CA providing fake accommodation entries banned/removed from practice for life by PH High Court on reference by ICAI holding him guilty of misconduct

CA providing fake accommodation entries banned/removed from practice for life by PH High Court on reference by ICAI holding him guilty of misconduct.

Case Law Details:
Civil Reference No. 5 of 2012 (O&M)
Institute of Chartered Accountants of India (Petitioner) v. Vivek Kapoor and others (Respondents)
Date of Judgment: 18, March, 2016

Brief Facts of the Case:
ICAI, on the complaint received from the Commissioner of Income Tax-II, Amritsar, initiated disciplinary action against the above named respondent namely; CA Vivek Kapoor who was a whole time practicing Chartered Accountant, practicing mainly at Amritsar.

The allegations leveled against him were as under:

(1) That he was engaged in the business of giving accommodation entries to various persons after charging commission ranging from 1 to 3% during the period 1997-98 to 2001-02.
(ii) The said Chartered Accountant had opened, admittedly 15 bank accounts at Amritsar by using fake names, photographs and introducers.
(iii) He himself used to operate all these bogus accounts through which the accommodation entries were routed.
(iv) Cash was obtained from the beneficiaries and bank drafts/cheques were issued to beneficiaries which were mostly shown as partners in various exporting concerns by writing forged partnership deeds. In few other cases the entries were also given to the beneficiaries by way of sales turnover, share application money and  loans etc.
(v) The Respondent offered additional income of Rs. 42,64,000/- on account of the above said business before the Settlement Commission following enquiries against him for assessment year 1998-99 to 2002-03.
(vi) CA Vivek Kapoor Chartered Accountant made duplicate partnership deeds, profit and loss accounts and balance sheets on the basis of client records who were genuine exporters available with him in his professional capacity
(vii) The accommodation entries given by CA Vivek Kapoor to various persons was admitted by him before the Investigation Wing.

The proceedings were initiated by ICAI in 2006. However, the notice sent was received back undelivered with postal remarks “left country”. The matter was considered by the Disciplinary Council of ICAI in its meeting held in November, 2008. CA Vivek Kapoor was found guilty of professional and other misconduct. As per ICAI Regulations, the matter was referred to the Disciplinary Committee (DC) for enquiry. Even during the course of enquiry before the DC, CA Vivek Kapoor remained unrepresented. Finally, the Disciplinary Committee held CA Vivek Kapoor as guilty of other misconduct under Section 22 read with Section 21 of the Chartered Accountants Act, 1949. The Council of ICAI recommended to the High Court for removal of the name of CA Vivek Kapoor from the register of members for a period of 10 years.

Important Excerpts from the Judgment:

The case against respondent No. 1 was established on the basis of admissions made by him before Income-tax authorities. The allegations against him were not denied by him at any stage of the proceedings, either before the Council or the Disciplinary Committee. Even before this court, respondent No. 1 remained unrepresented despite service.

Though there are many frauds in which Chartered Accountants are involved, but there are very few cases in which the complaints against them are pursued to its logical end and the Institute take disciplinary action against its members.

From the facts, noticed above, it is clear that respondent No. 1 grossly violated the code of ethics for Chartered Accountants. He admitted his guilt before the Income-tax authorities, which resulted in defrauding the revenue. Thereafter, he left the country. He did not avail of the opportunity afforded to him at different stages to defend the case against him. A professional, who behaves in this manner, deserves to be dealt with sternly. In our opinion, the conduct of respondent No. 1 is wholly unworthy of a Chartered Accountant, who is expected to maintain high standard of professional conduct. The punishment proposed by the Institute in these circumstances is quite lighter. Such a professional deserves to be debarred from practice for life time. Hence, in exercise of powers conferred under Section 21(6) of the Act, we deem it appropriate to direct that name of respondent No. 1 be removed from the register of members of the Institute for life. Ordered accordingly.