1986 Supreme(Guj) 51

Gujarat High Court
Judgename :B.K.MEHTA, D.H.SHUKLA
RAJKOT ENGINEERING ASSOCIATION - Appellant
Versus
UNION OF INDIA - Respondent
S.C.A. 2068 of 1985
Decided On : 03/31/1986

Headnote:

Constitution of India , 1950 – Article 14 ,19 (1) (g) and 133 - Income-tax Act 1961 - Income-tax Act 1961 – Section 44ab , 131 - Gujarat Co-operative Societies Act - Section 84 - Companies Act 1956 – Section 226 , 228 and 619 (2) - Taxation Laws (Amendment) Act 1975 – Section 142 - Chartered Accountants Act 1949 - Sales Tax Act – Section 9 , 12 (5) , 25 (1) (a) , 271 (1) (a) and 273a (4) - Finance Act 1984 – Section 271b - Petitions intend to dispose them of by this common judgment though we will shortly set out relevant facts and circumstances in which respective petitioners have moved those petitions challenging the validity of which has been placed on the statute book by Finance Act 1984 with effect from and Rule 6g as well as forms 3ca to 3 of Income-tax (Amendment) Rules 1985 promulgated on and made effective from and sec. 271b providing penalty for not getting the accounts audited broadly on the ground of impugned provisions being violative of Arts - Authorised representatives comprise mainly of Advocates Chartered Accountants or Commerce Graduates as permitted to appear in proceedings under the Act - Before impugned provisions were put on the statute book Act did not prescribe for any compulsory audit of the accounts of the assessees or a class of assessees except in those cases where Income-tax Officer so directs after obtaining previous approval of the Commissioner and having regard to the nature and complexity of the accounts of the assessee to get his accounts audited by a Chartered Accountant - Main grievance of the petitioners is that Parliament has after due deliberations thought fit not to put a similar provision of compulsory tax audit on the statute book when an attempt was made by clause - Particulars of accounts statements or other documents furnished by the assessee for preparations of the return of income and also to report on the scope and result of their examination of such accounts in course of preparations thereof - This classification according to the petitioners has become more unintelligible in view of the amendment of proviso to section 44ab permitting a class of assessees which is required to have the accounts audited under the special Act governing them to produce the report of their non-Chartered Accountant Auditors in compliance of the obligation prescribed under section 44ab - Amended proviso therefore perpetuates a hostile discrimination which is inbuilt in the impugned provisions – Held, Firstly term audit cannot be construed in a narrow and restricted meaning as the scope of auditing has been expanded in the last few decades - It is not necessary to elaborate this point - Suffice it for our purposes to quote the following passage from the book Contemporary Auditing by under the caption Extension in the scope of Auditing at page - Developments in last two decades have extended the scope of auditing - Therefore a more comprehensive definition of auditing given by Schlosser may also be considered. According to him auditing is a systematic examination of financial statements records and related operations to determine adherence to generally accepted accounting principles management policies or stated requirements - Earlier definition of auditing by Mautz emphasises the verification of accounting statements - Income-tax Officer who has to decide about the taxability of the income and admissibility of the expenses and the auditors report or certificate even if prejudicial to the assessee cannot preclude him from pleading that the auditors opinion was not well-founded or legally correct - As a matter of fact in the reply affidavit filed on behalf of Union Government it has been clearly conceded that auditors report or certificate if prejudicial to the assessee would not estop the assessee concerned from doubting the correctness of it and it will not be binding in sense that he would be estopped or precluded from pleading against it - Contention therefore stands rejected - No other contentions have been urged - Petitioners of Special Civil Application No. 2068 of 1985 and Mr learned Advocate for petitioners of Special Civil Application No. make oral applications for a certificate for leave to appeal to Supreme Court under Art. 133 (1) read with Art. 134-A of Constitution of India - Learned Standing Counsel for Union Government as well as learned Counsel appearing for Chartered Accountant submitted that neither of conditions mentioned in Art. 133 (1) (a) and (b) is satisfied and in any case the condition about need of question being decided by the Supreme Court does not arise for the reason that as many as three other High Courts have taken a similar view - Petition dismissed.