JUDGMENT By the Court.—This is a Reference under Section 21(5) of Chartered Accountants Act, 1949 (hereinafter referred to as the “Act, 1949) as it was before its substitution and amendment by Act No. 9 of 2006 which came into force on 17.11.2006, in the matter of Sri Anil Kumar Sangi, Chartered Accountant at NOIDA. 2. Brief facts necessary for exercising powers under Section 21(6) of Act, 1949 may be stated as under. 3. Smt. Seema Raj, Assistant Commissioner Income Tax, Central Circle IV, New Delhi (hereinafter referred to as the “ACIT, New Delhi”) forwarded a complaint dated 19.3.1998 under Section 21(1) of Act, 1949 against Respondent-Anil Kumar Sanghi, alleging that he was Chartered Accountant of one Sri Prakash Chandra Yadav son of Sri Ram Lakhan Singh Yadav, Former Union Minister. In the wake of allegations on Sri Prakash Chandra Yadav regarding receipt of kick-backs of Rs. 133 crores Urea Scam, certain inquiries were conducted by Central Bureau of Investigation (hereinafter referred to as the “CBI”) and Central Economic Intelligence Bureau (hereinafter referred to as the “CEIB”). On the basis of information received from CEIB, Income Tax Authorities conducted searches at residential premises of Sri Prakash Chandra Yadav and Respondent-Anil Kumar Sanghi, registered offices of companies of Sri Prakash Chandra Yadav and on the bank accounts of such companies and on persons/related persons. These searches were conducted between June, 1996 to January, 1997 and therein following facts were revealed: “(a) Huge cash deposits running into crores of rupees had been made by the Respondent in three bank accounts of his concerns viz. M/s. Anil Sanghi and Associates and M/s. Ganpati Invtt. Consultants. Details of these bank accounts and the cash deposits in them are as follows: S. No. Bank Accounts Name of Account holder Total deposit from financial year 1993-94 to 1.11.1996 (the date of search) (in Rs) 1. No. 612 in Jammu & Kashmir Bank, NOIDA M/s. Anil Sanghi & Associates 25,47,95,300.00 2. No. 613 in Jammu & Kashmir Bank, NOIDA M/s. Ganpati Investment Consultants 71,66,400.00 3. No. 2387 in Andhra Bank, Asaf Ali Road, New Delhi. No. 612 in Jammu & Kashmir Bank, NOIDA M/s. Anil Sanghi & Associates 25,47,95,300.00 2. No. 613 in Jammu & Kashmir Bank, NOIDA M/s. Ganpati Investment Consultants 71,66,400.00 3. No. 2387 in Andhra Bank, Asaf Ali Road, New Delhi. M/s. Ganpati Investment Consultants 1,66,91,616.00 Grand Total 27,86,53,316.00 (b) The money so deposited in these three accounts had then been transferred either directly or after being routed through one or more bank accounts into the following Companies in which Shri Prakash Chandra Yadav and his family members were in the controlling position as Directors/Authorized Signatories for the bank accounts of the Companies: S. No. Name of the Companies Amount transferred to the company from one of the three accounts (Rs.) Whether Shri Prakash Chandra Yadav/his family members were directors /Authorized Signatories 1. M/s. Vaidahi Lease & Finance Pvt. Ltd 1,20,00,000.00 Shri Harshvardhan S/o Shri Prakash Chandra Yadav was the director as well as authorized signatory. 2. M/s. Shilpi Securities Pvt. Ltd. 1,20,00,000.00 Shri Harshvardhan S/o Shri Prakash Chandra Yadav was the director. 3. M/s. Independent Courier Pvt. Ltd 1,31,00,000.00 Smt. Manju Yadav, W/o Shri. Prakash Chandra Yadav was the authorized signatory. 4. M/s. Harmony Psychiatry Center Pvt. Ltd. 1,31,00,000.00 Smt. Manju Yadav, W/o Shri Prakash Chandra Yadav was the director and authorised signatory. 5. M/s. Patliputra International Trading Ltd. 2,79,38,500.00 Shri.Prakash Chandra Yadav and his wife were the promoters/ subscribers and Shri Prakash Chandra Yadav was the authorized signatory. 6. M/s. Kandla Petrochemicals Corpn. Ltd 2,24,16,000.00 Shri Prakash Chandra Yadav, his son & his wife were directors and Shri Prakash Chandra Yadav was the authorized signatory. 7. M/s. Uikam Invtt. & Finance Pvt. Ltd 4,55,12,000.00 Shri Harshvardhan, S/o Shri Prakash Chandra Yadav was the authorized signatory. 