TaxTMI 
TaxTMI 
2003 (11) TMI 602
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....inst advance tax paid. On investigation it was found by the Income-tax Department that the Respondent had changed the amount of advance tax paid in copies of challans that are retained by the assessee and sent to the Department alongwith the return. The returns also, in many cases, were verified by him. The address given in the returns was his own so that the refund vouchers could reach him and he had, in fact, encashed these vouchers by opening bank accounts in the names of the assessees. He is said to have admitted having committed this forgery etc. thereby defrauding the exchequer to the tune of Rs. 15 lakhs. As per FIR filed by the Income-tax Officer, the Respondent was arrested and was remanded first to police custody till 6th May, 1993 and thereafter to judicial custody till 20th May, 1993. 1.2 The charges, if proved, would render the Respondent guilty of 'other misconduct' under section 21, read with section 22 of the Chartered Accountants Act, 1949;" 3. As per the provisions of the Act and the Regulations framed thereunder, the petitioner forwarded on 16-12-1993, a copy of the complaint inviting the respondent to file his written statement. No written statement ....
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....ived by the Council on 19-10-2002, whereby the respondent again sought adjournment on the ground of the illness of his wife. The Council considered the aforesaid letter dated 18-10-2002 and after noting the fact that on identical ground adjournment had already been granted earlier and in absence of supporting medical reports as well as in view of the fact that the complainant had intimated their appearance along with their counsel, the petitioner-Council did not think it fit to grant the adjournment as prayed for. In fact on 19-10-2002, the complainant representated by one Mr. Yogendra Dube, Assistant Commissioner of Income-tax along with authorized representative Shri Umedsing Bhati, Chartered Accountant, appeared before the petitioner- council and made oral submissions. The petitioner-Council, after considering the entire record, the report of the Disciplinary Committee and written submissions dated 4-9-2002, 10-10-2002, 11-10-2002 and letter dated 18-10-2002 of the respondent, decided to accept the report of the Disciplinary Committee. The petitioner-council held that the conduct of the respondent was most unethical and unprofessional and it was decided to recommend the severest....
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.... the respondent had also requested for holding de novo inquiry as provided in the regulation when the constitution of the Disciplinary Committee underwent a change but the said request had also been rejected by the Disciplinary Committee without any valid reason. That the findings and conclusions of the Disciplinary Committee as accepted by the Council were totally erroneous and against the legal position. That the Disciplinary Committee ought to have accepted the request for keeping the disciplinary proceedings in abeyance till finalization of pending criminal case against the respondent, as otherwise the same would cause prejudice to the case of the respondent. That the report of the Disciplinary Committee be quashed and set aside; in the alternative, the report be quashed and set aside and the proceedings be restored to the Disciplinary Committee. Finally, an alternative prayer was made that if at all the respondent was found to be guilty, the High Court should not accept the recommendation of permanent removal of the respondent's name from the register of members and the respondent be visited with minimum punishment as provided under section 21(6)(b) or section 21(6)( c) of the....
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....ad not summoned all the necessary witnesses for examination, nor directed the complainant to produce the witnesses was a grievance without any basis. The attention of the Court was invited to the finding in paragraph 30 of the report of the Disciplinary Committee wherein the Disciplinary Committee had taken note of the fact that the respondent had made a request that "all departmental employees who were in service at that point of time" be called as witnesses. It was submitted that the Disciplinary Committee had specifically dealt with the said request of the respondent. In relation to the contention regarding holding of de novo inquiry as provided by Regulation 15(5) of the Regulations it was submitted that any party to the inquiry may make such demand and thereafter it was for the Disciplinary Committee to decide whether such a de novo inquiry was required or not, was justified or not, or was warranted or not, on the facts and circumstances of each case. In this connection, attention was invited to the fact that at the first meeting of the Disciplinary Committee on 29-4-1999, as could be seen from the minutes recorded, no substantial progress had been made in the proceedings and ....
