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MUMBAI, June 10: Can a client demand compensation from a chartered accountant for the losses suffered due a piece of wrong advice? While rul...

MUMBAI, June 10: Can a client demand compensation from a chartered accountant for the losses suffered due a piece of wrong advice? While ruling out the demand for compensation of around Rs 5 lakh made by an aggrieved client, the Maharashtra State Consumer Disputes Redressal Commission has defined the extent of liability of chartered accountants in such cases.

The ruling applies to lawyers-solicitors and other professionals too. 8220;Chartered accountants are amenable to the Consumer Protection Act, only when it is clearly established that they have given an opinion which is clearly contrary to the explicit provisions of law, not supported by any textual commentary,8221; the ruling of the commission president, Justice A A Halbe, states.

The judgement was in response to an appeal filed by chartered accountant Ravi Pandit against a Satara district forum order. The district forum had directed Pandit to pay Rs 4,39,600 along with Rs 50,000 as compensation towards mental torture and Rs 10,000 as legal costs to aclient. It was alleged that Pandit rendered incorrect advice which cost the client, Gopal Apte, Rs 1,89,000 in capital gains tax.

Apte approached Pandit after he closed down his Satara-based plastic moulds factory following labour interest. He had decided to sell his unit8217;s assets and wanted to minimise his tax liability on the sale proceeds. Though he was aware that he could get an exemption by investing the money in approved securities/bonds as prescribed under the Income Tax Act, Pandit advised him otherwise as he still owed money to his bank. Pandit was of the view that if the capital gains bonds were pledged to the bank, Apte would not be able to avail tax exemption.

He advised Apte to invest the money directly in Bank of Maharashtra. Pandit relied on earlier judgement of the Income Tax tribunal while giving this advice. Apte followed the advice but, he soon received a notice of the capital gains tax liability. Realising that it was Pandit8217;s advice that had landed him in trouble, he then filed forcompensation in the district forum.

There he alleged that Pandit was working as an auditor in the Bank of Maharashtra and had a vested interest in asking him to deposit the money there. The district forum upheld his plea following which Pandit moved the state commission. Pandit8217;s counsel D Y Chandrachud argued that his client had based his advice on case laws of the Income Tax Appellate Tribunal. Therefore, there was no malafide intention. Moreover, Chandrachud said that if the IT tribunal did not entertain its own case laws, the chartered accountant cannot be held guilty. The state commission set aside the district forum8217;s order and allowed Pandit8217;s appeal.