TMI Blog2012 (12) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts and audit report. 2.1 After examining the said complaint by the Joint Commissioner (Audit) of Excide Department, the institute called for certain information and details from the petitioner vide institute's letter dated 6.3.2009. Subsequently, the Disciplinary Committee of the institute, prima facie, examined the said complaint dated 24.10.2008 and the information supplied by the petitioner and through Director (Discipline) of the Disciplinary Committee of the institute, prima facie, opinion dated 12.10.2009 of the Disciplinary Committee was submitted to the institute. In the said opinion, the Disciplinary Committee formed prima facie opinion that the petitioner is guilty of professional and other misconduct falling within the meaning of Clause (7) of Part-I of IInd Schedule to the Chartered Accountants (Amendment) Act, 2006 [hereinafter referred to as "the Act"]. 2.2 The said prima facie opinion was supplied to the petitioner and his explanation and reply was called for. In response, the petitioner filed his written statement dated 25.4.2009 (which was submitted in response to the notice/intimation dated 6.3.2009) and another written statement dated 27.5.2010 (which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without actually performing the audit as required. 2.7 Aggrieved by the said two concurrent orders, the petitioner has preferred present petition. 3. Mr. Shah, learned advocate, has appeared for the petitioner and submitted that the impugned order dated 12.9.2011 and the order dated 5.5.2012 are arbitrary, too harsh and non-commensurate with the alleged misconduct. The learned counsel for the petitioner contended that the petitioner cannot be said to have shown gross negligence (as contemplated under clause (7) of Part-I of IInd Schedule to the Act) in preparing and submitting tax audit report. Mr. Shah, learned counsel for the petitioner submitted that the tax audit report contained some minor and irrelevant typographical errors which are negligible and the said mistakes/errors did not cause or did not result into any actual financial loss to the Excise Department. He submitted that the errors in the tax audit report cannot be construed as or classified as gross negligence as contemplated under clause (7) of Part-I of IInd Schedule to the Act. Mr. Shah, learned advocate for the petitioner also claimed that the report/order dated 12.9.2011 by the competent authority of the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the petitioner did not exercise due diligence and/or he was grossly negligent in performing his professional duties. Mr. Soparkar submitted that in view of the provision contained under clause (7) of Part-I of IInd Schedule to the Act, existence of motive or intention is neither relevant nor necessary when question under consideration is about exercising due diligence and/or committing gross negligence in performing professional duty. He also submitted that the Disciplinary Committee/Institute has taken entire aspect and record as well as submissions of the petitioner into consideration and after examining entire material vis- -vis the gravity of the charge or the proved professional misconduct, the institute has taken appropriate decision which does not call for any interference in exercise of writ jurisdiction by the Court. So far as the petitioner's allegation about violation of principles of natural justice is concerned, Mr. Soparkar submitted that sufficient opportunity was granted to the petitioner, however, the petitioner did not remain present, but he asked for extensions and therefore, ultimately, the committee proceeded to pass order as regards quantum of penalty and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads thus:- "2. That an action under Section 21B(3) of the Chartered Accountants (amendment) Act, 2006 was contemplated against CA Rajesh Vasant Dudhwala and, therefore, communications dated 30.05.2011 and 18.07.2011 were addressed to him thereby granting him an opportunity of being heard in person as also to make written representation." (emphasis supplied) 5.4 Thus, when time/adjournments are granted and yet the petitioner continues to ask for more time only on the ground that he is engaged and busy in preparing the tax returns of his branch i.e. without any strong reason and compelling circumstance for not appearing before the committee and to avail opportunity of hearing as regards proposed penalty and/or he did not even find time to submit even written representation as regards proposed penalty then, no fault can be found with the competent authority/institute in proceeding to take the decision as regards proposed penalty and such order cannot be categorized as vitiated on the ground of denial of reasonable opportunity and cannot be set aside. 5.5 The details mentioned in the order dated 12.9.2011 go to show that the petitioner was granted opportunity/time and even furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor fanatical but should be flexible yet firm in this jurisdiction. No man shall be hit below the belt - that is the conscience of the matter." 6. Now, so far as the petitioner's submissions as regards the concurrent conclusions by the disciplinary committee and appellate committee as well as the prima facie opinion are concerned, it would be appropriate, so as to consider the said aspects, to keep in focus the provision contained under clause (7) of Part-I of IInd Schedule to the Act, which read thus:- "(7) does not exercise due diligence, or is grossly negligent in the conduct of his professional duties;" 6.1 The said Part-I of IInd Schedule (which is framed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified report properly prior to issuing the same, as a result of which, lot of time of our officers have been wasted. Annual Report is an important financial document for many stake holders and it cannot be taken lightly. Therefore, it is brought to your notice for taking necessary action in this regard against aforesaid Auditor." (emphasis supplied) 6.4 In pursuance of the said complaint, the institute called for certain details from the petitioner under its letter dated 6.3.2009 and after considering the complaint and the details submitted by the petitioner and also the other material, the disciplinary committee submitted its prima facie opinion dated 12.10.2009 wherein the committee recorded, inter alia, that "8.3 It is an admitted fact that there was an error in the quantity figure of the stocks in the Annual Reports of the Company for the financial years 2005-06 2006-07. Further, quantity details of the stocks was also wrongly certified by the Respondent in Tax Audit Reports for the Financial Year 2006-07. The Respondent contended that the said mistake was due to typing, arithmetic, copying and pasting. 