8. M/s. Patliputra Credit & Securities Ltd. 11,24,96,439.00 Shri Prakash Chandra Yadav, his wife and father were the directors. Total amount transferred 25,85,63,939.00 4. Statement of respondent on oath was recorded on different dates by ADIT (Investigation), New Delhi/ACIT, New Delhi about source of cash deposits in three accounts mentioned above. From these statements and facts which were available to Income Tax Department, it became evident that cash approximating to Rs. 27.86 crores was given by Sri Prakash Chandra Yadav to respondent for returning it to former after giving it appearance of genuineness. From these statements and facts which were available to Income Tax Department, it became evident that cash approximating to Rs. 27.86 crores was given by Sri Prakash Chandra Yadav to respondent for returning it to former after giving it appearance of genuineness. In the process of achievement of this end respondent deposited above amounts in bank accounts of his own concern and then issued cheques and demand drafts to companies in which Sri Prakash Chandra Yadav was Secretary. No returns were filed by these companies until the time of search. But, after search and on receipt of notices under Section 158 BC of Income Tax Act, 1961 (hereinafter referred to as the “Act, 1961”), companies filed their returns for block period wherein amounts received by them from three accounts were shown as loan from M/s. Anil Sanghi and Associates and M/s. Ganpati Investment Consultants. An amount of Rs. 10,44,78,000/- shown in accounts of M/s. Patliputra Credit and Securities Ltd. was shown as share capital/share application money received from public though it was nothing but money received from one or more of said three accounts. 5. Copy of complaint dated 19.3.1998 was forwarded to respondent alongwith letter dated 25.10.1999 for his response on said complaint. Respondent, however, failed to give any reply. Thereafter aforesaid complaint was considered by Council of Institute of Chartered Accountants of India (hereinafter referred to as the “CICA”) in its 233rd meeting held on 7th, 8th and continued on 24th and 25th April, 2003. It decided to refer matter to Disciplinary Committee for inquiry as contemplated under Section 21(1) of Act, 1949. Disciplinary Committee made its inquiry on following eight charges: “(1) Since the Respondent has filed his return for the block period declaring the cash deposited in the three accounts to be his income and the block period returns of eight companies (in which Shri Prakash Chandra Yadav and /or his family members were in controlling position) showing the money introduced into them as loan from his two concerns M/s. Anil Sanghi & Associates and M/s. Ganpati Investment Consultants, knowing fully well that it is not his but Shri Prakash Chandra’s money. Thus, he has failed to disclose a material fact known to him (which is not disclosed) in a financial statement but disclosure of which is necessary to make the financial statement not misleading”. Thus, he has failed to disclose a material fact known to him (which is not disclosed) in a financial statement but disclosure of which is necessary to make the financial statement not misleading”. (2) The Respondent has used his knowledge as a Chartered Accountant to help Shri Prakash Chandra Yadav in evasion of tax running into crores of rupees. Thus the Respondent has been grossly negligent in the conduct of his professional duties. (3) The Respondent has given false statements under oath before Government agencies in order to bail out Shri Prakash Chandra Yadav. (4) The Respondent has obtained the resignations of Shri Prakash Chandra /his family members from all the companies and taken over as their Director to make it appear that it was he who in the first place purchased /promoted these Companies. Returns for all these Companies have been filed after search & signed by him as director. Thus the Respondent was working in collusion with Shri Prakash Chandra Yadav and trying to mislead Government agencies about the true nature of cash deposit in his accounts. (5) The Respondent gave the idea to introduce part of the undisclosed income of Shri Prakash Chandra Yadav into M/s. Patliputra Credit & Securities Ltd., in the form of share capital subscribed by the public and for this purpose, he, even went to the extent of violating the guidelines issued by the SEBI. (6) The Respondent has committed irregularities in banks by misusing people’s photographs /names and even forging their signatures. (7) The Respondent flouted guidance /guidelines issued by Securities & Exchange Board of India (SEBI) from time to time. (8) The Respondent was the Proprietor of M/s. Ganpati Investment Consultants.” 