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Institute of Chartered Accountants of India Versus Vivek Kapoor and others

2016 (6) TMI 368 - PUNJAB AND HARYANA HIGH COURT

Scam of providing accommodation entries by Chartered Accountants - Violation of Code of Ethics of the Institute of Chartered Accountants of India (ICAI) - Held that:- From the facts, noticed above, it is clear that respondent No. 1 grossly violated the code of ethics for Chartered Accountants. He admitted his guilt before the Income-tax authorities, which resulted in defrauding the revenue. Thereafter, he left the country. He did not avail of the opportunity afforded to him at different stages t .....

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he Act, we deem it appropriate to direct that name of respondent No. 1 be removed from the register of members of the Institute of Chartered Accountants of India for life. Ordered accordingly. - Civil Reference No. 5 of 2012 (O&M) - Dated:- 18-3-2016 - MR. RAJESH BINDAL & MR. HARINDER SINGH SIDHU JJ. Mr. Arun Nehra, Advocate for the petitioner. Mr. P. C. Goel, Advocate for Union of India. Mr. Denesh Goyal, Advocate for respondent No. 4. ... Rajesh Bindal J. 1. This order will dispose of thre .....

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could not be served. Number of efforts were made thereafter for service of respondent No. 1, but all failed. The order passed on 7.8.2013 shows that house of respondent No. 1 was found to be locked. The Process Server was informed that he had sold his house six/seven months ago and had gone to some unknown place. The application for substituted service was allowed. The service was effected by affixation and further by publication in two newspapers (English and Punjabi). Despite that, none appea .....

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artnership deeds. Several bank accounts were opened using fake names, photographs and introducers. Respondent No.1 himself was operating all benami bank accounts. After receipt of the complaint, proceedings were initiated against respondent No. 1. Copy of the complaint was sent to respondent No. 1 vide letter dated 2.6.2006 for response, however, the notice was received back undelivered with postal remarks left country . The matter was considered in the meeting of the Disciplinary Council in its .....

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in its meeting. They were at liberty to file any response thereto. After considering the submissions of the complainant, the Council accepted the report of the Disciplinary Committee. Respondent No. 1 was held guilty of other misconduct under Section 22 read with Section 21 of the Act. The Council, vide order dated 14.7.2011, decided to recommend to this court for removal of the name of respondent No. 1 from the register of members for a period of 10 years. 4. The submission of learned counsel .....

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provisions but caused loss of revenue to the State to the tune of lacs of rupees for his undue benefit. He further submitted that respondent No. 1 had, in fact, admitted his guilt before the income-tax authorities later on. After committing the fraud, he left the country. 5. Learned counsels appearing for Union of India and Income-tax Department supported the case of the petitioner. 6. Heard learned counsel for the parties and perused the paper book. 7. Though there are many frauds in which Char .....

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Kapoor who was a whole time practicing Chartered Accountant, practicing mainly at Amritsar, was engaged in the business of giving accommodation entries to various persons after charging commission ranging from 1 to 3% during the period 1997-98 to 2001-02. The said Chartered Accountant had opened, admittedly 15 bank accounts at Amritsar by using fake names, photographs and introducers. He used to operate all these bogus accounts through which the accommodation entries were routed. Cash was obtai .....

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ncome on account of the above said business of ₹ 42,64,000/- was offered by Shri Vivek Kapoor before the Settlement Commission following enquiries against him for assessment year 1998-99 to 2002-03. 2. The above conduct amounts to professional misconduct in relation to Chartered Accountants in practice as per para 11 of the First Schedule which states that a Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he engages in any business or occupation .....

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ffidavits of Shri Ravinder Pal Mehra and Shri Shahsi Pal Mehra (Annexures 3A and 3B) and the petition u/s 273A of Zubin Khurana, Alka Khurana, Vinod Khurana (Annexure 6A, 7A and 8A) and the legal notices sent by Zubin Khurana, Alka Khurana, Vinod Khurana to Shri Vivek Kapoor (Annexure 6B, 7B, 8B). (5) Shri Vivek Kapoor was advisor of Zubin Khurana, Alka Khurana, Vinod Khurana. These persons have sent legal notice to him (enclosed as Annexure 6B, 7B, 8B), which shows that he did not disclose the .....

