Case Law (SC) -- Limit imposed by ICAI for conducting number of Tax Audit 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.

Shaji Poulose v. Institute of Chartered Accountants of India [2024 INSC 451] dated 17.05.2024

Issue for consideration:

"(i)       Whether the Council of the respondent-Institute, under the 1949 Act, was competent to impose, by way of Guidelines, a numerical restriction on the maximum number of tax audits that could be accepted by a Chartered Accountant, under Section 44AB of the IT Act, 1961, in a Financial Year by way of a Guideline?

(ii)    Whether the restrictions imposed are unreasonable and therefore, violative of the right guaranteed to Chartered Accountants under Article 19(1)(g) of the Constitution?

(iii)          Whether the restrictions imposed are arbitrary and illegal and therefore, impermissible under Article 14 of the Constitution?

(iv)          Whether exceeding such specified number of tax audits can be deemed to be ‘professional misconduct’?

(v)           What order?"

 Extract of decision:-

"49.6 Chartered Accountants face many different responsibilities: to the profession; to the tax administration; to the client and to the economy at large. In that context, we stress on the importance of preserving their independence of view and integrity; to separate their client-advisory role from their role as public 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 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.

g) The Registry to intimate the concerned High Courts regarding disposal of the transferred cases accordingly.

h) No costs.”

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