--- title: A raid's sworn statement named a company director as the deal's facilitator. Tribunals had already cleared the money. description: A search produced a statement naming a chartered accountant as a share deal's facilitator. Tax appeals had already found the money genuine; the Board found no case either. case_number: BOD 736/2024 file_number: PPR/P/88/2016/DD/09/INF/2021/BOD/736/2024 forum: board-of-discipline institute: icai decided_on: 2024-08-27 outcome: Not guilty clauses: Item (2) of Part IV of the First Schedule order_pdf: https://disc.icai.org/wp-content/uploads/2024/09/23.-BOD-736-2024.pdf published: 2026-09-09 author: Jainam Shah keywords: bod 736 2024, item 2 part iv first schedule, other misconduct board of discipline, income tax search statement, section 132(4) statement, share premium investment, information under rule 7, board of discipline not guilty source: /icai/board-of-discipline/bod-736-2024 --- # A raid's sworn statement named a company director as the deal's facilitator. Tribunals had already cleared the money. A chartered accountant introduced two Kolkata-based companies to a family running an investment business, then took a seat on one of the two companies' board while it invested crores of rupees into that family's company at a striking premium. Years after an income-tax search on that company turned up a statement recorded on his oath, the Board of Discipline took up the question of whether the statement made him a facilitator of the deal.[^parties] ## What happened ```timeline A chartered accountant introduces two Kolkata-based companies to a family running an investment business. The family goes on to take over one of the two companies, and the chartered accountant becomes a director on its board, while denying any shareholding or stake of his own in either company. The two companies subscribe to shares in the family's investment company at a premium running into thousands of rupees a share, against a face value of ten rupees. Between them they pay in close to twenty-seven crore rupees. The income-tax department searches the investment company's premises, suspecting the two subscribing companies never had the means to pay such a premium and existed only to route unaccounted money in. Statements are recorded on oath, including one from the chartered accountant, who says the previous owners of the two subscribing companies were paid outside the books when the family took them over. Tax officers treat the money as unexplained and add it to the investment company's assessed income. On appeal, first the Commissioner of Income Tax and then the tax tribunal both hold the investment genuine and delete the addition, and the department's own further appeals against that finding are dismissed. The search finding reaches the Institute as information rather than as anyone's complaint, and the chartered accountant is called to answer for having facilitated the investment. The Board weighs the statement against what the tax proceedings found, and against what seven years of assessments on his own income never turned up. ``` Three things outside the timeline decided the case. The first was how narrow the operative line of evidence really was. Question 43 of the sworn statement asked the chartered accountant to explain why the two subscribing companies should not be treated as paper companies used to route unaccounted funds. His answer said: > I accept that subscribing companies M/s Apsara Trex P. Ltd. and M/s Shreya Tieup P. Ltd. were > brought over by the Godha family at the face value of the shares. The owners of the said companies > were compensated outside the books for the agreed value between the Godha family and the owners > somewhere equivalent to the amount of reserves outstanding in books of these two companies. I do > not have the knowledge of the exact amount of the total out of the books deal. That Godha family > may remember, I accepted the post of the Director for the intervening period due to my family > relationship with Godha family. I am neither any beneficiary nor own any shares in the company. > (para 1) Read plainly, that answer describes a separate transaction — the family's own purchase of shares in one of the two companies from its earlier owners — and says nothing about where the money for the later investment came from. The second was what years of separate tax litigation had already found. The Commissioner of Income Tax (Appeals) held that the two subscribing companies had built up their own share capital and reserves long before the family ever entered the picture, and deleted the entire addition against the investing companies' income; the tribunal upheld that finding on the department's own appeal (para 3–4). The third was what the department's own scrutiny of the chartered accountant's personal finances never found. Across seven years of his own assessments, nothing was ever added to his income (para 18). By the time the Board decided the case, nearly ten years had passed since the search.[^timeline] ## The charge - **Item (2) of Part IV, read with Section 22** — the First Schedule's general clause for "other misconduct." It has no fixed list of acts; it catches whatever conduct discredits the profession, once no more specific item fits.