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TMI Blog2024 (5) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... d by a Chartered Accountant, u/s 44AB of the IT Act, 1961, in a Financial Year by way of a Guideline? - HELD THAT:- As perused the impugned Guideline dated 08.08.2008 which is extracted above. The same has to be read in the context of the respondent-Institute functioning under the overall control, guidance and supervision of the Council which means the Council of the Institute has to carry out the duties so as to achieve the objects of the Act as delineated in its various provisions of the 1949 Act, vide Section 15. The power vested in the Council is general insofar as the carrying out the provision of the Act is concerned and in particular and without prejudice to the generality of the aforesaid powers, certain duties have been specifically delineated. This is evident on a reading of sub-sections (1) and (2) of Section 15 of the 1949 Act. One of the objects of the 1949 Act is to ensure that the profession of the Chartered Accountant in the country maintains high professional ethics and renders quality service inasmuch as Chartered Accountants are absolutely necessary for the efficient tax administration in the country. That on account of their services, the onerous duties cast on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misconduct in futuro. This is in order to avoid the Parliament itself amending the Schedules to the 1949 Act every time a different type of misconduct is to be inserted to the Schedules by way of an amendment to the Act. Therefore, the regulation or Guideline issued by the Council, the breach of which would result in a professional misconduct, being a part of clause 1 of Part II of the Second Schedule have to be read as part and parcel of the 1949 Act itself. The delegation of powers to add newer types of misconducts by way of a regulation or a Guideline is neither excessive nor ultra vires under Section 22 of the 1949 Act which deems any breach of a regulation or Guideline as a misconduct as per Clause 1 of part II of Schedule II to the 1949 Act. Thus Council of the respondent-Institute had the legal competence to frame the impugned Guideline restricting the number of tax audits that a Chartered Accountant could carry out which was initially thirty and later raised to forty-five and thereafter to sixty in an assessment year. Therefore, the Council of the respondent-Institute having the legal competence to frame the Guidelines, the breach of which would result in professional misc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the public exchequer in terms of appropriate quality of tax audit reports under Section 44AB. The restriction placed under Section 224 of the Companies Act, 1956 with regard to the number of companies which could be audited by an auditor or firm of auditors is also an instance of regulation of the profession of Chartered Accountants intended by the Parliament so as to ensure that standard and quality in the audit of accounts of companies as defined under Section 3 of the Companies Act, 1956 are maintained. This is to protect the rights and interest of the shareholders as well as the investors in the companies. Any omission or inadvertence in the auditing of such company accounts would inevitably have an adverse impact not only on the balance-sheets of the companies but also on the potential investments and growth of the companies. There has not been any challenge to the said regulation which is in the form of a restriction. Any breach of the restriction placed on the Chartered Accountants under Section 224 may lead to misconduct under the provision of 1949 Act. Whether exceeding such specified number of tax audits can be deemed to be professional misconduct ? - It was borne out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dated 08.08.2008 and its subsequent amendment is valid and is not violative of Article 19 (1) (g) of the Constitution as it is a reasonable restriction on the right to practise the profession by a Chartered Accountant and is protected or justifiable under Article 19 (6) of the Constitution. b) However, the said clause 6.0, Chapter VI of the Guidelines dated 08.08.2008 and its subsequent amendment is deemed not to be given effect to till 01.04.2024. c) Consequently, all proceedings initiated pursuant to the impugned Guideline in respect of the writ petitioners and other similarly situated Chartered Accountants stand quashed. d) Liberty is reserved to the respondent-Institute to enhance the specified number of audits that a Chartered Accountant can undertake under Section 44AB of the IT Act, 1961, if it deems fit. e) Liberty is also reserved to the writ petitioners or any other member of the respondent-Institute to make a representation in the above context which may be taken into consideration in the event respondent-Institute intends to amend the Guideline as per point No. (d) above. f) The writ petitions as well as all the transferred cases are disposed of in the aforesaid terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VIL) NO. 69 OF 2023 TRANSFERRED CASE (CIVIL) NO. 70 OF 2023 TRANSFERRED CASE (CIVIL) NO. 71 OF 2023 TRANSFERRED CASE (CIVIL) NO. 72 OF 2023 TRANSFERRED CASE (CIVIL) NO. 73 OF 2023 TRANSFERRED CASE (CIVIL) NO. 74 OF 2023 TRANSFERRED CASE (CIVIL) NO. 75 OF 2023 TRANSFERRED CASE (CIVIL) NO. 76 OF 2023 TRANSFERRED CASE (CIVIL) NO. 77 OF 2023 TRANSFERRED CASE (CIVIL) NO. 78 OF 2023 TRANSFERRED CASE (CIVIL) NO. 79 OF 2023 TRANSFERRED CASE (CIVIL) NO. 81 OF 2023 TRANSFERRED CASE (CIVIL) NO. 82 OF 2023 TRANSFERRED CASE (CIVIL) NO. 83 OF 2023 TRANSFERRED CASE (CIVIL) NO. 84 OF 2023 TRANSFERRED CASE (CIVIL) NO. 85 OF 2023 TRANSFERRED CASE (CIVIL) NO. 86 OF 2023 TRANSFERRED CASE (CIVIL) NO. 87 OF 2023 TRANSFERRED CASE (CIVIL) NO. 88 OF 2023 For the Petitioner(s) : Mr. Ashwin Kumar D.S., Adv. Ms. Aditi Anil Dani, Adv. Mr. Rangasaran Mohan, Adv. Ms. Surbhi Mehta, AOR Mr. Ishan Roy Chowdhury, Adv. Mr. Tapesh Kumar Singh, Sr. Adv. Mr. Sukant Vikram, AOR Mr. Prashant Bharadwaj, Adv. Mr. Aditya Pratap Singh, Adv. Mr. Pai Amit, AOR Ms. Pankhuri Bhardwaj, Adv. Mr. Abhiyudaya Vats, Adv. Mr. Nikhil Pahwa, Adv. Ms. Vanshika Dubey, Adv. Mr. Kushal Dube, Adv. Mr. Tathagata Dutta, Adv. Mr. P. Ashok, Adv. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a Financial Year by way of a Guideline? 89 10 Re: Point No. 2: Whether the restrictions imposed are unreasonable and therefore, violative of the right guaranteed to Chartered Accountants under Article 19 (1) (g) of the Constitution? 95 11 Re: Point No. 3: Whether the restrictions imposed are arbitrary and illegal and therefore, impermissible under Article 14 of the Constitution? 95 12 Re: Point No. 4: Whether exceeding such specified number of tax audits can be deemed to be professional misconduct ? 124 13 Conclusion 137 The petitioners herein are Chartered Accountants who have challenged the validity of Clause 6 of Guidelines No. 1-CA(7)/02/2008 dated 08.08.2008 issued by the Institute of Chartered Accountants of India (hereinafter referred as, respondent-Institute ), under powers conferred by the Chartered Accountants Act, 1949 (hereinafter referred to as the 1949 Act ) on the ground that the same is illegal, arbitrary and violative of Article 19 (1) (g) of the Constitution of India. 