 PART D- PROFESSIONAL ACCOUNTING

Duty to the Client (Rule 25-32), under Chapter II Standards of Professional Conduct and
Etiquette of Part VI

(Reasons) why accountancy or recording is important:

I. Fee from Clinet
II. Other ancillary expenses like stamp duty, stationary

Expenses Divided into 4 broad categories:

a. Filing of the plaint
b. Once the matter or the suit is accepted by the court
c. Once the initial arguments get started, evidences
d. At the stage of final arguments

Legal requirements for keeping accounts:

a. To calculate the Annual income
b. To calculate the income tax
c. To calculate the professional tax
d. Amount due to the client
e. Amount due by the client

Penalty for note keeping accountancy: if he fails to maintain the account, then he is liable to pay
penalty starting from 2k to 1 lakh Rs. As per section 271 (a) of IT act.

Requirements of advocates Act and Bar Council of India Rules:

Rule 25. An advocate should keep accounts of the client’s money entrusted to him, and the accounts
should show the amounts received from the client or on his behalf, the expenses incurred for him and
the debits made on account of fees with respective dates and all other necessary particulars.

Rule 26. Where moneys are received from or on account of a client, the entries in the accounts
should contain a reference as to whether the amounts have been received for fees or expenses, and
during the course of the proceedings, no advocate shall, except with the consent in writing of the
client concerned, be at liberty to divert any portion of the expenses towards fees.

The necessity of such account is obvious in view of Counsel—client relationship. In Ananda

Devi v. Banchhanidhi Somant Sao it was held to be the duty of the pleader to keep complete
and accurate accounts so that there be no dispute between him and his clients. This requirement
of maintaining account serves many purposes.

Rule 27. The Liability of the Lawyer arising out of Accounts: Where any amount is received or
given to him on behalf of his client, the fact of such receipt must be intimated to the client, as early as
possible.

28. Lawyer to Settle Fee: After the termination of the proceedings, the advocate shall be at liberty
to appropriate towards the settled fee due to him, any sum remaining unexpended out of the amount
paid or sent to him for expenses, or any amount that has come into his hands in that proceeding.
29. Where the fee has been left unsettled, the advocate shall be entitled to deduct, out of any moneys
of the client remaining in his hands, at the termination of the proceeding for which he had been
engaged, the fee payable under the rules of the Court, in force for the time being, or by then settled
and the balance, if any, shall be refunded to the client.

30. A copy of the client’s account shall be furnished to him on demand provided the necessary
copying charge is paid.

31. An advocate shall not enter into arrangements whereby the funds in his hands are concerned into
loans.

32. An advocate shall not lend money to his client for the purpose or any action or legal proceedings
in which he engaged by such client.

Explanation – An advocate shall not be held guilty for a breach of this rule, if in the course a pending
suit or proceeding, and without any arrangement with the client in respect of the same, the advocate
feels compelled by reason of the rule of the court to make a payment to the court on account of the
client for the progress of the suit or proceeding.

Rules for Advocate on Record:

1. Every advocate-on·record shall keep such books of account as may be necessary to show and
distinguish in connection with his practice as an advocate-on-record-
(i) Moneys received from or on account of and the moneys paid to or on account of each of his
clients; and
(ii) The moneys received and the moneys paid on his own account.

2. Every advocate-on-record shall, before taxation of the Bill of Costs, file with the Taxing Officer a
Certificate showing the amount of fees paid to him or agreed to be paid to him by his client.

Need of Accountancy:

Accounting System is not only a legal requirement, but it also answers certain prominent
questions. Like every businessman, every professional is always willing to know about the net
revenue he or she has made during a period and is also interested in knowing the financial
position. It is accounting, which answers about the revenue and Owings and ownership of the
entereprenure. As far as the legal necessity of the accounting is concerned, it has been made
imperative for practicing advocates to maintain proper books of account as per Indian Income
Tax Act, 1961. According to the provision laid down in rule 6F(1) of Section 44 AA(3) "Every
person carrying on legal...profession... or authorised representative shall keep and
maintain the books of account and other documents specified in Sub rule (2)". Thus, for the
taxation purposes, every solicitors or a person performing as an authorised representative of any
other person is required to have a proper set of Accounting records.

Besides, The Bar Council of India rules, 1975 also indicates about the maintenance of proper
books of accounts. It has set standards of professional conduct and etiquette to be adhered to
regarding the client's money and expenses Rule 25, as has been seen earlier, clearly requires that
a legal practitioner must keep the accounts of the client's money. It covers the receipts from
client and expenses incurred and fee charged by the advocate. All transactions are to be recorded
in a chronological order in terms of date. Further, rule 30 thrust a liability upon the legal
Accountancy for Lawyers practitioner to provide a copy of the client's account to the client on
demand. On failure, the advocate may be held liable for misconduct and the case may be referred
to the disciplinary committee for action.

Bar council of India rules, 1975 also requires from an advocate that he/ she must disclose full
and frank information to his client. Though this may be interpreted in context of the facts of the
case, but it should also be kept in mind that an advocate is not only a 'man of law' but he/she is a
representative of his/her client also. He/she acts as an agent of the client, hence, it becomes the
duty of the advocate to disclose all the facts, information, etc. to the client whether related to the
case or incidental to the case. This is in conformity with the basic principle of accounting, which
requires that all material facts must be disclosed to the party having their interest their in.

Thus, it is clearly evident from the facts that every advocate on one hand where he possesses or
supposed to have a better understanding of laws relating to his profession, on the other hand he
must have a proper knowledge of Accountancy. It will not only be fruitful for him/her, in a sense
to keep himself/herself away from the charges of misconduct but will also make him able to
discharge his tax liability as a tax payer.