Chartered Accountant Fined Rs 50 lakh by NFRA

The National Financial Reporting Authority (NFRA) has imposed a Rs 50 lakh penalty on Chartered Accountant Pawan Jain, a partner at M/s Kumar Jain & Associates. This is one of the highest in recent years for a chartered accountant for professional misconduct. This allowed business services provider Quess Corp. to wrongly claim an income tax deduction of nearly Rs 971 crore over three years.

According to the NFRA’s recent order, CA Pawan Jain played a significant role in helping Quess Corp secure income tax deductions of Rs 113.86 crore in FY19, Rs 428.80 crore in FY20, and Rs 428.16 crore in FY21.

The NFRA emphasised that the CA’s actions have serious implications for government revenue. The claimed deductions were made under Section 80 JJAA of the Income Tax Act, 1961, allowing eligible enterprises a 30% deduction on increased employee expenses for three consecutive assessment years.

The NFRA order criticised CA Pawan Jain for not exercising due diligence in certifying the information in Form 10 DA and not obtaining sufficient appropriate evidence regarding compliance with Section 80 JJAA conditions before issuing reports.

The investigation originated from information shared by the Director General of Income Tax (Investigation) in Bengaluru in August 2022, highlighting income tax deduction claims totaling Rs 1135.41 crore by Quess. NFRA subsequently surveyed the professional conduct of the chartered accountants and their firms involved in the certifications supporting the income tax deduction claims.