LexSHAJI POULOSE versus INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA & OTHERS
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* Author [2024] 6 S.C.R. 777 : 2024 INSC 451 Shaji Poulose v. Institute of Chartered Accountants of India & Others (Transferred Case (Civil) No. 29 of 2021 ) 17 May 2024 [B.V. Nagarathna* and Augustine George Masih, JJ.] Issue for Consideration Council of the Institute of Chartered Accountants of India, if 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, u/s. 44AB of the 1961 Act, in a Financial Year by way of a Guideline; the restrictions imposed, if unreasonable, arbitrary and illegal and thus, violative of the right guaranteed to Chartered Accountants u/Art. 19(1)(g) and impermissible u/Art. 14 of the Constitution; and exceeding of the specified number of tax audits, if can be deemed to be ‘professional misconduct’. Headnotes Chartered Accountants Act, 1949 – Income Tax Act, 1961 – s. 44AB – Audit of accounts – Clause 6 of Guidelines No.1- CA(7)/02/2008 dated 08.08.2008 issued by the Institute of Chartered Accountants of India, 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 – Petitioners undertook audits u/s. 44AB of the IT Act, 1961 over and above the number of tax audits specified as per the Guidelines dated 08.08.2008 – Issuance of the notices to the petitioners for violation of the Guideline which was a misconduct – Initiation of disciplinary proceedings by the Institute against the petitioners – Challenge to the Guidelines as well as to the disciplinary proceedings: Held: Clause 6.0, Chapter VI of the Guidelines dated 08.08.2008 and its subsequent amendment is valid and not violative of Art. 19(1)(g) as it is a reasonable restriction on the right to practise the profession by a Chartered Accountant and is protected or justifiable u/Art. 19(6) – However, the said clause 6.0, Chapter VI 778 [2024] 6 S.C.R. Digital Supreme Court Reports of the Guidelines dated 08.08.2008 and its subsequent amendment is deemed not to be given effect to till 01.04.2024 – Thus, all proceedings initiated pursuant to the impugned Guideline in respect of the writ petitioners and other similarly situated Chartered Accountants quashed – Institute at liberty to enhance the specified number of audits that a Chartered Accountant can undertake u/s. 44AB, if it deems fit – Writ petitioners or any other member of the Institute at liberty to make a representation. [Para 50] Chartered Accountants Act, 1949 – s. 22 – Income Tax Act, 1961 – s. 44AB – Guidelines No.1-CA(7)/02/2008 dt 08.08.2008 restricting the maximum number of tax audits that could be accepted by a Chartered Accountant, u/s. 44AB of the Income Tax Act, 1961, in a Financial Year – Competency of the Council of the Institute of Chartered Accountants of India, to impose restriction, by way of Guidelines: Held: Council of the 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, 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 – It is not vitiated on account of there being lack of competency or powers to frame the Guideline by the Council of the Institute – Issuance of the Guidelines dt 08.08.2008 by the Institute not hit by the vice of excessive delegation – Thus, the Regulation or Guideline issued by the Council, 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 – Delegation of powers to add newer types of misconducts by way of a regulation or Guideline neither excessive nor ultra vires u/s. 22. [Paras 13.1-13.3] Chartered Accountants Act, 1949 – Income Tax Act, 1961 – s. 44AB – Council of the Institute of Chartered Accountants of India, imposing by way of Guidelines No.1-CA(7)/02/2008 dated 08.08.2008 , a numerical restriction on the maximum number of tax audits that could be accepted by a Chartered Accountant, u/s. 44AB of the Income Tax Act, 1961, in a Financial Year by way of a Guideline – Restrictions imposed, if unreasonable, arbitrary and illegal and thus, violative of the right guaranteed to Chartered Accountants u/Art. 19(1)(g) and
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