TMI Blog1987 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... it of the companies should be done by chartered accountants, an income-tax practitioner or an advocate can Me the return and represent the company in the proceedings before the assessing authority and appeals. Section 44AB provides that in respect of a business having turnover exceeding 40 lakhs rupees and professional income the gross receipts exceed ten lakhs rupees the accounts should be audited by chartered accountants and this provision adversely affects the practice of income-tax practitioners and advocates. Learned counsel for the petitioners, Sri. S. R. Ashok, contended that section 44AB of the Income-tax Act, 1961, confining the audit to chartered accountants alone results in invidious discrimination and is violative of article 14 of the Constitution and the elimination of the income-tax practitioners and advocates from doing audit work infringes the fundamental right guaranteed under article 19(1)(g) of the Constitution. Learned standing counsel for the Revenue contended that the impugned provision is founded upon reasonable classification having nexus with the object of checking evasion and the avoidance of the petitioners regarding audit is reasonable restriction save ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be audited by an accountant as provided in the Explanation to section 288(2) of the Act. Section 288, while enumerating the categories of persons entitled to represent the assessee before the hierarchy of authorities under the Act, amplified the expression "accountant" in clause (iv) of sub-section (2) by an Explanation stating that the accountant is a chartered accountant or any person entitled to be appointed as an auditor under section 226(2) of the Companies Act. In so far as assessees adverted to under section 44AB are concerned, chartered accountants alone are competent to audit the accounts and to submit report and the income-tax practitioners and advocates are not eligible to do the job. The petitioners state that they have attained excellence in the groove of tax practice by their experience and academic attainment and they are equally efficient in performing the audit and as such there is no rationale behind the preference shown to chartered accountants. The principles regarding the vice of discrimination and classification justifying differential treatment are firmly settled by several decisions. It may not be feasible to refer to a bead-roll of decisions hande ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the Legislature. " In addition to the traditional approach from the perspective of concept of reasonable classification in conjunction with the nexus to the object, another dimension is evolved in E. P. Royappa v. State of Tamil Nadu, AIR 1974 SC 555, wherein it is held as follows (at p. 583) : "Equality is a dynamic concept with many aspects and dimensions and it cannot be 'cribbed, cabined and confined' within traditional and doctrinaire limits. From a positivistic point of view, equality is the antithetic to arbitrariness. In fact, equality and arbitrariness are sworn enemies ; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is, therefore, violative of article 14." This new approach evolved in Royappa's case, AIR 1974 SC 555, for the first time gained currency and was followed in subsequent decisions streamlined by finer facets. The gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... association. The qualifications for eligibility to be enrolled as income-tax practitioners and advocates are entirely different. The qualification for income-tax practitioners is a B.Com degree or diploma and for advocates it is the law degree. A study in B.Com supplies fringe and elementary rudiments of accounting but the specialised study of accounts and audit is not prescribed for the B.Com degree. The syllabus of subjects for the study of law is different and far removed from the subjects intimate with audit. The compulsory audit for companies followed up by a report postulates the presentation of a current and correct get-up of the transactions and facilitates the shareholders and other interested persons to have a close-up of the state of affairs of the company. In Institute of Chartered Accountants of India v. P. K. Mukerjee [1968] 38 Comp Cas 628, the Supreme Court with regard to the role of chartered accountants held as follows (at p. 634) : "In other words, the auditing was intended for protection of the beneficiaries and the auditor was expected to examine the accounts maintained by the trustees with a view to inform the beneficiaries of the true financial position. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led 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 grip over them and there is a remote possibility of such assessees unfolding themselves from the nest of chartered accountants. This contention is far-fetched and not founded upon proximity to a realistic approach. It is further contended that section 44AB is superfluous as recourse to section 142(2A) of the Act serves the purpose. Section 142(2A) enables the assessing authority to direct the accounts to be audited in the event of complexity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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