Delhi High Court stays NFRA proceedings against CA for ‘professional misconduct’ over tax deduction claim
The Delhi High Court recently stayed the proceedings initiated under the Companies Act against a Chartered Accountant (CA) for professional misconduct for alleged irregularities in claiming deduction under Section 80 of the Income Tax Act (IT) for a company [CA Unnikrishnan Menon v National Financial Reporting Authority and Another].
The deduction was claimed for one Queens Corp Limited (QUESS). For this, the National Financial Reporting Authority (NFRA) issued a show cause notice under Section 132(4)(c) of the Companies Act to CA Unnikrishnan Menon.
Menon approached the Court arguing that under the National Financial Reporting Authority Rules, 2018, NFRA can issue show cause notice only to the auditor of a company under investigation.
He said that in his case, neither he nor the company of which he is a member is the auditor of QUESS (the company under investigation) and therefore, the show cause notice could not have been issued to him.
He referred to Rule 4(1) of the NFRA Rules and stressed that investigation can be done only with respect to an auditor of the company under investigation.
Justice Subramonium Prasad considered the case and concluded that a prima facie case was made out in favour of the petitioner.
He, therefore, stayed the proceedings in the show cause notice till the next date of hearing which is scheduled on May 7.
The Court also issued notice to the NFRA.
Senior Advocates Sanjeev Puri along with advocates Ajay Bahl, Vinati Kastia, Aditya Jalan and Raghav Seth appeared for Unnikrishnan Menon.
The NFRA was represented through Advocate Zoheb Hossain.
Central Government Standing Counsel Asheesh Jain and advocate M Theepa appeared for the Union government.