India’s National Financial Reporting Authority (NFRA) has passed an order and imposed a penalty against a chartered accountant involved in the Quess Corp tax matter, according to a press release by the Indian staffing firm.

The regulatory agency fined Pawan Jain, Partner of M/s. Kumar Jain & Associates, chartered accountants who had issued reports u/s 80 JJAA of the Income Tax Act (IT Act) for the financial years 2018-19, 2019-20, and 2020-21 for the company.

The Economic Times reports that the regulator issued a fine of INR 5 million (USD 60,133), on the accountant for professional misconduct that enabled Quess Corp to claim undue income tax deduction of almost INR 9.7 billion (USD 116.8 million) over three years.

In an order released on Thursday, the audit regulator said the report and the certification by Jain, helped Quess Corp claim the income tax deduction of INR 11.3 billion (USD 136.5 million) in FY19, INR 4.2 billion (USD 51.5 million) in FY20 and INR 4.2 billion (USD 51.4 million) in FY21.

"Thus, the work of the CA has major implications for revenue (to the government)," the NFRA said. “The deductions were claimed under section 80 JJAA of the Income Tax Act, 1961. This section allows eligible enterprises a deduction of 30% on increased employee expenses for three assessment years in a row.”

The Times of India reports that the Authority had taken up the case after the income tax director general for investigation shared information about irregularities in tax deduction claimed by Quess Corp during five financial years starting 2016-17.

The deductions were claimed based on the forms signed by Jain, who has been charged with not verifying reorganisation businesses, something he had to check with Quess. He also failed to exclude employees for which Quess was getting the benefit of the Employees’ Pension Scheme from government.

Earlier this week, Quess Corp announced it has received a rectification order from the Deputy Commissioner of Income Tax, reducing the original demand of INR 3 billion (USD 36.0 million) for the assessment year 2019-2020 to INR 1.41 billion (USD 16.9 million).