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efore the Investigation Wing, Amritsar and in his application before the Settlement Commission clearing being out that Shri Vivek Kapoor was grossly negligent in conduct of his professional duties. 8. After receipt of the complaint, copy thereof was sent to respondent No. 1 vide letter dated 2.6.2006 for his response. He did not submit any reply. The matter was referred by the Council to the Disciplinary Committee. Even before the Disciplinary Committee, respondent No. 1 could not be served as h .....

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oted that the respondent has been in full time practice as a Chartered Accountant at Amritsar. The respondent has failed to submit his written statement inspite of regular reminders. The letters were returned undelivered with the postal remarks Prapt karta desh chor kar chala gaya hai . 12. The Committee is of the view that the respondent has opened various bank accounts using fake names and photographs. He was also operating all these bogus accounts to route the accommodation entries. The cash .....

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t in the statement given by him before the income-tax authorities and also in the application made before the Settlement Commission. The Committee also examined the witnesses, namely, Shri Ravinder Pal Mehra and Shri Shashi Pal Mehra who had given the statement on oath before the Commissioner of Income-tax as well. The witnesses also deposed before the Committee that the respondent has misguided them by explaining that the income when would be shown would not be taxable as it is in the form of e .....

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in evading Taxes and, therefore, has committed acts which are unbecoming of a Chartered Accountant. The Committee is thus of the view that the respondent is guilty of Other Misconduct under Section 22 read with Section 21 of the Chartered Accountants Act, 1949. CONCLUSION: 15. Thus, in conclusion, in the considered opinion of the Committee, the respondent is guilty of Other Misconduct under Section 22 read with Section 21 of the Chartered Accountants Act, 1949. 9. On receipt of the report of th .....

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tants Act, 1949. 11. The Council also decided to recommend to the High Court that the name of the respondent be removed from the Register of Members for a period of ten years which shall run concurrently alongwith the same punishment recommended in other two cases i.e., [25-CA (G-11)/2004] and [25-CA(S-27)/ 2005] against the same respondent. 10. The case against respondent No. 1 was established on the basis of admissions made by him before Income-tax authorities. The allegations against him were .....

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since 1982. I am educated upto B.A. and as stated earlier have done C.A. I am practicing as income tax consultant for the last 20 years. I am practicing only at Amritsar and not anywhere else. But I am having outstation clients in Delhi only, nowhere else. Q.2 It has been noted that you have introduced two accounts in the name of M/s J K Enterprises, Prop. Deepak Kumar in OBC, Putlighar and of Mr. Shiv Kumar in OBC, Civil Lines. Do you accept this. Ans. It is submitted that I being a good citiz .....

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(residence) and 42713 (office). They came to me at Amritsar in the year 1997 when Sh. Raj Kumar Gupta had come for some bank audit. During the meeting they asked me to offer accounts in various names at Amritsar so that the accommodation entries may be given at Yamuna Nagar and Jagadhari. They were after getting the entries of export concerns. This was because the export project is tax free. Since I was having some export concerns with me. I was lured by them into sending the export entries to t .....

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the money to Amritsar. The money received at Amritsar was deposited by me with the help of my employees in the office. They used to prepare the drafts from the bank and send the drafts to Yamuna Nagar at the address of Ashwani Mittal, Kheri Bazar, Jagadhari by courier service i.e. First Flight, Court Road, Opp. Swami Motors, Amritsar. The detail of the bank accounts used at Amritsar is as follows: (1) OBC Putlighar in the nameof J K Enterprises Prop. Deepak Kumar, 52626 (2) OBC Civil Lines in th .....

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me of Jac Bros. (10) In addition to the above it is also informed that as per my intimation Ashwani Mittal and his association have opened an account in the name of Jac Bros in Central Bank of India Yamuna Nagar or Jagadhri. In this acount along with the actual partners of Jac Brother whose photographs were prepared by me (without the knowledge of the actual partners of Jac Bros) Mr. SC Garg, Shallu Gupta, Atul Garg etc. were partners. I am supplying you the detail of the same. (11) Also it is i .....

