Case Digest: Rulings on Penalties Imposed on CA’s

This case digest deals with the various orders in which penalties were imposed on the Chartered Accountants (CAs) for their professional misconduct. A few examples of professional misconduct committed by CAs include: When they do not exercise due diligence, or is grossly negligent in the conduct of his or her professional duties; fails to obtain sufficient information which is necessary for the expression of an opinion, or its exceptions are sufficiently material to negate the expression of an opinion; and fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances, etc The Institute of Chartered Accountants of India (ICAI) has imposed fines totaling Rs. 1.25 lakhs on two Chartered Accountants (CAs) for professional misconduct related to the non-communication of acceptance of audit assignments with resigning auditors. The penalties were levied following hearings conducted by the Board of Discipline (BoD) under Section 21A(3) of the Chartered Accountants Act, 1949. Both CAs were given opportunities to present their cases during hearings held via video conferencing. The BoD emphasized the statutory requirement for incoming auditors to communicate in writing with outgoing auditors before accepting audit assignments. The failure to do so undermines professional ethics and accountability within the auditing profession. ICAI takes Disciplinary Action: Names of 7 Chartered Accountants removed for Professional Misconduct Through a notification dated January 3, 2025, the Institute of Chartered Accountants of India ( ICAI ) has taken strict disciplinary action against seven of its members for professional misconduct. The names of these Chartered Accountants ( CAs ) have been removed from the ICAI’s official register for varying durations, accompanied by financial penalties. The disciplinary actions detailed in an official notification, include penalties and the removal of membership rights under the provisions of the Chartered Accountants Act, 1949, and associated rules. ICAI Penalizes CA for 21 Professional Misconducts: 3-Month Debarment and Rs. 1 Lakh Fine Imposed The Institute of Chartered Accountants of India ( ICAI ) has imposed a 3 months debarment and Rs. 1 lakh fine on Chartered Accountant ( CA ) who committed 21 professional misconducts under several provisions. Considering the facts and circumstances of the case, along with the verbal and written representations, the Committee found non-compliances in the 2012-13 financial statements of SICOM Investments and Finance Limited, audited by the Respondent. These non-compliances relate to AS-15, AS-16, AS-18, SA-700, sections of the Companies (Auditor’s Report) Order, 2003, and various notes and clauses in the Revised Schedule VI to the Companies Act, 1956. ICAI debars CA for 90 Days for False Declaration on INC-22 Using Rental Agreement and Utility Bills The Institute of Chartered Accountants of India ( ICAI ) has debarred Chartered Accountant ( CA ) for a period of 90 days and imposed a fine of Rs. 20,000 for professional misconduct. The institute noted that the CA made false declarations on INC-22 using the rental agreement and the utility bills. The committee concluded that CA had violated the professional standards outlined in the Chartered Accountants Act, 1949. As per the committee’s findings, his actions constituted a failure to exercise due diligence, thus falling within the scope of professional misconduct. Incorporation of 20 Companies in 18 Days with Same Address and Set of Directors: ICAI Disciplinary Committee holds CA Guilty of Professional Misconduct The Disciplinary Committee of the Institute of Chartered Accountants of India ( ICAI ) has recently held a Chartered Accountant ( CA ) guilty of professional misconduct, owing to incorporation of 20 companies with the same address and same set of directors within a span of 18 days, removing the CA for 3 Years from the roll of CAs and imposing a fine of Rs. 20,000/-. Accordingly, the Committee upon considering the nature of charges and the gravity of the matter ordered that the name of CA. Santhosh D N (M.No. 252502) be removed from Register of Members for a period of 3 (Three) years and a fine of Rs. 2,00,000/- (Rupees Two Lakhs only) be imposed upon him, to be paid within 90 days of the receipt of the order and in case of failure in payment of fine as stipulated, the name of the Respondent be removed for a further period of 30 days from the Register of Members. Non-Communication with complainant before Acceptance of Appointment as Statutory Auditor amounts to Misconduct: ICAI imposes Penalty on CA