1.1 Some of the present writ petitions have been filed before this Court under Article 32 of the Constitution while others were filed before various High Courts invoking Article 226 thereof. By o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of tax audits, under Section 44AB, that can be accepted by a Chartered Accountant in a financial year? In other words, whether a Chartered Accountant can be restricted from undertaking more tax audits than specified by the respondent-Institute? Whether the impugned Guideline is saved under Article 19 (6) of the Constitution of India? Historical Perspective: 3. It is apposite for us, at this juncture, to preface the origin of Section 44AB in the IT Act, 1961, popularly known as the compulsory audit provision and the ceiling limit imposed by the respondent-Institute on the Chartered Accountants by way of a Guideline, violation of which would result in a misconduct. 3.1 With the aim of examining and suggesting legal and administrative measures for countering evasion and avoidance in direct taxation in the country, the Government of India on 02.03.1970, constituted a High Power Committee of Experts, namely, the Direct Taxes Enquiry Committee, under the chairmanship of Justice K.N. Wanchoo, retired Chief Justice of India. In December 1971, the Wanchoo Committee submitted its Final Report to the Government of India. A bare perusal of Chapter 1 Introduction, Direct Taxes Enquiry Commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit by a Chartered Accountant in certain cases where so sought by the Assessing Officer. 3.4 Thereby, only a few of the recommendations of the Wanchoo Committee were accepted in the first instance and legislated upon by the Parliament. As per the respondent-Institute, this conspicuously reflects that the Parliament did not favour compulsory tax audit provision of all sizeable cases by Chartered Accountants and as a necessary corollary, the opportunity to conduct tax audits must be seen as a privilege extended by a statute. 3.5 Later, the provision for compulsory audits found favour with the Parliament and was inserted by the Parliament through Finance Act, 1984. The then Finance Minister, while introducing the budget through the Finance Bill, 1984 stated in Parliament as under: With the reduction in rates and expeditious disposal of assessments, I believe there will now be no excuse for any leniency to be shown to those who abuse our laws, such cases will necessarily have to be dealt with severely. In order to discourage tax avoidance and tax evasion, I am also introducing some further measures. In all cases where the annual turnover exceeds Rs. 20 lakhs or where the gross receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year or years relevant to the assessment year commencing on the 1st day of April, 1985 or any subsequent assessment year; or (b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year or years relevant to the assessment year commencing on the 1st day of April, 1985 or any subsequent assessment year, get his accounts of such previous year or years audited by an accountant before the specified date and obtain before that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed: Provided that in a case where such person is required by or under any other law to get his accounts audited by an accountant, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and obtains before that date the report of the audit as required under such other law and a further report in the form prescribed under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, CBDT noted that the quality of tax audits was deteriorating as some Chartered Accountants were completing fifty tax audits a month. It is apparent on the face of the material perused that such a finding would run counter to the long sought and deliberated goal of plugging the loopholes in tax administration and saving considerable and precious time of assessing officers by presentation of quality audit reports. To remedy this, authorities in tax administration were of the view that the Government could impose a ceiling on maximum number of audits an auditor could undertake. Vide letter dt. 19.01.1988, CBDT sought comments from the Secretary, Institute of Chartered Accountants of India on possibly restricting the number of tax audits a Chartered Accountant may be permitted to complete in a year. The contents of the CBDT letter dated 19.01.1988 are reproduced as under: F.No.225/2/88-IT.ALL Government of India Ministry of Finance Department of Revenue (C.B.D.T.) New Delhi, Dated the 19th January, 1988. Shri R.L. Chopra, Secretary, Institute of Chartered Accountants of India, I.P. Estate, New Delhi. Sub: Fixation of number of tax audit per auditor. Dear Sir, As per the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, setting the limit of thirty tax audits. Admittedly, at this point, the ceiling limit was intended as only a self-regulatory mechanism to be followed by all members. 3.12 The vires and constitutionality of aforesaid Notification No. 1/CA(7)/3/88, dated 13.01.1989 was the subject of much litigation before several High Courts. In fact, the Notification was successfully challenged by a practicing Chartered Accountant, in Writ Petition No. 5925 of 1989 before the Madras High Court. The legality and validity of the Notification No. 1/CA(7)/3/88, dated 13.01.1989 as also Notification No. 1-CA(7)/15887 dated 25.05.1987 was also assailed in Writ Petition No. 5926 of 1989. The central challenge in both writ petitions was to the Notifications being violative of Article 19 (1) (g) of the Constitution. Of imminent interest is the constitutional challenge to the ceiling limit in Writ Petition No. 5925/1989. The Madras High Court observed that accepting a legitimate professional engagement by a professional can never be considered unprofessional and be made a misconduct . It was further noted that, once a person acquires the requisite qualifications to be a Chartered Accountant, he would be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Notification dated 13.01.1989 was challenged. However, the said writ petition was dismissed by the said High Court by its order dated 16.05.2005. 3.14 Further, a challenge to Notification dated 13.01.1989 was dismissed by the High Court of Kerala vide judgment dated 25.02.2003 in O.P. No. 3775 of 1991. Dismissing the challenge, it was noted that Section 30 (2) (k) of the 1949 Act vests power on the Council to make regulations for regulating and maintaining the status of members of the Institute and standard of professional qualifications of members of the Institute. It was noted that the restriction therein, as it does here, confined the ceiling limit only to tax audit assignments accepted under Section 44AB and not to any other audit work, unless otherwise restricted under any law. Noting the importance attributed to a certificate of audit issued by a Chartered Accountant and its concomitant serious public interest, it was further noted that audit is a time-bound work demanding precision and that the intent of the restriction was to ensure quality and accuracy in execution. It was further noted that on recommendation of the Professional Development Committee, the Notification ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in the financial year corresponding to the assessment year 1997-98. 