2012 (3) TMI 195 - HC - Indian Laws

ICAI member guilty of gross professional misconduct falling within the meaning of Clause (7) of Part- I of the Second Schedule u/s 22 r.w.s. 21 of the Chartered Accountants Act, 1949 false certificate u/s 80HHC issued in the Form No. 10CCAC Held that - It is established that no payment was received against the export, therefore, certificate issued by the respondent was false. It is a bogey raised by the respondent that he has verified all the documents and only then issued the certificate. The misconduct is of serious nature. The attempt was thus to dupe the tax authorities and help the assessee to avoid the tax to that extent such a conduct has to be taken seriously. Some penalty needs to be imposed so that it acts as deterrent and such professional misconduct are not committed. Weighing the circumstances, the ends of justice would be subserved by removing his name from the Register of Members for a period of six months.

Issues Involved:

1. Allegation of Professional Misconduct.
2. Validity of the Certificate Issued by the Respondent.
3. Adequacy of the Disciplinary Committee's Findings.
4. Appropriate Penalty for Professional Misconduct.

Issue-wise Detailed Analysis:

1. Allegation of Professional Misconduct:

The case revolves around a complaint by the Commissioner of Income Tax, New Delhi, against a Chartered Accountant (the respondent) under Section 21(5) of the Chartered Accountants Act, 1949. The complaint alleged that the respondent issued a false certificate enabling an assessee to claim a wrongful tax deduction under Section 80HHC of the Income Tax Act. The Disciplinary Committee of the Institute of Chartered Accountants of India found the respondent guilty of professional misconduct, and the Council recommended removing the respondent's name from the Register of Members for three years.

2. Validity of the Certificate Issued by the Respondent:

The respondent issued a certificate in Form 10CCAC stating that the assessee had received export proceeds in convertible foreign exchange, which was necessary for claiming a deduction under Section 80HHC. However, the assessment revealed that the export proceeds were not realized, and the entire export sale remained outstanding. The certificate was thus deemed false and bogus. The respondent argued that he had taken due care and that the documents were taken away by the assessee when he suffered a severe paralytic attack. However, the court found this explanation unconvincing and concluded that the certificate was indeed false.

3. Adequacy of the Disciplinary Committee's Findings:

The court examined the Disciplinary Committee's findings and agreed that the respondent was guilty of professional misconduct. The court referenced a previous Division Bench judgment in Council of Institute of Chartered Accountants of India Vs. B. Ram Goel, which defined professional misconduct as a failure to act honestly and reasonably according to professional standards. The court emphasized that the respondent's actions were contrary to honesty, unethical, and amounted to a betrayal of trust, thereby constituting professional misconduct.

4. Appropriate Penalty for Professional Misconduct:

The court considered the respondent's plea for leniency, citing his unblemished 21-year practice, sickness, and the age of the incident as mitigating factors. However, the court also recognized the seriousness of the misconduct, which involved enabling a false tax deduction claim of Rs. 18,32,985/-, resulting in a potential tax saving of approximately Rs. 6.5 lakhs. The court referenced similar cases where leniency was granted due to the passage of time but concluded that the respondent's misconduct warranted a more substantial penalty to serve as a deterrent. The court decided to impose a penalty by removing the respondent's name from the Register of Members for six months, balancing the mitigating factors and the gravity of the misconduct.

Conclusion:

The court upheld the findings of the Disciplinary Committee and the Council, confirming the respondent's guilt of professional misconduct. Considering both mitigating factors and the seriousness of the offense, the court imposed a penalty of removing the respondent's name from the Register of Members for six months. The reference was answered and disposed of accordingly.

← Previous Next →