The court upheld the validity of the Guidelines limiting tax audits by Chartered Accountants, finding them reasonable and in the public interest, thus not violating Article 19(1)(g) of the Constitution.

1. 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 order dated 09.12.2020, this Court transferred the writ petitions pending before various High Courts to this Court. That is how, these cases have been clubbed and were heard together and are being disposed of by this common order.

1.2 The petitioners are, specifically, aggrieved by the mandatory ceiling limit imposed by Clause 6.0, Chapter VI of said Guidelines on the number of tax audits that a Chartered Accountant can accept in a financial year under Section 44AB of the Income Tax Act, 1961 (hereinafter referred to as “IT Act, 1961”). Additionally, and importantly, the petitioners seek a direction for quashing and/or setting aside of the disciplinary proceedings initiated by the respondent-Institute in pursuance of the Impugned Guideline. Clause 6.0, Chapter VI of Guidelines dated 08.08.2008 provides that 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 IT Act, 1961. It further provides that in the case of a firm of Chartered Accountants, the “specified number of tax audit assignments” shall be construed as the specified number of tax audit assignments for every partner of the firm.

1.3 At the outset, we find it pertinent to note that the ceiling limit, that is the subject of controversy has not been stagnant but has, on the basis of several factors, been increased by the Council of respondent-Institute during the passage of time. Initially, the Council of respondent-Institute vide Notification No. 1/CA(7)/3/88 dated 13.01.1989 set a limit of thirty audits, in exercise of powers conferred on it under Clause (ii), Part II, Second Schedule of the 1949 Act. Further, in February 2014, vide resolution adopted at the 331st Meeting of the Council of respondent-Institute, the ceiling limit in question was specified as sixty and presently stands the same.

Bird’s Eye View of the Controversy:

2. The controversy that has arisen in these petitions is twofold: firstly, whether the respondent-Institute, constituted under the 1949 Act, had the competency to impose a restriction of the nature and effect herein? If the answer is in the affirmative, secondly, whether a Chartered Accountant’s right “to practice any profession” as provided under Article 19(1)(g) of the Constitution, is unreasona