Brigadier H. P. Singh Vs CA. Bhagyashree Sathe (ICAI Disciplinary Committee)
No Lien on Client Records for Unpaid Fees: ICAI Reprimands CA, Imposes ₹50,000 Fine
Summary: The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI), Bench-II, by an order dated 3 October 2026, reprimanded CA. Bhagyashree Sathe (Membership No. 037396), partner of M/s D. V. Sathe & Co., Pune, and imposed a fine of ₹50,000, payable within 60 days from receipt of the order, for professional and other misconduct concerning TDS compliance failures and withholding client records over outstanding professional fees. The disciplinary proceedings arose from a complaint filed by Brigadier H. P. Singh, Director of M/s Ajanta Techagro Land Development Private Limited. The punishment order followed findings pronounced on 29 August 2026, holding the respondent guilty under Clause (7) of Part I of the Second Schedule and Clause (2) of Part IV of the First Schedule to the Chartered Accountants Act, 1949. The Committee emphasised that a chartered accountant cannot exercise a lien over a client’s documents, accounting records or statutory portal credentials for non-payment of professional fees. It further held that eventual return of records under a settlement agreement did not adequately justify or explain the earlier period of withholding. The final punishment consisted of a reprimand and monetary fine; no removal from the Register of Members was ordered.
The respondent’s firm had been engaged in professional work concerning M/s Ajanta Techagro Land Development Private Limited since 2012. Its responsibilities included audit services, maintenance of accounting entries in Tally, deduction and deposit of Tax Deducted at Source (TDS), income-tax payments, professional tax compliance and filing statutory returns. The complaint contained two principal allegations. The first concerned a tax demand of ₹1,14,532.50 arising from alleged short deduction of TDS, delayed deposit of tax and late filing of TDS returns. The second related to the firm’s refusal to hand over the company’s Tally accounting data, TDS challans, digital signature token, Income Tax Department login credentials and TRACES user ID and password. The complainant maintained that these records and credentials were necessary for the company’s independent management of its accounts and statutory obligations. Their continued retention allegedly prevented the company from accessing essential financial information and completing compliance activities after the professional relationship deteriorated.
Regarding the first charge involving TDS defaults, the complainant alleged that the respondent’s firm failed to deduct tax at the appropriate rate, delayed tax deposits and filed statutory statements after the prescribed due dates. The Committee noted that, for FY 2017-18, approximately ₹75,871.50 related to late filing fees, interest on defaults and short deduction of tax. According to the complainant, the necessary details accompanied the amounts remitted to the respondent for TDS compliance, and the firm was expected to correctly identify the payments, determine the applicable deduction rates and ensure timely statutory reporting. The complainant also alleged that the respondent failed to communicate certain deficiencies and did not properly rectify errors in the company’s income-tax return. The broader dispute therefore concerned whether a professional entrusted with accounting and tax compliance had discharged the necessary responsibilities with reasonable care and adequate documentation.
The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) has reprimanded CA. Bhagyashree Sathe and imposed a ₹50,000 fine for TDS compliance lapses and withholding client records and statutory credentials over unpaid professional fees.
The Committee held that a chartered accountant cannot exercise a lien over a client’s documents, accounting records or statutory portal credentials for non-payment of fees. It also found that eventual handover under a settlement did not satisfactorily explain the preceding delay.
The order dated October 3, 2026, follows findings dated August 29, 2026, in the complaint filed by Brigadier H. P. Singh, Director of M/s Ajanta Techagro Land Development Private Limited.
Background of the Case
The respondent, a partner of M/s D. V. Sathe & Co., was involved in the company’s audit, accounting, tax payments and return filing work from 2012.
The complaint raised two principal allegations. First, a demand of ₹1,14,532.50 arose from short deduction, delayed payment of TDS and late filing of returns. Second, the firm refused to hand over Tally data, TDS challans, the digital signature token and Income Tax/TRACES login credentials.
The respondent disputed negligence and relied on a Settlement Agreement dated October 31, 2018, under which records were eventually transferred and certain compliance issues addressed.
TDS Defaults and Defence of Communication Gap
The respondent attributed delays partly to inadequate or delayed information from the company. She submitted that liability attributable to her had been paid from her own funds.
She acknowledged payment of approximately ₹13,710 towards TDS-related defaults. At the punishment stage, she also described an incorrect selection of Section 194-I instead of Section 194C as an inadvertent, one-time clerical error.
The complainant maintained that relevant details accompanied remittances and that incorrect deduction and delayed compliance resulted in demands, interest and fees.
Due Care Requires Written Advice and Documentation
The Committee noted the respondent’s admission that TDS returns had been delayed and that the existence of TDS-related demands and defaults was not disputed.
It held that a professional engaged for accounting, taxation and compliance work must exercise due care, maintain adequate documentation and advise the client in writing about missing information or compliance risks.
No cogent documentary evidence established that the respondent had discharged these responsibilities with the required diligence.
The Committee consequently found her guilty under Clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, for failure to exercise due diligence concerning TDS deduction, deposit and timely compliance.
Records Withheld Against Outstanding Professional Fees
The second charge concerned retention of client records and credentials against outstanding professional fees of ₹72,300.
The respondent maintained that all records were ultimately provided and that the complainant acknowledged receipt under the settlement. She also submitted that the digital signature certificate had expired and that the company possessed an active signature.
The Committee accepted that the records were eventually handed over. However, it identified the relevant question as whether the preceding withholding was justified, rather than whether the client eventually received the material.
It found that the respondent’s own submissions established retention for a few months, with release occurring only upon execution of the settlement.
ICAI Rejects Claim of Lien
Referring to the Ethical Standards Board’s decision, the Committee held that unpaid fees did not permit a chartered accountant to retain client documents or records.
At the punishment stage, the respondent stated that she had understood in good faith that a lien could be exercised. The Committee rejected reliance on general academic extracts or study material, holding that these could not override the Board’s authoritative position.
It observed that withholding accounting data, digital signatures and statutory credentials restricts the client’s access to financial information and adversely affects statutory compliance.
The retention caused avoidable hardship and impeded the company’s independent functioning. The respondent was therefore held guilty of other misconduct under Clause (2) of Part IV of the First Schedule.
Settlement and Earlier Exoneration Did Not Resolve Present Charges
The Committee declined to treat the settlement as conclusively resolving the dispute. It noted that the terms were not ultimately honoured and that disputes continued.
Although a withdrawal letter had been submitted, the complainant subsequently confirmed that he wished to pursue the complaint.
The respondent also relied on an earlier Board of Discipline order dated June 15, 2023, finding her not guilty in another complaint. The Committee distinguished that matter as involving breach of trust, whereas the present proceedings concerned failure to discharge professional duties and involved different allegations.
Punishment Imposed
After considering the findings and the respondent’s representations, the Committee imposed a reprimand and ₹50,000 fine, payable within 60 days from receipt of the order.
The order imposed no removal from membership.
