SC Safeguards CAs: No PMLA Charge for Routine Form 15CB Certification

Supreme Court Safeguards Chartered Accountants: Issuing Form 15CB Is Not Abetment of Money Laundering

Introduction

The Supreme Court of India has delivered a significant reprieve to practicing Chartered Accountants (CAs) by dismissing an Enforcement Directorate (ED) challenge against a Madras High Court ruling. The apex court held that issuing Form 15CB—a statutory certificate under the Income-Tax Act for foreign remittances—does not amount to abetment of money laundering, even if the underlying transaction is later found fraudulent. This decision in The Deputy Director v. Murali Krishna Chakrala (SLP (Criminal) Diary No. 8123/2024) upholds the Madras High Court judgment in Murali Krishna Chakrala v. The Deputy Director, Directorate of Enforcement, Chennai ([2023] 457 ITR 579) and clarifies the limited role of CAs in tax compliance.

Also Read SC Judgment in K. Murali Krishna Vs Deputy Director (Supreme Court of India), Miscellaneous Application No. 1900/2025 in SLP(Crl) No.10821/2025, Dated: 24/07/2025: SC Protects CA: Issuing Form 15CB Not Abetment of Money Laundering

The ruling comes amid rising ED scrutiny of professionals involved in financial certifications. By equating a CA’s duty to that of a bank’s panel lawyer, the courts have drawn a clear line: professionals are not investigators. This article examines the case, judicial logic, and its impact on the accountancy profession.

Factual Matrix

A company engaged in importing goods sought to remit funds abroad. As mandated by Section 195 of the Income-Tax Act and Rule 37BB, the bank required Form 15CB from a CA before processing the payment. Murali Krishna Chakrala, the appellant CA, issued the certificate based on documents submitted by the client, including invoices and contracts.

Later, the ED alleged that the company had inflated import values to illegally transfer money overseas, constituting money laundering under the Prevention of Money Laundering Act, 2002 (PMLA). The agency named the CA in its Enforcement Case Information Report (ECIR), accusing him of abetting the offence under Section 3 of PMLA by facilitating the tainted remittance.

Challenging the ECIR, the CA moved the Madras High Court, which quashed the proceedings against him.

Madras High Court’s Reasoning

In a detailed order, Justice N. Anand Venkatesh observed:

“A Chartered Accountant is not required to verify the genuineness of documents submitted by clients. His role is akin to that of a panel lawyer of a bank, who provides a legal opinion on title deeds without investigating their authenticity. Such professionals cannot be prosecuted along with the principal offender.”

The court emphasized that Form 15CB is a tax compliance tool, not a seal of transactional legitimacy. The CA’s responsibility is confined to:

• Verifying remittance details.
• Determining applicable withholding tax rates under domestic law or DTAA.
• Ensuring FEMA/RBI compliance for permissible capital/current account transactions.

Requiring deeper scrutiny would impose an untenable burden, transforming CAs into forensic auditors. The High Court found no evidence of the CA’s knowledge or intent to aid laundering—essential for PMLA liability. Mere statutory compliance, absent collusion, does not attract criminal prosecution.

Supreme Court Upholds the View

The ED filed a Special Leave Petition (SLP) against the High Court’s order. The Supreme Court dismissed it, refusing to interfere with the reasoned judgment below. Though dismissal of an SLP does not create binding precedent, it signals approval of the High Court’s logic and discourages similar prosecutions.

The apex court’s stance aligns with its earlier rulings protecting professionals acting in good faith. In CBI v. K. Narayana Rao (2012), it shielded lawyers from liability for opinions rendered in professional capacity. Extending this principle, the court affirmed that CAs discharging tax law duties cannot be roped into PMLA proceedings without proof of active involvement.

Implications for the Profession

This judgment is a watershed for India’s 3.5 lakh+ CAs, many of whom have faced ED summons or arrests in recent money laundering probes. ICAI data reveals over 50 professionals were targeted in 2022–23 for audit or certification roles in cases involving shell entities or bogus billing.

Key Takeaways:

1. Scope of Duty: CAs must apply “reasonable professional skepticism” (per ICAI’s SA 240) but are not obligated to conduct independent verifications beyond statutory requirements.
2. PMLA Safeguard: Section 3 requires “knowingly” assisting in laundering. Passive certification, without mens rea, is protected.
3. Operational Clarity: Banks and clients cannot shift investigative responsibility onto CAs. The primary onus remains on the remitter.

The ruling may influence pending cases, including those linked to high-profile fugitives. It also counters ED’s practice of naming ancillary professionals to pressure principal offenders.

However, the ED argued that Form 15CB is often misused in trade-based laundering (e.g., over-invoicing). The courts responded that regulatory gaps, if any, must be addressed through policy—not by criminalizing routine compliance.

Looking Ahead

With India’s outward remittances crossing $100 billion annually (RBI, 2023–24), seamless tax certification is critical for trade. The judgment prevents professional paralysis, where CAs might refuse Form 15CB assignments fearing ED action.

ICAI has welcomed the verdict and plans to issue practice advisories, urging members to:

• Document client representations.
• Flag red flags (e.g., round-tripping, mismatch in goods description).
• Report suspected fraud under ICAI’s disciplinary framework.

The CBDT may consider digitizing Form 15CB further, integrating RBI’s LIBOR database or GSTN data to reduce reliance on manual verification.

Conclusion

The Supreme Court’s decision in Murali Krishna Chakrala reaffirms that tax compliance is not complicity. By insulating CAs from PMLA’s dragnet for statutory duties, it upholds professional integrity and facilitates legitimate cross-border flows. For regulators, the message is clear: target the masterminds, not the messengers.

As India integrates deeper into global finance, such judicial clarity ensures that fear of prosecution does not stifle expertise. For Chartered Accountants, this is not just legal relief—it is a vote of confidence in their bounded, yet vital, role.