Facts of the Case

Disciplinary proceedings were initiated against CA P. Musalaiah pursuant to a CBI investigation relating to assessment proceedings of Dr. Kanduri Upendra Kumar (HUF), Kadapa, for Assessment Year 2012–13. Shri Shaik Abdul Fazulla, then Deputy Commissioner of Income Tax, Circle–2(1), Tirupati, conducted scrutiny of the assessee’s return.

It was alleged that illegal gratification of ₹3,00,000 was demanded to settle the assessment favourably and that the Respondent, acting as the Chartered Accountant of the assessee, arranged and facilitated payment of the bribe through an intermediary. A CBI trap was laid on 07 July 2014, during which an envelope containing cash was recovered. Criminal proceedings were initiated under the Prevention of Corruption Act, 1988.

The Board of Discipline considered the Findings dated 10 February 2023 and thereafter issued notice under Section 21A(4). After hearing the Respondent on punishment on 15 June 2023, the Board passed final orders.

Issues Involved

Whether the Respondent abetted bribery, facilitated illegal gratification to influence income tax assessment proceedings, failed to uphold professional integrity and independence, and whether such conduct amounted to “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949.

Authority’s / Prosecution Allegations

It was alleged that the Respondent coordinated meetings between the assessee and the Income Tax official, arranged the bribe amount, and actively participated in settlement of the assessment through illegal gratification. The allegations were supported by CBI trap proceedings, recovery of cash, recorded conversations, witness statements, and surrounding circumstances.

Respondent’s Arguments

The Respondent denied the allegations and contended that he was falsely implicated. He submitted that he merely represented the assessee in assessment proceedings and did not arrange or pay any bribe. He argued that the criminal case was pending and that disciplinary proceedings should not rely on disputed evidence. The Respondent also contended that the envelope recovered during the trap did not belong to him and that no direct evidence established his involvement.

Court / Authority Order and Findings

The Board of Discipline examined the CBI charge sheet, recovery memos, statements of witnesses, recorded conversations and other documentary evidence. The Board observed that disciplinary proceedings are distinct from criminal proceedings and are governed by the standard of preponderance of probabilities.

The Board found that the Respondent played an active role in facilitating the illegal gratification for favourable assessment, that corroborative evidence established his involvement, and that his conduct demonstrated lack of integrity and probity. The Board rejected the contention that pendency of criminal proceedings barred disciplinary action and held that the Respondent’s actions brought disrepute to the profession.

Important Clarification

The Board clarified that Chartered Accountants are expected to uphold the highest standards of integrity and must not, directly or indirectly, facilitate bribery or illegal gratification to influence statutory proceedings. Abetment of corruption constitutes grave professional misconduct irrespective of the outcome of criminal proceedings.

Final Outcome

The ICAI Board of Discipline held CA P. Musalaiah (M. No. 023675) guilty of “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22. In exercise of powers under Section 21A(3) of the Act, by order dated 15 June 2023, the Board directed removal of the name of the Respondent from the Register of Members for a period of one (1) year.

Source Link- https://www.mytaxexpert.co.in/uploads/1768820717_CA.PMusalaiahM.No.023675KadapainRe.pdf

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