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being done by me. I want to clear my consciousness and come out clean before the department. It is submitted that other than the export entries to the partners, some share application money was also sent in favour of T. G. Leisure & Resorts P. Ltd. and also some money was given to Daisy Investments i.e. Awayzet Road, Delhi. Entries worth 60 lacs (approx) were given to them. All of these are done on the instruction given by Ashwani Mittal. Whatever is stated above is true to best of my knowle .....

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ement of Sh. Vivek Kapoor recorded on 18.1.2002 xx xx xx Q.3 Pl. tell who is Deepak Kumar, the prop. of J K Enterprises in the account 52626 in OBC Putlighar. Ans. Actually nobody in the name of Deepak Kumar exits. Any available photograph was attached. This photograph is not known to me. However the account was operated by me and I used to sign as Deepak on the cheques. Q.4 Pl tell who is Deepak Kumar on the account opening form of A/c number 10350 in OBC Hall Bazar. Ans. This account was also .....

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ccount of J K Enterprises Prop Deepak Kumar in CBI (Central Bank of India) Civil Lines, Amritsar the photograph is of somebody else, and was arranged randomly. However again the account was operated by me by signing as Deepak. In the Jee Bee International also the signature of Deepak Kumar are done by me but the photograph of Ajay Kumar who is working as an accountant with Sanjay Weaving Co. Verka. Q.5 Pl tell who is Sameer Arora signing the cheques of AG Exports in SBOP East Mohan Nagar, Amrits .....

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at this concern was opened as partnership concern with Kuljit Singh as partner and Vicky. Kuljit Singh was a sham name and I signed as Kuljit Singh. The AG Exports was also opened as a partnership with SBOP East Mohan Nagar with Sameer Arora and Avtar Singh as partners. The signatures are of Sameer Arora and Avtar Singh but these are not any real persons. Q.6 What about the account of AG Exports with State Bank of Bikaner & Jaipur. Ans. This was an account opened as proprietorship in the nam .....

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Exprots was also operated by me. The photograph on the Bani Export account is that of Sandeep Singh resident of Chall Mandi and the photograph on Rajan Arora HUF account is of someone not known to me and has been randomly picked. xx xx xx In the end I would like to state that all the entries using the names of various export namely RK Overseas, AG Exports, bani Exports, Jac Bros. Bee Bee International either cash, cheque or draft are not having any basis. This is only a method of converting the .....

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a whole time practicing Chartered Accountant practicing Company in Amritsar and having a few clients with Branch Offices in Delhi and Karnal as well. The applicant was also auditing the books of account of the following exporter firms u/s 44AB of the Act. 1. M/s AG Exports, Tarn Taran Road, Amritsar. 2. M/s Bant Exports, Tarn Taran Road, Amritsar 3. M/s R. K. Overseas, Tarn Taran Road, Amritsar 4. M/s Jac Bros., Tarn Taran Road, Amritsar 5. M/s Bee Bee International, 62- Bhandari Bridge, Amritsa .....

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ting entries. The modus operandi suggested by them was that applicant would provide them with true copies of the Trading, Profit & Loss A/c and Balance Sheets of the genuine exporters for which the applicant was the Audition on the basis of the actual balance sheets of such genuine exporters, one of them would prepare duplicate profit & loss account, balance sheets and partnership deeds with deferent set of partners and locate persons interested in buying accommodation entries of tax fre .....

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rprises A/C No. 52626 OBC, Hall Bazar, ASR J. K. Enterprises A/C No. 10650 OBC, Bagh Jallianwala, ASR J. K. Enterprises A/c No. 6823 State Bank of Patiala, East Mohan Nagar, ASR A.G. Exports A/c No. 1338 State Bank of Patiala, East Mohan Nagar, ASR R. K. Overseas A/c No. 1344 Pb. & Sind Bank, Andhvidalaya Bani Exports A/c No. 1005 PNB, Green Avenue, ASR Bee Bee International A/c No. 1121 State Bank of Bikaner & Jaipur, M.M.M. Road A. G. Exports A/c No. 288 State Bank of Bikaner & Jai .....