3.16 After several iterations of the announcement calling for the reports from members, the Council at its 197th Meeting, held on 16.01.1999-18.01.1999, considered the matter of review of limit of thirty tax audits in a year. It is important to note that members, even in the year 1999, were of the view that the objective of calling the information was only to review the limit and not to take disciplinary action and requested the President to suitably publish the view of the Council. In pursuance thereof, an announcement was published in the Institute s Journal in March, 1999, the relevant portion of it is reproduced as under: Dear Colleague, March is a month of marching ahead. X X X Ceiling on Tax Audit Under Section 44AB The revision of ceiling on tax audit under Section 44AB of the Income Tax Act is under consideration of the Council. In order to enable the Council to take an appropriate decision in the matter, members are requested to comply with the requirements called for in the format published in the Journal. The information is being collected only for statistical purposes and will be treated as confidenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Council should increase the ceiling limit of tax audits although factors such as the increased permeation of access to technology and consequential increased professional competence of auditors, dynamic and increasing economy, growth of new and specialized areas of practices, and such other factors prevailed. The Council, finally authorized its President to decide upon an appropriate increase in the ceiling on number of tax audits after taking into consideration the views expressed by its members. In pursuance thereof, on 11.05.2007, the respondent-Institute increased the limit on number of tax audits from thirty to forty-five per Chartered Accountant per year. 3.21 At this stage it is pertinent to note that the respondent-Institute was of the opinion that the extant self-regulatory mechanism was ineffective in ensuring compliance of the maximum limit. Therefore, the 1949 Act was amended by the Parliament by the Chartered Accountants (Amendment) Act, 2006 (hereinafter referred to as Amendment Act, 2006 ) by which the erstwhile Notifications were superseded by Guidelines dated 08.08.2008. In view of the above development, this Court by order dated 01.04.2013 dismissed the Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h that the restriction has been incisively deliberated upon and the need of the restriction has been supported by expert practitioners over an extended period of time, the respondent-Institute has placed heavy reliance on the above-discussed CBDT letter dated 19.01.1988 and the Report of the Comptroller and Auditor General of India (for short, CAG ), being No. 32 of 2014, tiled Performance Audit on Appreciation of Third Party (Chartered Accountant) Reporting in Assessment Proceedings , presented to the Parliament on 19.12.2014. 3.24 Our attention was drawn to Section 3.6 Control on number of tax audit assignment of the CAG s Report wherein pertinent observations were made on effectuating control on Chartered Accountants undertaking tax audit assignments under Section 44AB of the IT Act, 1961. Highlighting the relationship between the number of tax audits undertaken and the quality of tax audits, the CAG reported that there was no system in field offices of Income-Tax Department (for short, ITD ) to monitor compliance by Chartered Accountants of ceiling limit set by respondent-Institute. The CAG was informed by the respondent-Institute, in September 2014, that even though Chartered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring quality of tax audit. 3.27 Respondent-Institute at its 339th Meeting held from 23.12.2014 to 25.12.2014 discussed the report of the CAG and in pursuance thereof, a group of Council Members was constituted on 24.01.2015 to study the report of the CAG for the year ending March, 2014 and place its findings before the Council for appropriate direction. The Council decided to refer all cases, where ceiling was exceeded, to the Director (Discipline). 3.28 It is averred that respondent-Institute had no mechanism to record exact data on number of tax audits undertaken by a Chartered Accountant until the respondent-Institute made it mandatory in 2019 that submission of all tax audit reports undertaken by a Chartered Accountants be marked with a Unique Document Identification Number ( UDIN ). Lacking such a mechanism, the respondent-Institute, seeking to initiate disciplinary proceedings for professional misconduct for carrying out tax audits assignments under Section 44AB of the IT Act, 1961, treated data gathered by the CAG as complaints and issued communications to some petitioner-Chartered Accountants who accepted more than specified limit of tax audits for the Assessment Year 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guidelines 2008 and issue a writ in the nature of certiorari or any other appropriate writ, order or direction and quash and set aside chapter VI of Ext P2, which deals with tax audit assignments under section 44AB of the Income Tax Act 1961. (c) To call for records leading to Exhibit P3, Exhibit P7 and Exhibit P9 and issue a writ in the nature of certiorari or any other appropriate writ order or direction, setting aside Ext P3, P7 and P9 as the same is violative of fundamental rights guaranteed under Article 14 and l9(1)(g) and also against the direction in Ext Pl judgment. (d) To direct the highest body of the 1st respondent to pass orders on Ext P5 representation filed by the petitioner. (e) To grant such other appropriate reliefs to the Petitioner as this Hon'ble Court may deem fit and proper in the interest of justice. Hence, this Court has now come to be seized of the present petitions and questions involved therein. Submissions : 4. We have heard learned senior counsel Sri V. Giri, Sri P.S. Patwalia, Sri Preetesh Kapur, Sri Rajashekhar Rao, Sri Tapesh Kumar Singh and learned counsel Sri Manish K. Bishnoi, Sri Pai Amit, Sri Goutham Shivshankar, Sri Nirmal Kumar Ambastha, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on putting a ceiling limit on the number of tax audits under Section 44AB, IT Act, 1961 insofar as no maximum cap is placed on other audit assignments under the IT Act, 1961 that are carried out by Chartered Accountants with similarly taxing reporting requirements, such as Sections 44AD, 44AE, 44AF of the IT Act, 1961. In furtherance of the above, it was also urged that the impugned Guidelines, in effect, also discriminate between Chartered Accountants practicing in smaller cities and towns as they are not in a position to charge the fee for each tax audit assignment in the same manner which can be charged by a Chartered Accountant practicing in big metropolitan cities. In effect, it was contended that the restriction will cause a more significant drop in the income of Chartered Accountants practicing in mofussil areas. As a result of this uneven restriction, an efficient Chartered Accountant may be able to complete the entire audit work within a short duration and remain unemployed for the rest of the year, was the submission made. 4.5 As further contended by the petitioners, the main object of the 1949 Act, is to regulate the conduct of the members of the respondent-Institute in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that limiting the maximum seating capacity to 50, irrespective of the size of the screen in a cinema hall was unconstitutional and violative of Article 19 (1) (g). 4.8 Learned counsel for the petitioners have vehemently argued that in the absence of any statistics or data supporting the restriction on the number of tax audits and a related reasonable explanation justifying such a cap, this restriction could not be justified under Article 19 (6) of the Constitution. Thereby, the petitioners have contended, that the limit on the number of tax audits a Chartered Accountant could accept has no reasonable nexus with the provisions of Section 44AB. 4.9 The petitioners have also drawn our attention to allegedly-identical Notification No. 1/CA(7)/3/88 dated 13.01.1989 issued by the Council of the respondent-Institute in exercise of powers conferred under Clause (ii) of Part II of Second Schedule to the 1949 Act. It was highlighted that said Notification brought a restriction of the exact nature, function and importantly, restrictive effect wherein a ceiling limit of thirty tax audits was imposed under Section 44AB of the IT Act, 1961. The petitioners have placed most significant reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .08.2008 may be struck down as running foul of Articles 19 (1) (g) and 14 of the Constitution of India. 