TMI Blog1989 (8) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts, statements and return of income to be filed before the income-tax authorities. He has been carrying on his profession since 1976. He is an authorised representative within the meaning of section 288(1) of the Act. The relevant clause applicable would be clause (vi) of sub-section (2) which reads as follows : "(vi) any person who has acquired such educational qualifications as the Board may prescribe for this purpose." Section 139 of the Act provides for filing a return. Sub-section (9) read along with the Explanation says that the return of income shall be accompanied by statements relating to the computation of the income chargeable under various heads of accounts, computation of the gross total income and computation of the tax payable on the income returned. As per rule 12A of the Rules, every authorised representative, before he makes an appearance before the Income-tax Officer or after making such appearance, shall furnish to the officer : (a) particulars of accounts, statements or other documents supplied to him by the assessee for the preparation of the return of income ; and (b) if the authorised representative has for the purpose of the preparation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fected as they are denied the right to carry on their profession effectively. In practical terms, this would, in fact, exclude all authorised representatives other than chartered accountants from practising their profession as authorised representatives in respect of the assessees whose turnover exceeds rupees forty lakhs and in respect of professionals whose income (gross receipts from profession) exceeds rupees ten lakhs. As a result of this compulsory audit by the chartered accountants, necessarily, one has to engage the services of chartered accountants. The result will be to exclude all authorised representatives other than chartered accountants from practising their profession and this would amount to an unreasonable restriction, amounting to almost a prohibition. Further, it brings about a discrimination in favour of a class of persons, viz., chartered accountants. Therefore, this provision is attacked in the affidavit as follows : "The petitioner submits that the classification made by choosing only chartered accountants for favoured treatment as against other classes of authorised representatives would be a person who falls within one of the clauses of section 288(2). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber of assessees and it was felt necessary by the Government that compulsory audit in the cases of bigger assessees would facilitate better tax administration and would also enable the Income-tax Officer to concentrate on the investigational aspect of the assessment rather than attending to routine check of the accounts maintained by the assessees. It is incorrect to contend that the chartered accountants have been favoured to the exclusion of the income-tax practitioners. Auditing of accounts is a specialised job. It means official examination of accounts and verification by reference to receipts and vouchers. Therefore, only chartered accountants have acquired such skill and knowledge. It may be true that some income-tax practitioners may also acquire that skill by sheer practice without passing the necessary examinations. But that does not preclude Parliament from prescribing special qualifications with reference to the auditing of the accounts. The inevitability brought about by section 44AB by restraining certain class of authorised representatives from being engaged by certain assessees for audit of their records and accounts itself cannot render the provision unconstitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om of trade guaranteed under article 19(1)(g) of the Constitution is denied in the case of an assessee. Therefore, besides the points raised on behalf of the income-tax practitioners, he would add this as well. Mrs. Nalini Chidambaram, appearing for the Department, would state that the points raised by both counsel (in all these writ petitions) either on behalf of the income-tax practitioners or on behalf of the assessee are no longer res integra. There are several decisions which have upheld the validity of the section wherein identical contentions raised on behalf of the petitioners have been held to be untenable. Counsel submitted in support of their submissions Mohan Trading Co. v. Union of India [1985] 156 ITR 134 (MP) ; Rajkot Engineering Association v. Union of India [1986] 162 ITR 28 (Guj); Abhay Kumar and Co. v. Union of India [1987] 164 ITR 148 (Raj); A. S. Sarma v. Union of India [1989] 175 ITR 254 (AP) and T. S. Nataraj v. Union of India [1985] 155 ITR 81 (Kar). She is adopting the reasoning contained in these judgments as her arguments and would submit that the writ petitions are liable to be dismissed. Having regard to the above arguments, we are only to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain before the I specified date' a report of the audit in the prescribed form duly signed and verified by the 'accountant' setting forth such particulars as may be prescribed by rules made in this behalf by the Central Board of Direct Taxes. In cases where accounts are required to be audited by or under any other law (as in the case of companies and co-operative societies), it will suffice if the accounts are audited under such other law before the 'specified date' and the assessee obtains before the said date the report of the audit as required under such other law, and also a report of audit in the form to be