Tax Audit Limit is arbitrary & Unconstitutional – HC

By CA Sandeep Kanoi CA, CS, CMA Judiciary December 28, 2014 5 comments

TaxGuru Citation: 2014 taxguru.in 399
Case Name: K. Bhagavatheeswaran Vs Institute Of Chartered Accountants of India (Madras High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Madras High Court

All the auditors cannot be placed on an equal footing and an assumption cannot be made that an auditor would be able to fulfill his obligations only up to 30 tax audit assignments under section 44AB of the Income-tax Act, per financial year. It is not known on what basis or on what statistics it is contended by the respondents that only 30 tax assignments can be undertaken by a chartered accountant. What applies to an individual chartered accountant would equally apply to a partner of a firm in whose case-also, the restriction is 30 tax audit assignments per financial year. The Act does not contemplate distribution of available work to all the chartered accountants on the rolls of the Institute, nor does it impose an obligation on the Institute to provide work for a young and aspiring chartered accountant. That is an area in which the respective chartered accountant has to look after himself.

Therefore, for all the aforesaid reasons, in both these writs, the fixation is arbitrary and unreasonable and the same is in violation of article 14 of the Constitution. In both the cases, there is discrimination and that would vitiate the respective notifications. Further, it is significant to note that the auditors had been accepting the assignments without any restriction whatsoever in the past years and all these years, no such restriction regarding the number of assignments to be undertaken was thought of. So also, for all these years the chartered accountants were free agents who could negotiate and settle their fees with their respective clients and that is an area in which the Institute has never been interfering. Therefore, 1 am of the opinion that such restrictions placed by the first respondent in respect of the number of audit assignments and also the fees structure apart from being discriminatory, are also unreasonable.