Pasayat, C.J. 1. This is a reference under Section 21 (5) of the Chartered Accountants Act, 1949 (in short, the Act) by Institute of Chartered Accounts of India (hereinafter referred to as institute). Proceedings were initiated against Mr. T.S. Ranganathan (hereinafter referred to as respondent) alleging that he was guilty of professional misconduct, starting point for the same was a complaint received from Commissioner of Agricultural Income-tax. Trivandrum (hereinafter referred to as complainant) alleging that respondent had certified Profit and Loss Account of one Mr. M.K. Ananthayya Gowder for the year ended on 31-3-1975 as correct, whereas there was an error of Rupees 1,00,000/- on the expenditure side of account. As a result of the mistake, inadmissible deduction of income and short levy of Rs. 78,213/- by way of tax had resulted. Upon examination of written statement from respondent along with the complaint, Council of the institute came to a prima facie opinion that respondent was guilty of professional misconduct. Accordingly, matter was referred to the Disciplinary Committee constituted under the Act for enquiry. After hearing parties and recording evidence that was tendered before it, Disciplinary Committee came to the conclusion by majority that respondent was guilty of having committed professional misconduct within the meaning of Sections 21 and 22 of the Act read with Clause (7) of Part I of the Second Schedule to the Act. After considering the said report, Council of the institute recorded its findings and recommended that respondent be reprimanded. Thereafter, as required under Section 21(5) of the Act, matter has been referred to this Court.
2. Heard learned counsel appearing for the parties.
3. Factual background, highlighted in the reference, are as follows : Accounts of Mr. Ananthayya Gowder were audited by M/s. K.K. Thampan & Co., Chartered Accountants, Calicut (hereinafter referred to as Auditors). Said assessee was assessed to tax by Agricultural Income-tax Officer, Vythiri. Original assessment for the year ending 31-3-1975 was completed by determining net income at Rs.47,442/- as against net loss of Rs. 153/- returned by assessee, and assigning him the status of' individual'. While completing assessment, assessing officer allowed the entire claim of expenditure of Rs. 3,19,163.55 as shown in the expenditure side of Profit and Loss Account filed by assessee in support of the return and accounts produced by him. Such accounts were audited and Profit and Loss Account and Balance Sheet were prepared and certified by Auditors. Assessing Officer, while completing assessment, did not verify the arithmetical accuracy, correctness and completeness of the figures in the Profit and Loss Account for the reason that accounts were certified to be correct by a reputable firm of auditors and on presumption that figures furnished, duly audited and certified by them would be correct and reliable. On subsequent scrutiny of Profit and Loss Account, it was found that total amount of expenditure side of the Profit and Loss Account was really Rs. 2,19,168/-. But total amount of expenditure struck down and certified by Chartered Accountants as Rs. 3,19,163/-. Thus amount of expenditure incurred by assessee for the year 1975-76 was inflated by Rs. 1,00,000/-. Subsequent scrutiny of accounts revealed the gross negligence and misconduct on the part of auditors. Assessee was visited with penal consequences. Complaint was made for initiating action against auditors. In view of the factual position highlighted in the complaint, it was felt that there was serious lapse and misconduct on the part of the auditors warranting appropriate action. In accordance with Regulation 11(5) of Chartered Accountants Regulation, 1964 (in short, the Regulation), institute forwarded a copy of the complaint to auditors with a request to disclose to the Council, as required under Regulation 5(d), name of the member answerable to the charge of misconduct and also to send a copy of the complaint to said member with a request to submit statement, if any as required under Regulation 11(6). In reply, auditors stated that respondent was answerable to the charge of misconduct. Respondent submitted his written statement on 20-8-1983. His stand, inter alia, was that assessee prepared the accounts through his accountant. Books of account were brought to the office of respondent. Profit and Loss Account and closing Trial Balance as prepared by representative of assessee were checked by a senior clerk of the respondent, Mr. C. Daniel. While totalling Profit and Loss Account, mistake was committed by the accountant of assessee and instead of showing Rs. 2,19,163.55 on the expenditure side, it was inadvertently shown as Rupees 3,19,163.55. This was overlooked by the Clerk of respondent. It was further stated that respondent did not undertake audit work of assessee, but acted only as a tax consultant and prepared the returns from the books and statements furnished by assessee. It was further stated that there was no gross negligence or misconduct on the part of respondent and that the person who checked the accounts was an experienced and long time employee of respondent with a clean record and there was no occasion to doubt his capacity or integrity. It was also stated that there was no negligence or dishonesty on the part of respondent and he bona fide entrusted the clerical work to his subordinate staff. It was that respondent is not guilty of any conscious neglect or omission in the discharge of his duties.