The Institute of Chartered Accountants of India ( ICAI ) imposes a penalty on Chartered Accountants ( CA ) as the act of non-communication with the complainant before acceptance of appointment as statutory auditor amounts to misconduct. The Board found CA guilty of Professional Misconduct falling within the meaning of Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949. The board held respondent CA guilty of non-communication with the Complainant before the acceptance of the appointment as the statutory auditor of the company for the FY 2018-19 by the Respondent during the course of the hearing. The Board imposed a Fine of Rs.25, OOO/- (Rs. Twenty-Five Thousand only) on CA. CESTAT Quashes Penalty imposed on CA u/r 26 of Central Excise Rules on ground of Proper Issuance of Certificate Shri Monohar Lal Agarwala vs Commissioner of Central Excise & Service Tax CITATION: 2023 TAXSCAN (CESTAT) 1286 The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed on the Chartered Accountant (CA) under rule 26 of the Central Excise Rules,2002 on the ground of proper issuance of certificate by the assessee. The Bench observed that the assessee had not specified the purpose for which the certificate was issued by him and the assessee had not abetted the offense, if any, committed by the company in claiming the benefit of exemption provided under Notification. Non-Payment of Service Tax by Internal Auditor due to Delayed Payment of Salary by KSFC: Karnataka HC Directs CA Firm to Pay 250000 Penalty M/S. V.K. NIRANJAN AND CO vs THE COMMISSIONER OF SERVICE TAX CITATION: 2023 TAXSCAN (HC) 2074 The Karnataka High Court directed the Chartered Accountant (CA)Firm, the petitioner to pay 250000 rupees which is 25% of the total penalty imposed against non-payment of Service Tax due to Delayed Payment of Salary by KSFC. The 25% penalty was accepted to be paid by the petitioner itself in the affidavit submitted. A division bench comprising Justice P S Dinesh Kumar and Justice V Srishananda observed that “Further, order imposing Rs.10,12,433/- as penalty under Section 78 of the Act, itself needs to be set aside, if there is a factual error, especially in the absence of department making an available copy of the letter issued by the KSFC. The affidavit filed by the Review Petitioner mentions that he is intending to put quietus by paying 25% of the penalty. “ ICAI Condemns CA Examiner for Carrying Answer Sheet from one place to another and Designating Third Party to Check Papers The Chartered Accountant Examiner is penalised by the Institute of Chartered Accountants of India (ICAI) for moving answer sheets of Intermediate Examination from one location to another and giving the paper-checking task to a separate party who is not affiliated with ICAI in any way. The CA was given a Rs. 25,000 fine by the ICAI, and his name was also taken from the Register of Members for three months. The negligent attitude of the Respondent not only put the image of ICAI and its examination system at stake in the eyes of all stakeholders but also such an act on his part is clear-cut violation of the guidelines issued by the examination Committee of ICAI i.e., Clause E of General Instructions to the examiners, stated the committee. ICAI removes 4 Chartered Accountants for Professional Misconduct and Failure to Pay Fine The Institute of Chartered Accountants of India (ICAI) has recently taken action against four Chartered Accountants (CAs) for professional misconduct and failure to pay fines within the stipulated time. One CA in Lucknow was removed from the register of members for a year and fined Rs. 1,00,000 for violating items 6, 7, and 8 of Part I of the Second Schedule to the Chartered Accountants Act, 1949. In Durgapur, another CA was fined Rs. 3,00,000 for professional misconduct under Clause 1 of Part II of the Second Schedule to the Chartered Accountants Act, 1949. A Mangalore-based CA was also fined Rs. 5,00,000 for professional misconduct under Clause 1 of Part II of the Second Schedule to the Chartered Accountants Act, 1949 In Delhi, another CA was fined Rs. 1,00,000 and had their name removed from the register of members for three months for violating Clause 11 of Part I and Clause 2 of Part IV of the First Schedule read with Section 22 of the Chartered Accountants Act, 1949. Tax Evasion by misusing Performance Certificate: CESTAT upholds Penalty on CA under Rule 26 of Central Excise Rule CITATION: 2023 TAXSCAN (CESTAT) 344 Vishal Jain vs C.C.E. & S.T The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld the penalty imposed on Chartered Accountants (CA) under Rule 26 of Central Excise Rule, 