1985 (4) TMI 49 - HC - Income Tax

Summary

Issues Involved:
1. Constitutional validity of Section 44AB of the Income Tax Act, 1961.
2. Alleged violation of Articles 14 and 19(1)(g) of the Constitution.

Summary:

1. Constitutional Validity of Section 44AB:
The petitioners challenged the constitutional validity of Section 44AB of the Income Tax Act, 1961, which mandates compulsory audit of accounts by Chartered Accountants (CAs) for certain classes of persons carrying on business or profession. They argued that this provision is discriminatory, arbitrary, and irrational.

2. Alleged Violation of Article 14:
The petitioners, primarily Income Tax Practitioners (ITPs), asserted that they possess qualifications and experience similar to CAs and that the exclusive right conferred on CAs is discriminatory and arbitrary. They argued that this provision violates their fundamental rights under Article 14 of the Constitution. The court, however, held that CAs possess special qualifications and expertise in auditing accounts, which ITPs do not. The classification was deemed rational and not arbitrary, fulfilling the twin tests of a valid classification under Article 14.

3. Alleged Violation of Article 19(1)(g):
The petitioners also contended that Section 44AB infringes their right to practice their profession under Article 19(1)(g) of the Constitution. The court found that the right to practice a profession is not absolute and is subject to reasonable restrictions. The provision was enacted to prevent tax evasion and facilitate administrative convenience, which are legitimate objectives. Therefore, the restriction was considered reasonable and saved by Article 19(6) of the Constitution.

Conclusion:
The court dismissed the writ petitions, upholding the validity of Section 44AB of the Income Tax Act, 1961, and found no violation of Articles 14 and 19 of the Constitution. The rule issued in all cases was discharged, and parties were directed to bear their own costs.