8.4 As regard discrepancies in Tax Audit Report, it has been obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfected with mistakes and that mistakes had been committed in preparing, signing and submitting the report. However, the petitioner has tried to underplay the mistake by claiming that the "mistakes" were merely typographical errors. It comes out that there is no dispute about the fact, rather the petitioner has admitted, that there were errors, inaccuracies and anomalies in the report prepared, signed and certified by the petitioner. After wishing away the mistakes, inaccuracies and anomalies in the report on the pretext that it was typographical error of computer operator, the petitioner tried to shift the liability on the company by stating, inter alia, that, "the basic responsibility of preparing annual accounts including notes on accounts is of the company". 8. The petitioner then, concluded his written statement/reply stating, inter alia, that :- "Considering the explanation of error, explanation given by the company and supporting evidence, nature of error, no loss suffered by excise department and no gross negligence in performance of audit, I request Your Honour to take lenient view in my case." (emphasis supplied) 8.1 Another relevant and vital feature which emerge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... film 1962815.760 was shown as 2052815.760 (Due to above mistake). (ii) In the quantity record of finished goods of Gandhidham unit there was totalling mistake in quantity manufactured. The actual quantity manufactured was 2099.265 M.T. was shown as 2159.265 M.T. The actual production of Metallised and Lacquered poly film of 2099.267 M.T. is tallied with the exercise return filed and accepted by Excise audit team. (iii) in the quantity records of raw materials consumed of Kim unit, the consumption of quantity of 973.969 M.T. includes closing stock of 42.553 M.T. Hence, the consumption quantity of 973.969 M.T. is required to be decreased by 42.553 M.T. The correct consumption quantity was (973.969 M.T. - 42.553 M.T.) 913.416 M.T. (iv) As the consumption was increased by 42.553 M.T. and this has increased the quantity issued to other department by the same quantity of 42.553 M.T. The Quantity issued to other branch of 573.274 should be read as 530.715 M.T. (573.24 M.T. - 42.553 M.T.). The original quantity and corrected quantity of goods received from department, consumption, quantity manufactured and good issued to department is given in the enclosed sheet (Schedule 4). Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takes in the quantitative details of raw-materials consumed, production and sales of the Company which were attributed to the mistakes on the part of accountant in cutting and pasting. With regard to the elimination of inter division transfers from the sale and purchases in the financial statements, the Respondent admitted that he should have eliminated the inter division transfers from the financial statements. He has further admitted that the non-elimination of the inter division transfers does not give true and fair view of the financial statements. 10. The Committee had also pointed out the discrepancy between the stated accounting policy of the Company and the actual implementation of the same in the presentation of financial statements, viz. as per the accounting policy on sales, it reads as under: "the sales are accounted exclusive of excise duty and other taxes and exclude inter divisional transfers" (point No.F of Schedule 19 to Balance Sheet as at 31.3.06) 11. However, in furnishing the details of sales of finished goods in Notes on Accounts, the sales were shown as including inter branch/divisional transfers. For this the Respondent admitted that it is a mistake on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present matter, the Company in its financial statements for the years 2005-06 and 2006-07 shown the Sales/Revenue inclusive of Inter Unit/Branch transfer in violation of the provisions of the Accounting Standard 9. 16. Further, by adding the amount/quantity of Branch Transfer in the financial statements, the accounts were misstated and did not give a true fair view of the affairs of the Company. In those circumstances, the Respondent ought to have disclosed the said fact in his audit report and/or expressed quantified opinion. But the Respondent failed to do so." 10.1 After having taken into account the aforesaid aspect, the committee has observed in the report dated 10.2.2011, that, "the financial statements are very important documents for the stake holders and the general public at large and they rely on certification of chartered accountants for accuracy and the correctness of the same." The committee has also observed that, "the committee though noted the admission of the respondent of the mistakes in the financial statement, could not accept (sic, accede) to his prayer that a lenient view may be taken of the mistakes". 10.2 Besides this, it is also pertinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of them, then, the petitioner has no reason or justification to make allegation about denial of opportunity of hearing. The principle of natural justice does not always mean that oral/personal hearing may be given. The decision taken after taking into consideration the written objections would also be sufficient compliance of the doctrine of natural justice. In this context, reference may be made to the decision of this Court in case between B.K. Sharma v. Union of India [2005(4) GLR 3432] wherein, the Hon'ble Division Bench in para-44 of the said decision observed thus:- "44. This aspect was also considered by De Smith, Woolf Jowell in Judicial Review of Administrative Action, and it was observed therein that "A fair "hearing" does not necessarily mean that there must be an opportunity to be heard orally. In some situations it is sufficient if written representations are considered. Where the words "hearing" or "opportunity to be heard" are used in legislation, they usually require a hearing at which oral submissions and evidence can be tendered. However, in a great many statutory contexts, a duty of "consultation" is placed upon the decision-maker. This is almost always in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusions by the Disciplinary Committee, as confirmed by the appellate committee, suffer from any infirmity and/or that the decision deserves to be interfered with on any permissible ground. 