Facts of the Case

Disciplinary proceedings were initiated against CA Girish Bherumal Gundesha pursuant to information received from the Income Tax Department following a search and seizure operation conducted on 14 December 2016 during the demonetisation period. The search was conducted at the premises of M/s Isanya Motors LLP and other connected persons, including Shri Satyen Gethani and Shri Kailash Chandan, who were clients of the Respondent.

During the search proceedings, statements under Section 131 of the Income-tax Act, 1961 were recorded from multiple persons, including the Respondent, which revealed that the Respondent had actively facilitated the exchange of old high denomination banned currency notes into new legal tender. The Respondent admitted that his clients had approached him for assistance in exchanging demonetised notes and that he had introduced various persons to each other, coordinated meetings, and received commission ranging between 3% and 14.5% for facilitating such exchanges.

The evidence on record showed that large amounts of banned currency were exchanged through unauthorised channels, with the Respondent playing a central role in connecting parties, routing cash transactions and enabling conversion of old currency into new notes during the prohibited period. The Respondent was also found to have professional knowledge of the illegality of such transactions, yet actively participated in the same.

Issues Involved

Whether the Respondent facilitated and participated in the exchange of banned high denomination currency notes during demonetisation in violation of Government policy and law, whether such conduct amounted to “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 read with Section 22, and whether severe disciplinary punishment was warranted under Section 21A.

Respondent’s Submissions

The Respondent denied intentional wrongdoing and contended that the transactions were legal exchanges permitted under RBI guidelines. He argued that he merely introduced parties and was not directly involved in exchanging currency. The Respondent further contended that he did not receive commission knowingly and that the transactions were undertaken by others. He also raised procedural objections regarding jurisdiction, composition of the Board, alleged defects in inquiry procedure and relied upon judicial precedents relating to standard of proof and disciplinary proceedings.

Court / Authority Order and Findings

The Board of Discipline carefully examined the extensive documentary evidence, statements recorded under the Income-tax Act, and the Respondent’s own admissions. The Board noted that multiple witnesses consistently stated that the Respondent introduced them to each other for the purpose of exchanging demonetised currency and that commission was paid for such facilitation. The Board found that the Respondent had full knowledge of the illegality of such exchanges during demonetisation and nevertheless actively assisted in routing transactions.

The Board rejected the Respondent’s defence that the exchanges were legal, holding that RBI notifications clearly restricted exchange of banned notes and that unauthorised conversion through private parties was illegal. The Board observed that the Respondent, being a Chartered Accountant, was expected to uphold the highest standards of integrity and compliance with law, especially during a sensitive national economic exercise like demonetisation.

The Board further held that disciplinary proceedings are distinct from criminal proceedings and that misconduct can be established on the basis of preponderance of probabilities. On evaluation of evidence, the Board concluded that the Respondent deliberately abused his professional position, facilitated illegal transactions and earned commission, thereby bringing grave disrepute to the profession.

Important Clarification

The Board clarified that Chartered Accountants are duty-bound to uphold the law and public policy. Active facilitation of illegal financial transactions, particularly during demonetisation, constitutes serious professional misconduct. The absence of criminal conviction or pendency of proceedings under other statutes does not dilute disciplinary liability under the Chartered Accountants Act, 1949.

Final Outcome

The ICAI Board of Discipline held CA Girish Bherumal Gundesha (M. No. 042885) 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 10 June 2022, the Board directed removal of the Respondent’s name from the Register of Members for a period of three months and imposed a monetary fine of ₹1,00,000 (Rupees One Lakh only), payable within 60 days from receipt of the order.

Source Link - https://www.mytaxexpert.co.in/uploads/1768898211_CA.GirishBherumalGundeshaM.No.042885Pune.pdf

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