4.12 Learned senior counsel for petitioner in Writ Petition (C) No. 1360 of 2021, Sri P.S. Patwalia relied upon the judgment of this Court in Institute of Chartered Financial Analysts of India vs. Council of the Institute of Chartered Accountants of India, (2007) 12 SCC 210, ( Institute of Chartered Financial Analysts of India ) to contend that undertaking more tax audits could not possibly classify as professional misconduct. According to the learned senior counsel, the aforesaid case assists their submissions insofar as it was held that classification of an activity must be looked at pragmatically and within the structural context and realities. Therein, it was held that acquiring a qualification could not be construed as a professional misconduct and consequentially, such a restriction was held to be violative of Articles 14 and 19 (1) (g). On a similar ground, emphasizing the sanctity of a right guaranteed under Article 19 (1) (g), reliance was placed on paras 14 and 15 of the judgment in B.P. Sharma vs. Union of India, (2003) 7 SCC 309, ( B.P. Sharma ), wherein this Court he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh, (2016) 7 SCC 353, ( Modern Dental College and Research Centre ). Learned counsel contended that where a fundamental right of an individual is abridged, justification of the restriction needs more than mere demonstration of power; that the aforesaid position forms a part of our jurisprudence. 4.16 Learned senior counsel elucidated that a significant effect of the present restriction would be that a structural advantage is accrued to partnership firms over sole practitioners as a partnership firm of Chartered Accountants will be able to take up more multiples of tax audits than an individual practitioner permissibly can under the Guidelines. Learned counsel contended that a Chartered Accountant has a fundamental right to carry out tax audit, guaranteed under Article 19 (1) (g) and such a right could not be bartered away to colleagues in a partnership firm. 4.17 Learned senior counsel also argued that the impugned Guideline is hit from the vice of excessive delegation as a resolution, by itself, could not penalize as misconduct for taking on more clients. Also, reliance was placed on V. Sasidharan vs. Peter and Karunakar, (1984) 4 SCC 230, ( V. Sasidharan ) wherein this Court had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f punishment for professional misconduct. 4.20 According to learned senior counsel, the Council of respondent-Institute, under powers conferred on it by the 1949 Act, deems a member to be qualified and competent to dutifully practice the services required of a Chartered Accountant and thereby, imposition of a blanket ban by the same Council without any qualitative assessment imposes an onerous penalty on the rights of a Chartered Accountant. More so, to attach a label of professional misconduct without any qualitative assessment, simply due to exceeding the maximum limit, would be incongruous with the object sought and damage future potential prospects without any established relationship between numerical benchmark and quality. 4.21 Reliance was placed by the petitioners on a judgment of the High Court of Delhi in Shri R. Nanabhoy vs. Union of India, 1982 SCC Online Del. 210 : CWP No. 2398/81, ( Shri R. Nanabhoy ) . It was held by Wad, J. therein that Section 233(B) and Section 637(A) of the Companies Act, 1956 did not empower the Central Government to impose any restriction on the number of cost audits which a cost accountant may undertake. Noting that there was no material to ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he object is not to prohibit practice of but only to maintain quality in audit work, which is wholly in the interest of the general public including the ITD. It was further contended that the objects of both, the instant Guidelines dated 08.08.2008 and the erstwhile Notification dated 13.01.1989 have been to ensure efficiency, improve quality service, ensure maintenance of high standards of performance and to have equitable distribution of tax audit work amongst members of the respondent-Institute. 5.3 Learned senior counsel for the respondent-Institute submitted that the notified limit on tax audits has been decided by the Council, an expert body, on consideration of all pragmatic limitations and other work undertaken by a Chartered Accountant besides tax audit under Section 44AB, IT Act,1961. Section 139 of the IT Act, 1961 mandatorily requires every assessee, governed by provisions of Section 44AB of the IT Act, 1961, to file tax audit report along with his return before the due date presently, 30th September of every year. That being the case, the respondent-Institute contended that a Chartered Accountant cannot conceivably complete more than the specified number of audits in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned Guidelines are issued to ensure maintenance of quality and standards in the work done and services rendered by Chartered Accountants. This would also aid in better and equitable distribution of work amongst the Chartered Accountants and to avoid concentration of professional work in a few hands, to ensure which is also a duty cast upon the Council in furtherance of its regulatory functions under the said Act. As per the respondent-Institute, the Council is in the best position to have definite information about deterioration in the quality of work, as also monopolization both relevant factors in taking a decision on the maximum number of tax audits to be accepted. 5.8 It was also contended that a reduction in income and/or client base is not a ground in itself to say that fundamental rights of a professional are affected. Nor can there by a comparison with the Advocate s profession. 5.9 To contravene the contention raised by petitioners that neither does the 1949 Act contemplate distribution of available work amongst Chartered Accountants, nor is there any obligation to provide work for young Chartered Accountants, it was contended that under the 1949 Act, the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly because it results in reduction in the income of the citizen. 5.12 Learned senior counsel, Sri Datar, also argued that the power to regulate a particular business or profession implies the power to prescribe and enforce all such just and reasonable rules and regulations, as may be deemed necessary for conduct of business or profession in a proper and orderly manner vide Deepak Theatre, Dhuri vs. State of Punjab, 1992 Suppl. (1) SCC 684, ( Deepak Theatre ). Reliance was further placed by the respondents on T. Velayudhan Achari vs. Union of India, (1993) 2 SCC 582 , ( T. Velayudhan Achari ), wherein it was held that limiting the number of depositors that can be accepted by an individual, firm or unincorporated associations under Section 45S (1) of the Banking Laws (Amendment) Act, 1983 is not violative of Article 19 (1) (g) of the Constitution, as it is in public interest that larger interests of the depositors are protected. 