Manoj Kumar Gupta, J.:-- 1. This is a reference by the Council of the Institute of the Chartered Accountants of India to this Court u/S. 21(5) of the Chartered Accountants Act, 1946 (hereinafter referred to as ‘the Act’). The respondent who is a chartered accountant had audited the accounts of M/s. Tyagi Gur Khandsari Udyog for the assessment year 1998-1999. The said firm along with its income-tax returns also submitted the audited balance sheet and profit and loss accounts for the year ending 31 March, 1998. The Income Tax Officer, Roorkee noticed various discrepancies in the balance sheet and profits and loss accounts of the said firm. The case of the firm was taken up for scrutiny by Income Tax department but the said firm did not produce any book of accounts, manufacturing and other records even after issuance of notice u/S. 142(1) and summons u/S. 131 of the Income-tax Act. Consequently, penalty was imposed on the said firm for non-compliance of terms of the notices u/S. 142(1). When the assessee firm did not produce the books of accounts for verification even after being penalised, the Income Tax department decided to inspect the records of the firm maintained by the Trade Tax Officer. Thereupon it transpired that Trade Tax officer, Sector-I, Roorkee had conducted number of surveys during the relevant period but no books of accounts were found though manufacturing was going on. The Trade Tax officer has categorically mentioned in his assessment order that no books of accounts were produced before him in the course of assessment proceedings even after several opportunities. 2. The Income Tax officer after noticing serious discrepancies in the audited balance sheet and profit and loss accounts of the assessee firm which were prepared by respondent in his capacity as a chartered accountant vide its letter dated 18-6-2001 brought these facts to the knowledge of the Council. On receipt of the letter from Income Tax Officer, the Council called for a clarification from the respondent vide its letter dated 11-10-2002. In response to it, the respondent submitted his clarification vide letter dated 22-10-2002. The clarifications received from respondent were not found to be satisfactory and therefore, the information sent by Income Tax officer was treated as information u/S. 21 of the Act and on basis thereof, following charges were framed against the respondent 1. In response to it, the respondent submitted his clarification vide letter dated 22-10-2002. The clarifications received from respondent were not found to be satisfactory and therefore, the information sent by Income Tax officer was treated as information u/S. 21 of the Act and on basis thereof, following charges were framed against the respondent 1. The respondent has shown closing stock of sugarcane and Gur as Rs. 40,20,005/- in the balance sheet while the closing stock of Gur was Rs. 44,10,000/- and of sugarcane Rs. m 32,550/- aggregating to Rs. 44,42,550/- has been shown in the Manufacturing, Trading and Profit and Loss account. The balance sheet tallies on a figure of Rs. 40.99,728.51 while the value of closing stock was only Rs. 44,42,550/-. 2. The closing stock of 468 quintals of sugarcane is shown as per col. 12 of form No. 3CD while the closing stock of 465 quintals of sugarcane is shown in the Manufacturing, Trading and Profit & Loss Account. 3. The Audit Report, Balance Sheet, Manufacturing, Trading and Profit & Loss Account has been prepared on computer but all the documents bear date in ink, the question arises as to what was the need of keeping the date blank while print outs were taken. 4. Thus, the respondent failed to point out discrepancies in the audit report and books of accounts of M/s. Tyagi Gur Khandsari Udyog for the assessment year 1998-1999 relating to financial year 1997-98. 5. Further, the Income Tax department issued notice u/S. 142(1) and summons u/S. 131 of the Income-tax Act, 1961 but the firm failed to produce any books of Accounts. Penalty was imposed for non-compliance of the terms of Notices u/S. 141(1). 6. The Trade Tax Officer, has in his assessment order categorically mentioned that no books of accounts were produced before him. The Trade Tax Officer had passed an ex parte order assessing total sales of Rs. 23360102/- as against sales declared by assessee firm of Rs. 15060101.48. An ex parte order had also to be passed by Income Tax Officer on total income of Rs. 5187640/- as income declared in the return of income was only Rs. 8090/- 7. The maintenance of books of accounts and audit thereof is at stake looking to the discrepancy in the audit report as also from the conduct of assessee firm. 3. 5187640/- as income declared in the return of income was only Rs. 8090/- 7. The maintenance of books of accounts and audit thereof is at stake looking to the discrepancy in the audit report as also from the conduct of assessee firm. 3. The respondent submitted his clarifications vide letter dated 22-10-2002 stating that the closing stock of Rs. 40,20,000/- as shown in the balance sheet has been wrongly copied up by his computer operator from the closing stock of last year (this year opening stock figure). In the profit & loss account, the figure of closing stock of Rs. 44,10,000/- of Gur and Rs. 32,550/- of Sugarcane is correct. It is a case of clerical mistake of the computer operator. 