Fundamental ethical principles to be complied with by the members of the profession:
Certain fundamental ethical principles have to be adhered to by the practicing members of the CA profession to ensure compliance with tax laws and effective tax management. The fundamental principles to be observed when developing ethical requirements relating to tax practice include all the fundamental principles by which a member is governed in the conduct of his professional relations with others. These fundamental principles are –
Integrity: A professional accountant should be straightforward and honest in performing professional services.
Objectivity: A professional accountant should be fair and should not allow prejudice or bias, conflict of interest or influence of others to override objectivity.
Professional Competence and Due Care: A professional accountant should perform professional services with due care, competence and diligence and has a continuing duty to maintain professional knowledge and skill at a level required to ensure that a client or employer receives the advantage of competent professional service based on up-to-date developments in practice, legislation and techniques.
Confidentiality: A professional accountant should respect the confidentiality of information acquired during the course of performing professional services and should not use or disclose any such information without proper and specific authority unless there is a legal or professional right or duty to disclose.
Professional Behaviour: A professional accountant should act in a manner consistent with the good reputation of the profession and refrain from any conduct which might bring discredit to the profession. The obligation to refrain from any conduct which might bring discredit to the profession requires IFAC member bodies to consider, when developing ethical requirements, the responsibilities of a professional accountant to clients, third parties, other members of the accountancy profession, staff, employers and the general public.
These fundamental principles have to be kept in mind by the tax practitioner while advising his client. Such fundamental principles when interpreted in the form of responsibilities/duties of a member as a tax practitioner/tax adviser, can be translated as given below –
(i) A member rendering professional tax services is entitled to put forward the best position in favour of his client, provided he can render the service with professional competence, it does not in any way impair his standard of integrity and objectivity, and is in his opinion consistent with the law. He may resolve doubt in favour of his client, if in his judgment, there is reasonable support for his position.
(ii) A member should not hold out to clients the assurance that the tax return he prepares and the tax advice he offers are beyond challenge. Instead, he should ensure that his
clients are aware of the limitations attached to his tax advice and services so that they do not misinterpret an expression of opinion as an assertion of fact.
(iii) A member who undertakes or assists in the preparation of a tax return should advise his client that the responsibility for the content of the return rests primarily with the client. The member should take the necessary steps to ensure that the tax return is properly prepared based on the information received from the client.
(iv) Tax advice or opinions of material consequence given to a client should be recorded either in the form of a letter to the client or in a memorandum for the files.
(v) A member must not associate himself with any return or communication which he has reason to believe:
(a) contains a false or misleading statement;
(b) contains statements or information furnished by the client hastily or without any real knowledge of whether they are true or false; or
(c) omits or obscures information required to be submitted and such omission or obscurity would mislead the tax department.
If any of the above situations prevails, the member’s responsibility is to resign from acting as the client’s tax representative.
(vi) A member may prepare tax returns involving the use of estimates only if such use is expressly authorized by the tax laws. For example, under the Income-tax Act, 1961,
presumptive tax provisions can be applied to assessees carrying on an eligible business under section 44AD and business of plying, hiring or leasing goods carriages by applying the presumptive rates specified in the Act. The limitation regarding the amount of gross receipts, number of vehicles to be owned etc. will have to be taken into account to find out whether presumptive tax provisions would apply in the assessee‘s case.
(vii) In preparing a tax return, a member ordinarily may rely on information furnished by his client provided that the information appears reasonable. Although the examination or
review of documents or other evidence in support of the client’s information is not required, the member should encourage his client to provide such supporting data, where appropriate.
In addition, the member:
(a) should make use of his client’s returns for prior years whenever feasible.
(b) is required to make reasonable inquiries where the information presented appears to be incorrect or incomplete.
(viii) The member’s responsibility when he learns of a material error or omission in a client’s tax return of a prior year (with which he may or may not have been associated), or of the failure of a client to file a required tax return, is as follows:
(a) He should advise his client to file a revised return (if the time limit has not expired and assessment has not been completed) rectifying such er ror or omission.
(b) If the client does not correct the error:
(i) the member should inform the client that he cannot act for him in connection with that return or other related information submitted to the authorities;
(ii) the member should consider whether continued association with the client in any capacity is consistent with his professional responsibilities; and
(iii) if the member concludes that he can continue with his professional relationships with the client, he should take all reasonable steps to assure himself that the error is not repeated in subsequent tax returns.