Facts of the Case

A complaint was filed by CA Nitin Mittal against CA Sushant Beri alleging professional misconduct in relation to the tax audit of M/s Baz Cycle Industries for the Financial Year 2016–17. The complainant had been conducting the tax audit of the said firm up to Financial Year 2015–16 and had received due audit fees and consultancy charges.

It was alleged that the Respondent accepted the tax audit assignment for Financial Year 2016–17 without first communicating in writing with the complainant, who was the previous tax auditor of the firm. The complainant produced a copy of Form 3CB dated 05 October 2016 issued by him and Form 3CB dated 02 August 2017 issued by the Respondent to substantiate the allegation.

The complainant also relied upon his letter dated 13 November 2017 addressed to the Respondent, pointing out the breach of professional etiquette.

Issues Involved

Whether the Respondent accepted the tax audit assignment previously held by another Chartered Accountant without first communicating with him in writing, and whether such conduct constituted professional misconduct under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949.

Petitioner’s Arguments

The complainant contended that he was the continuing tax auditor of the firm and that there were no professional disputes or unpaid dues which would justify bypassing the mandatory requirement of prior communication. It was argued that the Respondent knowingly violated the ethical requirement by accepting the tax audit without any written communication, thereby committing professional misconduct.

Respondent’s Arguments

The Respondent admitted that he did not communicate with the complainant prior to acceptance of the tax audit assignment. He submitted that the client had approached him directly and that due to certain circumstances, he was unable to contact the complainant.

The Respondent further submitted that there was no malafide intention on his part and that the mistake occurred inadvertently. He also pointed out that subsequently the complainant had expressed willingness to withdraw the complaint and had stated that he had no objection to the tax audit conducted by the Respondent.

Court Order / Findings

The ICAI Board of Discipline examined the complaint, documentary evidence including Forms 3CB, correspondence between the parties, and the oral and written submissions of the Respondent. The Board noted that the Respondent categorically admitted that he had not communicated with the complainant prior to accepting the tax audit of the firm for Financial Year 2016–17.

The Board referred to Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949, which mandates that a Chartered Accountant shall not accept an audit position previously held by another Chartered Accountant without first communicating with him in writing.

The Board further observed that the subsequent attempt by the complainant to withdraw the complaint could not be entertained, as the disciplinary proceedings had already concluded. The absence of malafide intent was noted, but the breach of ethical requirement stood established.

Important Clarification

The Board clarified that prior written communication with the previous auditor is a mandatory ethical requirement, and failure to comply with the same constitutes professional misconduct, irrespective of whether there is malafide intention or whether the client directly approaches the incoming auditor.

Final Outcome

The ICAI Board of Discipline held CA Sushant Beri (M. No. 514345) Guilty of “Professional Misconduct” under Item (8) of Part I of the First Schedule to the Chartered Accountants Act, 1949 read with Section 21A(3).

By order dated 10 January 2022, the Board Reprimanded the Respondent.

Source Link-  https://www.mytaxexpert.co.in/uploads/1768900137_CA.NitinMittalvsCA.SushantBeriM.No.514345Ludhiana.pdf 

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