4. After considering the explanation of the respondent, the Council being of the opinion that the prima facie charges of misconduct are made out against the respondent and it comes under clauses (7) and (8) of Part I of Second Schedule read with sections 21 & 22 of the Chartered Accountants Act, 1949 decided to refer the case of the respondent to the disciplinary committee. 5. Requisite information in this regard was sent to the respondent on 3-1-2006 specifying the charges levelled against him and calling upon him to submit his written statement. In response to it, the respondent submitted his written statement duly verified dated 11-2-2006. Thereafter, the matter was taken up by the Council at its meeting held in August, 2008 in New Delhi. The Council was prima facie of the opinion that the respondent was guilty of professional misconduct and accordingly referred the case to the disciplinary committee constituted under the Act for enquiry. 6. Before the disciplinary committee, the respondent appeared and pleaded guilty under the provision of Regulation 15(2) of the Chartered Accountants Regulations, 1988. Thereafter, the hearing was concluded. The disciplinary authority submitted its report dated 3-2-2010 wherein it held respondent guilty of professional misconduct falling within Clauses (7) and (8) of Part I of Second Schedule read with sections 21 and 22 of the Chartered Accountants Act, 1949. 7. The copy of report of the disciplinary committee was forwarded to the respondent by the Council vide its letter dated 19-5-2010 and he was informed that it will be considered by the Council in one of its meeting. 7. The copy of report of the disciplinary committee was forwarded to the respondent by the Council vide its letter dated 19-5-2010 and he was informed that it will be considered by the Council in one of its meeting. The respondent was requested to send his written representation and also to appear in person if he so desires. The respondent submitted his written representation on 15-11-2010 and also appeared before the Council and made oral submission. On consideration of the report of disciplinary committee along with written representation dated 15-11-2010 and the oral submissions made by the respondent, the Council decided to accept the report of disciplinary committee and accordingly the matter was referred to this Court as provided u/S. 21(5) of the Act. 8. On receipt of this reference notices were issued to the respondent and also to the Central Government by order dated 13-12-2011. The office report reveals that the notices sent to the respondent by registered cover has not been received back. However, this Court by order dated 10-4-2012 directed the Council to once again take steps for service on the respondent by registered post. Again notices were sent by registered post. However, respondent again did not appear and ultimately the court vide its order dated 9-7-2012 held the service on the respondent to be sufficient. 9. We have heard Sri Vinod Swarup, learned counsel for the Council and have perused the record. 10. The main question for consideration is whether the charges levelled against the respondent amounts to an act of ‘gross negligence’ and ‘an act of omission’ falling under clauses (7) and (8) of part I of Second Schedule read with sections 21(5) and 22 of the Act. Sri Vinod Swarup, learned counsel for the Council vehemently contended that in view of admission of the guilt by respondent and other materials on record it is established beyond doubt that the respondent is guilty of gross negligence and omissions in performance of his duties as a chartered accountant. 11. “Gross negligence” is a term of relative import. Its true meaning can be judged only with reference to the duties which a person is obliged to perform. 11. “Gross negligence” is a term of relative import. Its true meaning can be judged only with reference to the duties which a person is obliged to perform. An act or omission may be gross negligence and amount to misconduct for one small class of persons while it may not be so for some other class of person and simply be termed as mere negligence or an act of inadvertence or over sight. In (2007) 12 SCC 210 : ( AIR 2007 SC 2091 ) Institute of Chartered Financial Analysts of India and others v. Council of the Institute of Chartered Accountants of India and others, the Apex Court cited with approval the view taken in Prabodh Kumar Bhowmick v. University of Calcutta (1994) 2 Cal LJ 456 and which is to the following effect:-- “14. Misconduct, inter alia, envisages breach of discipline, although it would not be possible to lay down exhaustively as to what would constitute conduct and discipline, which, however, is wide