ICAI Professional Misconduct: Chartered Accountant Crossed Tax Audits Specified Limit Found Guilty by ICAI

The Institute of Chartered Accountants of India (ICAI) in the matter of CA. Prabir Kumar Chatterjee, found the Chartered Accountant guilty of professional misconduct.

1. That vide findings under Rule 18 ( 17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committee was inter-alia of the opinion that CA. Prabir Kumar Chatterjee (M. No.053765) (hereinafter referred to as the Respondent”) was GUILTY of professional misconduct falling within the meaning of Clause (1) of Part II of the Second Schedule to the Chartered Accountant Act 1949. The Committee observed that final hearing was held on 30th December, 2020 through video conferencing.

2. That pursuant to the said findings, an action under Section 21B(3) of the Chartered Accountants (Amendment) Act, 2006 was contemplated against the Respondent and communication was addressed to him thereby granting an opportunity of being heard in person and/or to make a written representation before the Committee on 27th October, 2021.

3. The Committee noted that on 27th October, 2021, the Respondent was not present. The Respondent vide his email dated 22nd October 2021 informed that due to his old age his physical movement is not possible and requested committee to consider his case sympathetically.

4. The Committee considered the reasoning as contained in findings holding the Respondent Guilty of professional misconduct vis-à-vis documents available on record on the findings of the Disciplinary Committee.

5. The Committee considered the written submissions made by the Respondent and noted that the Council General Guidelines, No.1-CA(7)/02/2008, dated 8th August,2008 under Chapter VI “Tax Audit assignments under Section 44AB of the Income-tax Act, 1961 “, provide that a member of the Institute in practice shall not accept, in a financial year, more than the “the specified number of tax audit assignments” under Section 44AB of the Income-tax Act 1961. Further, in Explanation given in Para 6.1, in sub-para(a) & (b) states that :

“the specified number of tax audit assignments” means –

(a) in the case of a Chartered Accountant in practice or a proprietary firm of Chartered Accountants, 45 tax audit assignments , in a financial year, whether in case of corporate or non-corporate assesses and

(b) in the case of firm of Chartered Accountants in practice, 45 tax audit assignments per partner in the firm, in a financial year, whether in respect of corporate or non­corporate assesses.

5.1 The Committee further noted that the tax audit assignment under Section 44AB of the Income ­Tax Act 1961 is a time-bound assignment unlike other professional fields, and the work of audit requires precision. The certificate of audit issued by a Chartered Accountant under Section 44AB of Income Tax Act 1961 has statutory force for the purpose of Income Tax whereas a Chartered Accountant in practice is free to accept audits under Sections 44AD and 44AE of the Income-tax Act, 1961 without any limit. Thus, considering all these relevant factors, the Committee viewed that it cannot be said that ceiling of tax audit limit is in any way unreasonable or discriminatory. Accordingly, there is no basis for the contention that there is violation of Article 14 or Article 19(1)(g) of the Constitution of India.

5.2 The Committee further noted that the Guidelines do not in any way affect the rights of the Chartered Accountant under the Constitution of India being only a reasonable restriction as in the process of regulating and maintaining the status of Chartered Accountant, the measures taken to put a cap on tax audit assignments are intended to maintain and improve the quality of work and cannot in any way be stated to be an unreasonable restrictions. The Committee also noted the observations of the Supreme Court in Jyoti Prasad’s case stating as follows:

“Where the legislatures fulfil its purpose and enacts laws, which in its wisdom, to considered necessary for the solution of what after all Is a very human problem the tests of “reasonableness” have to be viewed in the context of the issues which faced the legislature. In the constitution of such laws and particularly in judging of their validity the Courts have necessarily to approach it from the point of view of furthering the social interest which it is the purpose of the legislation to promote, for the Courts, are not in these matters, functioning as it were in vacuum, but as parts of a society which is trying by enacted law to solve its problems and achieve a social concord and peaceful adjustment and thus furthering the moral and material progress of the community as a whole”. 

5.3 The Committee, accordingly, after consideration of all relevant facts and material on record as also the nature of tax audits, had found such a ceiling to be necessary in the larger interest of the profession and the guidelines on the tax audit assignment under Section 44AB of the Income Tax Act, 1961.

5.4 The Committee observed that the Respondent failed to provide any satisfactory documentary evidence in support of his claim of tax audit conducted by him. Thus, the Committee viewed that the Respondent has conducted following excess tax audits as given hereunder in column (3):

7. The Committee thus viewed that the misconduct on the part of the Respondent has been established within the meaning of Clause (1) of Part II of Second Schedule and keeping in view the facts and circumstances of the case, ordered that a fine of Rs 5,00,000/- (Rupees Five lakhs Only) that shall be paid within a period of 01 month from the date of receipt of this Order and in case he fails to pay the same as stipulated, the name of the Respondent, CA. Prabir Kumar Chatterjee (M. No.053765) be removed for a period of 06 (Six) month from the Register of members.

To Read Judgement Download PDF Given Below: