Facts of the Case

The disciplinary proceedings against CA Dinesh Kumar Agrawal (Membership No. 016535), Agra, arose from an investigation conducted by the Central Bureau of Investigation in RC No. G(E)/2005/EOW-I/DLI. The investigation uncovered a large-scale fraudulent scheme during the period 2003–2005 involving misuse of the name of an existing charitable trust, Indian Medical Scientific Research Foundation (IMSRF), Rajkot. Several fake bank accounts were fraudulently opened in the name of IMSRF and other fictitious trusts, through which donations aggregating to approximately ₹3.26 crore were received and siphoned off. The funds were routed back to donor companies after deduction of substantial commissions, enabling them to claim illegitimate tax exemptions, despite IMSRF not being eligible for exemption under the Income-tax Act after 31.03.2003.

The investigation revealed that the respondent played a significant role in opening bank accounts of fictitious trusts, introducing account holders, filling account opening forms, and allowing use of his residential address for PAN card applications of such trusts. The CBI filed a charge sheet against the respondent and others under Sections 120B, 420, 467, 468 and 471 of the Indian Penal Code, 1960. Based on these facts, disciplinary proceedings were initiated by the Institute of Chartered Accountants of India.

Issues Involved

Whether the conduct of the respondent Chartered Accountant in facilitating the creation and operation of fake trusts, opening bank accounts, and enabling routing of bogus donations constituted “other misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949, and whether disciplinary action under Section 21A(3) was warranted.

Petitioner’s Arguments

The respondent, through written submissions, alleged procedural irregularities and delays in the disciplinary proceedings. He contended that a prima facie opinion was formed without granting him an opportunity of being heard and that complete documents relied upon by the Institute were not provided to him in time. He also argued that the related CBI case was still at the pre-charge stage and that disciplinary proceedings should not proceed when he was not a member of the Institute on the relevant date. Due to repeated non-appearance, however, no substantive defence on merits was presented before the Board.

Respondent’s Arguments

The Director (Discipline) and the Board relied upon the detailed investigation findings, bank records, PAN applications, witness statements and the CBI charge sheet, which established the active role of the respondent in the fraudulent scheme. The Board also noted the respondent’s consistent non-cooperation and failure to appear despite multiple opportunities.

Court Order / Findings

The Board of Discipline, after examining the prima facie opinion, evidence on record, and the respondent’s conduct, held that the respondent was actively involved in a fraudulent operation involving misuse of charitable trust mechanisms for siphoning funds and enabling tax evasion. The Board observed that disciplinary proceedings under the Chartered Accountants Act can continue even if the member is not on the Register at the time of inquiry, provided the misconduct was committed during the period of membership. The Board further noted the respondent’s past disciplinary record and pattern of unethical conduct.

The Board concluded that the respondent was guilty of “other misconduct” falling within Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22 of the Act.

Important Clarification

The Board clarified that professional misconduct involving facilitation of financial fraud, misuse of charitable institutions and erosion of public trust strikes at the core of the dignity and ethical standards of the Chartered Accountancy profession. Disciplinary jurisdiction of ICAI extends to acts committed during the period of membership, irrespective of subsequent status.

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 Dinesh Kumar Agrawal (M. No. 016535) from the Register of Members for a period of three (3) months.

Source Link- https://www.mytaxexpert.co.in/uploads/1768890604_CA.DineshKumarAgrawalM.No.016535.pdf

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