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....he petitioner Council have found the respondent guilty by coming to the conclusion that the entire exercise was carried out by the respondent or at his behest and his conduct is unbecoming of a professional within the meaning of the term "other misconduct" under section 21, read with section 22 of the Act. 13. A brief resume of the relevant provisions of the Act and the Regulations framed thereunder. 13.1 The Chartered Accountants Act, 1949 (the Act) has been brought on Statute Book with the object of developing and establishing a system in which the Accountants will, in autonomous association of themselves, largely assume responsibilities involved in the discharge of their public duties by securing maintenance of the requisite standards of professional qualifications, discipline and conduct. That the control of the Central Government shall be confined to a very few specified matters. Preamble of the Act makes it clear that it is expedient to make provision for the regulation of profession of Chartered Accountants. Section 2(1)(e) of the Act defines 'Institute' to mean the Institute of Chartered Accountants of India constituted under the Act. Section 3 provides for incorporat....
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....sional or other misconduct it shall record such a finding accordingly and direct the proceeding to be filed or the complaint to be dismissed. Sub- section (3) of section 17 of the Act lays down that upon receipt of the report of the Disciplinary Committee if the Council finds the member guilty of any professional or other misconduct, it shall record the finding accordingly and shall proceed in the manner laid down in the succeeding sub-sections. Sub-section (4) of section 21 of the Act specifies that where the Council finds a member guilty of professional misconduct specified in First Schedule, the Council shall afford an opportunity of hearing to the Member before an order is passed against such member and the orders that may be passed shall be any one of the following :- (a) reprimand the member; (b) remove the name of the member from the Register for such period not exceeding five years, as the Council thinks fit. 13.3 It is further provided by way of Proviso thereunder that where the Council thinks it fit that the case is one in which the name of the member ought to be removed from the Register either permanently or for a period exceeding five years, no ord....
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....ld an inquiry against the member in respect of such conduct and a finding against him in such an inquiry would justify appropriate action being taken by the High Court. . . ." (p. 73) 15. Section 30 of the Act grants power to the Council to make regulations which shall be published by Notification in the Gazette of India, and section 30B of the Act provides that every regulation made under the Act shall be laid before each House of Parliament. Thus, Chartered Accountants Regulations, 1988 have been duly framed by virtue of the aforesaid power and have the force of a statute. 16. The Chartered Accountants Regulations, 1988 (the Regulations) provide for various procedural requirements in relation to Members, Examinations, Article Clerks and Audit Clerks, etc. Regulation 12 which falls in Chapter II (dealing with Members) pertains to complaints and enquiries relating to misconduct of members. Regulation 12(1) provides that a complaint against a member under section 21 of the Act shall be investigated and all other inquiries relating to the misconduct alleged shall be held by the Disciplinary Committee. Sub-regulations (2) and (3) provide for the modality and the form in which th....
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....elf or through a legal practitioner or any other member. Sub-regulation (4) of Regulation 15 provides for the power to the Disciplinary Committee to regulate its procedure in such manner as it considers just and expedient. At the same time sub-regulation (5) of Regulation 15 stipulates that where during the course of an enquiry there occurs a change in the membership of the Disciplinary Committee for any reason whatsoever, any party to the enquiry may demand that the enquiry be held 'de novo' and upon such demand being made, the Disciplinary Committee may for sufficient cause and for reasons to be recorded in writing order that the enquiry shall be held 'de novo'. 18. Regulation 16 provides for the Report of the Disciplinary Committee which is to be submitted to the Council. In a case where the Disciplinary Committee finds the delinquent member guilty of the misconduct alleged against him a copy of the report of the Disciplinary Committee shall be furnished to such member and he shall be given an opportunity of making representation in writing to the Council. The Council is empowered to order a further inquiry if it finds it necessary after taking into consideration the report o....
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.... Act. There are various other provisions which prescribe the powers and duties of the Auditors as well as the responsibilities. These provisions are indicative of the extent a Chartered Accountant is looked upon by the society, with special reference to the corporate world, as being competent to discharge various statutory duties and responsibilities as a qualified professional. 21. Similarly under the Income-tax Act, 1961 section 288 stipulates as to who can appear as authorized representative of an assessee under the said Act. Section 288(2)(iv) states that an accountant can be an authorized representative. The Explanation below the said sub-section specifies that in this section, namely section 288 of the said Act, 'Accountant' means a Chartered Accountant within the meaning of the Act. The Income-tax Act stipulates compulsory audit of accounts in relation to various categories of assessees for different purposes. Section 12A of the said Act stipulates that the accounts have to be audited by a Chartered Accountant in case of a trust or institution seeking registration. Similarly section 44AB of the said Act provides for audit of accounts of certain persons carrying on busines....
