Facts of the Case

The disciplinary proceedings arose from a complaint filed by Ms. Hena Kumar Sukhna, IRS, Assistant Director of Income Tax (Investigation), Mohali, in connection with the Punjab Sand Mining Auctions Scam. It was alleged that persons behind the Rana Group of Companies secured three sand mines through benami transactions using three benamidars, namely Shri Ajitpal Singh, Shri Kulwinder Paul Singh and Shri Amit Bahadur.

During investigation, it was revealed that the respondent, CA Surinder Kumar (M. No. 070405), while holding a full-time Certificate of Practice and performing attestation functions, became a partner in three partnership firms namely M/s Rajbir Enterprises, M/s Rajbir Enterprises, Mohali, and M/s New Rajbir Enterprises on 10.06.2017. The partnership deeds clearly recorded the objects of carrying on mining and related activities and allotted a profit-sharing ratio of 3% to the respondent.

It was alleged that these partnerships were part of a larger arrangement involving benami transactions and fund flows connected with the auction of sand mines. The Director (Discipline) formed a prima facie opinion holding the respondent guilty under Items (4) and (11) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Issues Involved

Whether entering into partnership firms for mining business while holding a full-time Certificate of Practice constituted professional misconduct under Item (4) of Part I (entering into partnership with non-members) and Item (11) of Part I (engaging in other business or occupation) of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The respondent contended that the complaint was procedurally defective and initially filed without proper authorization. On merits, he submitted that the partnership firms never commenced business operations, no bank accounts were opened, and no mining licences were granted. He claimed that he had only intended to surrender his Certificate of Practice if and when business operations commenced and that mere signing of partnership deeds could not amount to engaging in another business or occupation.

Respondent’s Arguments

The Disciplinary Directorate relied on partnership deeds and records establishing that the respondent had entered into mining partnerships while holding a full-time Certificate of Practice. It was argued that Regulation 190A mandates prior permission of the Council before engaging in any other business, and violation occurs at the stage of entering into such arrangements, irrespective of whether business actually commenced.

Court Order / Findings

The Board of Discipline examined the record and held that Regulation 190A of the Chartered Accountants Regulations, 1988 clearly prohibits a member in practice from engaging in any business other than the profession of accountancy without prior permission of the Council. The Board observed that joining a partnership firm with the object of carrying on mining business itself constitutes engagement in another business and violates Item (11) of Part I of the First Schedule.

The Board further held that by entering into partnerships with non-members, the respondent violated Item (4) of Part I of the First Schedule. The contention that business did not actually commence was rejected, as the act of entering into such partnerships itself amounted to professional misconduct. The Board, however, did not sustain the charge of “other misconduct” under Item (2) of Part IV, holding that it fell outside the scope of the original complaint.

Important Clarification

The Board clarified that a Chartered Accountant holding a full-time Certificate of Practice must obtain prior permission before entering into any business arrangement, and violation occurs at the stage of forming such partnerships, even if the business does not subsequently commence operations.

Final Outcome

The Board of Discipline, in exercise of powers under Section 21A(3) of the Chartered Accountants Act, 1949, ordered removal of the name of CA Surinder Kumar (M. No. 070405) from the Register of Members for a period of one (1) month.

Source Link- https://www.mytaxexpert.co.in/uploads/1768890987_Ms.HenaKumarSukhnaIRSADITInv..pdf

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