TaxTMI 
TaxTMI 
2013 (7) TMI 525
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....facturing and other records even after issuance of notice u/s.142(1) and summons u/s.131 of the Income Tax Act. Consequently, penalty was imposed on the said firm for non compliance of terms of the notices u/s. 142(1). When the assessee firm did not produce the books of accounts for verification even after being penalised, the Income Tax department decided to inspect the records of the firm maintained by the Trade Tax officer. Thereupon it transpired that Trade Tax officer, Sector-I, Roorkee had conducted number of surveys during the relevant period but no books of accounts were found though manufacturing was going on. The Trade Tax officer has categorically mentioned in his assessment order that no books of accounts were produced before him in the course of assessment proceedings even after several opportunities. 2. The Income Tax officer after noticing serious discrepancies in the audited balance sheet and profit and loss accounts of the assessee firm which were prepared by respondent in his capacity as a chartered accountant vide its letter dated 18-6-2001 brought these facts to the knowledge of the Council. On receipt of the letter from Income Tax Officer, the Council called....
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....ns vide letter dated 22-10-2002 stating that the closing stock of Rs.40,20,000/- as shown in the balance sheet has been wrongly copied up by his computer operator from the closing stock of last year (this year opening stock figure). In the profit & loss account, the figure of closing stock of Rs.44,10,000/- of Gur and Rs.32,550/- of Sugarcane is correct. It is a case of clerical mistake of the computer operator. 4. After considering the explanation of the respondent, the Council being of the opinion that the prima facie charges of misconduct are made out against the respondent and it comes under clauses (7) and (8) of Part I of Second Schedule read with sections 21 & 22 of the Chartered Accountants Act, 1949 decided to refer the case of the respondent to the disciplinary committee. 5. Requisite information in this regard was sent to the respondent on 3-1-2006 specifying the charges levelled against him and calling upon him to submit his written statement. In response to it, the respondent submitted his written statement duly verified dated 11-2-2006. Thereafter, the matter was taken up by the Council at its meeting held in August 2008 in New Delhi. The Council was prima facie....
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....or the Council vehemently contended that in view of admission of the guilt by respondent and other materials on record it is established beyond doubt that the respondent is guilty of gross negligence and omissions in performance of his duties as a chartered accountant. 11. "Gross negligence" is a term of relative import. Its true meaning can be judged only with reference to the duties which a person is obliged to perform. An act or omission may be gross negligence and amount to misconduct for one small class of persons while it may not be so for some other class of person and simply be termed as mere negligence or an act of inadvertence or over sight. In (2007) 12 SCC 210 Institute of Chartered Financial Analysts of India and others v. Council of the Institute of Chartered Accountants of India and others, the Apex Court cited with approval the view taken in Prabodh Kumar Bhowmick v. University of Calcutta; (1994) 2 Cal LJ 456 and which is to the following effect :- "14. Misconduct, interalia, envisages breach of discipline, although it would not be possible to lay down exhaustively as to what would constitute conduct and discipline, which, however, is wide enough to include w....
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....ing and related statements or holds himself out to the public as an accountant and renders professional services or assistance in or about matters of principle or detail relating to accounting procedure or the recording, presentation or certification of financial facts or data. There are various enactments where reports of chartered accountant are given special significance. 14. Under the Income Tax law, section 44 AB makes audit of accounts of certain persons carrying on the business or profession compulsory. Section 139 requires such audit report, audited profit and loss account and audited balance sheet to be filed alongwith the return of income. Section 115 VW mandates submission of report of an accountant in prescribed form alongwith return of income. Section 142 empowers the income tax authorities to require an assessee to get the account audited in the prescribed form calling for such details therein as they deem necessary. Failure to comply with such requirement attracts penalty u/s. 271-B. The audited reports and accounts are given due weightage and normally are to be accepted on their face value. The law pre-supposes that by virtue of the expert knowledge and specialis....
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....gh the record of the case with the assistance of Sri Vinod Swarup, advocate for the Council. On minute scrutiny, we find no illegality in the findings recorded by the disciplinary committee and which were accepted by the Council. Admittedly, the balance sheet and profits and loss accounts of the assessee were incorrect. Whether the mistake was bonafide or not is not very material. The respondent has utterly failed to perform his duties as a tax auditor. Even if the computer typist took the last year's closing stock figure and adjusted the cane payment dues account to tally the balance sheet, the respondent was required to compare the closing figure with the closing balance in the books of accounts and the trial balance thereof. There is also no evidence that the respondent cared to obtain confirmation from third parties regarding the amount due to them, which would have demonstrated that the cane dues as mentioned in the balance sheet are incorrect. He simply signed the balance sheet, profits and loss account prepared by the computer operator without verifying the correctness and authenticity of the facts and figures appearing therein. This is also evident from his own admission co....