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....ccepted. It is in the aforesaid context that the conduct of the respondent has to be tested and appreciated in the context of evidence placed on record. 23. Before determining the establishment of guilt or otherwise of the respondent it is necessary to deal with one of the basic contentions as regards violation of principles of natural justice. The law in relation to granting of reasonable opportunity and the principles of natural justice is by now well settled and the Apex Court has to say as under on the said subject. 24. In the case of Sohan Lal Gupta v. Smt. Asha Devi Gupta [2003] 7 SCC 492, the Apex Court has succinctly reiterated and enunciated the law relating to grant of reasonable opportunity of hearing and its scope, extent, and nature, and principles of natural justice in the following terms: Reasonable Opportunity. "20. There cannot be any dispute with regard to the proposition of law that the parties would be entitled to a reasonable opportunity of putting their case - Montrose Canned Foods Ltd. v. Eric Wells (Merchants) Ltd. [1965] 1 Lloyd's Report 597. A reasonable opportunity would mean that a party must be given an opportunity to explain his argum....
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.... fails to heed such guidance, the Tribunal might seek to focus the proceedings by allocating the remaining hearing time between the parties. This the Tribunal is entitled to do, provided it will allow a reasonable time for both parties to put forward their arguments and evidence.' 23. For constituting a reasonable opportunity, the following conditions are required to be observed : 1. Each party must have notice that the hearing is to take place. 2. Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses. 3. Each party must have the opportunity to be present throughout the hearing. 4. Each party must have reasonable opportunity to present evidence and argument in support of his own case. 5. Each party must have a reasonable opportunity to test his opponent's case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument. 6. The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and argument. Principles of Natural Justice 29. The prin....
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....29, it was held : (See pp. 539-40, para 24) 24. The principle that in addition to breach of natural justice, prejudice must also be proved has been developed in several cases. In K.L. Tripathi v. State Bank of India [1984] 1 SCC 43 Sabyasachi Mukharji, J. (as he then was) also laid down the principle that not mere violation of natural justice but de facto prejudice (other than non-issue of notice) had to be proved. It was observed, quoting Wade's Administrative Law (5th Edn., pp. 472-75), as follows : (SCC p. 58 para 31) 'It is not possible to lay down rigid rules as to when the principles of natural justice are to apply, nor as to their scope and extent. . . . There must also have been some real prejudice to the complainant; there is no such thing as a merely technical infringement of natural justice. The requirements of natural justice must depend on the facts and circumstances of the case, the nature of the inquiry, the rules under which the Tribunal is acting, the subject-matter to be dealt with, and so forth.' Since then, this Court has consistently applied the principle of prejudice in several cases. The above ruling and various other rulings taking....
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....me real prejudice to the complainant : there is no such thing as a merely technical infringement of natural justice.' 37. In Khaitan (India) Ltd. v. Union of India Cal. LT 1999(2) HC 478, one of us said : (Cal. LT p. 482, para 11) '11. The concept of principles of natural justice has undergone a radical change. It is not in every case, that the High Courts would entertain a writ application only on the ground that violation of principles of natural justice has been alleged. The Apex Court, in State Bank of Patiala v. S.K. Sharma [1996] 3 SCC 364 has clearly held that a person complaining about the violation of the principles of natural justice must show causation of a prejudice against him by reason of such violation. The Apex Court has held that the principles of natural justice, may be said to have been violated which require an intervention when no hearing, no opportunity or no notice has been given. Reference in this connection may also be made to Managing Director, ECIL v. B. Karunarkar AIR 1994 SC 1074. The question as to the effect of non-grant of enough opportunity to the learned counsel for the appellant by the Commission to meet the allegations made in t....
