INCOME TAX ACT, 1961

Section 21A Rule 9 and Rule 14

Filing of complaint before ICAI - Requirement to provide reasons to complaint for prima facie conclusion of member being not guilty of alleged misconduct - -

A shareholder Mr. 'T' in M/S 'F' filed complaint bearing Complaint No. 2304 with Institute of Chartered Accountants of India (ICAI) against Internal Auditors of the Company. The complaint, had been closed by ICAI and its decision had been communicated to said 'T', who challenged this by way of writ petition contending that ICAI was obliged to record and convey reasons for closing the complaint agianst Internal Auditor ICAI submitted that poceedings before Disciplinary Committee and Board of Discipline under the Act, were principally between Institute and its Members, same could not be viewed as a private dispute between complainant and Chartered Accountant and therefore, reasons for closing the complaint were not required to be conveyed to complainant. Held: Combined reading of rule 3, 5(7)(a), 7, 8, 9, 14 of the Chartered Accountants (Proceure of Investigations of Professional and Other Misconduct and Conduct of Cases makes, it clear that where inquiry is initiated on a complaint filed under rule 3 complainant is entitled to receive a copy of order closing such inquiry agianst the member. 'Order' would necessarily include reasons for the same. The Rules having themselves created this right in favour of complainant, it cannot be accetped that complainant would only be supplied with 'Information' of the closure of complaint. Even otherwise, the duty to assign reasons is one of the essential concomitant of the principles of natural justice and also, it was not the case of ICAI that the Act or Rules exempt Director (Discipline) or the Board of Discipline from recording reasons for the prima facie opinion of member being not guilty of any misconduct. The only defence taken was that such reasons were not required to be communicated to the complainant and also, it was not the case of that the Act or Rules exempt Director (Discipline) or the Board of Discipline from recording reasons for the prima facie opinion of member being not guilty of any misconduct. The only defence taken was that such reasons were not required to be communicated to the complainant. However, in absence of such communication of reasons, the objective of prescribing a condition for recording reasons would itself fail. Accordingly, ICAI was under an obligation to provide reasons to complainant for its prima facie conclusion of member being not fuilty of any misconduct on complaint made by a complainant. However, such reasons need not be elaborate and would not widen the scope of interference of courts while exercising powers of judicial review.

Distinguished:Wholesale Trading Services (P) Ltd. v. Institute of Chartered Accountants of India (2019) 119 Taxmann.com 350 (Del) and Dinesh Gupta v. Vishal Chandra Gupta 2012 SCC Online Del 6333, N.C. Bansal v. Board of Discipline of ICAI Manu/DE/0887/2014. Supported by:Pankaj Garg v. Meenu Garg (2013) 3 SCC 246 (SC), Karnti Associates (P) ltd. v. Masood Ahmed Khan (2010) 9 SCC 496 : 2011 TaxPub(EX) 1575 (SC), Ajantha Industries v. Central Board of Direct Taxes, New Delhi (1976) 1 SCC 1001 : 1976 TaxPub(DT) 601 (SC), Secretary and Curator, Victoria Memorial Hall v. Howrah Ganatantrik Nagrik Samity (2010) 3 SCC 732.

SUBSCRIBE FOR FULL CONTENT