6. Disciplinary Committee initially scheduled its inquiry fixing 24.12.2003 which was re-scheduled as 26.12.2003 but it was adjourned on the request of respondent to 30.1.2004. Again on 30.1.2004 and 3.3.2004 matter was adjourned. On 28.4.2004 respondent was present in proceedings and after administering oath, charges were read out to him and he pleaded not guilty. Then on 29.4.2004 when matter was taken up respondent was present for hearing. His statement was recorded and he was also cross-examined by Disciplinary Committee Members. On next day, i.e., 30.4.2004 respondent failed to appear and also gave no information, notice or request to Disciplinary Committee. Then on 29.4.2004 when matter was taken up respondent was present for hearing. His statement was recorded and he was also cross-examined by Disciplinary Committee Members. On next day, i.e., 30.4.2004 respondent failed to appear and also gave no information, notice or request to Disciplinary Committee. In view thereof Committee concluded oral hearing and submitted report holding Charges 1, 2 and 8 of “professional misconduct” falling within Clause (11) Part I of First Schedule and Clause (7) Part I of Second Schedule and other misconduct under Sections 22 read with 21 of Act, 1949, proved. 7. With regard to Charges 3, 4, 5, 6 and 7 Disciplinary Committee held respondent not guilty of “professional misconduct”. 8. Thereafter CICA decided to give an opportunity of hearing to respondent under Section 21(4) of Act, 1949 before passing any order against him. Respondent, however, neither submitted any reply before CICA nor appeared on date fixed, in the meeting of CICA in March, 2008. Hence CICA decided to remove name of respondent from registered Member for a period of five years and has made present Reference under Section 21(5) of Act, 1949. 9. Before us also though respondent is represented through Sri P.K. Tripathi, Advocate but he has chosen not to appear and advance his submissions. Hence we had no option but to proceed to decide matter after hearing Sri Vinod Swarup, Advocate appearing for CICA and perusal of record. 10. With respect to Charges 1, 2 and 8 found proved against respondent, we find that Disciplinary Committee has recorded its findings as under: “5.1 The Respondent in his deposition before the Committee submitted that the money deposited in the two concerns, M/s. Anil Sanghi & Associates and M/s. Ganpati Investment Consultants belongs to him. The Income Tax Department had assessed the income in his hands and the same income had been assessed in the hands of Mr. Prakash Chandra also. The issue is pending before the ITAT and the matter will be finally decided by the Tribunal. 5.2 In view of the above, according to the Respondent, the Committee could not take a view unless the decision is delivered by the ITAT. On being reminded, that the Committee is examining his professional conducted vis-a-vis the complaint filed by the Income Tax Department, the Respondent submitted that the total amount deposited in the Bank account was his undisclosed income. On being reminded, that the Committee is examining his professional conducted vis-a-vis the complaint filed by the Income Tax Department, the Respondent submitted that the total amount deposited in the Bank account was his undisclosed income. As regards the source of the money deposited in these accounts, the Respondent submitted that it was his personal money and he had given advances and loans to the listed companies which are his companies. 5.3 The respondent further submitted that M/s. Anil Kumar Sanghi & Associates is a professional firm and M/s. Ganpati Investment Consultants is not a professional firm and he was Proprietor of both the firms. The Respondent admitted that he had not sought any permission from the Institution for engaging himself in any work other than the profession and pleaded guilty on this account. As regards the Directorship of the Companies, the Respondent submitted that at that time he was the Director of those Companies. Shri Prakash Chandra Yadav and family members were appointed Directors in the year 1996 and they were Directors upto 1997. He further submitted that Mr. Prakash Chandra Yadav and his family members were also signatories to these bank accounts. As regards the allegation that the Respondent had used his knowledge as a Chartered Accountant and helped Mr. Prakash Chandra Yadav to evade tax, he submitted that the money belongs to him only and Mr. Prakash Chandra Yadav and his family members were simply the signatories. 