MCA) says work has begun for an “early warning system” regarding shell companies.

 

The term is used to refer to a company without active business operations or much of assets. This by itself isn’t illegitimate but they could be used as a manoeuvre for financial operations of a suspect or illegitimate nature.

 

Currently, there is no way to check shell companies systemically, an official said. Chartered accountants (CAs) do come out with qualified accounts of such companies but these come in a random way on the ministry’s MCA21 portal. Qualified accounts refer to bits of information about which CAs have doubts or disagreement with the audited entity’s management.

 

After the hoped-for early warning system comes, qualified accounts would be flagged on the ministry’s portal, helping it and other regulators to check on such entities. “We are yet to work out the nitty gritty of this system but are on the job,” another official said.

graphHe said this would do away with the current system of random inspections to identify such companies. The portal will have filings by CAs in such a way that regulators will be alerted, he said.

 

Earlier, minister of state for corporate affairs P P Chaudhary had said the government would try to use the information technology tool of artificial intelligence in this regard.

 

CAs told Business Standard that an early warning system by itself wouldn’t change things by much. There should also be stringent norms to make auditors more independent. One of them said it is a company’s promoters who appoint the auditor, which means the latter does not retain the independence to openly report facts. So, a CA’s appointment would need to move away from promoters.

 

The ministry had recently issued rules to limit the number of subsidiaries a company may have — no more than two layers. This will apply prospectively but existing companies have to disclose details of their entire list of subsidiaries to the registrar of companies within 150 days. Banks and insurance companies are excluded from this rule.

 

With no limit on the number of subsidiaries, regulators found it difficult to track illicit transactions.

 

Source: Business Standard

Auditors come under lens amid crackdown on shell companies

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A multi-agency clampdown has begun on shell companies to tackle the black money menace wherein the role of auditors has come under the scanner for alleged connivance in facilitating illegal transactions.

The auditors’ role is also being looked into for not raising the red flag as several cases have come to the fore, including at listed companies, for alleged mismatch in financial statements, sharp erosion in net worth, siphoning off funds to group and promoter entities, sources said.

Stepping up the vigil, the corporate affairs ministry as well as Sebi and other regulatory authorities are keeping a close tab on activities carried out by shell companies.

Sources said regulatory agencies are examining the role of auditors to ascertain whether they were also involved in suspected illegal activities.

The ministry as well as Sebi are closely looking at the functioning of auditors in various companies, especially those that have not been carrying out business for long. After a detailed analysis, the authorities would decide on the next course of action, sources added.

Auditors, who have greater responsibilities under the Companies Act, 2013, are required to ensure that financial statements of a company are proper and can red flag dubious transactions.

As part of larger efforts to fight illicit fund flows and tax evasion, the ministry has already struck off the names of over two lakh companies from the records and further action is expected.

Besides, Sebi has taken against 331 listed entities that are suspected shell companies. While the watchdog had imposed strict trading restrictions on these scrips, curbs have been eased in some cases after the companies went on appeal against Sebi’s move.

On Tuesday, the government said more than 1.06 lakh directors would be disqualified for their association with shell companies.

The ministry, which is implementing the companies law, has also identified professionals, chartered accountants, company secretaries and cost accountants associated with the defaulting companies.

Besides, such people “involved in illegal activities have been identified in certain cases and the action by professional institutes such as ICAI, ICSI and ICoAI is also being monitored”, an official release said on Tuesday.

Separately, authorities are looking at the possibility of having stricter scrutiny of global auditing firms to make them more accountable with such auditors coming under the lens in various corporate misdoings.

A big area of concern pertains to the big guns seeking to wash off their hands whenever their names crop up in any accounting wrong-doing while their delaying tactics in the name of jurisdiction have also been noticed, an official had said earlier.

While the existing legal framework provides for stringent provisions for auditing activities, there is no specific system in place when it comes to overseas audit firms.

While discussions on having tighter regulations for foreign audit firms are going on, the ministry is already examining the recommendations of the 3-member expert panel on various issues related to audit firms amid concerns over certain practices circumventing regulations.

 The expert panel, headed by Teri Chairman Ashok Chawla, had submitted its report in March this year.
Source: Times of India

Directors of Shell firms can’t join other companies’ boards

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Directors of shell companies which have not filed tax returns for three or more years will be barred from taking similar positions elsewhere or getting reappointed, the government said, as it intensified the crackdown on firms that exist only on paper.

The government has struck more than 2 lakh shell companies off the Register of Companies and put restrictions on their bank accounts as part of its clampdown on black money.

Directors of the companies that were struck off the RoC could face up to 10 years in jail if they were found siphoning off funds, the government said on Wednesday.

The government said it is compiling the profiles of the directors at such companies in collaboration with enforcement agencies and expects the move to cover 2-3 lakh people.

 Professionals such as chartered accountants, company secretaries and cost accountants associated with shell companies and involved in illegal activities have also been identified, according to a statement.

The decisions were made at a review meeting chaired by the minister of state for corporate affairs, PP Chaudhary, to strengthen the rules and procedures of corporate governance, it said.

The move “would not only help in checking the menace of black money but also would promote an ecosystem of ‘ease of doing business’ and enhancing investors’ confidence”, Chaudhary said.

Enforcement agencies are compiling profiles of directors, including their background, antecedents and role in the operations and functioning of these companies.

“All efforts are also being made to identify the actual beneficiaries and persons behind such shell companies,” the government statement said.
The government is also monitoring action being taken by professional institutes such as the Institute of Chartered Accountants of India and Institute of Company Secretaries of India.