5.13 The judgment of Delhi High Court in Shri R. Nanabhoy, was sought to be distinguished from the present case by citing the presence of both legislative sanction and expert opinion, vide CBDT Letter dated 19.01.1988 and CAG Report No. 32 of 2014, supporting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1913, and the Indian Accountancy Board advises Government in all matters relating to the profession and assists it in maintaining the standards of the professional qualifications and conduct required of the members of the profession. The majority of the Board s members are elected by Registered Accountants members of the profession from all parts of India. These arrangements have, however, all long been intended to be only transitional, to lead up to a system in which such accountants will, in autonomous association of themselves, largely assume the responsibilities involved in the discharge of their public duties by securing maintenance of the requisite standard of professional qualifications, discipline and conduct, the control of the Central Government being confined to a very few specified matters. 2. The Bill seeks to authorise the incorporation by statute of such an autonomous professional body and embodies a scheme which is largely the result of a detailed examination of the whole position by an ad hoc expert body constituted for the purpose, after taking into account the views expressed by the various Provincial Governments and public bodies concerned. (emphasis supplied) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly. Explanation . An associate or a fellow of the Institute who is a salaried employee of a chartered accountant in practice or a firm of such chartered accountants or firm consisting of one or more chartered accountants and members of any other professional body having prescribed qualifications shall, notwithstanding such employment, be deemed to be in practice for the limited purpose of the training of articled assistants. 7.4 Section 3 deals with incorporation of Institute of Chartered Accountants of India while Section 7 states that every member of the Institute is to be known as Chartered Accountant. Vide Section 9, the Council of the Institute is constituted for the management of the affairs of the Institute and for discharging the functions assigned to it under the Act and its functions are delineated in Section 15. The above-mentioned Sections are extracted as under: 3. Incorporation of the Institute.- (1) All persons whose names are entered in the Register at the commencement of this Act and all persons who may hereafter have their names entered in the Register under the provisions of this Act, so long as they continue to have their names borne on the said Register, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment shall be eligible for election to the Council under clause (a) of sub-section (2). (4) No person who has been auditor of the Institute shall be eligible for election to the Council under clause (a) of sub-section (2), for a period of three years after he ceases to be an auditor. x x x 15. Functions of Council.- (1) The Institute shall function under the overall control, guidance and supervision of the Council and the duty of carrying out the provisions of this Act shall be vested in the Council. (2) In particular, and without prejudice to the generality of the foregoing powers, the duties of the Council shall include (a) to approve academic courses and their contents; (b) the examination of candidates for enrolment and the prescribing of fees therefor; (c) the regulation of the engagement and training of articled and audit assistants; (d) the prescribing of qualifications for entry in the Register; (e) the recognition of foreign qualifications and training for the purposes of enrolment; (f) the granting or refusal of certificates of practice under this Act; (g) the maintenance and publication of a Register of persons qualified to practice as chartered accountants; (h) the lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule to the Act stipulates that a member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct if he contravenes any of the provisions of the Act or the regulations made thereunder or any Guidelines issued by the Council of the respondent-Institute. For immediate reference the same reads as under: PART II: Professional misconduct in relation to members of the Institute generally A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he (1) contravenes any of the provisions of this Act or the regulations made thereunder or any guidelines issued by the Council; Therefore, if a member of the Institute contravenes the provisions of the aforesaid Chapter VI of the Guidelines dated 08.08.2008, he shall be deemed to be guilty of professional misconduct under the 1949 Act. Clause 6 is extracted as under: Chapter VI Tax Audit assignments under Section 44AB of the Income-tax Act, 1961 6.0 A member of the Institute in practice shall not accept, in a financial year, more than the specified number of tax audit assignments under Section 44AB of the Income-tax Act, 1961. Provided that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.1.6 A Chartered Accountant in practice shall maintain a record of the tax audit assignments accepted by him relating to each financial year in the format as may be prescribed by the Council. The Council at its 331st meeting held from 10th to 12th February, 2014 decided to increase the specified number of tax audit assignments for practicing Chartered Accountants, as an individual or as a partner in a firm, from forty-five to sixty. The said limit will be effective for the audits conducted during the financial year 2014-15 and onwards. 7.7 Section 21 refers to Disciplinary Directorate, while Section 21A deals with Board of Discipline and Section 21B deals with Disciplinary Committee. Section 21C states that the Authority, the Disciplinary Committee, Board of Discipline and the Director (Discipline) shall have the powers of a Civil Court. These provisions have to be read with the Schedules to the 1949 Act. The First Schedule of the 1949 Act deals with professional misconduct in relation to Chartered Accountants in practice and it enumerates various types of misconduct. It has four Parts. Part I deals with professional misconduct in relation to Chartered Accountants in practice. Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations may provide for all or any of the following matters : (a) the standard and conduct of examinations under this Act; (b) the qualifications for the entry of the name of any person in the Register as a member of the Institute; (c) the conditions under which any examination or training may be treated as equivalent to the examination and training prescribed for members of the Institute; (d) the conditions under which any foreign qualification may be recognised; (e) the manner in which and the conditions subject to which applications for entry in the Register may be made; (f) the fees payable for membership of the Institute and the annual fees payable by associates and fellows of the Institute in respect of their certificates; x x x (k) the regulation and maintenance of the status and standard of professional qualifications of members of the Institute; x x x (t) any other matter which is required to be or may be prescribed under this Act. (3) All regulations made by the Council under this Act shall be subject to the condition of previous publication and to the approval of the Central Government. (4) Notwithstanding anything contained in sub-sections (1) and (2) the Central Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Second Schedule of the 1949 Act, issued a Notification bearing No. 1/CA(7)/3/88 dated 13.01.1989 specifying that a member of the Institute in practice shall be deemed to be guilty of professional misconduct, if he accepts in a financial year, more than specified number of tax audit assignments under Section 44AB of the IT Act, 1961, the specified number being thirty (now sixty) in a financial year, whether in respect of corporate or non-corporate assesses. 