Facts of the Case

A complaint was initiated by Shri Benny John, Director of Income Tax (Investigation), Kochi, alleging that forged affidavits were filed before Income Tax authorities during search proceedings conducted in cases represented by CA K. I. John. It was alleged that such affidavits were submitted with the object of escaping tax liability by asserting that Panch witnesses were not present during search operations.

The complaint noted that similar affidavits were filed in multiple cases represented by the Respondent. These affidavits purportedly bore signatures of Panch witnesses denying presence during searches. All affidavits were sent for forensic examination along with genuine signatures of Panch witnesses, which revealed that the signatures on the affidavits were forged. Based on this, it was alleged that the Respondent was involved in facilitating or procuring forged affidavits and thereby committed “Other Misconduct”.

Issues Involved

Whether the Respondent procured, facilitated or was complicit in filing forged affidavits before Income Tax authorities to challenge validity of search proceedings, and whether such conduct constituted “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The complainant department contended that the practice of filing identical affidavits disputing Panchanama was observed only in cases handled by the Respondent, raising suspicion of his involvement. It was argued that the affidavits were proven to be forged through forensic examination and that such acts seriously undermined the integrity of Income Tax proceedings and constituted grave professional misconduct.

Respondent’s Arguments

The Respondent denied all allegations and submitted that he neither drafted nor procured the affidavits and had no role in arranging signatures of Panch witnesses. He contended that affidavits were brought by clients and filed on their instructions, and that he relied on documents produced by them in good faith. The Respondent emphasized that he did not benefit from the affidavits and that there was no evidence showing his involvement in forging signatures or inducing witnesses. He further relied on judicial precedents holding that misconduct must be proved by evidence and not suspicion.

Court / Authority Order and Findings

The Board of Discipline examined the complete record including forensic examination reports, statements of witnesses, affidavits, Income Tax orders, and submissions of the parties. The Board acknowledged that forensic examination conclusively established that signatures on certain affidavits were forged. However, the Board noted that there was no direct or circumstantial evidence linking the Respondent to the act of forgery or procurement of forged affidavits.

The Board observed that witnesses, including Panch witnesses, denied signing affidavits but also did not implicate the Respondent in procuring or preparing such documents. The Board further noted that the Respondent’s role was limited to representing clients and filing documents produced by them. There was no evidence that the Respondent advised, induced or conspired in the creation of forged affidavits.

The Board reiterated that disciplinary proceedings require proof of misconduct attributable to the member and that suspicion, however strong, cannot substitute evidence. In absence of proof of the Respondent’s involvement, the Board held that professional misconduct was not established.

Important Clarification

The Board clarified that while filing of forged documents before statutory authorities is a serious matter, disciplinary liability of a Chartered Accountant arises only when there is evidence of his involvement in preparation, procurement or conscious use of such forged documents. Mere representation of clients and filing of documents produced by them, without proof of complicity, does not constitute professional misconduct.

Final Outcome

The ICAI Board of Discipline held CA K. I. John (M. No. 004255) Not Guilty of “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22. By order dated 10 February 2023, the Board directed closure of the case under Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.

Source Link - https://www.mytaxexpert.co.in/uploads/1768899056_ShriBennyJohnKochivsCA.K.I.JohnM.No.004255Kottayam.pdf

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