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.... reasonable opportunity but more than that. As an illustration, the sequence of events in which the written statement was called for from the respondent and the number of opportunities the respondent was granted may be considered. 27. The complaint dated 29-6-1993 was sent to the respondent under letter dated 16-12-1993 calling for his written statement. As no written statement was received a reminder was sent on 31-3-1994 calling for written statement latest by 20-4-1994. On 20-4-1994 the respondent wrote to the Institute that letter dated 16-12-1993 had not been received and the same may be sent to the respondent. On 6-5-1994 the respondent was sent a copy of the earlier letter dated 16-12-1993 with Annexures and the respondent was requested to send written statement before 31-5-1994. On 28-5-1994 the respondent sought adjournment till 31-8-1994. The same was granted vide letter dated 25-7-1994. Again on 26-8-1994 the respondent sought time till 28-2-1995 and the same was granted till 10‑3‑1995 and the respondent was informed that no further extension of time shall be granted. However, once again on 5-3-1995 the respondent sought further time and also stated that s....
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....d that the respondent has failed to appreciate the distinction between granting of opportunity and availing of the same. In a case where the respondent is accorded sufficient number of opportunities but failed to avail of the same this is what is stated by the Apex Court in the case of Vikas Deshpande v. Bar Council of India AIR 2003 SC 308 : "12. We do not find any substance in the submission made by the appellant that he could not be proceeded ex parte. It is evident from that perusal of the record that there are four acknowledgements on the record which show that the appellant had been duly served four times and in spite of the notices having been served on the appellant he did not choose to appear before the Disciplinary Committee at any point of time. The Disciplinary Committee had no other option but to hear the matter. . . ." (p. 311) 29. In the case of Sohan Lal Gupta (supra), the Supreme Court states : ". . . Even otherwise, a party has no absolute right to insist on his convenience being consulted in every respect. The matter is within the discretion of the arbitrator and the Court will intervene only in the event of positive abuse. (See Montrose Cann....
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....It is a statement of fact which waives or dispenses with the production of evidence by conceding that the fact asserted by the opponent is true. In other words, admission is confession or voluntary acknowledgement, made by a party as to the existence of certain facts which are in issue or relevant to an issue. The predominant characteristic of an admission, which is a type of evidence, consists of its binding character. Thus, an admission is of evidentiary value only to the extent that its maker has personal knowledge of the matters admitted to. It is immaterial as to whom or before whom the admission is made, but it will operate as a foundation of the rights of the parties once making of admission is established. The effect of admission is that it constitutes a substantive piece of evidence in the case and, for that reason, can be relied upon for proving the truth of the facts incorporated in an admission. Once it is found that admission is clear, certain and definite and not ambiguous, vague or confused, it will have the value and effect of shifting of the onus of proving to the contrary on the party making admission, with the result that it casts an imperative duty on such party....
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....by month of March when the financial year is likely to end, as to what his estimated income would be and on such meagre income it would not be necessary to pay self-assessment tax of such a large amount. That various such refund cases had arisen and this led him to make further detailed inquiry which evidently unearthed the fraud perpetrated on the department. Mr. Bhati has further deposed that in case of one Mrs. Kokilaben Shah, challan showed the amount of self-assessment tax at Rs. 11,011 while the bank scroll reflected a sum of Rs. 11 as paid by the said lady. That refund order had been issued to the said assessee, on the basis of payment of Rs. 11,011, which had duly been credited in A/c. No. 1249 which was in the name of the said lady. That the Account opening form for this S/B Account showed the address of the Account Holder as No. 307, Mahakant, Ashram Road, Ahmedabad which is the address of the office of the respondent. The amount of refund which was issued and credited to the said Bank Account was immediately transferred to the Bank Account of M.R. Shah & Co. That on similar facts refund in the name of Mr. Kishor Jagatiyani, Amrutlal S. Vyas and Kisan C. Sitlani (HUF) wer....
