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December 3, 2022

Chartered Accountant is not required to go into the genuineness of the documents for form 15CB

Chartered Accountant is not required to go into the genuineness of the documents for form 15CB

Madras HC : Chartered Accountant is not required to go into the genuineness of the documents submitted by his clients for form 15CB

Facts and issue of the case

One Mani Anbazhagan opened a bank account in the name of some persons in Indian Bank, Thousand Lights Branch and presented some import documents to the Branch Manager, requesting him to transfer foreign exchange to certain entities abroad. The Branch Manager submitted the Principal Commissioner of Customs those import documents for inspection after smelling a rat. The documents for B.K. Electro Tool Products were among those checked by the Principal Commissioner of Customs, who discovered that the majority of them were fakes. The Branch Manager of Thousand Lights was immediately made aware of this transaction by the Principal Commissioner of Customs, who also contacted the Enforcement Directorate. The Thousand Lights Branch Branch Manager informed his superiors of this situation.

The FIR is based on the commission of a scheduled offence under the Prevention of Money-Laundering Act (PMLA), 2002 pursuant to which the Enforcement Directorate registered a case. According to the complaint, these individuals opened fictitious bank accounts, submitted false Bills of Entry, parked large sums of money in those accounts, and had money transferred to various parties abroad through the bank to make the transaction appear to be licit for the alleged purpose of import.

An initial examination found that Rs. 8 crores had been transferred through seven banks from India to fictitious foreign entities. Nevertheless, despite the fact that the complaint was made as previously mentioned, the Enforcement Directorate kept looking into the matter. The Enforcement Directorate discovered some Form 15CB during their investigation that had been issued by an auditor named Murali Krishna Chakrala. They focused on him, and when he was questioned, he revealed shocking details, including that one of his clients, Kiyam Mohammed, had requested the issuance of Form 15CB under Rule 37-BB of the Income Tax Rules, 1962, and had provided supporting documentation. Murali Krishna Chakrala perused those documents and issued certificates to the effect that it is not necessary to issue Form 15CB in respect of overseas payment of imports.

The five numbers of Form 15CB relating to B.K.Electro Tool Products were also uploaded in the website portal of Income Tax Department on 22.08.2016. The five numbers of Form 15CB issued by Murali Krishna Chakrala were presented to the Branch Manager, State Bank of Travancore, Mount Road Branch, for transferring a sum of Rs.3.45 crores to various entities in Honk Kong

Based on the lead provided by Murali Krishna Chakrala, the Enforcement Directorate zeroed in on Kiyam Mohammed and apprehended him. Kiyam Mohammed revealed the involvement of Abdul Haleem in these activities and accordingly, Abdul Haleem was nabbed.

Aggrieved by the addition of him as accused in the case, the CA filed a discharge petition in the trial court which was rejected. Aggrieved by the order of the trial court, he proceeded with the present revision petition.

Observation of court

Heard Mr.Nithyaesh Natraj, learned counsel, representing Mr.S.Ravi, learned counsel for Murali Krishna Chakrala [petitioner herein] and Mr.N.Ramesh, learned Special Public Prosecutor for the Enforcement Directorate.

In a detailed counter affidavit dated 09.11.2022, the Enforcement Directorate justifies the prosecution of Murali Krishna Chakrala and asserting that there is enough evidence against him for the trial to continue. Below is a summary of the counter affidavit’s main points.

It is submitted that the averments contained in the criminal revision petition are not true and denied in toto. It is further submitted that the petitioner as a practising Chartered Accountant, free to practise his profession and render professional services in the matter of filing VAT return to the business entity in the name and style of M/s.Copy Care, which is owned by A-7. Whereas, the Petitioner/A-6, in this case travelled beyond the professional scope, ethics and value and in the process issued the Form – 15CB in the name of M/s.B.K.Electro Tool Products, using the PAN number of A-2 and photo identity of A-1 and ultimately facilitated the money mule, to operate the account in the name of M/s.B.K.Electro Tool Products through seven AD Banks to send foreign exchange to the extent of USD 8,237,007.95 equivalent to INR 59,47,03,760.46, without disclosing the identity of the beneficial owner and end-use. The Petitioner/A-6 is deeply involved in the scam and it is no way connected within the scope of professional services as a chartered accountant and therefore the criminal revision petition is liable to the dismissed as devoid of merit

I submit that the Petitioner/A-6 made an admission that he issued certificate in Form 15CB in favour of the M/s.B.K.Electro Tool Products at the request of A-7. The Petitioner/A-6 made further admission that the certificate in Form- 15CB is one of the supporting documents to make foreign outward remittance. The above submission of the Petitioner/Accused-6 crystallise that he never interacted or looked into financial state of affairs of either A2 or A1 whose PAN number and Photograph were being used in operating the account of M/s.B.K.Electro Tool Product. The only excuse sought by the Petitioner/A-6 that there was a bonafide belief on his part with A-7 that made him to sign the Form 15CB showing the photograph of A1 and PAN number of A2 as an owner of M/s.B.K.Electro Tool Products. Whereas, A-7 was examined u/s.50 of PMLA, 2002, on 12.01.2022, A-7 neither identified the Petitioner/A-6 nor A-1 or A-2, with reference to photograph, in reply to question no.8. The combined reading of submission of the Petitioner/A-6 and the statement given by A7 before the IO is contradictory with one another. The truth can be unravelled only at the time of trial and it is premature at this point of time. Further, the foreign outward remittances are made through the seven AD banks and not only with one bank as projected by the petitioner/A-6.”

The complaint’s allegations and the statement of Murali Krishna Chakrala, which he provided under Section 50 of the PML Act, were both reviewed by Mr. Nithyaesh Natraj, a learned counsel, who argued that without Murali Krishna Chakrala, Kiyam Mohammed (A7) and Abdul Haleem (A8)involvement’s would never have been revealed. He also claimed that during the course of his professional duties, Murali Krishna Chakrala had provided five numbers of Form 15C , after scrutinizing the documents that were presented to him by Kiyam Mohammed (A7). There was no cause for Murali Krishna Chakrala to question the validity of the import documentation.

Mr.Nithyaesh Natraj, learned counsel, further contended that Form 15CB for making overseas payment towards import is not required even under the law and that is why, except the State Bank of Travancore, all the other nationalised banks had transferred the funds based on the import documents without insisting upon a Form 15CB from a Chartered Accountant. Had Murali Krishna Chakrala been a part of the conspiracy, he would not have gullibly uploaded the certificates into the Income Tax Department portal on the same day

Conclusion of court

The High Court thus held that “a Chartered Accountant is required to only examine the nature of the remittance and nothing more. The Chartered Accountant is not required to go into the genuineness or otherwise of the documents submitted by his clients.”

 Applying the same, it was found that the prosecution of Murali Krishna Chakrala, in the facts and circumstances of the case at hand, could not be sustained.


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