Facts of the Case

The complainant, Smt. Malar Kodi, Director of M/s Rainbow Power International Private Limited, engaged the respondent, CA Ranjit Kumar Yadav, for audit, taxation and GST compliance services from FY 2015–16 till February 2022. After introduction of GST with effect from FY 2017–18, the complainant continued to transfer amounts to the respondent towards GST payment, being unaware of the availability and applicability of the Input Tax Credit mechanism.

In January 2022, upon discovering the Input Tax Credit provisions, the complainant raised a grievance with the respondent, who neither provided a satisfactory explanation nor relinquished GST login credentials. It was subsequently discovered that while collecting amounts from the complainant towards GST payment, the respondent had fully utilised Input Tax Credit to discharge GST liability and retained the excess amount for himself. Legal notice dated 05.02.2022 demanding refund was acknowledged by the respondent, but the excess amount was not returned.

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 misappropriating excess GST amounts collected from the client by fully utilising Input Tax Credit and retaining client funds for personal use without disclosure.

Petitioner’s Arguments

The complainant contended that the respondent deliberately misled her by stating that Input Tax Credit was available only to businesses with turnover in crores, collected GST amounts in cash and through bank transfers, fully adjusted GST liability using Input Tax Credit, and misappropriated the balance amount. Bank statements, GST returns and payment records were relied upon to show that ₹3,73,950 was collected, whereas actual net GST payable in cash was only ₹1,34,012. It was further pointed out that part of the GST amount was transferred to the respondent’s wife even when she was not a partner of the respondent firm.

Respondent’s Arguments

The respondent appeared before the Board during the final hearing and admitted that he had received amounts in excess of GST payable and had utilised the balance for himself. The respondent did not dispute utilisation of Input Tax Credit nor the excess amount received, and did not provide any justification for retaining the same without informing the complainant.

Court Order / Findings

The Board of Discipline examined GST returns (GSTR-3B), bank statements, payment details and admissions of the respondent. The Board noted that the complainant paid ₹3,73,950 towards GST for FYs 2017–18 and 2018–19, while the total GST liability was ₹3,60,250, out of which ₹2,24,818 was discharged through Input Tax Credit, leaving only ₹1,34,012 payable in cash.

The Board observed that despite full utilisation of Input Tax Credit, the respondent collected and retained amounts far exceeding the actual GST paid, without disclosure to the complainant. The Board further noted that the respondent admitted during hearing that he used the excess amount for himself. Such conduct was held to be a serious breach of professional trust and integrity, amounting to misuse of client funds.

The Board concluded that the respondent’s actions constituted conduct unbecoming of a Chartered Accountant and squarely fell within “Other Misconduct” under Item (2) of Part IV of the First Schedule.

Important Clarification

The Board clarified that a Chartered Accountant acts in a fiduciary capacity while handling client funds. Collection of amounts in excess of statutory liability, full utilisation of Input Tax Credit, and retention of client money for personal use without disclosure constitutes grave professional misconduct warranting stringent disciplinary action.

Final Outcome

The Board of Discipline, ICAI, held that CA Ranjit Kumar Yadav was GUILTY of Other Misconduct under Item (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. In exercise of powers under Section 21A(3), the Board ordered removal of his name from the Register of Members for a period of three months and imposed a fine of ₹1,00,000, by order dated 25.09.2024, pursuant to its findings dated 12.06.2024.

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