Facts of the Case

A complaint was initiated by the Directorate of Income Tax (Investigation), Kolkata, against CA Bijay Kumar Agrawal, alleging that he assisted in raising bogus share application money and share premium through various shell companies allegedly controlled by the Mahabir Danwar Jewellers Group. It was alleged that these activities were carried out in connivance with known accommodation entry operators for the period Financial Years 2006–07 to 2012–13, resulting in large-scale tax evasion.

The allegations were primarily based on a statement recorded on oath on 19 June 2014 under Section 131 of the Income-tax Act, 1961, wherein the Respondent allegedly admitted to arranging accommodation entries through “jamakharchi/shell companies” for clients. Subsequently, the Respondent retracted the statement by filing a sworn affidavit dated 23 June 2014.

The disciplinary proceedings examined the Respondent’s alleged association with entities such as M/s A.B. Polyplast Private Limited, M/s Shree Hanuman Minerals Private Limited, M/s Shree Trading Company, M/s Krishna Gopal Ore and Minerals Private Limited, and M/s Jupiter Hotel Limited, among others.

Issues Involved

Whether the Respondent assisted in providing accommodation entries through shell companies, whether such conduct constituted “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949, and whether disciplinary action could be sustained in the absence of corroborative documentary evidence.

Complainant’s Arguments

The Complainant Department relied on the statement recorded under oath and assessment orders of alleged beneficiary companies to allege that the Respondent was involved in providing accommodation entries of share capital and share premium. It was contended that such activities amounted to professional misconduct and brought disrepute to the profession.

Respondent’s Arguments

The Respondent denied the allegations and contended that the statement recorded on 19 June 2014 was obtained under pressure and was promptly retracted. He submitted that he was never a director, shareholder or auditor of the alleged shell companies during the relevant period and that no documentary evidence established his involvement in accommodation entry operations.

The Respondent further argued that no assessment order in his own case concluded that he earned commission income from accommodation entries and that additions made in third-party cases could not be used to infer misconduct on his part.

Court / Authority Order and Findings

The Board of Discipline examined the entire record including the statement on oath, the retraction affidavit, assessment orders of beneficiary companies, ROC records and submissions of the parties. The Board noted that no corroborative documentary evidence was produced to substantiate the allegation that the Respondent facilitated accommodation entries.

The Board observed that the retracted statement could not be relied upon in isolation, particularly when the Income Tax Department failed to bring on record any material evidence such as flow of funds, commission income, or control over alleged shell entities. The Board further noted that no conclusive finding was recorded against the Respondent in his own income-tax assessments.

The Board held that suspicion and conjecture cannot substitute proof in disciplinary proceedings and that allegations must be established by cogent and reliable evidence.

Important Clarification

The Board clarified that disciplinary proceedings under the Chartered Accountants Act require independent and corroborative evidence. Allegations of accommodation entry operations cannot be sustained solely on the basis of retracted statements or assessment findings in third-party cases without establishing direct involvement of the member.

Final Outcome

The ICAI Board of Discipline held CA Bijay Kumar Agrawal (M. No. 055653) 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 06 December 2023, the Board directed closure of the proceedings 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/1768820976_ShriAbhishekMishravsCA.BijayKumarAgrawalM.No.055653Kolkata.pdf

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