The appeal in this case was filed by T.D. Venkata Rao (Appellant) challenging the validity of Section 44AB of the Income Tax Act, 1961 (IT Act).
Section 44AB of the IT Act requires a person carrying business having total sales, turnover or gross receipts exceeding Rs. 40 lakhs or a person carrying profession if his gross receipts exceeding Rs. 10 lakhs in any previous year to get the accounts audited by an accountant. The explanation to the section provided for the definition of “Accountant” as the same mentioned in the explanation to Section 288(2)(4) of the IT Act which provided that the term “Accountant” would mean “Chartered Accountant within the meaning of the Chartered Accountancy Act and includes persons entitled to be appointed to Act as auditors of companies in a particular State by reasons of the provisions of section 226(2) of the Companies Act, 1956.”
The current Section 44AB of the IT Act has been challenged by the Appellant on behalf of the Income Tax Practitioners. The Appellant contends that the Income Tax Practitioners should be entitled to be authorized representatives and that they are excluded for auditing accounts which violates their Fundamental Rights, specifically Article 14 and 19 of the Constitution.
The Hon’ble Supreme Court observed that the High Courts on the same matter had rejected the challenge which was rightly done on their part. Observed that Income Tax Practitioners do not have the same expertise in the matter of accounts as is possessed by the Chartered Accountants. Chartered Accountants have special aptitude in the matter of Audits because of their training so it is reasonable that they form a class of themselves and thereby should be required to audit accounts exceeding the turnover as is mentioned in the provisions.
Further noted, although there is a restriction on part of performing audits for Income Tax Practitioners, they are still entitled to be authorized representatives of the assessees. Consequently, the challenge under Article 19 fails.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
The appellant is not represented, though we have waited from some time. The appeal is, therefore, dismissed with no order as to costs Restored.
We have heard learned counsel for the appellant. The appellant challenged the validity of Section 44(AB) of the Income-Tax Act,. 1961 in so far as it required every person carrying on business, if his total sales, turnover or gross receipts exceeded Rs. 40 lacs, and every person carrying on a profession, if his gross receipts exceeded Rs. 10 lacs, in any previous year “to get his accounts of such previous year audited by an accountant before the specified date …”. The Explanation to the Section defines “Accountant” for its purpose to have the same meaning as in the Explanation below Section 288(2). Section 288 deals with authorised representatives. Sub-section (2) clause (4) refers to an Accountant. The explanation says that in that Section “Accountant” means a Chartered Accountant within the meaning of the Chartered Accountancy Act and includes persons entitled to be appointed to act as auditors of companies in a particular State by reasons of the provisions of Section 226(2) of me Companies Act.
The challenge is on behalf of the Income Tax Practitioners. It is submitted that they are entitled to be authorised representatives on behalf of the assessees and that excluding them for the purpose of auditing accounts as aforestated violates Articles 14 and 19 of the Constitution. The High Court in the order under challenge, as other High Courts had done, rejected the Challenge and, in our view, rightly so.
Chartered Accountants, by reason of their training have special aptitude in the matter of audits. It is reasonable that they, who form a class by themselves, should be required to audit the accounts of businesses whose income exceeds Rs. 40 lacs and professionals whose income exceeds Rs. 10 lacs in any given year. There is no material on record, and indeed, in our view, there cannot be, that an Income Tax Practitioner has the same expertise as Chartered Accountants in the matter of Accounts. For the same reasons, the challenge under Article 19 must fail, and it must be pointed out that these Income Tax Practitioners are still entitled to be authorised representatives of assessees.
The appeal is, therefore, dismissed, with costs.