7.14 As for relevant provisions of the IT Act, 1961 is concerned, Section 44AB of the IT Act, 1961 was inserted in the statute book by the Finance Act, 1984 and the same came into force with effect from 01.04.1985. Presently, Section 44AB provides that every person carrying on business, whose total sale, turnover or gross receipts exceed Rs. 10 crore, and every person carrying on a profession, if his gross receipts exceed Rs. 50 lakhs, in any previous year, is required to get his accounts of such previous year audited by a Chartered Accountant, and obtain before the specified date, a report of the audit in the prescribed form duly signed and verified by such Chartered Accountant. The said provision is popularly called compuls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year, get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed: Provided that this section shall not apply to a person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD or sub-section (1) of Section 44ADA: Provided further that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April, 1985, or, as the case may be, the date on which the relevant section came into force, whichever is later: Provided also that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions, learned senior counsel Sri Datar submitted that although a little over ten thousand Chartered Accountants had violated the Guideline in question, notices for initiation of disciplinary proceedings were at first issued only in respect of a few of them, including writ petitioners herein and those who had undertaken more than two hundred tax audits. In regard to others, who had exceeded the specified number of tax audits, no disciplinary proceedings have been initiated as yet. 12. At the outset, we consider it useful to examine the privilege conferred under the 1949 Act to practise the profession of a Chartered Accountant. Reference to the observation of this Court in All-India Federation of Tax Practitioners vs. Union of India, (2007) 7 SCC 527, ( All-India Federation of Tax Practitioners ), is helpful in this regard. In answering the question of whether the Parliament was competent to levy service tax on services rendered by Chartered Accountants, this Court observed at para 34 that a Chartered Accountant or a Cost Accountant obtains a license or a privilege from the competent body to practise. We find ourselves in agreement with this observation. Reading along with Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, such regulation of the profession. 13.1 In this context, Chapter V of the 1949 Act assumes importance. The said Chapter deals with misconduct. Section 22 of the Act defines professional or other misconduct to deem to include any act or omission provided in any of the Schedules. However, nothing in Section 22 shall be construed to limit or abridge in any way the power conferred or duty cast on the Director (Discipline) under sub-section (1) of Section 21 to inquire into the conduct of any member of the Institute under any other circumstances. The two prongs of Section 22 are expansive and wide inasmuch as there is no limitation in any way on the power conferred or duty cast on the Director (Discipline) under Sub-section (1) of Section 21 to inquire into the conduct of any member of the Institute under circumstances other than what is stated in the Schedules. Also, professional or other misconduct is defined by a deeming provision which implies that the Schedules which have enumerated various kinds of misconducts are not exhaustive or static. With the passage of decades and with the emerging varieties of misdemeanour, omissions or commissions of Chartered Accountants which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is to be inserted to the Schedules by way of an amendment to the Act. Therefore, the regulation or Guideline issued by the Council, the breach of which would result in a professional misconduct, being a part of clause 1 of Part II of the Second Schedule have to be read as part and parcel of the 1949 Act itself. The delegation of powers to add newer types of misconducts by way of a regulation or a Guideline is neither excessive nor ultra vires under Section 22 of the 1949 Act which deems any breach of a regulation or Guideline as a misconduct as per Clause 1 of part II of Schedule II to the 1949 Act. 13.3 In the circumstances, we hold that the Council of the respondent-Institute had the legal competence to frame the impugned Guideline restricting the number of tax audits that a Chartered Accountant could carry out which was initially thirty and later raised to forty-five and thereafter to sixty in an assessment year. Therefore, the Council of the respondent-Institute having the legal competence to frame the Guidelines, the breach of which would result in professional misconduct, in terms of clause 1 of Part II of the Second Schedule of the 1949 Act cannot be held to be vitiated o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on any trade or business, either by itself or through a corporation owned or controlled by the State, to the exclusion of private citizens wholly or in part. It is trite law that restrictions imposed by the State upon the freedom guaranteed by Article 19 (1) (g) cannot be justified on any ground outside Article 19 (6) vide Nagar Rice and Flour Mills vs. N. Teekappa Gowda and Bros., (1970) 1 SCC 575, ( Nagar Rice Milling ). 16. The ambit of reasonable restrictions on the exercise of rights under Article 19 (1) (g) in the interest of the general public under Article 19 (6) was further explained in Hathising Manufacturing Co. Ltd. vs. Union of India, (1960) 3 SCR 528 ( Hathising Manufacturing Co. Ltd. ), which concerned the challenge to the validity of Section 25FFF (1) of the Industrial Disputes Act, 1947, which required the industries to pay compensation on closure of their undertakings: 10. Whether an impugned provision imposing a fetter on the exercise of the fundamental right guaranteed by Article 19 (1) (g) amounts to a reasonable restriction imposed in the interest of the general public must be adjudged not in the background of any theoretical standards or pre-determinate pat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general welfare of the public. 20. In this regard, we place reliance upon Sakhawant Ali vs. State of Orissa, (1954) 2 SCC 758 ( Sakhawant Ali ), wherein this Court was seized of a challenge to a disqualification from electoral candidature of legal practitioners who were employed on payment, on behalf of the municipality or to act against the municipality. This Court emphasised upon the salutary object of the disqualification, i.e., the purity of public life, which would invariably be thwarted if there arose a situation where there was a conflict between interest and duty. This Court took note of the possibility of a conflict of interest and duty of a municipal councillor employed as a paid legal practitioner and was alive to the possibility that such a councillor may misuse his position to obtain municipal briefs, get unreasonable fees sanctioned or compromise the interests of the municipality while acting on behalf of private parties. What is of pertinence here is that this Court was alive to the fact that cases of misuse may be an exception because lawyers would be loathe to stoop to such tactics, yet, it upheld the restriction because it sought to prevent a possible abhorrent mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This is for the reason that the State bears a special responsibility for maintaining standards amongst members of the licensed professions. This view is strengthened by the reasoning in Williamson vs. Lee Optical Co., 348 U.S. 483 (1955), ( Williamson ) and Semler vs. Oregon State Board of Dental Examiners, 294 U.S. 608 (1935), ( Semler ). (ii) On this point, the dicta from Goldfarb vs. Virginia State Bar, 421 U.S. 773, 792, (1975), ( Goldfarb ) is also instructive and the relevant portion of the judgment reads as follows: .The interest of the States in regulating lawyers is especially great, since lawyers are essential to the primary governmental function of administering justice, and have historically been officers of the courts. 