The Supreme Court of India has upheld the Madras High Court's judgment in the case of Murali Krishna Chakrala v. The Deputy Director, Directorate of Enforcement, Chennai, ruling that a Chartered Accountant (CA) cannot be held criminally liable for merely performing his statutory duty under tax law.
Background of the Case
The case involved a Chartered Accountant who had issued Form 15CB, as required by banking regulations, for facilitating foreign remittances related to the import of goods. Later, the Enforcement Directorate (ED) accused the company involved of illegally transferring funds abroad and alleged that the CA had abetted money laundering under the Prevention of Money Laundering Act (PMLA).
High Court's Observation
The Madras High Court, in its 2023 judgment ([2023] 457 ITR 579), granted relief to the CA, observing:
"A Chartered Accountant is not required to verify the genuineness of documents submitted by clients. His role is akin to that of a panel lawyer of a bank, who provides a legal opinion on title deeds without investigating their authenticity. Such professionals cannot be prosecuted along with the principal offender."
The Court clarified that the CA's role in issuing Form 15CB is purely procedural and confined to confirming whether tax has been properly deducted as per the provisions of the Income-tax Act, without independently verifying the underlying transactions.
Supreme Court Upholds Relief
The Supreme Court, in The Deputy Director v. Murali Krishna Chakrala (SLP (Criminal) Diary No. 8123/2024), upheld the High Court's reasoning, effectively reaffirming that issuing Form 15CB does not amount to abetment of money laundering.
By dismissing the appeal filed by the Enforcement Directorate, the Apex Court underscored that professional duties carried out in good faith under statutory requirements cannot attract criminal liability unless there is conscious involvement or intent to aid an illegal act.
Significance of the Ruling
This landmark judgment provides crucial clarity and protection to Chartered Accountants and other professionals, ensuring they are not held criminally responsible for the misuse of documents or information by clients, provided their actions are within the scope of their statutory obligations.
The ruling reinforces the judiciary's commitment to upholding professional independence and sets a precedent limiting unwarranted prosecution of tax professionals in PMLA-related cases.
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