Bail Granted to Chartered Accountant – Complete Analysis
Hon’ble Mr. Justice Pankaj Bhandari of High Court of Rajasthan, while deciding the S.B. Criminal Miscellaneous Bail Application No. 5882/2021 allows the bail application of Shri Bhagwan Sahay Gupta in a case titled Bhagwan Sahay Gupta vs Union Of India, Office Of Sr. Intelligence Officer, Goods And Service Tax Intelligence Directorate, Jaipur Region Unit, Jaipur on May 04, 2021.
Table of Contents
- Facts of the Case
- Arguments by Petitioner and Defendants
- Why Petitioner (CA) was arrested
- Ground of opposing bail by GST department
- Why Court granted bail
- What is Section 132 with analysis
- What is Section 439 of Cr.P.C.
- What safeguards should Chartered Accountant adopt
Facts:
- Shri Bhagwan Sahay Gupta who is a Chartered Accountant by profession (Petitioner) filed his bail application in the High Court of Rajasthan under Section 439 of P.C. which provides Special Powers to the High Court or Court of Session regarding bail.
- A complaint was filed against the petitioner for assisting in registering 11fake firms and these firms have availed input tax credit to the tune of Rs.146 crores.
Arguments by Petitioner:
- Counsel of Petitioner argued that he is a Chartered Accountant of India and he has registered the firms on the basis of documents provided by one Shri Vishnu Garg who is also a co-accused in this case.
- Petitioner also contended that he is booked in an offence under Section132 (1)(i) (iv) read with Sub-Section (5) of Central Goods & Service Tax Act, 2017 which provides the maximum sentence of Six Months. But, Petitioner is in custody from 23.01.2021 (We understand that in there is a typo error in Judgment and this date should be 23.01.2020).
- Petitioner also argued that asper the charge-sheet, petitioner has only received Rs.75,000/- for filing GST returns and Rs.5,000/- per firm for the registration.
Arguments by the Department and Grounds of Opposing Bail
- Department argued that petitioner charged around Rs. 3,500/- per GST Return instead of charging Rs.1500/- per GST return.
- No allegation was made by the Department against the complainant that he has received any amount or any percentage with regard to the wrong input tax credit availed.
- Department also mentioned that co-accused Shri Vishnu Garg has accepted in his statement that the petitioner has created the firms on the basis of documents provided by him.
- Department also argued that petitioner was instrumental inregistration of 11 fake firms and these firms have availed input tax credit to the tune of Rs.146 crores.
- Department also contended that petitioner was aware as he was filing GST returns of non-existent firms.
- Department has also contended that petitioner is charged for an offence in which sentence of five years is provided.
Court Order
- The court granted bail to the petitioner by taking note of the fact that Chartered Accountant has remained in custody for a period of one year and five months and he is also having a child.
- Petitioner was directed to furnish a personal bond in the sum of Rs.1,00,000/- (RupeesOneLac Only) together with two sureties in the sum of Rs.50,000/- (Rupees Fifty Thousand only) each to the satisfaction of the learned trial court with the stipulation that he shall appear before the appropriate court.
Author’s Analysis
What is Section 132(1)(i) (iv) read with Sub-Section (5) with their analysis?
According to Section 132(1)(i)(iv) of the CGST Act, 2017, where any person commits or helps in committing following acts, then he shall be punishable with imprisonment for a maximum term of six months or with fine or both:
i. Providing false or fake accounts or documents with an intention to evade payment of tax due under this Act;
ii. Obstructs or prevents any officer in the discharge of his duties;
iii. Transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;
Safeguards to be adopted by Chartered Accountants
- Chartered Accountant should reasonably verify the background of their client and in case of suspicious activity must stop working for such client and should inform to the department.
- Should take undertaking from client that the client will provide the true and correct facts and documents and the CA is taking only his Professional Fee which he is charging from other clients and no extra fee is charged by CA from client. And in case CA is charging extra fee then he should mention it in writing to the client and should take his assent.
- More over some time CAs charges different amount of fees for same work from different clients then it doesn’t mean that they are doing something wrong. Many a times, CAs charges very less amount of fees just on account of fierce competition.
- In CAs firm GST registration is done by their team members and for registration they need to take OTP form client again and again and therefore in order to make it more convenient for them and also to avoid inconvenience of client, team member provide phone number and/or email id either of himself or of CA. In such cases, after the GST registration client do not receive messages of GST Department and if client is doing illegal activities then CA will also come under the suspicion of illegal activities. Therefore, this practice should be avoided strictly.
- This is a common practice of CAs that they keep DSCs of their clients in their office. In such cases, CAs should take consent letter or NOC from their clients to keep their DSC. And the CAs should ensure that before suffixing the DSC of client on any document or return, they should send PDF copy of such document or return on the email of client and obtain the signed copy of such document or return from client.
All above said steps will safeguard Chartered Accountants and other professionals against illegal activities of their client, if any.
Action to be taken by Chartered Accountant, if not found guilty
In this case, if CA is found not guilty then he has following remedies which he can adopt:
- Chartered Accountant can claim damages on account of physical and mental harassment, agony, sufferings along with loss of reputation in the society.
- In case, the intention of opposite party was malicious and if he has sufficient grounds to prove it then also legal action may be taken.
It is a well settled law that it is better that 10 guilty persons escape than one innocent suffer.