24. We now look at how this Court has understood public interest in matters pertaining to abridgment of Article 19 (1) (g). (i) A Constitution Bench of this Court, through JC Shah J, in Mohd. Faruk vs. State of M.P., (1969) 1 SCC 853 , held that the Notification issued by the State Government prohibiting the slaughter of bulls and bullocks in premises maintained by a local authority infringed upon the right to freedom of profession under Article 19 (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Govt. of Kerala, (1997) 9 SCC 495, ( Krishnan Kakkanth ), this Court held as under: 27. The reasonableness of restriction is to be determined in an objective manner and from the standpoint of the interests of general public and not from the standpoint of the interests of the persons upon whom the restrictions are imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly and even if the persons affected be petty traders ( Mohd. Hanif v. State of Bihar [AIR 1958 SC 731] ). In determining the infringement of the right guaranteed under Article 19(1), the nature of right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, enter into judicial verdict ( Laxmi Khandsari v. State of U.P. [(1981) 2 SCC 600 : AIR 1981 SC 873] ; D.K. Trivedi and Sons v. State of Gujarat [1986 Supp SCC 20] and Harakchand Ratanchand Banthia v. Union of India [(1969) 2 SCC 166 : AIR 1970 SC 1453] ). 28. Under clause (1)(g) of Article 19, every citizen has a fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dits subject to reasonable restrictions. 27. We must be careful in our delineation between a right and a privilege. As discussed above, the idea of compulsory tax audits was neither an inherent part of the practice of a Chartered Accountant nor an essential function which could be claimed as a fundamental right under Article 19 (1) (g). Furthermore, an examination of the nature of the supposed right that was being enjoyed by Chartered Accountants reflects that in practice, an assessee, seeking to comply with the requirements of Section 44AB, would approach a Chartered Accountant to obtain a certificate of audit. We have already observed and noted that Section 44AB, IT Act, 1961 was inserted to assist the Revenue Department in public. Thereby, it is only through the extension of statutory privilege by the presence of Section 44AB, IT Act, 1961, that a Chartered Accountant gets the opportunity to undertake tax audits under the said section. If the Parliament, in its wisdom, at a certain future date, due to technological developments or any other reason, finds that expeditious and accurate assessments can be ensured without imposing on assessees the burden of additional requirement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the IT Act, 1961 should have provision to prescribe for quality of tax audit assignments rather than relying on respondent-Institute. 30. It would be apposite at this juncture to refer to the judgment in P.V. Sivarajan vs. Union of India, AIR 1959 SC 556, ( P.V. Sivarajan ), delivered by a Constitution Bench of this Court. Petitioner therein was aggrieved by the rejection of his application as a registered exporter of coir products, on the ground that he had not already exported the minimum specified quantity of 500 Cwts. It was observed by this Court that Parliament had enacted the Coir Industry Act, 1953, finding it expedient in public interest that the Union should take under its control the coir industry as several malpractices had crept in the export trade such as non-fulfilment of contracts, supplying goods of inferior quality in an industry crucial to the repute of India s products and national economy. With the intent of limiting these losses due to qualitative underperformance, the Central Government, under powers conferred by the statute, framed Rules in 1958. The Rules were assailed by the petitioner therein, contending that they erroneously prescribed a quantitative t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to the validity of the said rules on the ground of Article 14 must also fail, because the classification of traders made by Rules 18 and 19 is clearly rational and is founded on an intelligible differentia distinguishing persons falling under one class from those falling under the other. It is also clear that the differentia has a rational relation to the object sought to be achieved by the Act. As we have already pointed out, the export trade in coir commodities disclosed the existence of many malpractices which not only affected the volume of trade but also the reputation of Indian traders; and one of the main reasons which led to this unfortunate result was that exporters sometimes accepted orders far beyond their capacity and that inevitably led to non-fulfilment of contracts or to supply of inferior commodities. In order to remedy this position the trade had to be regulated and so the intending exporter was required to satisfy the test of the prescribed minimum capacity and to establish the prescribed minimum status before his application for registration is granted. In this connection it may also be relevant to point out that the rules seem to contemplate the granting of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be categorically rejected. The potential effect of the concerned restriction is that practitioners dealing in mofussil areas or catering to small assessees will face a reduction in their income which is violative of their right to freely engage in their profession. We find ourselves unable to agree with this contention. There is no material to suggest that this partial limitation on the practise of the profession would lead to a significant reduction in income. In any case, it is trite law that reduction of income cannot be a ground for holding a reasonable restriction unreasonable vide Minerva Talkies which we shall discuss later. Where the devolution of a privilege is justifiably restricted in public interest and such restriction has a rational nexus with the objects sought to be achieved, the restriction cannot be held unreasonable due to hardship faced by a certain section of professionals. 34. The following judgments of this Court are also apposite: (a) In B.P. Sharma, clause 17 of the instructions issued in 1979 by the Ministry of Tourism and Civil Aviation, Department of Tourism, Government of India prohibiting the renewal of identity cards to guides who were carrying on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) (g), it was observed that the law placing restrictions on the citizens right to do business must satisfy two conditions set out in clause (6) of Article 19: firstly, the restrictions imposed by the law must be reasonable, and secondly, the restrictions must be in the interests of the general public. If these two tests are satisfied, the law placing restriction on the citizens right guaranteed under Article 19 (1) (g) must be upheld. While considering the validity of Rule 41-A which had limited the number of films to be exhibit in a day to four shows, it was noted that holding of continuous five shows from 10 am in the morning caused great inconvenience to the incoming and outgoing cine-goers and endangered public safety. A short interval of fifteen minutes between two shows is too little time for cleaning the cinema halls and there was also rush by the cine-goers to occupy the seats. Moreover, licensees would start exhibiting approved films and slides before the cine-goers could occupy their seats, with the result they would not have the benefit of the same. The absence of interval between the shows resulted in denial of fresh air, ventilation and cleanliness in the cinema hall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the onerous and time-consuming nature of the work of the Chartered Accountant requiring accuracy and perfection. The Income Tax Act attributes much importance to the certificate of audit by the Chartered Accountant and therefore, it is in public interest also to introduce certain restrictions on the volume of work lest it would affect professional standards apart from affecting the professional status. We are in complete agreement with the aforesaid observations. In our view, the comparison made between Chartered Accountants and Advocates by the petitioners is also inappropriate. 