ICAI Disciplinary Action on CA -False Declaration on INC22

ICAI Disciplinary Action on Chartered Accountant for False Declaration on INC-22

• ICAI has imposed significant disciplinary measures on CA for professional misconduct. The CA has been debarred for 90 days and fined Rs. 20,000 due to false declarations made on the e-form INC-22 using rental agreements and utility bills.
• This case, concerning the financial year 2018-19 for M/s NITP Marketing Services Private Limited, highlights the critical importance of due diligence and the severe consequences of professional negligence.
• The ICAI’s actions in this case underscore its commitment to maintaining high professional standards and ensuring that its members adhere to ethical guidelines and statutory obligations.

Case Details

Certification and Filing of Documents

• The CA was responsible for certifying and filing essential documents for M/s NITP Marketing Services Private Limited, specifically the e-form INC-22. This form is crucial for notifying the RoC about the physical address of a company, necessary for legal and correspondence purposes.
• The CA’s actions were found to be in violation of the professional standards expected of members of the ICAI. The false declarations on the INC-22 form, which is used for the notice of situation or change of situation of the registered office of a company, raised serious concerns about the integrity and reliability of the information provided by the CA.

Allegations

The RoC in Goa raised concerns regarding the accuracy and authenticity of the documents submitted:

• Uploading Unsigned Balance Sheets: The CA allegedly uploaded unsigned balance sheets via e-form AOC-4.
• Certification Without Verification: The CA certified e-form INC-22 without personally verifying the registered office of the company, relying solely on the rental agreement and utility bills provided by the company.

ICAI’s disciplinary committee found in Investigation and Findings

• The ICAI’s disciplinary committee found that the CA certified the INC-22 form without personally visiting the registered office of the company. Instead, the CA relied solely on the rental agreement and utility bills provided by the company, failing to perform necessary due diligence.
• The CA made false declarations on the INC-22 form, a serious breach of professional conduct. This was considered gross negligence and a violation of the professional standards outlined in the Chartered Accountants Act, 1949.

Disciplinary Hearing and Decision

• During the disciplinary hearing on March 19, 2024, the CA presented his case, citing reasons for his actions, including the timing of the physical verification and his reliance on documents provided by the company. However, the committee found these explanations insufficient. The CA’s failure to personally verify the registered office was deemed a significant breach of professional ethics and due diligence.

The ICAI disciplinary committee imposed the following penal Consequences

• The CA’s name was removed from the Register of Members for 90 days, prohibiting him from practicing as a Chartered Accountant during this period.
• CA was fined Rs. 20,000, payable within 90 days of receiving the order. Failure to comply with the fine would result in an additional 30-day removal from the Register of Members.

Importance of Due Diligence in Chartered Accountancy

Due diligence is a critical responsibility for Chartered Accountants, ensuring the accuracy and integrity of financial reporting and compliance with legal requirements. This case emphasizes the risks of relying solely on client-provided documents without independent verification.

Professional Standards and Ethical Obligations

The Chartered Accountants Act, 1949, outlines the professional standards and ethical obligations CAs must adhere to. The Chartered Accountants actions in this case violated these standards, leading to the disciplinary action by the ICAI. Maintaining trust and credibility in the profession requires strict adherence to these standards.

Lessons Learned and Best Practices for CAs

• Always conduct personal verification of critical information, such as a company’s registered office, before certifying documents. Relying solely on client-provided documents can lead to inaccuracies and legal issues.
• Maintain thorough and accurate records of all verifications and checks conducted. This documentation is crucial in case of disputes or investigations.
• Adhere strictly to the ethical guidelines and professional standards outlined in the Chartered Accountants Act, 1949. Avoid any form of professional misconduct, such as making false declarations or exhibiting gross negligence.
• Stay updated with the latest developments in laws, regulations, and professional standards. Continuous education and training help CAs remain informed about their responsibilities and best practices in the profession.

Conclusion

The Institute of Chartered Accountants of India (ICAI) has debarred a Chartered Accountant for a period of 90 days and imposed a fine of Rs. 20,000. The disciplinary action was taken in response to false declarations made by the Chartered Accountants on form INC-22, which involved using a rental agreement and utility bills. This incident underscores the critical importance of due diligence and adherence to professional ethics within the field of Chartered Accountancy.

The ICAI’s decision to debar the Chartered Accountants and levy a financial penalty serves as a stern reminder to all professionals in the field about the severe consequences of unethical practices. It reinforces the necessity for Chartered Accountants to perform their duties with utmost honesty, accuracy, and compliance with legal and regulatory requirements. This case highlights the essential role of ethical conduct and meticulous attention to detail in maintaining the trust and credibility of the profession.