Shaji Poulose Vs. Institute of Chartered Accountants of India [May 17, 2024]
Parties Involved
Petitioner/Appellant: Shaji Poulose
A Chartered Accountant challenging the rules set by the ICAI.
Respondent: Institute of Chartered Accountants of India (ICAI)
The statutory professional body regulating Chartered Accountants in India.
Background
The ICAI issued Guidelines No.1-CA(7)/02/2008 on August 8, 2008, which included Clause 6.
Clause 6 imposed a ceiling on the number of tax audit assignments a Chartered Accountant could accept in a financial year under Section 44AB of the Income Tax Act, 1961.
Shaji Poulose challenged this restriction, claiming it violated:
Article 19(1)(g): Right to practice any profession.
Article 14: Right to equality.
The petitioner argued that the restriction was unreasonable and arbitrary, limiting professional freedom.
Legal Issues
Authority of ICAI:
Did ICAI have the competence to limit the number of tax audits a CA could undertake?
Fundamental Rights Violation:
Did the ceiling infringe upon the petitioner’s right to practice their profession under Article 19(1)(g)?
Reasonableness of Restriction:
Is the restriction justified under Article 19(6), which allows reasonable restrictions in the interest of the public?
Supreme Court’s Analysis
The Court analyzed the issue by balancing professional freedom and public interest:
Statutory Privilege vs. Right:
Conducting tax audits under Section 44AB is a statutory privilege given to CAs, not an inherent right.
ICAI, as a professional regulatory body, has the authority to issue guidelines to ensure quality and fairness.
Need for Restriction:
The ceiling of 60 tax audits per CA per financial year ensures:
Quality of audits is maintained.
Work is equitably distributed among members.
Overburdening of individual CAs is avoided.
Reasonableness and Public Interest:
Restricting the number of audits is reasonable under Article 19(6), as it protects the integrity of financial reporting and serves public interest.
Professional freedom is not absolute; it can be regulated to maintain standards.
Judgment
The Supreme Court upheld Clause 6 of the ICAI Guidelines.
It held that:
ICAI has legal competence to frame guidelines regulating audits.
Limiting each CA to 60 tax audits per year is reasonable and justified.
The ceiling was directed to be operative from April 1, 2024.
Significance of the Case
Clarifies ICAI’s Regulatory Powers:
Confirms that ICAI can regulate professional practice to maintain standards.
Balances Professional Freedom and Public Interest:
Ensures that professional freedom is exercised responsibly without compromising quality.
Sets a Precedent for Reasonable Restrictions:
Professional bodies can impose limits if they are necessary for public interest and quality control.
Provides Certainty:
Gives clarity to Chartered Accountants about the maximum number of tax audits they can undertake.
RELATED Blog
0 comments