2002 since the Certificate was misused for tax evasion. A two-member bench comprising Mr Ramesh Nair and Mr C L Mahar observed that the Appellant had issued false certificates without verifying any records, which is apparent from his statement which is annexed at Exhibit D to the petition. Based on the said false certificates the advance licenses were issued and on that basis, the imports were allowed. Later, when it was discovered that the licenses were issued based on these false certificates, the Commissioner of Customs imposed the penalty. ICAI imposes Rs. 5 Lakh and 3 months Probation on CA for exceeding No. of Tax Audits u/s 44AB The Disciplinary Committee (DC) of Institute of Chartered Accountants of India (ICAI) recently imposed a penalty of Rs. Five Lakhs along with 3 months of probation period on Chartered Accountant Rajender Kumar for alleged conduct of tax audit Section 44AB of the Income Tax Act, 1961, beyond the limit prescribed by the Institute, amounting to professional misconduct. The DC further opined during the hearings that the respondent was expected to adopt the highest standard of ethical behaviour and professional compliance of the Council General Guidelines. It was also observed that the CA had conducted 1397 audits in excess of the prescribed limit. ICAI Takes Disciplinary Action against 2 CAs for Professional Misconduct The Institute of Chartered Accountants of India (ICAI) has taken strict disciplinary action against two of its members, suspending them from practice for varying durations following findings of professional and other misconduct. One-Month Suspension in First Case. These decisions were issued under Section 21B(3) of the Chartered Accountants Act, 1949, and the relevant disciplinary rules framed under it. ICAI has reaffirmed that disciplinary integrity remains at the core of its mission, and it will not hesitate to act firmly when professional standards are breached. ICAI Takes Disciplinary Action Against 241 CAs in One Year, Sets New Record The Institute of Chartered Accountants of India (ICAI) has taken disciplinary action against 241 Chartered Accountants (CAs) in the current financial year, marking a new record. This is a sharp increase compared to 119 cases last year, highlighting ICAI’s stricter stance on ethics and professional misconduct. This record-breaking disciplinary action shows that ICAI is working towards a cleaner, more ethical, and globally competitive accounting profession in India. Lapses in Audit: ICAI Disciplinary Committee orders removal of CA from Roll for 1 Month and 1 Lakh Penalty The Institute of Chartered Accountants of India ( ICAI ) has taken disciplinary action against a Chartered Accountant ( CA ) for failure to adequately address the identified discrepancies in the company records found during the audit. The Disciplinary Committee’s investigation identified lapses in Chartered Accountant’s audit practices. The Committee determined that Chartered Accountant failed to report instances where the company allegedly accepted deposits disguised as sales and rearing activities for livestock. This raised concerns about the company’s true financial position and potential non-compliance with relevant regulations. Misclassification of Amount due from Subscribers/Promoter Directors by CA: ICAI slaps fine of Rs. 20,000, removes CA from Roll for 1 Month The Disciplinary Committee of the Institute of Chartered Accountants of India ( ICAI ) has held the matter of professional misconduct against a Chartered Accountant for alleged. The Committee ordered the removal of CA’s name from the Register of Members for one month and imposed a fine of Rs. 10,000, payable within 90 days. Failure to pay the fine would result in an additional 30-day removal from the Register. CA certifies SPICe Form verifying Address of Company in Video Call: ICAI finds CA guilty of Professional Misconduct The Institute of Chartered Accountants of India ( ICAI ) found Chartered Accountant ( CA ) guilty of professional misconduct for certifying SPICe for company incorporation verifying the address in video call sending his associate to place and not personally visiting the place. The ICAI has removed the respondent- CA’s name from the Register of Members for a period of 60 (sixty) days and a fine of Rs. 20,000 (Rupees Twenty Thousand only) be imposed upon him, to be paid within 90 days. Delhi HC highlights Need To Enhance Disciplinary Mechanisms Against CA Firms HARINDERJIT SINGH vs DISCIPLINARY COMMITTEE BENCH III THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA & ANR CITATION: 2024 TAXSCAN (HC) 1467 A Single Bench of the