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....of Taxes Paid for A.Y. 1992-93. This is just to request you as follows :- 1. That in the following case (List given below) advance tax payments made for A.Y. 1992-93 are not genuine and hence credit for advance tax paid and/or any other taxes paid as per challans attached may please not be given so as to preserve the revenues interest. 2. We would like to bring to your kind attention that in A.Y. 1990-91/1991-92, refund order/s have been issued already on the basis of fake advance tax, challans attached with the returns and same have been encashed. You are, therefore, kindly requested to issue fresh challans for the amounts payable including interest till this date immediately so that same can be paid at once so as to prevent any further loss of revenue. The relevant details are under preparations and we will submit the same to you. 3. Your Honour may also direct the Branch Manager, Sahyog Bank, Madalpur Branch, Ahmedabad that said challan be paid out of S.B. A/c. 1408 held in the name of M.R. Shah as learned ITO, Ward 8(8), Ahmedabad has already passed prohibitory order under section 226(3) at our request vide order dated 21-4-1993 for the purpo....
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....e Income-tax Officers of Wards 2(3), 4(10), 4(8), 4(7), 6(3), 6(2), 6(1), 8(8), 8(7), 8(5), 8(3), 8(2) and 8(1). These letters are at pages 62 to 74 of Paper Book No. V filed before this Court. 38. On 21-4-1993 the respondent appeared before the Income-tax Officer, Ward 8(1), Ahmedabad and gave statement on oath. The said statement in the preamble states that the respondent appeared on behalf of the following persons viz. : (1) Amrutlal S. Vyas, (2) Kishor B. Jagatiyani, (3) Kisan C. Sitlani (HUF) and (4) Kokilaben H. Shah to whom summons had been issued requiring their presence on 20-4-1993. A specific question, being question No. 2 was put to him as to in what capacity and in what connection the respondent was appearing and making statement on solemn affirmation. The respondent replied : "as authorized representative on behalf of the above persons". It was further deposed that the authority from the four assessees shall be submitted subsequently but he was authorized to make statements on behalf of the four assessees. The respondent was further questioned as to whether the details, such as Bank Passbook, details of payment etc. as referred to in the summons issued to all the f....
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....ead as a whole it becomes apparent that the respondent has admitted the commission of fraud by way of forged/fabricated challans showing fake payments and obtained refunds, deposited the same in Bank Accounts in the names of different persons, withdrawn the amount from the said Bank Accounts and utilised the same for personal purpose. Nowhere in the entire statement can one find any indication that the statement was obtained by any coercion or threat or inducement of any nature. This becomes amply clear when one takes into consideration the fact that the respondent had appeared in response to summons issued to four different assessees. It was not as if the respondent had been issued any summons to appear and depose before the authorities. This factor significantly points to the unequivocal direction of volition of the respondent in tendering the statement. 40. Thereafter, another statement on oath was recorded on 22-4-1993 by the Income-tax Officer, Ward 8(8). One more statement came to be recorded on 23/24-4-1993 under section 132(4) of the Income-tax Act. In the said statement, the respondent has once again described the modus operandi adopted by him. Vide question No. 12 of t....
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....efund fraudulently from the Income-tax Department, the respondent is not the person who has committed such a fraudulent activity and, hence, he should not be visited with any penal consequence. Moment the respondent agreed to return/pay the amount to the Income-tax Department it became abundantly clear that it was only he, who had enjoyed the fruits of the fraudulent transaction and when such a fraudulent practice was discovered he admittedly agreed to refund the amount and in fact refunded the amount with interest. 43. It is not necessary to refer to the various statements/charts giving details and the gross receipts by way of income-tax refunds credited during various assessment years in different Bank Accounts, transferred therefrom to the Bank Account of the respondent and/or his family members and utilisation of such funds. There are also statements/charts available on record showing the names of different persons in whose names various Bank Accounts were opened and operated by the respondent. In brief : there are sufficient details to link the respondent with the fraud complained of. Once there is admission of the respondent in the form of identically worded letters dated ....
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....ed that if two letters had been received the acknowledgement receipt would have mentioned accordingly, assuming that only one receipt had been issued or two separate acknowledgements would have been furnished. 45. Insofar as the affidavit dated 1-3-1995 is concerned, the same has been forwarded under letter dated 31-7-1995 to the Income-tax Officer, Ward 8(1)/8(8) and in fact from the acknowledgement receipt available on record it is apparent that the said letter has in fact been tendered on 8-11-1995. In the letter dated 31-7-1995, the respondent states that the affidavit has been filed during the course of the assessment proceeding in the case of the respondent vide letter dated 2-3-1995. 46. Without entering into the disputed arena as to whether the letter of retraction dated 8-6-1993 had been filed or not and the belated filing of affidavit dated 1-3-1995, it becomes necessary to take note of the fact that both the retractions, by way of letter and affidavit, have come about after nearly a month and half from the date of the first statement dated 21-4-1993. Both in the letter dated 8-6-1993 and the affidavit dated 1‑3‑1995 it is stated by the respondent that h....
