The Delhi High Court issued a stay on the proceedings initiated by the National Financial Reporting Authority (NFRA) against the Chartered Accountant (CA) alleged to be involved in professional misconduct related to an income tax deduction claim.
The petitioner, a Chartered Accountant, has approached the High Court to challenge a show cause notice issued by Respondent No.1 under Section 132(4)(c) of the Companies Act, 2013. This notice pertains to alleged irregularities in the deduction claimed under Section 80JJAA of the Income Tax Act, 1961 for M/s Quess Corp Limited (QUESS).
The Senior Counsel representing the petitioner argued that Section 132(4) of the Companies Act confers authority upon Respondent No.1 to investigate matters of professional or other misconduct by certain bodies corporate or individuals, as prescribed by rules. These rules, known as the National Financial Reporting Authority Rules, 2018, specify the class of companies or bodies corporate governed by the Authority.
Specifically, Rule 3 of the 2018 Rules outlines the entities subject to investigation by the Authority. The counsel contended that, according to these rules, a show cause notice can only be issued to an auditor of the company under investigation. Emphasising that neither the petitioner nor the petitioner’s firm serves as the auditor for QUESS, the company under scrutiny, the counsel asserted that the show cause notice should not have been issued to the petitioner.
Further supporting their argument, attention is drawn to Rule 4(1) of the 2018 Rules, which reinforces that investigations can only be conducted for auditors of the company under examination.
Considering the prima facie case presented by the Senior Counsel for the CA, the Delhi High Court has granted an interim stay on the ongoing proceedings related to the show cause notice. The stay will remain in effect until the next scheduled hearing date, providing a temporary reprieve for the petitioner in this legal matter.
The next listing of the matter is on 07.05.2024.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
