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TMI Blog2013 (7) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... rofessional skill which he possessed by acting in a totally perfunctory manner - Respondent acted in a grossly negligent manner and failed to obtain sufficient information to warrant the expression of opinion in the balance sheet and profits and loss accounts - Following decision of In Re: Shri ´M´, An Advocate of The Supreme Court of India [1956 (10) TMI 31 - SUPREME COURT] - Decided in favour of Council. Quantum of punishment - Held that:- No malafide intention has been found on part of the respondent in furnishing incorrect audit report and financial statements - Respondent is in profession for more than 20 years with no history of any such misconduct in the past - Interest of justice will be served if respondent is severely reprimanded for his misconduct - Decided in favour of Council. - Reference Case No. - 2 of 2011 - - - Dated:- 16-7-2013 - Hon'ble Prakash Krishna And Manoj Kumar Gupta,JJ. For the Applicant : Vinod Swarup For the Respondent : C.S.C. JUDGMENT (Delivered by Manoj Kumar Gupta, J.) 1. This is a reference by the Council of the Institute of the Chartered Accountants of India to this Court u/s.21(5) of the Chartered Accountants Act, 1946 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- aggregating to Rs.44,42,550/- has been shown in the Manufacturing, Trading and Profit and Loss account. The balance sheet tallies on a figure of Rs.40,99,728.51 while the value of closing stock was only Rs.44,42,550/-. 2. The closing stock of 468 quintals of sugarcane is shown as per col.12 of form no. 3CD while the closing stock of 465 quintals of sugarcane is shown in the Manufacturing Trading and Profit Loss Account. 3. The Audit Report, Balance Sheet, Manufacturing, Trading and Profit Loss Account has been prepared on computer but all the documents bear date in ink, the question arises as to what was the need of keeping the date blank while print outs were taken. 4. Thus, the respondent failed to point out discrepancies in the audit report and books of accounts of M/s. Tyagi Gur Khandsari Udyog for the assessment year 1998-1999 relating to financial year 1997-98. 5. Further, the Income Tax department issued notice u/s. 142(1) and summons u/s. 131 of the Income Tax Act, 1961 but the firm failed to produce any books of Accounts. Penalty was imposed for non compliance of the terms of Notices u/s. 141(1). 6. The Trade Tax Officer, has in his assessment order catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Accountants Act, 1949. 7. The copy of report of the disciplinary committee was forwarded to the respondent by the Council vide its letter dated 19-5-2010 and he was informed that it will be considered by the Council in one of its meeting. The respondent was requested to send his written representation and also to appear in person if he so desires. The respondent submitted his written representation on 15-11-2010 and also appeared before the Council and made oral submission. On consideration of the report of disciplinary committee alongwith written representation dated 15-11-2010 and the oral submissions made by the respondent, the Council decided to accept the report of disciplinary committee and accordingly the matter was referred to this court as provided u/s.21(5) of the Act. 8. On receipt of this reference notices were issued to the respondent and also to the Central Government by order dated 13-12-2011. The office report reveals that the notices sent to the respondent by registered cover has not been received back. However, this court by order dated 10-4-2012 directed the Council to once again take steps for service on the respondent by registered post. Again notices we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules of professional conduct expected of and applied to a specially privileged class of persons who, because of their privileged status, are subject to certain disabilities which do not attach to other men and which do not attach even to them in a non-professional character .... he (a legal practitioner) is bound to conduct himself in a manner befitting the high and honourable profession the whose privileges he has so long been admitted; and if he departs from the high standards which that profession has set for itself and demands of him in professional matters, he is liable to disciplinary action'." 12. In CBI v. K. Narayana Rao (2012) 9 SCC 512 the Apex Court laid down the criteria for judging whether particular act or omission is misconduct on part of a professional or not by observing that "the only assurance which such a professional can give or can be given by implication is that he is possessed of the requisite skill in that branch of profession which he is practising and while undertaking the performance of the task entrusted to him, he would be exercising his skill with reasonable competence. This is what the person approaching the professional can expect. Judged by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph from London Oil Storage Co. Ltd. v. Seear, Hasluck and Co. Dicksee on Auditing, 17th Edn. P 632 wherein Lord Alverstone stated as follows : "He must exercise such reasonable care as would satisfy a man that the accounts are genuine, assuming that there is nothing to arouse his suspicion of honesty and if he does that he fulfils his duty, if his suspicion is aroused, his duty is to probe the thing to the bottom and tell the directors of it and get what information he can." Now, the alleged misconduct has to be judged taking into consideration the duties and responsibilities cast upon a chartered accountant by law. It has to be seen whether he was 'grossly negligent' in conducting himself as a chartered accountant or not. 16. Record reveals that the respondent was personally present before the disciplinary committee and he accepted his guilt under Regulation 15(2) of the Chartered Accountants Regulations, 1988. The disciplinary committee after considering the explanation and evidence on record arrived at the following findings :- The Committee noted that there is a difference in the Closing stock value in the Balance Sheet as compared to the Trading Profit Loss Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance sheet and profits and loss accounts. This court, therefore, has no hesitation in accepting the finding of misconduct arrived at by the Council. 18. The next question which arises is regarding punishment which is to be awarded to the respondent. The respondent has very fairly admitted his guilt. It is not disputed that no malafide intention has been found on part of the respondent in furnishing incorrect audit report and financial statements. Further respondent claims to be in profession for more than 20 years with no history of any such misconduct in the past. These are mitigating circumstances and impel us to take a lenient view as regards the quantum of punishment. We are of the opinion that the interest of justice will be served if respondent is severely reprimanded for his misconduct as provided by section 21(6) (b) of the Act. 19. Accordingly, Reference is accepted. Respondent is held guilty of misconduct under clause (7) and (8) of part I of Second Schedule read with section 21(5) and 22 of the Act and is hereby severely reprimanded. Let a copy of this order be communicated to the Council for taking consequential action in accordance with law. - - TaxTMI - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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