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.... is restricted only to the statement made on oath and the letters dated 21-4-1993 written on the letter-head of the respondent remained on record, uncontroverted and without any demur. At the cost of repetition, it requires to be stated that, as seen from a specimen letter already reproduced hereinbefore, admission in the said letter is unambiguous in terms, unequivocal and without any reservation. It is not even the case of the respondent that the said letters were written without being aware of the correct position in law or without understanding the import of the said communication. In fact, the respondent, being as qualified as he is, cannot even take that plea. 47. The respondent has placed strong reliance on the decision of Supreme Court of India in the case of K.T.M.S. Mohammed v. Union of India [1992] 197 ITR 1961 in support of the submission that in case of retraction of statement reliance cannot be placed on such statement for the purpose of holding a person guilty for the misconduct he is charged with. It is necessary to appreciate the backdrop in which the controversy arose before the Apex Court. The appeal came to be filed in the Supreme Court against the order made....
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....tatement was not extorted. It, thus, boils down to this that the authority or any Court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law that this Court, in several decisions, has ruled that, even in passing a detention order on the basis of an inculpatory statement of a detenue who has violated the provisions of the Foreign Exchange Regulation Act or the Customs Act, etc., the detaining authority should consider the subsequent retraction and record its opinion before accepting the inculpatory statement lest the order be vitiated. . . ." (p. 213) 48. Therefore, this case does not assist the respondent in any manner. In fact, the legal position is reiterated when it is stated that it is only for the maker of the statement who alleges inducement, threat or promise, etc., to establish that such improper means have been adopted. Only caveat stipulated is that the Court or authority is required to apply its mind to the retraction, if any, and reject the same in writing if it is found that retraction does not dislodge the earlier admission. 49. Apart from th....
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....as to what constitutes misconduct : "Mere negligence or error of judgment on the part of an Advocate will not amount to professional misconduct. But different considerations arise where the negligence of the Advocate is gross and such gross negligence involves moral turpitude or delinquency. In dealing with this aspect of the matter, the expression 'moral turpitude or delinquency' is not to receive a narrow construction. Wherever conduct proved against an Advocate is contrary to honesty, or opposed to good morals, or is unethical, it may be safely held that it involves moral turpitude. A wilful and callous disregard for the interests of the client may, in a proper case, be characterised as conduct unbefitting an Advocate. Any conduct which makes a person unworthy to belong to the noble fraternity of lawyers or makes an advocate unfit to be entrusted with the responsible task of looking after the interests of the litigant, must be regarded as conduct involving moral turpitude. The Advocate-on-Record like the other members of the Bar are Officers of the Court and the purity of the administration of justice depends as much on the integrity of the Judges as on the honesty of t....
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....with against the delinquent. There is a serious responsibility on the Court a duty to itself, to the profession, and to the whole of the community to be careful not to accredit any person as worthy of the public confidence who cannot establish his right to that credential. However, when an important statutory body like the Council finds a member of the institute guilty of the misconduct and forwards the case to the High Court with its recommendation under section 21(5) of the Act, its findings based on the material on record would ordinarily not be disturbed unless found to be unjust, unwarranted or contrary to law." (p. 105) 55. Applying the aforesaid tests, it is apparent that it is not possible to state that the petitioner-Council has acted in any manner which could be termed to be unjust, unwarranted or contrary to law, i.e., the findings are based on no evidence or the petitioner has proceeded on mere conjectures and unwarranted inferences. 56. In the case of P.D. Gupta v. Ram Murti AIR 1998 SC 283, the Apex Court has stated in para 15 that : "Bar Council of India and State Bar Councils are statutory bodies under the Act. These bodies perform varying functions u....