The Disciplinary Committee of the Institute of Chartered Accountants of India (ICAI) issued an order against CA. Ashok Kumar Kher for professional misconduct. The complaint was filed by the Registrar of Companies, NCT of Delhi & Haryana. The committee’s findings centered on the CA’s audit of a company that received a Rs. 3.69 crore advance from a foreign body corporate. The committee noted that despite the company having no business activity for seven years, this advance remained outstanding. The CA failed to report this significant fact in his audit report and also did not address the lack of Foreign Exchange Management Act (FEMA) permission for receiving the funds. The committee also found that the CA failed to account for and recognize interest income from the company’s fixed deposits in its Profit and Loss account. In his defense, the CA argued that the advance was not a “deposit” under the Companies (Acceptance of Deposits) Rules, 2014, and that tax had been paid on the interest on an accrual basis. However, the committee deemed these submissions insufficient. It concluded that the professional misconduct was clearly established and, as a result, ordered the CA to be reprimanded and pay a fine of Rs. 25,000 within 60 days.
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NDIA
(Set up by an Act of Parliament)
[DISCIPLINARY COMMITTEE [BENCH-IV (2024-2025)]
[Constituted under Section 21B of the Chartered Accountants Act, 1949]
ORDER UNDER SECTION 21B(3) OF THE CHARTERED ACCOUNTANTS ACT, 1949 READ WITH RULE 19(1) OF THE CHARTERED ACCOUNTANTS (PROCEDURE OF INVESTIGATIONS OF PROFESSIONAL AND OTHER MISCONDUCT AND CONDUCT OF CASES) RULES, 2007.
[PR/G/285/22/DD/200/2022/DC/1778/2023]
In the matter of:
The Registrar of Companies,
Through Smt. Kamna Sharma,
Versus
CA. Ashok Kumar Kher
MEMBERS PRESENT:
1. CA. Ranjeet Kumar Agarwal, Presiding Officer (In person)
2. Shri Jiwesh Nandan, IAS (Retd.), Government Nominee (in person)
3. Ms. Dakshita Das, I.R.A.S. (Retd.), Government Nominee (Through, VC)
4. CA. Mangesh P Kinare, Member (Through VC)
5. CA. Abhay Chhajed, Member (In person)
DATE OF HEARING : 20th January 2025
DATE OF ORDER : 04th February 2025
1. That vide Findings dated 19.12.2024 under Rule 18(17) of the Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007, the Disciplinary Committee was inter-alia of the opinion that CA. Ashok Kumar Kher (hereinafter referred to as the Respondent”) is GUILTY of Professional Misconduct falling within the meaning of Item (7) of Part-I of the Second Schedule to the Chartered Accountants Act, 1949.
2. That pursuant to the said Findings, an action under Section 21B(3) of the Chartered Accountants (Amendment) Act, 2006 was contemplated against the Respondent and a communication was addressed to him thereby granting an opportunity of being heard in person/ through video conferencing and to make representation before the Committee on 20th January 2025.
3. The Committee noted that on the date of the hearing on 20th January 2025, the Respondent was physically present for the hearing and appeared before it. Thereafter, the Committee asked the Respondent to make submissions in the matter. During the hearing, the Respondent stated that he had already submitted his written representation dated 09th January 2025 on the Findings of the Committee. He submitted that advance of Rs. 3.69 Crores was received on multiple dates and was received when the Company has business activities. Further, the bank accounts of the Company have been dormant, and he has given details of all the banks of the Company in audited Financial Statements of the Company. The Committee also noted the written representation of the Respondent dated 09th January 2025 on the Findings of the Committee, which, inter alia, are given as under:-
- In terms of Rule 2(c) (ii) of the Companies (Acceptance of Deposits) Rules 2014 any advance received by a Company will not be termed as deposit if it is received from a Foreign Body Corporate.
- Due to sudden downfall in business and change in technology, business of the Company was stopped resulting in huge losses and as such the Company was not able to repay the said advance amount. The Respondent as an auditor had no role to play in the decision making of the Company.
- The Interest receivable shown in Financial Statement amounting to Rs. 2,74,030/- is an accumulated amount of interest accrued over a period of time and the same figure is standing since 31-03-2014 till 31-03-2021 under the same head.
- The Company has already paid tax on the said amount of Rs. 2,74,030/-in respective years on accrual basis.
4. The Committee considered the reasoning as contained in the Findings holding the Respondent ‘Guilty’ of Professional Misconduct vis-a-vis written and verbal representation of the Respondent. The Committee noted that the issues/ submissions made by the Respondent as aforestated have been dealt with by it at the time of hearing under Rule 18.
5. Thus, keeping in view the facts and circumstances of the case, material on record including written and verbal representation of the Respondent on the Findings, the Committee was of the view that the Company had received an advance of Rs. 3.69 crores from a foreign Company and it was outstanding in spite of the fact that the Company had no business activity since 7 years. The. Management of the Company in its representation letter dated 25/08/2013 addressed to the Respondent had stated that said advance was utilised towards payment of its operational costs. In view of this, the Committee noted that the Respondent had not reported this fact in his Audit Report; and he also failed to bring on record FEMA permission for receipt of said advance from a foreign Company.
6. Further, the Committee was of the view that interest should have been accrued every year on fixed deposits and corresponding income should have been recognised in the Profit and Loss account of the Company, but in the instant case, no income was booked in Profit & Loss account of the Company.
7. Hence, the Professional Misconduct on the part of the Respondent is clearly established as spelt out in the Committee’s Findings dated 19.12.2024 which is to be read in consonance with the instant Order being passed in the case.
8. Accordingly, the Committee was of the view that the ends of justice would be met if punishment is given to him in commensurate with his Professional Misconduct.
9. Thus, the Committee ordered that the Respondent i.e. CA. Ashok Kumar Kher, be REPRIMANDED and also imposed a fine of Rs. 25,000/- (Rupees Twenty five thousand only) upon him, which shall be paid within a period of 60 (sixty) days from the date of receipt of the Order.
Sd/-
(CA. RANJEET KUMAR AGARWAL)
PRESIDING OFFICER
Sd/-
(SHRI JIWESH NANDAN, I.A.S. {RETD.})
GOVERNMENT NOMINEE
Sd/-
(MS. DAKSHITA DAS, I.R.A.S.{RETD.})
GOVERNMENT NOMINEE
Sd/-
(CA. MANGESH P KINARE)
MEMBER
Sd/-
(CA. ABHAY CHHAJED)
MEMBER
