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BOD 727/2024Fine

An incoming tax auditor took over an audit without writing to the outgoing auditor. A fine of Rs 25,000 followed.

6 min readJainam Shah

A Bharatpur tax auditor took over an assignment from a family friend and predecessor, relying on verbal requests where the law requires a written one. The Board fined him Rs 25,000.

Held
FineGuilty of professional misconduct
Forum
Board of Discipline (First Schedule)
Clauses
Item (8) of Part I of the First Schedule
Decided
punished
File no.
PR/808/2022-DD/17/2023-BOD/727/2024
Source
Original order (PDF)

A young Bharatpur chartered accountant treated his client's retiring tax auditor as something close to a family elder, close enough that he expected the usual formalities to bend. What he never did, on his own account, was put a single word of that handover in writing.1

What happened#

A Bharatpur proprietorship has its tax audit handled for years by a chartered accountant its owner has come to trust as a family elder.
Health problems catch up with that auditor, and he can no longer keep up the assignment. He asks a younger chartered accountant, also known to the family, to take it over.
The younger accountant agrees. By his own account, every exchange about the handover happens by conversation, never on paper, and he completes the following year's tax audit without ever writing to his predecessor.
Years later, the retiring auditor's own son qualifies as a chartered accountant and struggles to build a practice in the same small town, losing clients to established names nearby. Around this time, the retiring auditor complains to the Institute that no one ever wrote to him at all.
The younger accountant tells the Board the omission came from family trust, not disregard, but produces no letter, no reply, and no record of any communication. The Board finds him guilty and fines him.

Two things in the record complicate the account beyond what the timeline carries.

The respondent's own story shifted with the audience. In his written submissions he said he had asked for a no-objection certificate verbally, more than once, and that the complainant kept evading it (para 4). At the hearing itself, he simplified this to saying he had accepted the work on request and on trust, without following the statutory procedure at all (para 11).

He also offered a motive for the complaint: that the retiring auditor's son, newly qualified, had struggled to hold onto clients in the same town, and that the complaint was a way of clearing the field for him (para 8). The complainant did not appear at the final hearing to answer this or anything else, telling the Board by email that he had already filed everything he had to say (para 9).

The charge#

Item (8) of Part I of the First Schedule requires a chartered accountant to communicate with the retiring auditor, in writing, before accepting an audit the other member already holds.2 The audit in question was a tax audit under section 44AB of the Income-tax Act, 1961.

A no-objection certificate is the usual way this duty gets discharged in practice, but the clause asks only for the letter — not for the outgoing auditor's consent, and not for a certificate at all.3 Here there was no letter, no certificate, and no other paper trail either. The Board found the respondent guilty and fined him.

What the respondent said#

His account did not deny that no written communication had passed; it explained why. He had accepted the assignment because the complainant himself, unable to continue the audit for health reasons, had asked him to take it on — and because he considered the complainant a guardian with whom his family had cordial relations (para 11).

Beyond that, he questioned the case built against him: the documents the complaint relied on, he said, were not public documents and had never been shared with him; a separate legal notice and proceeding were already running between the client and the complainant over the same material; and years of experience at a large audit firm had taught him the value of documentation, making this lapse an exception born of the personal relationship rather than a habit (paras 5–7).

What the Board held#

The Board read Item (8) for what it plainly requires:

before accepting the position of an auditor in any organization, a practicing Chartered Accountant shall be required to communicate with the outgoing auditor in writing and any violation of this provision will make a Chartered Accountant liable for misconduct (para 10)

Against that, the respondent's own defence supplied the finding. Asked why no written communication had ever reached the complainant, "the Respondent's submissions are void of any documentary evidence" (para 12). Health reasons, family trust and a disputed motive on the complainant's side went to why the letter was never sent — not to whether it existed. It did not.

The order#

the Board decided to impose a Fine of Rs.25,000/- (Rs. Twenty-Five Thousand only) upon him.

A fine sits above a reprimand and below removal from the Register on the Board's scale of punishment.4 Punishment followed the findings by several months.5

Why it matters#

This section is ours, not the Board's.

Verbal communication is not communication under Item (8). Even taking the auditor's account at face value — that the NOC was raised informally more than once — the clause requires it in writing. Put every retiring-auditor communication on paper, however cordial the relationship.

Family trust is not an exception written into the clause. A guardian-like relationship made the lapse understandable to the auditor, but it earned no leniency before the Board. Keep the same paperwork for family and stranger clients alike.

An absent complainant does not cost a case that already has enough on record. The complainant skipped the final hearing and filed nothing further, and the Board still ruled against the respondent on his own account. Never assume the other side's silence helps you.

An old handover can still cost you years later. This complaint surfaced only after the retiring auditor's son struggled to build a practice nearby, long after the audit changed hands. Treat every acceptance as a decision you may be asked to defend a decade on.

This summarises a public order and links the primary source. It is general information, not legal or professional advice.

Footnotes#

  1. CA. Sunil Kumar (M. No. 075294), Bharatpur, was the complainant, the outgoing tax auditor. CA. Arpit Taneja (M. No. 544209), Bharatpur, was the respondent, the incoming tax auditor. The client was M/s Divyansh Associates, a Bharatpur proprietorship, whose tax audit the complainant held for 2017-18 and the respondent took over for 2018-19. ↩

  2. Item (8) of Part I of the First Schedule requires a chartered accountant to communicate with the retiring auditor, in writing, before accepting a position as auditor previously held by another member. ↩

  3. A no-objection certificate is the outgoing auditor's written confirmation that they have no objection to the incoming auditor taking the assignment. It is the customary way Item (8)'s communication duty gets evidenced in practice, but the clause itself only obliges the incoming auditor to write — it does not require the outgoing auditor to issue anything in return. ↩

  4. Section 21A(3) gives the Board a graduated set of punishments — reprimand, a fine, and removal of the name from the Register for a limited period, in ascending order of severity. Check the current sub-section before relying on any figure — the amounts have been amended. ↩

  5. The findings document carries a signature date of 14 December 2024, which this page follows, and records the final hearing as 28 October 2024. The punishment order's opening paragraph instead gives the findings date as 10 February 2025 — the date of the findings in BOD 753/2024, a separate complaint by the same complainant against a different member, punished by the same Board on the same day. A findings date of 10 February 2025 would fall after this order's own signature date. Punishment, on a Board of three members, was passed on 29 July 2025 after the respondent appeared by video conference. ↩

Written by Jainam Shah. Found guilty under Item (8) of Part I of the First Schedule; the Board ordered a fine. General information, not legal or professional advice — read the order itself before relying on it.

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