The Hindu Business Line : The spread of wrong knowledge

AN INTERESTING case of professional misconduct under the Chartered Accountants Regulations came up before the Gujarat High Court in Council of the Institute of Chartered Accountants of India vs P. C. Parekh (2003 129 Taxman 80 Gujarat).

Mr Parekh (the respondent) authored a book entitled "Tax Planning for Secret Income (Black Money)". The Disciplinary Committee felt that it was a professional misconduct and referred the matter to the Council of the ICAI which concurred with the views of the Committee and felt that the member was guilty of professional misconduct. It suggested that his name be removed from the register of members for six months. The decision of the Council was given in 1990. Aggrieved, the respondent approached the High Court.

The argument of the respondent was that since the Council held him to be guilty of professional misconduct under the "other misconduct' category, the notification, as required under Part II (2)(b) of the Schedule, was not served on him. There was no embargo on writing books and, therefore, mere writing of such a book was not a misconduct.

The disciplinary proceedings were quasi-criminal in nature and, therefore, unless the misconduct was notified, a member cannot be charged for such misconduct. He also felt that there was nothing in the book which was likely to create an impression that chartered accountants were experts in creating black money and converting it into legal tender. There was also nothing in the book that could lower the image of the profession.

It was also felt that the disciplinary committee had gone beyond the charges levelled against the respondent, by stating that the effect of this writing was to educate the public as to how to create black money. He felt that there was nothing in the book that could be termed educating the public. He also countered that he had a fundamental right of speech and expression and this could not be denied to him.

To add weight to his arguments, he relied on the logic of the decisions in A. L. Kalra vs Project and Equipment Corporation of India Ltd (AIR 1984 SC 1361), Glaxo Laboratories (I) Ltd vs Presiding Officer, Labour Court AIR (1984 SC 505) and Rasikala Vaghajibhai Patel vs Ahmedabad Municipal Corporation (AIR 1985 SC 504). All these cases were decided in favour of employees in cases of wrongful dismissal and acts of omission on the part of employees. However, the respondent did repent before the court for having done such an act and also stated that he had given up the copyright of the book a few years after it was initially published.

The Institute, on its part, had a catena of judicial decisions apart from some strong facts. The respondent agreed that the Council had classified this misconduct as `other misconduct'. They felt that in publicising methods of tax evasion, the respondent's conduct was unbecoming of a CA. Reading the book, one got the impression that it provided direct and indirect suggestions as to the manner in which taxes could be evaded.

If the intent were pure, it would not have given details of the methods that can be employed for the purpose of tax evasion with illustrations and drafts of documents which were to be fabricated and the false entries that were to be made for the purposes of effective tax evasion.

It was reiterated that members of the Institute were required to maintain high standards of integrity and professional behaviour. The Institute preferred to take the support of the rationale of the decisions in ICAI vs B. Mukherjee (AIR 1958 SC 72), N. G. Dastane vs Shirkant S. Shivde (AIR 2001 SC 2028) and R. D. Saxena vs Balaram Prasad Sharma (AIR 2000 SC 2912). These cases which dealt with previous misconducts of CAs and advocates, by and large proclaimed removal of the names of the members for different period.

The Gujarat High Court, fixing its attention on the book per se, found the following remarks on the first page: "A book indispensable to every businessman, industrialist, government minister, politician, limited company, partnership, doctor, lawyer, actor, film-wallah, tax-practitioner, chartered accountant and Indian and foreign citizen" What follows are some extracts from the book which the court highlighted:

"We shall now discuss briefly, the ways and methods adopted by various persons in different fields to create black money. However, certain problems arise from such manipulations, which are tackled by the clever asssessee as under...

"The simplest method of creating black money by a doctor is simply to omit the issue of a receipt and also omit the entry of the same in the books of account...

"The revised statement based on manipulated accounts, bills, vouchers and receipts may be on the following lines...

"Thus, the foolproof method is made so that the officer cannot refuse the deduction... "

The court felt that the book is a treatise on dubious ways of dodging taxes, by preparing false accounts, secreting books of accounts, filing false statements and returns, bribing the officials, forging wills, agreements receipts and other documents.

The court was also amazed at the audacity of the respondent in justifying such putrid performance of inciting criminal acts by taxpayers, by emboldening them into a belief that they can get away by adopting the manipulative tactics suggested in the book and by corrupting the officials. The material contained in the book, if followed, would put the profession to shame, throwing to the winds the laudable norms of integrity and truthfulness expected of its members.

Upholding the stand of the Institute, the court held that the respondent is guilty of professional misconduct. Although the respondent was aged and not in good health, it suggested removal of his name from the list of members for a period of five years. The respondent, in a last-ditch effort, requested for a stay of the order so that he could trouble the Supreme Court. The court pooh-poohed the request as it felt that the respondent did not deserve further appeal.

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