Facts of the Case

A complaint was filed by Mr. Vijay Kumar, Chief Manager, SMEAG–SAG, ICICI Bank Ltd., Mumbai, against CA Anil Kumar Gupta, Proprietor of M/s Gupta Anil & Co., New Delhi. ICICI Bank had extended various credit facilities to M/s Anil Printers Ltd. The Respondent was associated with the borrowing company while simultaneously holding a valid Certificate of Practice as a Chartered Accountant.

It was alleged that the Respondent acted as an authorised signatory of the borrowing company and issued multiple certificates and confirmations to the bank on behalf of the borrower. The Respondent also used the official email domain of the borrowing company for correspondence with the bank and was involved in banking-related communications and documentation. Further, the Respondent was an Additional Director of M/s Sarvin Printers Pvt. Ltd., an associate concern, and had signed financial statements of the company. The complainant alleged that such conduct amounted to dual and conflicting roles, impairing professional independence.

Issues Involved

Whether the Respondent, while holding a Certificate of Practice, acted in a dual capacity by performing attest functions for a borrower company and simultaneously functioning as its authorised signatory and participant in managerial affairs, thereby committing professional misconduct under Item (11) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The complainant contended that the Respondent actively participated in the affairs of the borrowing company, acted as authorised signatory in banking transactions, issued certificates to ICICI Bank, and used the borrower’s official email domain, thereby playing a managerial and operational role. It was argued that such conduct compromised professional independence and violated the prohibition against engaging in business or employment while in practice.

Respondent’s Arguments

The Respondent denied the allegations and submitted that he was engaged only on a retainership basis and was paid professional fees subject to tax deduction under Section 194J of the Income-tax Act, 1961. He contended that his role was limited to finance, accounts and compliance matters, which fell within the professional domain of a Chartered Accountant. The Respondent further argued that he was merely a Director Simplicitor in M/s Sarvin Printers Pvt. Ltd., without involvement in day-to-day management, and that use of the company email ID was only for convenience and confidentiality.

Court / Authority Order and Findings

The Board of Discipline examined documentary evidence including bank correspondence, certificates issued by the Respondent, Board Resolutions of the borrowing company, email communications and admissions made during proceedings. The Board observed that the Respondent was authorised by the borrowing company to operate bank accounts, execute documents, and bind the company in transactions with the bank. The Board further noted that the Respondent issued certificates to the bank and simultaneously acted as an authorised signatory and functional executive, thereby assuming a dual role.

The Board held that such conduct was contradictory and impermissible, as a Chartered Accountant in practice cannot simultaneously perform attest functions and act in a managerial or executive capacity for the same entity. The Board observed that even if remuneration was termed as professional fees, the nature of duties performed clearly indicated involvement beyond permissible professional engagement. Accordingly, the Board concluded that the Respondent violated the independence and ethical standards prescribed under the Act and Regulations.

Important Clarification

The Board clarified that a Chartered Accountant in practice must maintain complete independence while performing attest functions. Acting as authorised signatory, participating in banking operations or binding a client company in transactions constitutes engagement in management or business, which is impermissible while holding a Certificate of Practice, irrespective of the nomenclature of remuneration.

Final Outcome

The ICAI Board of Discipline held CA Anil Kumar Gupta (M. No. 082320) guilty of Professional Misconduct under Item (11) 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 19 April 2023, the Board reprimanded the Respondent.

Source Link- https://www.mytaxexpert.co.in/uploads/1768820885_Mr.VijayKumarMumbaivsCA.AnilKumarGuptaM.No.082320NewDelhi.pdf

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