Chartered Accountant Granted Anticipatory Bail in GST Evasion Investigation

The Additional Sessions Court, Jamnagar in the case of ALKESH HARILAL PENDHADIYA Versus STATE OF GUJARAT  - 2025 (12) TMI 1296 - DISTRICT COURT JAMNAGAR held that a Chartered Accountant cannot be denied bail in connection with GST evasion committed by the firms, for which he maintains or audits accounts. The Court held that bail is the rule and committal to jail an exception and accordingly granted anticipatory bail to the applicant/accused, a Chartered Accountant, who was being investigated in connection with alleged GST evasion to the tune of approximately Rs. 560 crores involving multiple client firms.

Facts:

Alkesh Harilal Pendhadiya (“the Petitioner”) is a Chartered Accountant who maintains accounting records and audits financial statements for various business entities.

State of Gujarat (“the Respondent”), through the GST Investigation Wing and various Assistant Commissioners of State Tax (Enforcement), initiated investigation into alleged GST evasion committed by several business firms who were clients of the Petitioner.

The Petitioner contended that although several client firms of his are allegedly involved in GST evasion, a Chartered Accountant cannot be made liable to pay any GST since it is only the firms and the concerned persons of those firms who are liable for paying GST. The Petitioner submitted that he is merely maintaining accounts and auditing records of these firms and is not involved in manufacturing, business, or trading of goods or services. He further contended that the investigated matter is based on documentary and electronic evidence and therefore the question of changing statements would not arise.

The Petitioner asserted he is entitled to the presumption of innocence and would submit to restraints and conditions on his freedom by acceptance of conditions, which the court may deem fit to impose.

The Respondent contended that a strong case is made out against the Petitioner based on the record. The Respondent submitted that if the Applicant is released on bail, there is a possibility to tamper with evidence and influence/threaten witnesses. The Respondent argued that the Petitioner is Chartered Accountant of several companies and firms allegedly involved in GST evasion involving transactions of about Rs. 100 crores in Kanbhi Consultancy and about Rs. 12 crores in Alex Business Management, wherein the Petitioner is a director.

The Petitioner, apprehending arrest upon appearance before the GST Officers, sought anticipatory bail under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023(“B.N.S.S”) replacing the former Section 438 of the Code of Criminal Procedure. The anticipated offence is under Section 69 and 132 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), which are offences punishable with a maximum of 5 years' imprisonment and also compoundable under Section 138 of the CGST Act.

Issues:

Whether anticipatory bail should be granted to a Chartered Accountant accused of GST evasion under Section 132 of the CGST Act, given the nature of the offence and procedural safeguards?

Held:

The Additional Sessions Court, Jamnagar in ALKESH HARILAL PENDHADIYA Versus STATE OF GUJARAT  - 2025 (12) TMI 1296 - DISTRICT COURT JAMNAGAR held as under:

• Observed that, since the Chartered Accountant is not involved in any manufacturing/business/trading of goods or services, the question of him evading GST will not arise.
• Observed that, it could be at the most the firms who might have evaded any GST, if any, and the concerned person of those firms could be liable for paying such Goods & Service Tax and penal liability, if any; but their Chartered Accountant cannot be made liable to pay any GST for any evasion of GST by firms, if any, of whose account the Applicant used to maintain or to audit.
• Observed that, the Hon'ble Apex Court has observed that when an offence is punishable with imprisonment up to 7 years, then it is mandatory on the part of the police authority to scrupulously follow the directions issued in the cases of ARNESH KUMAR Versus STATE OF BIHAR & ANR - 2014 (7) TMI 1143 - Supreme Court. The police shall comply with said directions and the provisions made under Section 41A of Code of Criminal Procedure and prior to making mechanical arrest of a person, police authority shall have to follow the aforesaid provisions and dictums as well.
• Noted that, it is undisputed facts that the alleged offences in present case is punishable maximum up to five years imprisonment. Under such circumstances, the officer concerned has to strictly follow directions issued in the above referred authorities.
• Noted that, bail is the rule and committal to jail is an exception.
• Noted that, refusal of bail is a restriction on the personal liberty of the individual guaranteed under Article 21 of the Constitution of India and granting anticipatory bail does not amount to discharge but only granting of liberty during the investigation and pending trial with appropriate terms and conditions.
• Held that, considering facts & circumstances of the case, it will be just and proper to grant bail to the Petitioner. The anticipated offence is triable by the Ld. Magistrate and punishable maximum up to 5 years. There is no past criminal history of the Applicant before filing this application. These are peculiar facts which appeal this Court to invoke the power under Section 482 of B.N.S.S (Section 438 of Code of Criminal Procedure) as it is not fit case to put the Accused behind the bar.
• Held that, the Petitioner shall remain present before the concerned Investigating Officers/GST Officers at Gujarat, on the specified dates with all relevant documents and electronic records; shall co-operate in investigation; shall furnish address, email, and mobile number to investigating officers within 7 days and shall not change it without permission; shall surrender passport within 7 days or file affidavit of non-possession; shall not leave the country without permission; shall not make any inducement, threat, or promise to any witness; shall not tamper with evidence; shall maintain law and order; and shall cooperate in conducting trial if offence is registered.

Our Comments:

In the case of Rajesh Kumar Dudani Versus The State Of Uttarakhand & Anr.  - 2023 (3) TMI 682 - SC Order  the Supreme Court held that, summons under Section 70 of the Uttarakhand Goods and Services Tax / Central Goods and Services Tax Act, 2017 was issued and offence was under Section 132(i)(iii) and the case based on documentary evidence and other electronic evidence and there was no final assessment yet made and unless the same is determine, the accused person cannot be said to be under the legal liability to make any payment and after considering the facts of the case anticipatory bail was granted. The present judgment's approach mirrors this reasoning—that without a final assessment order, the civil/tax liability is not established, and without established liability, the criminal prosecution should not proceed mechanically.

The judgment diligently applies settled Supreme Court precedents related to anticipatory bail, including Arnesh Kumar(supra) and its progeny, enforcing procedural safeguards before arrest in cases punishable up to seven years’ imprisonment. It clarifies that liability for GST evasion lies with concerned firms and persons, not their Chartered Accountant, absent direct culpability. The Court balanced the State’s interest in investigation with the fundamental right to personal liberty under Article 21, emphasizing bail as the rule and jail as the exception, following established jurisprudence by the Apex court like in the case of State Of Rajasthan, Jaipur Versus Balchand @ Baliay - 1977 (9) TMI 126 - Supreme Court.

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