1987 (1) TMI 8 - HC - Income Tax

Summary

Issues Involved:
1. Constitutionality of restricting the term "accountant" to chartered accountants u/s 44AB of the Income-tax Act, 1961.
2. Alleged violation of Article 14 of the Constitution.
3. Alleged infringement of the fundamental right u/s 19(1)(g) of the Constitution.
4. Comparison of Section 44AB with Section 142(2A) of the Income-tax Act.

Summary:

1. Constitutionality of restricting the term "accountant" to chartered accountants u/s 44AB of the Income-tax Act, 1961:
The petitioners, comprising income-tax practitioners and an advocate, challenged the constitutionality of the restricted definition of "accountant" to chartered accountants in the Explanation to section 44AB of the Income-tax Act, 1961. They argued that they are equally competent to audit accounts and should be eligible to do so.

2. Alleged violation of Article 14 of the Constitution:
The petitioners contended that section 44AB, which confines the audit to chartered accountants, results in invidious discrimination and is violative of Article 14 of the Constitution. The court held that the classification of chartered accountants for the purpose of audit under section 44AB is based on reasonable grounds and bears a just and proper relation to the objective of checking tax evasion. The court cited several precedents, including State of West Bengal v. Anwar All Sarkar and R. K. Garg v. Union of India, to support the principle that reasonable classification is permissible under Article 14.

3. Alleged infringement of the fundamental right u/s 19(1)(g) of the Constitution:
The petitioners argued that the exclusion of income-tax practitioners and advocates from conducting audits infringes their fundamental right to practice any profession u/s 19(1)(g) of the Constitution. The court held that the restriction is a reasonable one, saved under Article 19(6) of the Constitution, as it is aimed at ensuring meticulous scrutiny of accounts by qualified professionals (chartered accountants) to detect tax evasion and facilitate expeditious assessments.

4. Comparison of Section 44AB with Section 142(2A) of the Income-tax Act:
The petitioners contended that section 44AB is superfluous as section 142(2A) already provides for the audit of complex accounts. The court clarified that section 44AB is intended for assessees with higher income brackets to ensure vigilance and expedite assessments, whereas section 142(2A) is invoked for complex accounts irrespective of the income bracket. The court found that the overlapping of these provisions does not render section 44AB invalid or superfluous.

Conclusion:
The writ petitions were dismissed, and the court upheld the constitutionality of section 44AB, affirming that the classification of chartered accountants for audit purposes is reasonable and does not violate Articles 14 or 19(1)(g) of the Constitution.