5.4 The Committee perused the various documents filed by the Complainant and the Respondent and the deposition of the Respondent. The Committee noted that the first charge leveled against the Respondent was that he had filed his return for the block period declaring the cash deposited in the three accounts to be his income and the block period return of eight companies in which Mr. Prakash Chandra Yadav and/or his family members were in controlling position showing the money introduced to them as loan from these companies knowing fully well that it was not his but Mr. Prakash Chandra’s money. The Respondent in this regard submitted that it was his money which he deposited in his bank account and as such there is nothing wrong. Prakash Chandra Yadav and/or his family members were in controlling position showing the money introduced to them as loan from these companies knowing fully well that it was not his but Mr. Prakash Chandra’s money. The Respondent in this regard submitted that it was his money which he deposited in his bank account and as such there is nothing wrong. 5.5 According to the Committee, in view of the above statements made by the Respondent at various points of time before the IT Department and the failure on his part to explain the source of income before the Committee that from where he had deposited such huge cash in the bank account, the contention of the Respondent that money deposited in bank a/c was his own money could be accepted. The Committee was of the opinion that the Respondent was guilty of the charge whereby he had filed return for the block declaring the cash deposited in the bank account showing the money introduced into them as his own money. 5.6 As regards the second charge that the Respondent had used his knowledge as a CA to help Shri Prakash Chandra in the evasion of tax running into crores of rupees and thus the Respondent had been grossly negligent in the conduct of his professional duties, the above facts as coming out from the statements clearly substantiate the allegation that the Respondent had helped Shri Prakash Chandra in the evasion of tax. There is a clear cut admission by the Respondent in his statement that he had committed a mistake to deposit such huge cash and the purpose of giving this cash was to give it white colour and channelise such cash for further utilization. Therefore, in the opinion of the Committee the Respondent was guilty of this charge also. 5.13 The last charge levelled against the Respondent was that he was the Proprietor of M/s. Ganpati Investment Consultants which is carrying out work other than professional work. The Respondent during the course of hearing before the Committee admitted that M/s. Ganpati Investment Consultants is a Proprietorship Firm and it is not carrying on any professional work. He also admitted that he had not sought any permission from the Institute to engage in any work other than the profession. Therefore, the Respondent had pleaded guilty before the Committee of this charge. He also admitted that he had not sought any permission from the Institute to engage in any work other than the profession. Therefore, the Respondent had pleaded guilty before the Committee of this charge. Accordingly in the opinion of the Committee, the Respondent was guilty of this charge.” (emphasis added) 11. Aforesaid charges are quite serious and found proved on the basis of material before Disciplinary Committee. 12. We also find that procedure prescribed under Section 21 which is consistent with requirement of principle of natural justice has been observed; adequate opportunity was afforded to respondent and there is neither any procedural flaw nor it can be said that findings in respect to Charges 1, 2 and 8, which have been found proved, erroneous or such as no person or ordinary prudence will come to such conclusion as has been arrived at by Disciplinary Committee. 13. In view of above, we confirm recommendation of CICA and direct that name of Respondent-Anil Kumar Sanghi (FCA) shall be removed from Members of Council of Institute of Chartered Accountants for a period of five years. Respondent shall stand disqualified to practice as Chartered Accountant for the aforesaid period. 14. The Reference is answered accordingly. 15. Let a copy of this judgment be sent to Council of Institute of Chartered Accountants forthwith for compliance and necessary action.