4. As required under Regulation 11(7), complaint and the written statement were placed before the President to decide whether any additional particulars or documents were required to be called for from parties prior to placing papers before the Council as required under Regulation 11(8). President decided that respondent should be requested to send copies of Profit and Loss Account, etc. Respondent forwarded photo copies of the Estate Account with reconciliation statement, etc. After considering the documents, it was concluded that respondent was guilty of professional and/or other misconduct and, therefore, matter was referred by the Council to the Disciplinary Committee. Said Committee was of the view that respondent was guilty of professional misconduct within the meaning of Section 21 read with Section 22 of the Act, and Clause (7) of Part I of the Second Schedule to the Act. Council considered the matter and accepted the view of Disciplinary Committee and has recommended penalty of reprimand. Consequently, as noted above, reference has been made to this Court.
5. At the time of hearing of the reference, learned counsel for institute submitted that the degree of care and caution required from a professional like a Chartered Accountant was clearly lacking and, therefore, penalty suggested is not only fair, but also on the lenient side. Learned counsel for respondent submitted that a mere lack of care cannot constitute professional misconduct.
6. On the background facts, it has to be seen whether failure of respondent to notice the mistake would constitute an act of negligence. It depends upon the fact whether the concerned person had applied his mind diligently to the job entrusted to him, and whether due care and caution, as is required to be adopted, was taken. Respondent took the stand that he had only certified that accounts have been prepared from the books of accounts. Job of a Chartered Accountant is not to make a compilation. When a certificate is given, arithmetical accuracy has to be ensured. That is the minimum requirement to be done by a Chartered Accountant. The test, according to us, is whether in addition to the failure to do the duty, there was failure to act honestly and reasonably. Word 'negligence' is associated in the provision with the word 'misconduct' and involves some element of moral culpability. Mere imprudence or want of judgment or grave error judgment is not enough. Misconduct Implies failure to act honestly and reasonably either according to the ordinary and natural standard or according to the standard of a particular profession. But error or misinterpretation of law and specially one view or another over a debatable construction cannot be ground for the allegation and finding of professional misconduct against a Chartered Accountant. Negligence is the omission to do something which a reasonable man, guided upon those considerations, which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do. It is not absolute or intrinsic, but relative to some circumstances of time, place or persons, imposing a duty to take cars. In dealing with matters of professional propriety, one cannot ignore the fact that the profession of Chartered Accountancy occupies the place of nobility, pride and honour and is a profession of trust. Expertise in the field of accounting and auditing is the hall-mark of Chartered Accountant's profession. When a Chartered Accountant prepared a Profit and Loss Account from the books of account and signs certificates to that effect, minimum that is expected to do is to verify the accuracy of the figures in the Profit and Loss Account with reference to the relevant books of account and he cannot escape the responsibility pleading that he did not audit it and that verification of accounts was done by the staff. As part of his professional duty and responsibility, he was required to take reasonable steps to satisfy himself that the work was carried out in a proper, fair and efficient manner. Certificate was issued by him, and the professional relationship was between him and the client. There cannot be any escape by respondent by taking the plea that an experienced accountant was verifying the totals. Elementary verification of totalling would have been sufficient to notice the mistake. Failure to carry out such elementary verification amounts to gross negligence and carelessness. Skill, care and caution, which a reasonably competent and cautious auditor was expected to exercise, was not done. Lack of it has affected veracity of his competence. Delegation of duties does not necessarily absolve a principal from the liability arising out of gross negligence. The intendment and object of the Act is to maintain the standard of the profession is a high level. Under an almost Identical fact situation, where auditor had completely depended on Assistants and did not even sample check in relation to accounts, it was held that it amounted to professional misconduct. But in the absence of dishonesty, reprimand was held to be sufficient (see Council of institute of CAs v. Umaantha Rao, AIR 1969 Mysore 312). Even though the job of verification and checking can be entrusted to a subordinate, ultimate sanctity is attached to the certification by the auditor. Whatever the employee does, in order to give effect to the employer's wish has to be treated as the act of the latter. The maxim applicable is "qui facit per alium facit per se", Where an employee is acting within the scope of his employment and in so acting does something negligent or wrongful, employer is liable, even though the act done may be the very reverse of that which the employee was actually directed to do.
7. In the above background. Council was justified in its conclusion that respondent was guilty of professional misconduct within the meaning of' Section 21 read with Section 22 and Clause (7) of Part I of Second Schedule of the Act. Penalty of reprimand, as recommended by Council, would be adequate and proper.
Reference is accepted and penalty of reprimand is awarded. Reference is answered accordingly.