Facts of the Case

A complaint was filed by Shri Amith D. Mallinathpura, Deputy Commissioner of Income Tax, Central Circle–2(2), Bangalore, against CA M. G. Vinaya Simha, Bangalore. The complaint arose pursuant to search and seizure operations conducted under Sections 132 and 153A of the Income-tax Act, 1961 in the cases of Shri H. Nagaraja and related entities.

During assessment proceedings, the Respondent furnished fabricated income tax challans purportedly evidencing payment of taxes aggregating to ₹3.82 crore, allegedly to reduce assessed tax liability. The Income Tax Department verified the challans and found that the challan numbers, dates and payment particulars did not match official bank and departmental records. It was alleged that the Respondent knowingly prepared and submitted false challans to mislead tax authorities and facilitate evasion of legitimate tax dues.

Issues Involved

Whether the Respondent fabricated income tax challans and furnished false documents to the Income Tax Department, whether such acts amounted to “Other Misconduct” involving moral turpitude, and whether the conduct fell within Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949.

Complainant’s Arguments

The Complainant Department contended that the Respondent deliberately fabricated challans to falsely claim payment of taxes and reduce tax demand. It was argued that verification from banks and departmental records conclusively established that the challans were fake. The Complainant submitted that such conduct was fraudulent, prejudicial to revenue interests, and unbecoming of a Chartered Accountant.

Respondent’s Arguments

The Respondent denied the allegations and contended that the challans were genuine and that any discrepancies arose due to clerical or banking errors. He further contended that criminal proceedings were pending and that disciplinary proceedings should be kept in abeyance till conclusion of criminal trials. The Respondent also alleged coercion in recording of statements during tax proceedings.

Court / Authority Order and Findings

The Board of Discipline examined assessment records, challans, bank confirmations, statements recorded under Section 131, correspondence with banks, and submissions of the parties. The Board noted that multiple challans furnished by the Respondent were not traceable in bank or Income Tax Department systems, and amounts claimed as paid were never credited to the Government account.

The Board rejected the Respondent’s defence of clerical error and held that the scale and pattern of discrepancies clearly demonstrated deliberate fabrication. The Board further observed that pendency of criminal proceedings does not bar disciplinary action and that the standard of proof in disciplinary proceedings is preponderance of probabilities.

The Board concluded that the Respondent knowingly furnished false evidence with intent to mislead tax authorities and reduce tax liability, thereby causing loss to public revenue and bringing disrepute to the profession.

Important Clarification

The Board clarified that Chartered Accountants are expected to maintain the highest standards of integrity and honesty. Fabrication of statutory documents and furnishing false evidence to government authorities constitutes grave professional misconduct involving moral turpitude.

Final Outcome

The ICAI Board of Discipline held CA M. G. Vinaya Simha (M. No. 208874) 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 15 June 2023, the Board directed removal of the name of the Respondent from the Register of Members for a period of fifteen (15) days.

Source Link https://www.mytaxexpert.co.in/uploads/1768821013_ShriAmithD.MallinathpuraIRSvsCA.MGVinayaSimhaM.No.208874Bangalore.pdf

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