Introduction
The Chartered Accountant (CA) has various fundamental duties to perform which have to be done with due diligence in light of the professional ethics set by The Institute of CA of India. Any misconduct or gross negligence by the CA would lead to the creation of liabilities and further disciplinary proceedings upon him/her. Recently, the Hon’ble Calcutta High Court gave an order on 26 July 2024 in the case of Acme Paint and Resin (P) Ltd. vs Deputy Commissioner of Revenue, An appeal that was filed beyond the period as prescribed under section 107(4) of the CGST (Central goods and services tax) Act, was permitted due to the delay resulting from the CA’s oversight in failing to notice the previous order issued by the High Court on May 15,2024. The Hon’ble High Court held this delay to be as sufficient cause for the condonation of delay and thereby leading the assessee to use the bona fide mistake by CA as a sword for defending the delay in filing an appeal.
The Hon’ble High Court of Karnataka in the case of Mrs. Premlatha Pagaria vs Income Tax Officer gave the judgement on similar lines accepting the mistake of overseeing of order by Commissioner (Appeals) by the CA as sufficient cause for condonation of delay.
This blog will be dealing firstly, with the responsibilities and liabilities of a CA and whether overseeing orders on the income tax portal could be accounted for as a mistake or not. Secondly, whether every mistake of CA comes within ambit of sufficient cause for condonation of delay. Finally, the blog would deduce the alternative approach that can be taken by the court and suggested changes to be made in the present system.
Overseeing of Order Cannot Be Accounted as a Mistake
Before moving on to the other aspects of the order it is pertinent for us to understand the different professional ethics and responsibilities that have to be performed by a CA and whether overseeing of court order comes under its ambit. As per section 22 of The Chartered Accountant Act, 1949 professional misconduct has been defined as any act or omission in any of the schedules of the act. There are various acts or omissions as laid down in the first and second schedules regarded as misconduct by a CA but none of them specifies nor it could be interpreted as regular updates of the court’s order to be one of them.
It is important for the court to also consider the nature of work performed by CA along with regarding it as sufficient cause for condonation of delay. A CA is responsible for the auditing of financial transactions and books of a person and to ensure that it falls under due check and compliances of different tax and financial provisions of the country. Instead of following the present approach the Hon’ble High Court could have followed the approach by Hon’ble Bombay High Court in the case of Vijay Vishin Meghani vs DCIT which emphasized the need of the assessee to act as a prudent man and not rely on the CA blindly without applying its own mind.
In the present case the assessee instead of relying on the CA blindly could have itself taken the responsibility of noticing the previous order on the portal of the Hon’ble Calcutta High Court which is publicly accessible to everyone. The assessee could have ensured that the appeal was filed timely within the limitation specified by section 107(4) of CGST. Thereby keeping an update about the court’s order cannot be accounted as a mistake by the CA although even if it still comes within the ambit of a mistake it cannot be used as a sufficient cause for condonation of delay.
Not Every Mistake by Ca Could Be Used as a Sufficient Cause for Condonation of Delay
The Hon’ble Supreme Court in the case of Balwant Singh vs Jagdish Singh laid down the test for sufficient cause as something that cannot be avoided by the party with due care and attention. In the instant order by the Hon’ble Calcutta High Court, the oversight could have been avoided by the due care and attention of either the CA or the assessee. Mistakes or Misconduct by CA has been accepted by the Hon’ble Courts as a sufficient cause in various judgments (G.V. Infosutions (P.) Ltd. vs Deputy Commissioner of Income-tax; The Mullana Agriculture Coop. Society v. Income-tax Officer) but the courts should be cautious of their approach while deciding it to be a sufficient cause for condonation of delay.
In the case of Shyam Gopal Charitable Trust vs DIT the Delhi High Court said that these decisions should not be used a general precedent in all cases, where the assessee is not able to follow the limitation period and attributes the failure of it to the CA and take itself to constitute a sufficient cause. This was also laid down by Hon’ble Supreme Court in the case of Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi.
The court emphasized that it is important for every case to be dealt based on its own merits. It is important for the court to also examine the general prudence of the assessee itself which could be performed with its due diligence for e.g., The ITAT Chandigarh Bench ‘B’ allowed the overseeing of order as the sole responsibility of the CA as the assessee in the present case were villagers who were not aware with the provisions and technicalities of the Income Tax Act and had no knowledge of how to operate income tax portals. Non-compliance with due procedures and limitations as laid by law could be excused based on exceptional circumstances but cannot be used as a general precedent for every case.
In the instant case, the appellant is a well-established firm which makes it unlikely that they were not aware of the limitation period for filing an appeal within section 107 of the CGST Act or even not having the knowledge to operate an income tax portal and being updated with the orders related to their case.
Analysis
The courts have been in a state of dilemma while deciding whether a cause is sufficient or not which has been an issue of contention. The principles for condonation of delay as laid down by the Hon’ble Supreme Court in Pathapati Subba Reddy & ORS vs Special Deputy collector could act as a guiding path for the courts in the upcoming cases. Some of the key principles that are laid down by the court are:
Firstly, relief would not be necessarily provided to the parties just because it was given to parties in a similar manner.
Secondly, the discretionary exercise of power regarding condonation of delay would not be exercised if the delay could have been avoided by the parties with due care and diligence.
Thirdly, the court emphasized that the bar on limitation under section 3 has to be construed strictly whereas section 5 which provides condonation of delay can be construed liberally. Thereby it could be interpreted that condonation of delay is an exception while adhering to the limitation period is the general norm.
The scope of professional misconduct and accountability of the CA has been an issue of contention in various cases. In the author’s opinion, it is important for the courts in collaboration with the Institute of CA of India to redefine the ambit of duties of a CA for the best interests of the taxpayers as well as the professionals.
One of the significant steps could be defining the scope of gross or due negligence under clause (7) of part II of second schedule in The Chartered Accountant Act, of 1949. The Hon’ble Supreme Court dealt with the issue of gross negligence in the case of Institute of Chartered Accountants of India vs P.K. Mukherjee but failed to differentiate the grounds between gross negligence and negligence.
Concluding Remarks
The Hon’ble Calcutta High Court should be considerate towards condonation of delay but it is equally imperative for the court to consider the other factors in the case and judge it on the basis of all relevant factors. In the instant case, the Hon’ble High Court should have analyzed the current position of the parties which is an established firm as every case has different factors, and a mistake committed by CA could not be a precedent for condonation of delay as earlier laid down by Hon’ble Supreme Court and Hon’ble High Court. The remedies have been provided for the benefit of the parties but the court should be cautious while providing it as misuse of the remedies would be violative of the objective of the legislature and would be a hindrance in the faster disposal of the cases which by in itself would be injustice for the other parties.
This blog is written by Vedant Sharma, Student.