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t. 1.5 After preparation of duplicate sets of Trading and Profit & Loss A/c, Capital are having names of various interested parties and balance sheets, as well as duplicate partnership deeds having names of interested parties as partners and opening of bank accounts, the next step used to be to issue bank drafts interested parties. The bank drafts/cheques were issued under the directions of Shri Ashwani Mittal of Yamuna Nagar. The drafts were issued mainly for outstation parties based in cit .....

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he parties in Amritsar, which were known to him only. The applicant also earned commission by using his contracts without various clients for arranging sales turnover. The cash received by way of sale proceeds was remitted to the sellers through cheques issued from the aforesaid bank accounts. A few parties were also given accommodating entries by way of Share application money. 1.9 The applicant had employed staff for handling cash and for getting drafts prepared. The applicant also incurred va .....

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ntries in the form of export profits, loans, creating turn over and share application money. Most of the time, the two persons of Jamuna Nagar mentioned above would refer the parties but, sometimes, the parties desirous of converting their unaccounted money into accounted one would contact the applicant directly. The rates of commission varied. It was 1% of the amount of the entries in respect of the cases referred by Shri Ashwani Mittal of Yamuna Nagar and 3% for the parties contacting directly .....

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o AY 2001-02, had identified certain expenses that may not have been incurred for the purpose profession and has therefore offered the same to tax before the Hon'ble Settlement Commission. The applicant had also offered to tax for each of the assessment years certain amounts which may have been earned by way of commissions etc. for which no records are available in order to ensure that there is no escapement of income. Neither the commission nor the interest income earned through investments .....

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ccount and balance sheets for each of the five years are as per appendix. The consolidated utilization statement is as per appendix. TRUE AND FULL DISCLOSURE The applicant has disclosed additional income of ₹ 42,64,000/- for all the five years on which the additional tax comes to ₹ 13,32,721/- as per the yearly computations given in the appendices. These disclosures are in addition to regular incomes for these years already disclosed in the regular of income furnished from time to ti .....

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may be. 3. Immunities from prosecution under the relevant provisions of the Income Tax Act, related sections of the IPC and Central Acts, as may be applicable, may kindly be granted. 4. Grant of installments for the payment taxes as a consequence of the settlement. 5. Permission to bring the undisclosed income in the books of account. 6. Such other relief to the applicant as may be deemed fit by the Hon'ble Commission having regard to the facts and circumstances of the applicant's case .....

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mber of the Institute has been guilty of any professional or other misconduct, the Council shall refer the case to the Disciplinary Committee, and the Disciplinary Committee shall thereupon hold such inquiry and in such manner as may be prescribed, and shall report the result of its inquiry to the Council. (2) If on receipt of such report the Council finds that the member of the Institute is not guilty of any professional or other misconduct, it shall record its finding accordingly and direct th .....

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he member an opportunity of being heard before orders are passed against him on the case, and may thereafter make any of the following orders, namely: (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: Provided that where it appears to the Council that the case is one in which the name of the member ought to be removed from the Register for a period exceeding five years or permanently, it shall not m .....

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the hearing of the case and shall cause notice of the date so fixed to be given to the member of the Institute concerned, the Council and to the Central Government, and shall afford such member, the Council and the Central Government an opportunity of being heard, and may thereafter make any of the following orders namely: (a) direct that the proceedings be filed, or dismiss the complaint, as the case may be; (b) reprimand the member; (c) remove him from membership of the Institute either perman .....

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) the discovery and production of any document; and (c) receiving evidence on affidavit. 13. As per the scheme of the Act, after following due procedure as laid down, the Council can take action against its members if the removal of name of a member from the register is upto the period of five years. In case the penalty proposed to be imposed is of a period more than five years, then the matter is to be referred to this court. After receipt of the recommendations from the Council, the court is c .....

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material, customers, investors, Banks, Financial Institutions, Insurers, Government, Tax Authorities, employees, collaborators and even their competitors. Keeping in view the importance of these statements and the large section of the society who use these statements for taking many vital decisions, it is necessary that these statements are attested by some person who is expert in this field so that the objectivity, integrity, reliability and credibility of the information is assured to a large .....

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