Income Tax Dept  Fails to Prove Charges Against CA alleged of Facilitating Bogus Companies for Tax Evasion: ICAI Finds CA Not Guilty of Professional Misconduct

The Board of Discipline of the Institute of Chartered Accountants of India ( ICAI ) observed that the income tax department was unable to provide sufficient evidence to support the allegations levelled against the Chartered Accountant ( CA ). The allegations were that the CA was involved in facilitating bogus companies for the purpose of income tax evasion.

The complainant - Income Tax Department, accused the Respondent, a Chartered Accountant, of involvement in facilitating the creation, operation, and management of fraudulent entities or companies lacking legitimate business activities. These entities are alleged to have provided accommodation entries to numerous beneficiaries in return for commissions, thus contributing to tax evasion.

The Respondent-CA asserted that the Director ( Discipline ) of the ICAI conducted an examination of various companies and concluded that these companies shared directors with those mentioned in the retracted Statement of Oath.

According to the CA, the Director ( Discipline ) failed to consider a crucial fact that just because they were directors, it does not invalidate the statement on oath.

Further stated that the matter pertains to accommodation entries, not directorships. Moreover, when the statement on oath was retracted within four days, there is enough evidence to suggest that it was taken under undue pressure.

Upon reviewing the documents and submissions, the Board addressed technical objections raised by the Respondent regarding the admissibility of the case before proceeding with its findings.

Despite the Respondent's objection that specific clauses of misconduct were not defined by the Complainant, the Board emphasised that the complainant's duty is to state allegations forming the factual basis for jurisdiction, and the absence of specific clauses is a mere technical defect.

Regarding defective complaints, the Director ( Discipline ) was tasked with forming a prima facie opinion of no case if defects are not cured by the Complainant. However, the Board retains discretion to proceed further with the matter despite such recommendations.

The responsibility to form a prima facie opinion on misconduct lies with the Director ( Discipline ), based on filed pleadings and evidence. During the hearing, the Complainant- Income Tax Department was asked to provide evidence regarding tax collection steps taken against the Respondent, as well as any actions against family members involved in alleged companies. However, the Department confirmed they lacked further evidence.

Upon thorough review, the Board noted that the primary evidence presented by the Income Tax Department was the Respondent's retracted statement. No Assessment Order demonstrated income additions or additions in beneficiary companies' hands. Despite opportunities, the Income Department failed to provide conclusive evidence supporting allegations of the Respondent forming shell companies for accommodation entries. Consequently, the Board of Discipline found the Respondent not guilty of the alleged charge.

To Read the full text of the Order CLICK HERE

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