enough to include wrongful omission or commission whether done or omitted to be done intentionally or unintentionally. It means, ‘improper behaviour; intentional wrong doing or deliberate violation of a rule of standard or behaviour’. In the same judgment, reliance has also been placed on the previous decision of the Apex Court in AIR 1957 SC 149 wherein it was held as under:-- “14....... As has been laid down by this Court in the matter of ‘G’, a Senior Advocate of the Supreme Court (A) ( AIR 1954 SC 557 ) (supra) the Court, in dealing with cases of professional misconduct is ‘not concerned with ordinary legal rights, but with the special and rigid rules of professional conduct expected of and applied to a specially privileged class of persons who, because of their privileged status, are subject to certain disabilities which do not attach to other men and which do not attach even to them in a non-professional character .... he (a legal practitioner) is bound to conduct himself in a manner befitting the high and honourable profession the whose privileges he has so long been admitted; and if he departs from the high standards which that profession has set for itself and demands of him in professional matters, he is liable to disciplinary action’.” 12. he (a legal practitioner) is bound to conduct himself in a manner befitting the high and honourable profession the whose privileges he has so long been admitted; and if he departs from the high standards which that profession has set for itself and demands of him in professional matters, he is liable to disciplinary action’.” 12. In CBI v. K. Narayana Rao (2012) 9 SCC 512 : (AIR 2013 SC (Cri) 448) the Apex Court laid down the criteria for judging whether particular act or omission is misconduct on part of a professional or not by observing that “the only assurance which such a professional can give or can be given by implication is that he is possessed of the requisite skill in that branch of profession which he is practising and while undertaking the performance of the task entrusted to him, he would be exercising his skill with reasonable competence. This is what the person approaching the professional can expect. Judged by this standard, a professional may be held liable for negligence on one of the two findings viz. Either he was not possessed of the requisite skill which he professed to have possessed, or, he did not exercise, with reasonable competence in the given case, the skill which he did not possess.” 13. A chartered accountant is a professional man possessing specialised knowledge in accountancy. He renders service involving the auditing or verification of financial transactions, books, accounts, or records or the preparation, verification or certification of financial accounting and related statements or holds himself out to the public as an accountant and renders professional services or assistance in or about matters of principle or detail relating to accounting procedure or the recording, presentation or certification of financial facts or data. There are various enactments where reports of chartered accountant are given special significance. 14. Under the Income Tax law, section 44 AB makes audit of accounts of certain persons carrying on the business or profession compulsory. Section 139 requires such audit report, audited profit and loss account and audited balance sheet to be filed along with the return of income. Section 115 VW mandates submission of report of an accountant in prescribed form along with return of income. Section 142 empowers the income tax authorities to require an assessee to get the account audited in the prescribed form calling for such details therein as they deem necessary. Section 115 VW mandates submission of report of an accountant in prescribed form along with return of income. Section 142 empowers the income tax authorities to require an assessee to get the account audited in the prescribed form calling for such details therein as they deem necessary. Failure to comply with such requirement attracts penalty u/S. 271-B. The audited reports and accounts are given due weightage and normally are to be accepted on their face value. The law pre-supposes that by virtue of the expert knowledge and specialised skill as an accountant and also the code of conduct by which he is bound, the declaration made by him in any financial statement are true and correct and have been so certified after due verification and proper enquiry and that no material fact known to him has been withheld. Thus, a very important duty is cast upon a chartered accountant. His reports and declarations facilitates the income tax authorities in finalising assessments in performance of their duties under the Income Tax Act. 15. The Apex Court while considering the case of misconduct on part of a chartered accountant quoted with approval the following paragraph from London Oil Storage Co. Ltd. v. Seear, Hasluck and Co. Dicksee on Auditing, 17th Edn. P 632 wherein Lord Alverstone stated as follows: “He must