Delhi High Court remarked that there’s a need for stricter rules against Chartered Accountant ( CA ) firms to improve accountability and transparency. The court said the Institute of Chartered Accountants of India ( ICAI ) needs to be strengthened by implementing changes to the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Act, which was passed in 2022. The High Court ordered the individuals to pay a penalty. The individuals had argued that under current rules, no action can be taken against a CA firm. The court disagreed, saying the ICAI can proceed against the entire firm or individual members. ICAI debars CA for 60 Days with Fine for False Declaration of Company’s Registered Office Verification The Institute of Chartered Accountants of India ( ICAI ) has removed the name of the Chartered Accountant ( CA ) for 60 days with a fine for false declaration of the company’s registered office verification and other non-compliance with the legal provisions. The Disciplinary Committee noted the discrepancies in the documents submitted by the Respondent-CA during the company’s incorporation process. Specifically, it noted that the purported co-working agreement was actually an offer letter addressed to a different entity than the one named in the agreement. Additionally, the agreement between the service provider and the premises owner lacked crucial details, such as the date of agreement. These inconsistencies raised doubts about the level of diligence exercised by the Respondent in verifying the documentation, further implicating the Respondent in the misconduct investigation. Professional Misconduct by CAs: ICAI removes 6 Chartered Accountants from Member Register The Institute of Chartered Accountants of India ( ICAI ) has removed the name of 6 Chartered Accountants from the register of members. The Disciplinary Committee of ICAI found the Chartered Accountants guilty of professional misconduct, according to sources. The Disciplinary Committee has further held CA Samar Jit Mitra guilty of Professional Misconduct falling within the meaning of Clause (1) of Part II of Second Schedule to the aforesaid Act and consequently after affording an opportunity of being heard in terms of Rule 19(1) of the aforesaid Rules, imposed a fine of Rs. 2,00,000/-(Rupees Two Lakhs) only to be paid within 90 days and in case of default in payment of fine within stipulated time, his name be removed from the Register of Members for a period of 01(One) month. CA fails to Exercise Due Diligence While Certifying Form 15CB: ICAI suspends CA for Two Years The Institute of Chartered Accountants of India (ICAI) has removed the Chartered Accountant Shri Joydeep Roy from the register of members for two years along with a fine of Rs. 25,000/(Rupees Twenty-Five Thousand) as he failed to exercise due diligence while Certifying Form 15C. The ICAI held that the Respondent is guilty of Professional Misconduct falling within the meaning of Clauses (7) & (8) of Part I of the Second Schedule to the Chartered Accountants Act, 1949. Casual Approach of CA in Not Attending Proceedings on Allegation of Forged Signature amounts to Professional Misconduct under CA Act: ICAI imposes Fine The Institute of Chartered Accountants of India (ICAI ) imposed a fine on Chartered Accountants (CA) and held that the casual approach of Chartered Accountant (CA) in not attending proceedings on the allegation of forged signature amounts to Professional Misconduct under the Chartered Accountants Act, 1949 The committee ordered that “the Respondent CA. Anil Kumar Bangad, (M.No.074337), be reprimanded along with a fine of Rs.25,000/- (Rupees Twenty-Five Thousand Only).” Failure to perform Proper Audit on Non-Disclosure of Step Down Subsidiaries: ICAI imposes 1Lakh Fine on CA The Institute of Chartered Accountants of India (ICAI) imposed 1 lakh fine on Chartered Accountants (CA) due to the failure to perform proper audit on non-disclosure of Step Down Subsidiaries. A Coram comprising Mrs. Rani Nair, Shri Arun Kumar, CA. Rajendra Kumar P, Member and CA. Cotha S Srinivas noted that” as per the charge, the Company in its consolidated financials for the year ended 31st March,2018 has not disclosed such step-down subsidiary, SMC and the Respondent too failed to consider and disclose such step-down subsidiary, SMC in his audit report on the consolidated financial statement of the auditee company.” NFRA Imposes 60 Lakh Penalty on CA and CA Firm: Debars CA for 5 Years For Professional Misconduct The National Financial Reporting Authority (NFRA) has imposed a total of Rs. 60 Lakhs Penalty on Chartered Accountant (CA) and CA Firm