35. It is also noted that under Section 224 of the Companies Act, 1956 which deals with appointment and remuneration of auditors, there is a bar with regard to appointment or reappointment of any person as an auditor of a company, if such person or firm of auditors is, at the date of such appointment or reappointment, holding appointment as auditor of specified number of companies or more than the specified number of companies. Explanation (1) to Section 224 defines specified number to mean (a) in the case of a person or firm holding appointment as auditor of a number of companies each of which has paid-u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscrimination, so to say, by the respondent-Institute in the matter. That, the impugned Guideline dated 08.08.2008 has been on the statute book, the disciplinary proceedings have been initiated only recently. The impugned Guideline has not been effectively given effect to. Therefore, the disciplinary proceeding may be quashed for the aforesaid reasons. In this regard, it was contended that when the respondent-Institute has remained silent and not acted upon the Guideline, since it was issued on 08.08.2008, all of a sudden there could not have been initiation of disciplinary proceedings only against the petitioners herein and possibly others who may not have approached any court of law, whereas many other Chartered Accountants have not been proceeded against and are virtually scot-free. Therefore, there is discrimination and violation of Article 14 of the Constitution of India herein in the implementation of the Guideline vide Notification dated 08.08.2008. Therefore, pending full and effective implementation of the Guideline impugned herein of the impugned proceedings against the petitioners herein for the alleged misconduct on their part for violating the Guideline may be dropped. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent circumstances. Thereby, for the limited period of uncertainty, the rule against doubtful penalization as a principle could, in the interest of justice and equity, be made applicable and the benefit of uncertainty be given to those subjected to misconduct proceedings in the instant writ petitions and to also those Chartered Accountants who may have received notices from the respondent-Institute and who may not have approached any court of law or to other similarly situated Chartered Accountants who may not have been proceeded against. 44. Reference may also be made to judgment of this Court in Jindal Paper Plastics vs. Union of India, (1997) 10 SCC 536, ( Jindal Paper Plastics ) wherein the question on merits was settled by a judgment of this Court in Kasinka Trading vs. Union of India, (1995) 1 SCC 274, ( Kasinka Trading ), delivered on 18.10.1994 and a larger bench on 20.12.1996 concluded that the judgment dated 18.10.1994 was good law. This Court allowed the petitioner s prayer therein that for the period of uncertainty in law, i.e., until the law, on merits, was settled by this Court on 18.10.1994, a lesser interest rate of 12% be charged instead of 17.5%, as ordered by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made a decade ago, we direct the Council to consider if the time is ripe to enhance the specified number of tax audits and to delineate the factors that it may consider in taking such a decision. 47. In that view of the matter, the respondent-Institute is at liberty to enhance the specified number of tax audits that could be undertaken by practicing Chartered Accountants under Section 44AB of the IT Act, 1961. For that purpose, liberty is reserved to the practising Chartered Accountants to make their suggestions to the respondent. 48. We wish to make certain observations before parting with these writ petitions. The Institute of Chartered Accountants of India over a period of time, has received recognition as a premier accounting body, domestically and globally, for maintaining highest standards in technical, ethical areas and for sustaining stringent examination and educational standards. Since its inception in the year 1949, the profession of Chartered Accountancy and accounting has grown leaps and bounds in terms of the number of members, which now stands at over 3.5 lakhs. The respondent-Institute has also played a significant role in ensuring the dynamism of the Chartered Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India seek advice of Chartered Accountants to understand the rules of the road. The integrity and standards of Chartered Accountants determine the efficiency in the functioning of the nation s taxation system. 49.2 There are many concepts and processes in the present taxation regime that rest, almost completely, on the vigilance of Chartered Accountants and auditors. The very concept of self-assessment carries with it the requirement of good faith practices. The most recent tax reforms seek to achieve transparent taxation by Honouring the Honest taxpayer. The success of such initiatives depends, to a very large extent, on the vigilance demonstrated by Chartered Accountants. 49.3 Transparency in accounting is imperative to the economy in many ways. For instance, in the absence of accurate financial reporting, it would become difficult for banks to make informed decisions about credit allocation. It is the quality, reliability and objectivity of this information which stakeholders rely upon to make informed judgments and allocate resources efficiently. The role of transparent accounting is critical in lending credibility to the financial market transactions. Market participants, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... citizens seeking to improve the functioning of the tax machinery of the Nation. Integrity, objectivity, professional competence and due care and confidentiality must be the doctrines guiding their work ethic. Conclusion: 50. In the circumstances, we dispose of the writ petitions in the following manner: a) Clause 6.0, Chapter VI of the Guidelines dated 08.08.2008 and its subsequent amendment is valid and is not violative of Article 19 (1) (g) of the Constitution as it is a reasonable restriction on the right to practise the profession by a Chartered Accountant and is protected or justifiable under Article 19 (6) of the Constitution. b) However, the said clause 6.0, Chapter VI of the Guidelines dated 08.08.2008 and its subsequent amendment is deemed not to be given effect to till 01.04.2024. c) Consequently, all proceedings initiated pursuant to the impugned Guideline in respect of the writ petitioners and other similarly situated Chartered Accountants stand quashed. d) Liberty is reserved to the respondent-Institute to enhance the specified number of audits that a Chartered Accountant can undertake under Section 44AB of the IT Act, 1961, if it deems fit. e) Liberty is also reserve ..... 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