Irregularities, inaccuracies, anomalies and mistakes committed by Chartered Accountant - Punishment upheld - HC
A Certificate from a chartered accountant is given great credence even by indirect tax authorities, Tribunals and Courts. But sometimes it surfaces that some CAs give these certificates very casually and without much verification. A Central Excise Joint Commissioner did not take kindly to one such report given by a CA and ultimately the CA was punished by the Institute with suspension for a year.
This case came up before the Gujarat High Court recently.
The petitioner, a practicing Chartered Accountant ["CA"] had undertaken, on agreement, assignment as Chartered Accountant of a multi location unit. The assignment also included work of auditing the accounts of the said company. It appears that on the basis of the certificate issued by the petitioner in his capacity as CA, the Excise Department had made certain assessments and liability of the said company towards excise duty under Excise Act were assessed. Thereafter, it came to the notice of the Excise Department that the accounts and audit report submitted by the petitioner was inaccurate and there were several serious and material discrepancies and anomalies. In this view of the matter, the office of Commissioner of Central Excise, Surat lodged complaint with the institute of the Chartered Accountant ["the institute"] and vide letter dated 24.10.2008 brought to the notice of the institute the irregularities as well as the inaccuracies, anomalies and mistakes committed by the petitioner in the accounts and audit report.
After examining the said complaint by the Joint Commissioner (Audit) of Excise Department, the Disciplinary Committee of the institute, formed prima facie opinion that the petitioner was guilty of professional and other misconduct falling within the meaning of Clause (7) of Part-I of II Schedule to the Chartered Accountants (Amendment) Act, 2006 ["the Act"].
The competent authority on 12.9.2011 passed order under Section 21(B)(iii) of the Act read with Rule 19(1) of the Chartered Accountant's Procedure of Investigation of Professional and other Misconduct and Conduct of Cases Rules, 2007 ["the Rules"] suggesting and recommending punishment of removal of petitioner's name from member's register for a period of 1 year.
On 28.1.2012, the appellate committee heard the petitioner and after considering the record including the report of the Disciplinary Committee and the decision of the competent authority, passed order dated 5.5.2012. The appellate committee concurred with the decision of the competent authority i.e. order dated 12.9.2011 and observed that, the appellant is rightly held guilty of professional misconduct within meaning of clause (7) of Part-I of II Schedule to the Act. The appellate committee also held that the petitioner did not exercise due diligence and he had shown gross negligence and carelessness in certifying Tax Audit Report which did not reflect true and fair picture of the affairs of the company and he signed the Tax Audit Report without actually performing the audit as required.
The aggrieved CA is before the High Court.
The High Court observed,
A Chartered Accountant has an obligation, not only statutory but also moral and social, to be absolutely and completely diligent and cautious and careful while preparing, signing and certifying Annual Accounts and/or Audit report. Several Government and private organizations and individuals rely on the report / certificate by Chartered Accountant and once a particular factual aspect or entries, etc. are prepared, signed and certified by Chartered Accountant they are ordinarily accepted without further probing or investigation.
In such circumstances, the duty and obligation of being absolutely diligent, conscious and careful is multiplied manifold and a Chartered Accountant should not, and cannot take, such obligation or perform his duties lightly or casually. A mistake by a petty clerk or lower level accountant may be dealt with in different manner but a mistake by a Chartered Accountant cannot be treated with indifference or casually or lightly. A mistake by a clerk or an accountant, which may be considered or allowed or overlooked as inadvertent error, cannot be overlooked lightly or casually if committed by a practicing Chartered Accountant, more so when it is committed in Annual report duly certified by him as correct and authentic report. It has to be, and should be, dealt with seriousness which it would deserve.
The professional or trained Chartered Accountant is equipped with knowledge, training and experience to catch a mistake and if such trained and experienced professional allows so many mistakes, errors, inaccuracies and anomalies pass-by without detecting them and if he signs and authenticates report containing such mistakes, etc. and also issues certificate, then, in such circumstances, any fault cannot be found with the conclusions by the Disciplinary Committee, also confirmed by the Appellate Committee, that the petitioner did not exercise due diligence. The petitioner has tried to wish-away his failure in detecting - catching and correcting the mistakes by attributing the blame to typist and computer operator.
The institute, which is statutorily obliged to maintain high standards of the profession and, for that purpose, to take action in cases which are brought to its notice wherein member of the institute is found wanting exercising due diligence and in being careful and cautions, would fail in its duty and obligation if it does not take appropriate action and/or does not pass appropriate order against such member. A lenient attitude by the institute may, in long run dilute the professional standards and tarnish its image and credibility and with passage of time may also result into diluting institute's vigil over its members and their conduct.
In present case, it is not possible to hold that punishment of removal of petitioner's name from the register for one year is harsh as compared to the proved charge. The decision as regards quantum of penalty is in the realm of the Disciplinary Authority and once misconduct is proved - and accepted as proved by the Court - then Court would not interfere with Disciplinary Authority's decision regarding quantum of penalty unless it is excessively disproportionate which amounts to or appears to be on the verge of victimisation.
The petitioner has failed to make out any case to entertain the petition in writ jurisdiction and interfere with two concurrent decisions preceded by prima facie opinion of the Disciplinary Committee. The petition, therefore, fails and is not accepted.
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