* EY a year ago shelved plan to spin off consultancy arm

* CVC interested in Italian consultancy business

* CVC approached Italian partners with proposal

* Partners divided, let deadline for book access pass

MILAN, May 14 (Reuters) - EY's Italian consulting arm failed to respond to a preliminary approach by CVC Capital Partners by an April 29 deadline, leaving in doubt prospects for the buyout firm's proposal, two sources close to the matter said.

CVC earlier this year proposed that EY Italy, which offers advisory services as well as auditing and tax services, spin off its advisory operations and CVC would buy the hived off business.

EY's Italian partners who run its consultancy business met on April 19 to discuss CVC's proposal, one of the two sources said.

Partners were informed about the difficulties of splitting the advisory operations from the rest of EY Italy given opposition from EY Global, and warned they would incur penalties and face possible lawsuit risks, the sources said.

EY's Italian consultancy partners are currently divided over a final decision, with some convinced that EY Global is not in a position to reject CVC's approach on their behalf, the sources said.

EY Italy is a "member firm" of EY's global network.

EY's corporate structure, like that of other professional services firms, is such that the Italy branch is owned by the local partners and uses the EY brand under an agreement with Britain's EY Global, to which it pays royalties.

EY Global has said it currently has no plans to sell part of the company though it continues to assess possible strategic opportunities. It reiterated its stance in answer to a request for comment from Reuters.

A representative for CVC declined to comment.

CVC had requested access to financial data by the end of April to be able to conduct a due diligence analysis, the sources said. However, while EY's Italian consultancy partners failed to agree to give CVC access to the data, the deadline was not a firm one and the buyout firm remains interested in the project, the sources said.

EY's advisory business in Italy could be worth as much as 1 billion euros ($1.08 billion) depending on the scope of the operations to be carved out, one of the two sources said.

CVC's proposal has been brokered by Marco Mazzucchelli, EY's partner in charge of private equity in the EMEIA region at the time, the two sources said. A spokesperson for Mazzucchelli, who left EY in March, said he declined to comment for this story.

One of the Big Four global accountancy firms, EY has developed over time a broader range of services it provides.

With auditing contracts normally multi-year, that business yields steadier revenue flows than consultancy and takes precedence over it.

In an effort to free its consultants from conflict of interest rules that stop them from providing their services to audit clients, EY invested heavily in a project, dubbed "Project Everest", to split up its audit and consulting operations.

However, a year ago EY said it was dropping the plan given the difficulties it had met.

EY Italy, currently led by CEO Massimo Antonelli who will be replaced by Stefania Boschetti starting July 1, generated revenue of 1.1 billion euros in the 12 months through June 2023, up 20% year-on-year, faster than the 14% revenue rise posted by the global network. ($1 = 0.9267 euros) (Reporting by Elvira Pollina and Valentina Za; Editing by Susan Fenton)