Facts of the Case

A complaint was filed by CA Rahul Ashok Jain, Surat, against CA Saurabh Buchha, alleging professional misconduct in relation to acceptance of tax audit of M/s Dokari Fashion, a partnership firm, for Financial Year 2019–20. The complainant was the tax auditor of the said firm for FYs 2017–18 and 2018–19.

It was alleged that the Respondent accepted the position of Tax Auditor for FY 2019–20 without first communicating in writing with the complainant, who was the previous tax auditor. The complainant further alleged lack of due diligence, stating that the Respondent proceeded with audit and certification without obtaining audited financial statements and audit report (Form 3CB and 3CD) for the immediately preceding year, which were required for compliance with KYC norms under the Code of Ethics.

Issues Involved

Whether the Respondent accepted the position of Tax Auditor previously held by another Chartered Accountant without prior written communication, and whether such conduct amounted to Professional Misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The complainant contended that no prior written communication was received before the Respondent accepted the tax audit assignment. It was argued that such communication is mandatory under Item (8) of Part I of the First Schedule and under the Code of Ethics, and failure to do so undermines professional discipline and collegiality.

Respondent’s Arguments

The Respondent submitted that he had attempted to communicate with the complainant by sending a letter dated 01 January 2021 through courier on 02 January 2021, but the courier receipt got misplaced due to COVID-related remote working. He accepted that the communication could not be substantiated with documentary proof and apologised for the lapse. The Respondent assured the Board that such an omission would not occur in future.

Court / Authority Order and Findings

The Board of Discipline examined the record, submissions and admissions of the Respondent. The Board reiterated that Item (8) of Part I of the First Schedule requires two essential conditions to be fulfilled:
(i) communication must be prior to acceptance, and
(ii) such communication must be in writing.

The Board noted that the Respondent failed to produce any evidence of delivery of written communication before accepting the tax audit assignment. The Board further observed that as per ICAI SSP records, both the complainant’s firm and the Respondent’s firm were located in the same building, albeit on different floors, and therefore personal delivery of written communication was easily possible.

The Board also recorded the Respondent’s admission during the hearing that he was at fault and that he could have ensured compliance by hand delivery. Based on the admission and documentary evidence, the Board held that the Respondent failed to comply with Item (8) of Part I of the First Schedule.

Important Clarification

The Board clarified that prior written communication with the previous auditor is a mandatory professional requirement. Absence of response, misplaced records, or assumptions of delivery do not absolve an incoming auditor from responsibility. Members must maintain positive evidence of such communication before accepting any audit assignment.

Final Outcome

The ICAI Board of Discipline held CA Saurabh Buchha (M. No. 191495) guilty of Professional Misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949. In exercise of powers under Section 21A(3) of the Act, by order dated 11 December 2023, the Board imposed a monetary penalty of ₹25,000 (Rupees Twenty-Five Thousand only) on the Respondent.

Source Link- https://www.mytaxexpert.co.in/uploads/1768820745_CA.RahulAshokJainvsCA.SaurabhBuchhaM.No.191495Surat.pdf

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