Council of ICAI vs. Ajay Kumar Gupta (Delhi High Court)

CA issuing wrong s. 80HHC certificate is guilty of “gross professional misconduct”

The CIT, Delhi, filed a complaint before the ICAI that the Respondent-CA had issued an audit report in Form No. 10CCAC certifying that the assessee had exports and that it was eligible for deduction u/s 80HHC of Rs. 18.32 lakhs. However, during the assessment, the claim was found to be false and the assessee admitted that. The assessee’s accounts showed that sale proceeds had not been realized within the prescribed period of 6 months. After enquiry, the ICAI held the CA to be guilty of professional misconduct under clause (7) of Part- I of the Second Schedule read with s. 22 & 21 of the Chartered Accountants Act, 1949. It recommended that the CA’s name be removed from the Register of Members for a period of three years and filed a reference seeking confirmation of that. In his defence, the CA argued that he had practiced for 21 years without a single incident of professional misconduct or negligence and that he could not put up his defence properly because he had suffered paralytic attack and the assessee had taken away the file and that a lenient view should be taken. HELD by the High Court:

(i) The Accountants’ profession occupies a place of pride amongst various professions of the world and makes observance of professional duties and propriety more imperative. When conduct of a member of the profession is contrary to honesty, or opposed to good morals, or is unethical, it is misconduct-warranting consequences indicated in the Statute. A breach of confidence is a stigma not only on the individual concerned, but is also likely to have effect on credibility of the profession as a whole.

(ii) The CA’s explanation that the assessee had taken away the file and that he suffered a paralytic stroke does not inspire any confidence because the relevant documents and information were supplied to him. The assessee accepted the fact that the s. 80HHC claim was not maintainable during the assessment proceedings. Once it is established that no payment was received against the export, the certificate issued by the CA was false. It is a bogey raised by the CA that he has verified all the documents and only then issued the certificate. On the quantum of punishment, on the one hand, the CA pleads his sickness, has an otherwise unblemished practice of 21 years and the incident is old. On the other hand, the misconduct is of serious nature because submitting a false/bogus certificate to the client to enable him to make false claim of deduction under the Income-tax Act, is of serious offence. That the CA made an attempt to dupe the tax authorities and help the assessee to avoid the tax to that extent such a conduct has to be taken seriously. He accordingly cannot be let off merely by giving him reprimand. 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.