prescribed by the Central Board of Direct Taxes. For the purposes of the proposed provision, the term 'accountant' Will have the same meaning as in the Explanation below sub-section (2) of section 288 of the Income-tax Act. The expression 'specified date', in relation to the accounts of any accounting year or years relevant to any assessment year, would mean the date of the expiry of four months from the end of the accounting year or, where the assessee has more than one accounting year, from the end of the accounting year which expired last before the commencemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is, therefore, not a case where the legal practitioners, who are qualified to perform the duty of an 'accountant' have been restrained from doing so. As for representation of the assessee before the assessing authority, the legal practitioner as well as the 'accountant' appear for the assessee, since both are included in the category of persons entitled to represent the assessee as an 'authorised representative' in accordance with section 288 of the Act. It is for the purpose of section 288 of the Act that legal practitioner and an 'accountant' are equals and not for the purpose of compulsory audit of the assessee's accounts, for which the 'accountant' alone is qualified. Admittedly, there is no discrimination made between legal practitioner and an 'accountant' for the purpose of appearance as an 'authorised representative" of the assessee in accordance with section 288 of the Act. If a person clubbed with others in section 288 possesses some further qualification enabling him to perform a function in addition to appearance as an 'authorised representative' of the assessee, no discrimination can result from the disability of others for want of qualification, to perform the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We may also refer usefully to a recent decision of the. Supreme Court in McDowell and Co. Ltd. v. C TO [1985] 154 ITR 148, wherein the shift towards emphasis on frowning at tax avoidance has been indicated. In view of this later decision of the Supreme Court, reference made by the Finance Minister in his Budget Speech to discouraging 'tax avoidance' cannot be objected to. It follows from the above discussion that challenge to the impugned provisions on all the aforesaid grounds based on article 14 and article 19(1)(g) of the Constitution has no merit and must be rejected. We may at this stage also refer to a decision of the Karnataka High Court in T. S. Nataraj v. Union of India [1985] 155 ITR 81, wherein similar challenge to the constitutional validity of these provisions based on articles 14 and 19(1)(g) was rejected. With respect, we are in agreement with the conclusion reached therein." It may be seen that this ruling referred, in its turn to T. S. Nataraj V. Union of India [1985] 155 ITR 81 (Kar) and agreed with the conclusion contained therein. Therefore, we will now take up T. S. Nataraj v. Union of India [1985] 155 ITR 81 (Kar) wherein the petitioners belong to two ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve wisdom has thought it fit to extend the special privilege, if there is any, of being entitled to carry out tax audit to special auditors who are recognised under a special law to be auditors for a category of assessees, we do not think that we would be justified in treating this impugned provision as violative of article 14 of the Constitution since in our opinion there is a fair reason for granting this preferential treatment to the special categories of assessees who are required under the special law to get their accounts audited, as for example, co-operative societies under the relevant Co-operative Societies Act since otherwise these welfare agencies would be subjected to the burden of audit twice over-one being commercial audit and the other being tax audit. It cannot be said that there is no fair reason underlying the proviso for giving preferential treatment to a specified category of assessees. This apparent preferential treatment does not militate against the rule of equality enshrined under article 14 of the Constitution. The non-corporate assessees who are not required to get their accounts audited under any law cannot, therefore, press this proviso in support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in so far as audit is concerned and as such section 44AB is not violative of article 14 of the Constitution. In T. S. Nataraj v. Union of India [1985] 155 ITR 81 (Kar) and Mohan Trading Co. v. Union of India [1985] 156 ITR 134 (MP), the Karnataka and Madhya Pradesh High Courts, respectively, took the same view." It may also be noticed that the Division Bench further held as below (p. 261) : "The object of section 44AB is to have a detailed scan of accounts of assessees in higher income brackets so that the detection of evasion, if any, may yield attractive dividends regarding exigibility to tax. Further, the compulsory audit facilitates the assessing authority to get at a neat epitome of the transactions without the necessity of devoting considerable time to scrutiny of accounts and transactions. The audit report contributes to expeditious and accelerated assessments and detection of evasion. The stipulation of audit by chartered accountants has a legitimate affinity to the object sought to be achieved. Learned counsel for the petitioner contended that by diverting their clientele to the corridors of chartered accountants for the purpose of audit, the petitioners lose their gri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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