and debarred the CA for Professional Misconduct. National Financial Reporting Authority (NFRA) is India’s independent regulator in respect of matters relating to accounting and auditing of prescribed class1 of entities which can be broadly described as ‘Public Interest Entities’ (PIEs). Misconduct: IBBI Imposes Fine of 2 Lakh Rupees on Chartered Accountant/IP for Violation of Regulations The Insolvency and Bankruptcy Board of India ( IBBI ) has imposed a fine of Rs. 2 lakh on a Chartered Accountant/Insolvency Professional for the alleged contravention of section 12, 25(2)(f), 208(2)(a) and 208(2)(e) of the Code, regulation 34 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), regulation 7(2)(a) and 7(2)(h) of IBBI (Insolvency Professional) Regulations, 2017 (IP Regulations) read with clauses 1, 2, 13, 14 and 16 of the Code of Conduct. Professional Misconduct: ICAI notifies Removal of 12 Chartered Accountants from Register Based on an order of the disciplinary committee of the Institute of Chartered Accountants of India (ICAI), the Institute has removed twelve Chartered Accountants from the Register of Members. This is in terms of the provisions of Section 21B(3) of the Chartered Accountants Act, 1949 read with Rules 18(17) and 19(1) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007. ICAI Disciplinary Directorate finds Chartered Accountant Guilty of Using Client’s Money for Personal Use and Tampering Cheques to Govt The Disciplinary Directorate of the Institute of Chartered Accountants of India (ICAI) has suspended a Chartered Accountant for one year and imposed a fine of Rs. One lakh for using the client’s money for personal use and tampering with cheques to the government. A complaint was filed against the Respondent, a Chartered Accountant CA Subodh Maheswari. The Client has given cheques amounting to Rs. 2.60 crores for the payment of VAT to the Respondent, who allegedly fabricated the cheques in his name as well as in his wife’s and son’s names. it was alleged that amount of Rs. 2.60 crores were remitted to the Respondent in the different trenches by way of 12 cheques dated between 29th October,2013 to 19th June,2015. CA Professional Misconduct: ICAI removes 4 Chartered Accountants from Register The Institute of Chartered Accountants of India (ICAI) has notified the removal of four chartered accountants from the Member’s register. This is after the Disciplinary Committee has found 4 Chartered Accountants guilty of professional misconduct. The names of the 4 Members has been removed from the Register along with the Fine. Discipline Committee has held CA. Sunil Kumar Agrawal (Membership No. 075953), M52, Rajeev Nagar, RAIPUR 492 007, guilty of ‘Other Misconduct’ in terms with Section 22 of the the Act and consequently ordered for removal of the name of CA. Sunil Kumar Agrawal (Membership No. 075953) from the Register of Members for a period of 01(One) month and also imposed a fine of Rs. 1,00,000/- (Rupees One Lakh) only to be paid within a period of 60 days. ICAI removes Name of a Chartered Accountant found Guilty of Cash Embezzlement & Fraud following Karnataka High Court Order After the Karnataka High Court Order, the Institute of Chartered Accountants of India ( ICAI ) has removed the name of a Chartered Accountant who is found guilty of Cash Embezzlement & Fraud. The division bench comprising of Justice Alok Aradhe and Justice M.G.S Kamal has observed that, “the penalty recommended to be imposed by the Institute to remove the respondent from the register of members for a period of one month is just and proper as he is proved to be guilty of other misconduct within the meaning of Section 22 read with Section 21 of the Act. The Court has directed the counsel to implement the order within a period of two months from the date of receipt of the copy of this order.” CA Professional Misconduct: ICAI removes Three Chartered Accountants from Register The Institute of Chartered Accountants of India (ICAI) has issued three notifications whereby the Institute removed three Chartered Accountants from the register for professional misconduct. In the first notification, CA. Ghanta Venkateswara Rao was removed from the Register of Members for a period of 02 (two) years and also imposed a fine of Rs. 50,000 (fifty thousand rupees only) to be paid within 3 (three) months and in case of default in payment of fine within the stipulated time, his name will be removed for a further period of 1 (one) month. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Case Digest: Rulings on Penalties Imposed on CA’s

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