CA held guilty of misconduct for forging income tax challan and recovering higher amount from clients

CA held guilty of misconduct for forging income tax challan and recovering higher amount from clients. Allahabad High Court enhanced the removal of name to 5 years against 2 years as proposed by ICAI

 CA held guilty of misconduct for forging

In a recent judgment, Hon’ble Allahabad High Court has directed removal of CA name from the membership of the ICAI for a period of 5 years when he was held guilty of ‘other misconduct’ by forging income tax challan and recovering inflated amount from clients.

ABCAUS Case Law Citation:
ABCAUS 1238 (2017) (05) HC

Brief Facts of the Case:
Assistant Commissioner of Income-tax, Agra (“Complainant”) furnished an information to the Institute of Chartered Accountants of India (‘ICAI’) stating that one chartered accountant (‘CA’) had deposited in local treasury unit of Income-tax Department, at Agra, against tax outstanding against partners of two firms (‘assessees’). The CA forged assessee’s copies of challans so as to show inflated figures of tax deposit made and collected/claimed amounts allegedly paid on behalf of assessees. This information was received by ICAI on 24.09.1978. 

In accordance with provisions of Regulation 11(5) of Chartered Accountants Regulations, 1964 (“Regulations 1964”), the CA was asked He was permitted to submit written statement (‘WS’). The CA denied allegations made against him. Besides others, he also stated that since First Information Report has also been lodged against him under Sections 468, 471, 120-B I.P.C. at Police Station wherein he had been enlarged on bail, and since matter was sub-judice in Criminal Court, therefore, he reserved his right to submit further reply later-on.

ICAI in its meeting held in accordance with Regulation 11(8) of Regulations, 1964, formed opinion that respondent was guilty of “professional” or “other misconduct” and referred the case to Disciplinary Committee (“DC”). The CA by a letter informed the Council that since criminal matter was pending, therefore, enquiry should be deferred. 

DC examined the matter and found that contents of criminal case and subject matter of enquiry were different, both were separate proceedings and one had no bearing on the other. Moreover, there was no otherwise obstruction in continuing with enquiry by DC. Hence, it decided to proceed with enquiry and fixed next date. Again respondent did not appear before DC. However, four witnesses from Income Tax Department and one partner of the assessee firm were present to depose their statements. DC considered the attitude of the respondent CA as attempt to evading enquiry, but in order to give a final opportunity, deferred the matter to a future date. Respondent was communicated above decision and also that in case he fails to appear, enquiry shall proceed ex-parte. 

After several adjournments, the DC assessing material on record available, DC recorded findings.

The Committee observed that the bills submitted by the Respondent CA to one assessee firm included Rs.8,751/- and Rs.1,254/- for the income tax payment supposedly made. However, the CA had actually deposited only Re.1/- and Rs.4/- being the last digit of these two payments. This was evident with the counterfoils of the challans were produced before the Committee. The said bills were made by the Respondent himself in his own handwriting. The Respondent when confronted with the evidence, has not been able to explain in what circumstances, he has made the bills and claimed re-imbursement and received the partial money. 

The DC opined that the fact that the challans produced by the Department are not in his own handwriting is of very little help to him, in the wake of evidence before the Committee about the re-imbursement claimed by the Respondent, which he has not been able to explain. 

The DC regretted that a member of the noble profession on whose conduct the whole society depends for meeting their obligations, had chosen to involve himself in a systematic fraud, involving huge amount. The Committee regretted that the conduct of the Respondent by not presenting himself for the examination by the Committee, at the final hearing, was  hardly justified. 

The DC formed the view that the Respondent CA had involved himself in respect of two parties in depositing the money only to the extent of the last digit and claiming the amount in full and, therefore, was guilty of “other misconduct” under Section 22 read with Section 21 of the Chartered Accountants Act, 1949.”

The CA appeared before the Council and made oral submissions. After considering report, written representations and oral submissions of respondent CA, the Council resolved to accept report of DC finding respondent guilty of “other misconduct” under Section 22 read with Section 21 of Act, 1949 and decided to recommend to this Court, in terms of Section 21(5) of Act, 1949. A Reference, under Section 21 (5) of Chartered Accountants Act, 1949 was made to Hon’ble Allahabad High Court by the Council of ICAI.

Contentions of the appellant CA:
It was contended that report had been submitted by DC after holding ex-parte enquiry and hence, it was liable to be rejected, being in violation of principle of natural justice; in respect of same matter, if criminal proceedings were going on, it was not open to DC to proceed with enquiry and submit report; no handwriting expert was examined to draw an inference that any kind of tampering etc. has been made by respondent; Report had been submitted without perusing the original documents; entire proceedings are in violation of Regulations, hence report was liable to be rejected, etc. 

Observations made by the High Court:
Hon’ble Allahabad High Court observed that so far as contention with regard to violation of Regulations was concerned, despite repeated query, no specific Regulation could be pointed out, which had been infringed either by DC or Council. Various dates on which proceedings were scheduled, and the manner in which respondent has sought accommodation, made it clear that there was well planned attempt on the part of respondent to delay proceedings, as far as possible, and that is how, enquiry which commenced in 1980, took almost 14 years. DC took about four years in submission of report and, thereafter, before Council also, repeated adjournments were sought, which were allowed by Council so that respondent may not have any impression of injustice. In this process also, it took four years before Council. Thereafter, Council itself has taken almost five years in making Reference to this Court and it has been received in the year 1999. 

It was observed that the Respondent CA did not examine any witness in his defence nor made any attempt in this regard. It allowed DC to proceed ex-parte, while on the contrary, several witnesses were examined in his presence also, who supported facts constituting information against respondent. Documentary evidence examined by Council clearly showed manipulations which were also admitted by respondent, as is evident from the findings recorded by DC.

Hon’ble Allahabad High Court observed that as per the report of DC, during the course of examination of witnesses, when respondent was present, he was confronted with relevant facts and his stand had been noted by DC in its report. The respondent CA could not show anything so as to persuade us to form a view that findings recorded by DC are on account of misreading of fact or otherwise perverse. It was in these facts and circumstances, we are in agreement with the report as well as resolution of affirmance of Council and confirm that respondent is guilty of “other misconduct”, warranting appropriate punishment therefore. 

Hon’ble Allahabad High Court observed that a Chartered Accountant is a person, who holds an office of confidence and not only his client, but even in Department in which Chartered Accountant represents the matter of his client, normally believe that he (Chartered Accountant) was performing his duties honestly. Such confidence had been breached by respondent CA not only with the persons, who engaged him, but it had played fraud on the Department also. He was admittedly a person of having long-standing in the profession, still had shown such a conduct, which could never be expected of a Chartered Accountant. In the circumstances, ICAI had recommended removal of name of respondent from the register of Member for a period of two years. Looking to the conduct of respondent, and the tactics adopted by him in delaying proceedings, stretching it to almost one and half decade, in our view, appropriate punishment would be removal of his name from Membership of the Institute for a period of five years. 

Held:
The High Court confirmed the misconduct. The Council was directed to removal the name of the CA from the Membership of the Institute for a period of five years. 

CA held guilty of misconduct for forging

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