[^item2] The allegation was narrow from the start: that the chartered accountant had facilitated the receipt of share capital with premium by the investment company from the two Kolkata-based companies, since those two companies appeared, on the department's reading, to lack the financial credentials to pay such a premium (para 5). ## What the respondent said He raised the charge on two fronts, procedural and factual. Procedurally, he argued that Question 43 fell outside what the Institute was allowed to examine at all. The information forwarded to the Institute concerned only the investment by the two companies into the family's business; Question 43 was about the family's separate purchase of one company's own shares from its earlier owners, a matter the information never raised. He also pointed out that the department had shared only three pages of what was, on his account, a fourteen-page statement, leaving no way to check whether his answer to Question 43 continued on a page nobody had produced (para 11). Factually, he said the two subscribing companies needed no outside help to pay the premium: their net worth and financial credentials went back to 2005-06, years before the family's involvement, a fact the Commissioner (Appeals) and the tribunal had both accepted when they cleared the investment (para 7). He held no shares in either subscribing company and none in the family's investment company; his role, he said, was limited to seeing that the investment was backed by proper valuation reports (para 8). On the statement itself, he said it was given under "undue harsh mental pressure and stress" during the search, while he was already being treated for hypertension and diabetes, and that his family had urged him to say whatever it took to end it (para 13). He had not filed a police complaint about it or formally retracted it, but argued a statement given under that kind of pressure, and read only in extract, carried no evidentiary weight worth retracting (para 15). ## What the Board held The Board's own reading of Question 43 matched the chartered accountant's account of it: the statement recorded that money had changed hands outside the books when the family took over the two subscribing companies, but not that he was personally complicit in the later investment those companies made. As the Board put it: > even though the said transaction of Rs. 15,53,00,000/- happened during the directorship of the > Respondent but nowhere there is a specific mention of the Respondent being himself complicit with > the KIPL regarding the investment of Rs. 15,53,00,000/- and outside book settlement (para 17) The Board then weighed what the tax authorities had themselves found. Two rounds of appeals — the Commissioner (Appeals) and, on the department's own further appeal, the tribunal — had both cleared the investment as genuine, and across seven years of assessment on the chartered accountant's own income, nothing had ever been added (para 18). On that combination, the Board held that he had substantiated his case for being not guilty (para 19), and concluded: > the Respondent is 'Not Guilty' of Other Misconduct falling within the meaning of Item (2) of > Part-IV of the First Schedule to the Chartered Accountants Act, 1949. Accordingly, the Board > passed an Order for closure of the case in terms of the provisions of Rule 15 (2) of the Chartered > Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of > Cases) Rules, 2007 (para 20) ## The order No punishment stage follows a not-guilty finding.[^rule] The findings were signed by the same Board that heard the case in person.[^coram] ## Why it matters *This section is ours, not the Board's.* **A tax tribunal clearing the money does not end a parallel disciplinary enquiry.** Two rounds of tax appeals had already found the investment genuine before the Institute even took up the facilitation charge. Treat a favourable tax ruling as one input, not as something that closes a professional-conduct question on its own. **An answer given about one transaction can be read as evidence of another.** The line the Institute built its case on was, on a plain reading, about a transaction it was not examining. Read exactly what a question asks before assuming any part of your answer covers more ground than it does. **Ask for, and keep, a full copy of anything you say on oath.** The department here produced only three of fourteen pages of the statement. Get and keep your own complete copy of any statement taken under search conditions, so a fragment cannot later stand for the whole. **Sitting on a board means answering for what it shows, whatever your shareholding.** Having no shares and no beneficial stake in either company did not by itself end the enquiry; the Board still examined what the directorship itself established. Keep your own record of what a directorship did and did not involve you in. This summarises a public order and links the primary source. It is general information, not legal or professional advice. [^parties]: The respondent was *CA. Atul Jain (M. No. 037097)*, Mumbai. The case reached the Institute as information under Rule 7 of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 — built on an income-tax search and the statements it produced, not on a complaint from any named person. [^item2]: Item (2) of Part IV of the First Schedule, read with Section 22 of the Chartered Accountants Act, 1949, covers "other misconduct" — conduct that discredits the profession but is not captured by the more specific items listed elsewhere in the Schedule. [^timeline]: The search was conducted on 23rd December 2014; the chartered accountant's statement was recorded on oath the next day. The assessment orders followed in October 2016, the Commissioner (Appeals) orders in March 2018, and the tribunal's common order in July 2019. The order's own header records the Institute's final hearing as 26th June 2024, while its hearing table records the same hearing as 25th June 2024; the order does not reconcile the two dates. The findings were signed on 27th August 2024. [^rule]: Rule 15(2) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 — where the Board finds a member not guilty, it records the finding and orders the complaint closed. There is no punishment hearing under Section 21A(3). [^coram]: CA. Rajendra Kumar P (Presiding Officer), Ms. Dolly Chakrabarty, IAAS (Retd.) (Government Nominee) and CA. Priti Savla (Member), all present in person at ICAI Bhawan, Mumbai.