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TMI Blog1952 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the open market transactions and a separate book for the black market transactions. While the former accounts contained entries, showing daily transactions the latter contained only consolidated entries made at the end of each week, of all the transactions of that week. At the end of the financial year all the weekly entries in the separate accounts were totalled up and there totals were entered in the regular accounts. For the year in question, 1943-44, the entries thus carried into regular account books show purchases of the value of ₹ 97,403-7-6 and sales of the value of ₹ 1,69,766-7-6. The respondent examined only the regular account books of the assessees and prepared the statements and income-tax return on the basis of these accounts. All the statements were signed by him and there was also an endorsement at the foot of the balance-sheet that it was verified and found to be correct. The profit and loss statement as drawn up by the respondent contained under the heading Stocks the following entry:- Recorded in separate book ₹ 97,407-3-6 and under the heading Sales the following entry: Recorded in separate book ₹ 1,69,766-7-6. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l course of business and that the income received by the firm as shown in the statement was correct were erroneous and could easily have been discovered to be erroneous by a proper investigation. They also contend that the explanation given by the respondent in his letter dated 2nd October, 1944, is equally erroneous and could have been avoided if he had acted with due diligence. Notice of this complaint was given to the respondent. He filed a statement in which he pleaded that he prepared the return and the statements only on the basis of the accounts produced before him by the assessees, that he acted throughout only as their representative, that he had no personal responsibility in the matter and that he was not guilty of any negligence. The matter was enquired into by the Disciplinary Committee who held that the charge of negligence was made out and that the respondent was guilty under clause (q) of the Schedule of the Act. The matter comes before us on reference under Section 21 of the Act. The point for decision is whether on the facts above-mentioned the respondent can be held to be guilty of gross negligence. There can be no negligence unless there is a duty cast upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor acts only for those individuals and it is his duty to act on their instructions, and to audit the accounts produced by them and prepare statements from them. He is under an obligation to them to perform the auditing with due skill and diligence and if he does that it is difficult to see what further obligation he has in the matter and in favour of whom. Mr. R. Ramamurthi Iyer the learned Advocate for the Council contended that the respondent was a representative of the assessee in the income-tax proceedings, that his position was anologous to that of an Advocate appearing for a party in Court and that he owed a duty to the Income-tax Department to act fairly in the presentation of the case of the assessees. We agree that the position of Chartered Accountants representing the income-tax assessees is similar to that of Advocates representing parties in Court and that their obligations are similar to those of Advocates. But what are the obligations of the Advocates? They are bound to act strictly within the instructions of their clients; They are under a duty not to misrepresent facts or to mislead the Court and they should be no parties in any manner to setting up false defences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounts without making an independent investigation. It is also added that the reference to separate book in the profit and loss statement is misleading as it suggests that the book was also examined. But if the duty of the respondent was only to prepare a correct statement from the accounts of the assessees and not to investigate whether those accounts are correct or not this charge must fall to the ground. The respondent did not state that the figures mentioned in the statement represented the real profits made by the assessees. He only stated that the balance-sheet represented the correct position according to the accounts of the assessees. Nor is there any foundation for the suggestion that the reference to the separate books in the profit and loss statement was misleading. It represents only the entries in the separate book carried forward into regular account books which had been examined by the respondent. In fact the letter clearly mentions what all accounts had been examined by the respondent and this is not one of them. 3. Finally it was stated that in his letter dated 2nd October, 1944, the respondent gave an explanation that the differences between sales mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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