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The assessee was a company engaged in the execution of civil construction works. The Assessing Officer (AO) issued a show cause notice under section 148A. AO had information that the assessee was a beneficiary of bogus sale transactions amounting to Rs. 2 crores.
The assessee submitted its reply that it hadn’t undertaken any such transaction. It also furnished a certificate from a Chartered Accountant certifying that the assessee hadn’t executed any transaction.
However, AO passed the order under section 148A(d) and also issued a notice under section 148. The assessee filed a writ petition against the order passed under section 148A by AO.
The Chhattisgarh High Court held that the assessee wanted the proceedings to be dropped merely based on a certificate issued by a Chartered Accountant.
The GST Portal showed sales to the assessee by entity Panveer Trading Private Limited. It was found that such an entity is selling tax invoices (accommodation entries) without a corresponding supply of goods. The assessee did not counter the allegations of bogus purchases from the entity except by furnishing a CA certificate to the effect that the assessee had not executed any such transaction.
Thus, there was, prima facie, some material based on which the Department could reopen the case. The assessee had not even attempted to assert that the material facts relied on upon the SCN are erroneous. In view of the above, the assessee's writ petition was to be dismissed.
The Delhi High Court has ruled that the Institute of Chartered Accountants of India (ICAI) has the authority to initiate an investigation against chartered accountants (CAs) on its own accord, based on "information" it receives, even if it does not receive a complaint.
The court stated that news reports cannot be considered "information" in and of themselves, but can prompt the ICAI to gather additional material that could be considered "information" for disciplinary proceedings against the CA in question.
Thus, where Suo Motu inquiry was initiated by ICAI in the Nirav Modi Scam against CAs who were joint Statutory Auditors of Punjab National Bank and had submitted a Limited Review Report in which they failed to disclose the Nirav Modi Scam of which they had knowledge at the time of reporting, the enquiry is not to be quashed as:
(i) It was not based solely on the news reports (which themselves contained no allegations against the petitioners-CAs);
(ii) The news reports merely acted as the trigger for the Institute to delve deeper into the massive fraud which had occurred and to examine whether any member had failed to abide by the SAs' which applied; and
(iii) The inquiry was based on obtaining a response from petitioner CAs and after the Directorate scrutinized the Limited Review Report dealing with the quarterly results of PNB and undertook a due examination of whether the petitioners had adhered to the Standards on Auditing (SAs) which applied.
Accordingly, the writ petitions filed by the petitioners-CAs shall stand dismissed. The Institute shall consequently be entitled to proceed further in accordance with the law.
That’s it from us for today! Stay Tuned for more updates from?Taxmann.com
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