Facts of the Case

The complainant, Shri Ajay Bharti, entered into a transaction for sale of an under-construction property to the family of the respondent, CA Akshay Mittal. It was alleged that the respondent, claiming his professional qualification, assured the complainant that GST exemption on the purchase consideration would be arranged. Subsequently, the respondent neither provided any GST exemption letter nor paid the GST amount.

During investigation, multiple allegations were examined by the Director (Discipline). After scrutiny, the proceedings were confined to two allegations, namely, engagement in marketing and advertisement of the respondent’s firm on online portals, and engagement in business other than the profession of Chartered Accountancy by issuing invoices for supply of building materials such as wall tiles and electrical items. Ultimately, the charge relating to engagement in other business under Clause (11) of Part I was found to be substantiated.

Issues Involved

Whether the respondent Chartered Accountant was guilty of professional misconduct under Clause (11) of Part I of the First Schedule to the Chartered Accountants Act, 1949 for engaging in business other than the profession of Chartered Accountancy by issuing invoices for sale of building materials in the name of his CA firm.

Petitioner’s Arguments

The complainant alleged that the respondent was engaged in activities beyond the scope of the profession by issuing invoices for supply of building materials through his Chartered Accountant firm. It was contended that such conduct amounted to carrying on business unrelated to professional services and violated the ethical standards prescribed for practising Chartered Accountants.

Respondent’s Arguments

The respondent denied the allegation and submitted that the invoices were personal in nature and were raised in the firm’s name only due to GST requirements relating to reversal of Input Tax Credit. It was argued that the materials were sold to the respondent’s father and that the transactions were bona fide and undertaken solely to ensure GST compliance. The respondent also contended that any errors were inadvertent and relied upon judicial precedents and a similar disciplinary order passed in favour of his father under the Company Secretaries Act.

Court Order / Findings

The Board of Discipline examined the invoices, documentary material and submissions made by the respondent. The Board observed that irrespective of the respondent’s explanation regarding GST compliance, issuance of invoices for sale of building materials under the guise of a Chartered Accountant firm constituted engagement in business other than the profession. The Board held that such activities were inconsistent with the professional standards expected of a practising Chartered Accountant and brought disrepute to the profession.

The Board further noted that the respondent acknowledged the impropriety of his actions and admitted guilt. The defence that the transactions were personal or undertaken for GST purposes was rejected, as professional firms cannot be used as a vehicle for non-professional commercial activities.

Important Clarification

The Board clarified that a practising Chartered Accountant cannot engage in trading or sale of goods or issue commercial invoices in the name of his professional firm. Even if such transactions are claimed to be personal or undertaken for tax compliance reasons, they amount to engagement in other business and violate Clause (11) of Part I of the First Schedule.

Final Outcome

The Board of Discipline, ICAI, held that CA Akshay Mittal was GUILTY of Professional Misconduct under Clause (11) of Part I of the First Schedule to the Chartered Accountants Act, 1949. In exercise of powers under Section 21A(3), the Board imposed a fine of ₹30,000, by order dated 15.07.2024.

Source Link - https://mytaxexpert.co.in/uploads/1768816266_ShriAjayBhartivs.CAAkshayMittalBoardofDisciplineICAI.pdf

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