CAs cannot be compelled to give response on his involvement in Income Tax Act, FEMA, PMLA, Benami Act Violations before ICAI: Delhi HC [Read Judgment]

CAs - ICAI

The Delhi High Court recently ruled that a Chartered Accountants ( CAs ) cannot be compelled to give the response on his involvement in the violation of the provisions of the Income Tax Act, FEMA, Benami Act, Prevention of Money Laundering Act before the Institute of Chartered Accountants of India (ICAI).

In the instant case, disciplinary proceedings were initiated against the petitioner, a Chartered Accountant on the basis of information received from Serious Fraud Investigation Office (SFIO). Accordingly, the disciplinary committee issued a show-cause notice requiring the petitioner to explain his involvement in money laundering operations with S.K.Jain and V.K.Jain and other professionals; inflation of Balance-Sheet by rotational transfer of funds amongst the entities controlled by S.K.Jain/V.K. Jain and thereby abetting defrauding the National Exchequer to the tune of 73 crores.

Before the Court, the counsel for the petitioner, Advocate Mr. Shariq J. Reyaz argued that no proceedings can be initiated against the petitioner since the action was merely on the basis of SFIO report and no subjective satisfaction has been recorded by the Disciplinary Authority in the impugned ‘prima facie opinion’, which renders it illegal.  He further argued that petitioner cannot be asked to file a written statement in respect of his involvement under the aforesaid provisions as it is beyond the purview of the Show-Cause Notice.

After considering the facts and circumstances of the case, the bench observed that the impugned ‘prima facie opinion’ meticulously refers to the allegations against petitioner in detail and takes note of petitioner’s Reply to Show-Cause Notice and so, it cannot be said that there is non-application of mind by Disciplinary Authority in rendering the ‘prima facie opinion’.

“The stand taken by petitioner in Reply to the Show-Cause Notice justifies initiation of disciplinary proceedings against him. Merely because respondent-SFIO has sent a Reminder, it would not justify an inference that respondent is bound to initiate disciplinary proceedings against petitioner,” the Court said.

While concluding, the Court observed that “Considering the nature of the allegations leveled against petitioner and his Reply to it, initiation of disciplinary proceedings against petitioner is well justified. Impugned ‘prima facie opinion’ though holds petitioner guilty cannot be said to be stigmatic as it is only a prima facie opinion and the finding of guilt has to be returned only after the conclusion of the disciplinary proceedings. Impugned ‘prima facie opinion’ is clarified to the aforesaid extent while making it clear that jurisdiction of respondent in initiating disciplinary proceedings shall be confined to the Show-Cause Notice and so, petitioner cannot be called upon to give his response in respect of applicability of the provisions of Income Tax Act, FEMA, Benami Act, Prevention of Money Laundering Act, etc..”

Subscribe Taxscan Premium to view the Judgment
taxscan-loader