2023 (8) TMI 784 - HC - Indian Laws

Disciplinary proceedings against the Chartered Accountant (CA) - Engagement in Business activities without approval from ICAI - Allegation of evasion of Sales Tax - opening an account in the bank in the name of fictitious firm and used the bank account for making the payment of transaction entered into between the fictitious firm and another company - HELD THAT - The entire basis is that the bank account opening forms were signed by respondent in respect of the concerns and based on the deposition made by the witnesses, the Committee was of the opinion that respondent was actively involved in business activities without obtaining prior permission of the Council. The Magistrate Court has acquitted respondent on the basis that there is no evidence that respondent had even opened those bank accounts. It is required to note that the acquittal is not on the basis of benefit of doubt being given to respondent but it is a clear case of acquittal on the basis that there is no evidence against respondent that he had opened these bank accounts or did what he was accused of. The Council was not correct in not accepting the acquittal by the Court of Metropolitan Magistrate, 25th Court, Mazgaon - Reference dismissed.

Summary

Issues involved:
Reference under Section 21(5) of the Chartered Accountants Act, 1949 regarding allegations of sales tax evasion and misconduct by the respondent.

Summary:
1. The Institute of Chartered Accountants of India received information regarding the respondent's alleged involvement in sales tax evasion through a newspaper report. The respondent was accused of purchasing and selling goods without paying sales tax, forging registration certificates, and opening bank accounts in the names of fictitious companies.

2. The Institute proactively requested the Deputy Commissioner of Sales Tax to file a formal complaint against the respondent based on the newspaper report. Subsequently, the Institute asked the respondent to provide comments on the matter, to which the respondent declined due to ongoing court proceedings.

3. A Disciplinary Enquiry was conducted by the Institute, during which various witnesses were examined, but the journalist who wrote the newspaper article was not called to give evidence.

4. The respondent was acquitted by the Court of Metropolitan Magistrate of the offences related to sales tax evasion, as there was no evidence to prove his involvement in opening the bank accounts or committing the alleged offences. The Disciplinary Committee proceeded with the enquiry despite the court's acquittal.

5. The respondent was unrepresented during the proceedings, and attempts to serve him with the enquiry report were unsuccessful.

6. The basis of the Disciplinary Committee's findings was the signing of bank account opening forms by the respondent, indicating his active involvement in business activities without prior permission. However, the court's acquittal was based on the lack of evidence against the respondent.

7. The High Court observed that the Council erred in not accepting the acquittal by the Magistrate's Court, which found no evidence against the respondent.

8. Consequently, the High Court declined to accept the Council's recommendation and dismissed the reference against the respondent.