exercise such reasonable care as would satisfy a man that the accounts are genuine, assuming that there is nothing to arouse his suspicion of honesty and if he does that he fulfils his duty, if his suspicion is aroused, his duty is to probe the thing to the bottom and tell the directors of it and get what information he can.” Now, the alleged misconduct has to be judged taking into consideration the duties and responsibilities cast upon a chartered accountant by law. It has to be seen whether he was ‘grossly negligent’ in conducting himself as a chartered accountant or not. 16. Record reveals that the respondent was personally present before the disciplinary committee and he accepted his guilt under Regulation 15(2) of the Chartered Accountants Regulations, 1988. The disciplinary committee after considering the explanation and evidence on record arrived at the following findings:-- The Committee noted that there is a difference in the Closing stock value in the balance sheet as compared to the Trading & Profit & Loss Account. The disciplinary committee after considering the explanation and evidence on record arrived at the following findings:-- The Committee noted that there is a difference in the Closing stock value in the balance sheet as compared to the Trading & Profit & Loss Account. Further, despite the variance in the closing stock value, the balance sheet tallied. If it was due to typographical error than the total of balance sheet would not have tallied. • The Committee also noted that there was a difference of 3 quintals in the amount shown against the closing stock in Form 3CD against the column No. 12 whereas the amount shown in the Manufacturing, Trading and Profit & Loss Account, the said figure was shown as 465 quintals. 17. Since the respondent has not appeared in spite of sufficient service, therefore, we have gone through the record of the case with the assistance of Sri Vinod Swarup, advocate for the Council. On minute scrutiny, we find no illegality in the findings recorded by the disciplinary committee and which were accepted by the Council. Admittedly, the balance sheet and profits and loss accounts of the assessee were incorrect. Whether the mistake was bona fide or not is not very material. The respondent has utterly failed to perform his duties as a tax auditor. Even if the computer typist took the last year’s closing stock figure and adjusted the cane payment dues account to tally the balance sheet, the respondent was required to compare the closing figure with the closing balance in the books of accounts and the trial balance thereof. There is also no evidence that the respondent cared to obtain confirmation from third parties regarding the amount due to them, which would have demonstrated that the cane dues as mentioned in the balance sheet are incorrect. He simply signed the balance sheet, profits and loss account prepared by the computer operator without verifying the correctness and authenticity of the facts and figures appearing therein. This is also evident from his own admission contained in the written representation of the respondent dated 15-11-2010 wherein he stated that the mistake could not be detected “due to work pressure of tax audit being near last closing date”. Signing of the balance sheet prepared by computer operator without cross checking the same, amounts to total abdication of his responsibility. Signing of the balance sheet prepared by computer operator without cross checking the same, amounts to total abdication of his responsibility. He failed to exercise the professional skill which he possessed by acting in a totally perfunctory manner. Thus, there can be no escape from the conclusion that the respondent acted in a grossly negligent manner and failed to obtain sufficient information to warrant the expression of opinion in the balance sheet and profits and loss accounts. This Court, therefore, has no hesitation in accepting the finding of misconduct arrived at by the Council. 18. The next question which arises is regarding punishment which is to be awarded to the respondent. The respondent has very fairly admitted his guilt. It is not disputed that no mala fide intention has been found on part of the respondent in furnishing incorrect audit report and financial statements. Further respondent claims to be in profession for more than 20 years with no history of any such misconduct in the past. These are mitigating circumstances and impel us to take a lenient view as regards the quantum of punishment. We are of the opinion that the interest of justice will be served if respondent is severely reprimanded for his misconduct as provided by section 21(6) (b) of the Act. 19. Accordingly, Reference is accepted. Respondent is held guilty of misconduct under clauses (7) and (8) of part I of Second Schedule read with sections 21(5) and 22 of the Act and is hereby severely reprimanded. Let a copy of this order be communicated to the Council for taking consequential action in accordance with law. Petition allowed. __________