Facts of the Case

The matter arose from information received by the Directorate pursuant to a newspaper report published in the Times of India, New Delhi dated 03.12.2016 alleging that CA Ashwani Kumar Dewan was involved in possession of high-end properties and evasion of taxes. Subsequent actions by the Directorate General of Central Excise Intelligence (DGCEI) and the Enforcement Directorate revealed that the respondent was the Managing Director of M/s C.T. Cotton Yarn Ltd., Bhind, and was allegedly the mastermind behind clandestine manufacture and clearance of excisable goods without payment of Central Excise duty.

Search and investigation proceedings revealed maintenance of parallel books, forged and manipulated documents, use of multiple group entities to divert funds, clandestine clearances, misuse of duty-free imports, and routing of proceeds through companies owned and controlled by the respondent. Penalties were imposed on the respondent under Rule 26 of the Central Excise Rules, 2002 and Section 112 of the Customs Act, 1962. Disciplinary proceedings were initiated under Section 21A of the Chartered Accountants Act, 1949.

Issues Involved

Whether the respondent Chartered Accountant was guilty of professional and other misconduct under Item (11) of Part I and Clause (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949, whether his conduct demonstrated lack of integrity and ethical standards, and whether acting as Managing Director of companies without prior approval of the ICAI constituted misconduct.

Petitioner’s Arguments

The Informant Department contended that the respondent, while being a Chartered Accountant, was actively involved as Managing Director in companies engaged in large-scale evasion of Central Excise duty and customs duties. It was argued that he engineered the modus operandi for clandestine manufacture, manipulated statutory records, forged documents, diverted funds, and violated statutory provisions. It was further contended that the respondent acted as Managing Director of M/s C.T. Cotton Yarn Ltd. and other companies without obtaining prior permission of the ICAI while holding a Certificate of Practice, thereby violating Item (11) of Part I of the First Schedule.

Respondent’s Arguments

The respondent submitted that criminal proceedings were pending and sought that disciplinary proceedings be kept in abeyance. He contended that the excise matter had been closed by DGCEI and that no final conviction had been recorded by criminal courts. He further submitted that he had obtained ICAI approval earlier for certain directorships and pleaded that subsequent appointments should be viewed leniently. The respondent also relied upon retraction of statements and pendency of writ petitions.

Court Order / Findings

The Board of Discipline held that disciplinary proceedings are independent of criminal proceedings and that misconduct can be established on the standard of preponderance of probabilities. Relying upon Supreme Court decisions including Ajit Kumar Nag vs. General Manager (PJ), Indian Oil Corporation Ltd. and Capt. M. Paul Anthony vs. Bharat Gold Mines Ltd., the Board held that pendency of criminal cases does not bar disciplinary action.

On facts, the Board found overwhelming documentary and circumstantial evidence demonstrating that the respondent, as Managing Director, exercised complete control over the affairs of M/s C.T. Cotton Yarn Ltd. and other group entities and orchestrated clandestine removals, evasion of excise duty, manipulation of records, and diversion of funds. The Board further noted that the respondent admitted to acting as Managing Director of companies while holding a Certificate of Practice and without obtaining specific and prior approval of the ICAI, in clear violation of Item (11) of Part I of the First Schedule.

The Board held that such conduct was clearly unbecoming of a Chartered Accountant, brought disrepute to the profession, and constituted professional and other misconduct under Item (11) of Part I and Clause (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949.

Important Clarification

The Board clarified that ICAI disciplinary jurisdiction is independent and distinct from criminal or quasi-criminal proceedings. A Chartered Accountant can be held guilty of professional misconduct even in the absence of a criminal conviction where conduct, knowledge, intent and surrounding circumstances establish ethical breach and behaviour unbecoming of the profession. Further, members in practice cannot engage in management of companies without obtaining prior approval of the ICAI.

Final Outcome

The Board of Discipline held the respondent, CA Ashwani Kumar Dewan (M. No. 082910), guilty of professional and other misconduct under Item (11) of Part I and Clause (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. The Board ordered removal of the name of the respondent from the Register of Members for a period of one (1) month.

Source Link- https://www.mytaxexpert.co.in/uploads/1768899162_CA.AshwaniKumarDewanM.No.082910DelhiinRe.pdf

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