21. In this background, the contention by learned counsel for the petitioner viz. that the mistakes cannot be said to be or construed as "gross negligence" is required to be considered. So as to support and justify its contention, the learned advocate for the petitioner has relied on the decisions in case of In Re: An advocate [AIR 1989 SC 245] and the decision in case of V.P. Kumaravelu v. The Bar Council of India, New Delhi Ors. [AIR 1997 SC 1014]. 21.1 In the decision In Re: An advocate [AIR 1989 SC 245], the Hon'ble Apex Court observed in para-12 that:- "12. In our opinion the appellant has not been afforded reasonable and fair opportunity of showing cause inasmuch as the appellant was not apprised of the exact content of the professional misconduct attributed to him and was not made aware of the precise charge he was required to rebut. The conclusion reached by the Disciplinary Committee in the impugned order further shows that in recording the finding of facts on the three questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) Whether the doctrine of benefit of doubt applies? (5) Whether an Advocate acting bona fide and in good faith on the basis of oral instructions given by someone purporting to act on behalf of his client, would be guilty of professional misconduct or of an unwise or imprudent act, or negligence simpliciter, or culpable negligence punishable as professional misconduct?" From the facts of the said case, it emerges that a profession similar to Clause (7) of Part-I of IInd Schedule of the Act was not under consideration before the Hon'ble Apex Court in the said decision. 21.2 So far as the decision in the case between V.P. Kumaravelu v. The Bar Council of India, New Delhi Ors. [AIR 1997 SC 1014] is concerned, in the said decision also, the profession similar to Clause (7) of Part-I of IInd Schedule of the Act was not under consideration before the Hon'ble Apex Court. Moreover, in the said decision, the Hon'ble Apex Court has observed that:- "12. Looking to all the circumstances the appellant was negligent as he had failed to attend to the two cases. His client had to suffer ex parte decrees. There is, however, no finding of any mala fides on the part of the appellant or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erges that the conclusions by the disciplinary committee and thereafter, by the appellate committee confirming disciplinary committee's conclusions that the petitioner did not exercise due diligence in preparing and certifying the report, cannot be faulted and the decisions relied on by the learned advocate for the petitioner would not, in light of facts of present case and in view of relevant provision, provide any assistance to the petitioner as the said decisions take into account different set of facts and circumstances which are materially different from facts of present case and the relevant provision are also different. 23. The learned advocate for the petitioner then contended that the quantum of penalty is too harsh and is not commensurate with the misconduct. 23.1 Once the Court comes to the conclusion that the findings/ conclusion as regards misconduct does not warrant any interference, then, unless the quantum of penalty is shown to be or is found to be so disproportionate as would amount to victimization, the Court would, ordinarily, not interfere with the quantum of penalty. 24. In present case, the competent authority has imposed penalty of removal of petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of a Chartered Accountant, which is given either negligently or in a fraudulent manner so as to see that the purpose of a dishonest and unscrupulous person is achieved. We feel that in a society where Chartered Accountants are highly respected as Professionals, a Chartered Accountant should take due care before issuing any Certificate and as in the instant case, the respondent had failed to do so, we feel that removal of his name from the Register of members for a period of six months would be sufficient punishment to the respondent and it will also have a deterrent effect." 24.2 It will also not be out of place to refer to the observations by the Court in paragraph no.20 and 21 of the decision in case between Council of Institute of Chartered Accountants of India v. Mukesh R. Shah [AIR 2004 GUJ 164], which read thus:- "20 A Chartered Accountant is statutorily required to undertake and carry out various functions as statutorily prescribed under the Companies Act, 1956. Part VI of the Companies Act deals with management and administration. Chapter I in the said part relates to general provisions and there are separate heads regarding accounts and audit. Section 226(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the income-tax authorities not only to accept the auditors' report, but also to draw the proper inference from the same. The income-tax authorities can, therefore, come to the conclusion that, since the auditors were required by the statute to find out if the deductions claimed by the assesses in their balance-sheets and profit and loss accounts were supported by the relevant entries in their account books, the auditors must have done so and must have found that the account books supported the claims for deductions. Where the original account books of the assessee had been destroyed in a fire it was held that the Appellate Tribunal, in allowing a deduction, could rely upon other material mainly consisting of the auditors' reports from which it could be inferred that the deductions were properly supported by the relevant entries in the account books". 25. When the facts of the petitioner's case and the report by the Disciplinary Committee and its conclusions as well as the concurring decision of the appellate committee are examined in light of the said observations, the submission by learned advocate for the petitioner cannot be accepted. 26. In light of the mistakes, inacc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deleting institutes vigil over its members and their conduct. Having regard to these aspects, the Court is not inclined to accept the petitioner's contention that the action taken by the institute is too harsh. 27.1 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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