Supreme Court transfers to itself a plea challenging Constitutional validity of Accounting Standards framed by ICAI [Read Order]

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The Supreme Court transferred to itself the petitions pending before 3 High Courts namely Kerala, Madras and Calcutta High Courts challenging Constitutional validity of Accounting Standards framed by the Institute of Chartered Accountants of India (ICAI).

In the writ petitions, which are sought to be transferred, writ petitioner, ICAI have challenged validity of Chapter VI of Guidelines No.1- CA(7)/02/2008 dated August 8, 2008 issued by the Council of ICAI on the ground that the same is violative of Article 19(1)(g) of the Constitution of India.

The Chapter VI of the Guidelines stipulated that a member of the Institute in practice shall not accept, in a financial year, more than the “specified number of tax audit assignments”, which is at present 60 under Section 44AB of the Income-tax Act, 1961.

Further, Section 22 of the Chartered Accountants Act, 1949 defines “professional or other misconduct” to include any act or omission provided in any of the Schedules to the Act.

Clause (1) of Part II of the Second Schedule to the Act stipulates that a member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct if he contravenes any of the provisions of the Act or the regulations made thereunder or any guidelines issued by the Council of the Institute.

As such, if a member of the Institute contravenes the provisions of the aforesaid Chapter VI of the Guidelines dated August 8, 2008, he shall be deemed to be guilty of professional misconduct under the Chartered Accountants Act, 1949.

The three-member bench of Justice Ashok Bhushan, Justice Subhash Reddy and Justice M.R.Shah stated that the guidelines which are impugned in the High Court and consequent disciplinary proceedings initiated against various chartered accountants throughout the country is an issue of public importance affecting Chartered Accountants as well as the citizens who have to obtain compulsory tax audits.

“We are satisfied that to settle the law and to clear the uncertainty among tax professionals and citizens, it is appropriate that this Court may transfer the writ petition, to authoritatively pronounce the law on the subject,” the court while transferring the writ petition said.

The court, however, found substance in the submissions made by counsel for the respondent writ petitioners that the interim orders operating in different writ petitions which are sought to be transferred should be allowed to be continued till this Court considers the matter and passes any other order.

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