Facts of the Case

The complainant, Shri Sudhanshu S. Gautam, Deputy Director of Income Tax (Investigation), Kolkata, filed a complaint against the respondent, CA Bijay Kumar Dokania, alleging involvement in providing accommodation entries in the form of pre-arranged Long Term Capital Gains through M/s BSR Finance and Construction Ltd. and other alleged shell entities. The allegations were primarily based on a statement recorded on oath from the respondent on 28.05.2014 under Section 131 of the Income-tax Act during investigation proceedings, wherein he was stated to have admitted involvement in arranging LTCG entries through brokers for beneficiary entities. The respondent was also alleged to have received cash commissions and to have facilitated falsification of books of accounts. The matter was placed before the Board of Discipline under Section 21A of the Chartered Accountants Act, 1949.

Issues Involved

Whether the respondent Chartered Accountant was guilty of “Other Misconduct” under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949 for allegedly providing LTCG accommodation entries and falsifying books of accounts, and whether the disciplinary proceedings were sustainable in absence of corroborative evidence beyond a retracted statement.

Petitioner’s Arguments

The complainant contended that the respondent had admitted, in his statement recorded under Section 131 of the Income-tax Act, that he was involved in providing accommodation entries in the form of pre-arranged LTCG through shell companies controlled and managed by him. It was further alleged that the respondent received cash from beneficiary companies and facilitated large-scale tax evasion. The complainant relied upon the statement recorded during investigation and related allegations to seek disciplinary action for Other Misconduct.

Respondent’s Arguments

The respondent denied the allegations and challenged the proceedings on both technical and substantive grounds. It was contended that the complainant had not specified the exact clause of misconduct in Form I and that the proceedings were initiated without proper jurisdiction. On merits, the respondent submitted that the statement relied upon by the complainant had been subsequently retracted and that no corroborative material or independent evidence was produced to substantiate the allegations. It was further pointed out that no addition was ultimately made in the respondent’s income in the assessment proceedings and that no evidence existed to establish formation or control of shell companies for providing accommodation entries.

Court Order / Findings

The Board of Discipline examined the technical objections and held that non-mentioning of a specific clause of misconduct in the complaint does not vitiate disciplinary proceedings, as it is the duty of the Director (Discipline) to identify the applicable clause based on allegations and material on record. On merits, the Board noted that the primary evidence relied upon by the complainant was the respondent’s statement dated 28.05.2014, which had subsequently been retracted. The Board further observed that despite multiple opportunities, the complainant department failed to bring on record any independent or corroborative evidence to substantiate the allegations of providing accommodation entries, controlling shell companies, or receiving commission. It was also noted that no addition was made to the respondent’s income in assessment proceedings. In absence of substantive evidence, the Board held that the charges against the respondent were not proved.

Important Clarification

The Board clarified that while procedural defects in a complaint are not fatal, allegations of professional or other misconduct must be supported by cogent and corroborative evidence. Reliance solely on a retracted statement, without independent material, is insufficient to establish misconduct under the Chartered Accountants Act, 1949.

Final Outcome

The Board of Discipline, ICAI, held that CA Bijay Kumar Dokania was 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. The complaint was ordered to be closed in terms of Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, by order dated 07.05.2024.

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