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.
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.
The CA 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 07, 2024.
The Court also issued notice to the NFRA.