The Institute of Chartered Accountants of India ( ICAI ) found the Chartered Accountant ( CA ) not guilty of misconduct as there was no involvement of respondent CA in the discrepancy of Investment of Share Capital 10.76 Crore.
The Informant Department filed the extant case against the Respondent based on survey proceedings conducted on 29th September 2014 under section 133A of the Income Tax Act 1961 in respect of M/S, Sethia Infrastructure Pvt. Ltd. ( ‘Company’ ). Shri Basantraj Sethia, Director of the said Company, in his statement recorded under Section 131 of the said Act voluntarily disclosed an amount of share premium of Rs 9.76 Crores as unaccounted income introduced in the form of Share Capital at high share premium through the following 15 alleged shell companies.
Shri Basantraj Sethia, in his statement, was unable to explain the discrepancy of the introduction of share capital of Rs. 10.76 Crores at a high share premium of Rs. 90 per share and later buyback at face value of Rs. 10 per share within 40 to 100 days of issue of shares. There was no valuation of shares done at any point in time. In his statement, he further stated that these shell companies were introduced and operated by the Respondent.
It was alleged that there were non-genuine transactions, and the entire sequence of events was created with the involvement of the Respondent to bring unaccounted income generated back into the books of M/S. Sethia Infrastructure Pvt. Ltd, and as of the date of the allegation, the respondent was managing/ controlling 21 companies out of which 9 companies invested in M/S. Sethia Infrastructure Pvt Ltd. The Respondent was running entry giving operation through Sheli companies.
The Director ( Discipline ) did not appreciate that in reply to various questions in the statement recorded on oath by the DDIT ( Invg ) which is relied upon by the Director ( Discipline ) in forming the prima facie view, the Respondent time and again answered that ‘l do not recall the circumstances’, The answers were so given as the enquiry was made by the DDIT ( Invg ) in respect of events which took place some five years back which he could not recollect due to efflux of time. Merely because the Respondent has incurred a loss in scrip, the law does not prohibit him from taking further investments in the same scrip.
The Board comprised of CA. Rajendra Kumar P, Presiding Officer and Ms. Dolly Chakrabarty, Government Nominee viewed that primarily based on the Statement on Oath of one of the Directors of the Company and his Statement, charges had been alleged against the Respondent, there was neither any corroborative nor conclusive evidence on record to substantiate the charge alleged against the Respondent.
The Board held that “the Respondent is NOT GUILTY of Other Misconduct falling within the meaning of Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22 of the said Act. Accordingly, the Board passed an Order for closure of the case in terms of the provisions of Rule 15 (2) of the Chartered Accountants ( Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases ) Rules, 2007.”
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