Rama Rao, J.:— These writ petitions are for the issue of an appropriate writ declaring that the restricted connotation of an accountant as chartered accountant in the Explanation to section 44AB of the Income-tax Act, 1961, is unconstitutional and declaring that the petitioners are also eligible to audit the accounts for the purpose of section 44AB of the Income-tax Act, 1961.

2. The petitioner in W.P No. 16961 of 1984 is an income-tax practitioner and petitioners Nos. 1 and 2 in W.P No. 930 of 1985 are income-tax practitioners and the 3rd petitioner is an advocate. The averments in support of the writ petition may be briefly stated: The petitioners are income-tax practitioners and an advocate who have been practising in tax matters arising under direct tax statutes. The income-tax practitioners are members of the Institute of Income-tax Practitioners. Though the Companies Act provides that the audit of the companies should be done by chartered accountants, an income-tax practitioner or an advocate can file the return and represent the company in the proceedings before the assessing authority and appeals. Section 44AB provides that in respect of a business having turnover exceeding 40 lakhs rupees and professional income the gross receipts exceed ten lakhs rupees the accounts should be audited by chartered accountants and this provision adversely affects the practice of income-tax practitioners and advocates. Learned counsel for the petitioners, Sri. S.R Ashok, contended that section 44AB of the Income-tax. Act, 1961, confining the audit to chartered accountants alone results in invidious discrimination and is violative of article 14 of the Constitution and the elimination of the income-tax practitioners and advocates from doing audit work infringes the fundamental right guaranteed under article. 19(1)(g) of the Constitution. Learned standing counsel for the Revenue contended that the impugned provision is founded upon reasonable classification having nexus with the object of checking evasion and the avoidance of the petitioners regarding audit is a reasonable restriction saved under article 19(6) of the Constitution.

3. Section 44AB introduced with effect from April 1, 1985, is as follows:

“44AB. Every person,—

(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year or years relevant to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year; or

(b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year or years relevant to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year,

get his accounts of such previous year or years audited by an accountant before the specified date and obtain before that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed:

Provided that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and obtains before that date the report of the audit as required under such other law and a further report in the form prescribed under this section.

Explanation.— For the purposes of this section,—

(i) ‘accountant’ shall have the same meaning as in the Explanation below sub-section (2) of section 288;

(ii) ‘specified date’, in relation to the accounts of the previous year or years relevant to an assessment year, means the date of the expiry of four months from the end of the previous year or, where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later.”

4. Section 44AB obligates assessees having a turnover of business exceeding 40 lakhs rupees or professional receipts exceeding 10 lakh rupees to have their accounts audited and obtain the audit report before the specified date. This is a condition precedent for processing the assessment on the return filed by such assessees and the infraction of the provision is visited by a penalty under section 271B. The other condition is that the accounts should be audited by an accountant as provided in the Explanation to section 288(2) of the Act. Section 288, while enumerating the categories of persons entitled to represent the assessee before the heirarchy of authorities under the Act, amplified the expression “accountant” in clause (iv) of sub-section (2) by an Explanation stating that the accountant is a chartered accountant or any person entitled to be appointed as an auditor under section 226(2) of the Companies Act. In so far as assessees adverted to under section 44AB are concerned, chartered accountants alone are competent to audit the accounts and to submit a report and the income-tax practitioners and advocates are not eligible to do the job.

5. The petitioners state that they have attained excellence in the groove of tax practice by their experience and academic attainment and they are equally efficient in performing the audit and as such there is no rationale behind the preference shown to chartered accountants. The principles regarding the vice of discrimination and classification justifying differential treatment are firmly settled by several decisions. It may not be feasible to refer to a bead-roll of decisions handed down by several courts expounding the principles in varied circumstances and diverse situations and the decisions with reference to taxing statutes and economic regulations may be adverted to. In State Of West Bengal v. Anwar Ali Sarkar,, [1952] AIR 1952 SC 75, the Supreme Court held as follows (at p. 86):

“The mere fact of classification is not sufficient to relieve the statute from the reach of the equality clause of article 14. To get out of its reach, it must appear that not only a classification has been made but also that it is one based upon a reasonable ground on some difference which bears a just and proper relation to the attempted classification and is not a mere arbitrary selection.”

6. In Morey v. Doud, [1957] 354 US 457, it is held as follows (at p. 255 of 133 ITR):

“In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment.”

7. In Anant Mills Co. Ltd. v. State of Gujarat, (1975) 2 SCC 175 : AIR 1975 SC 1234, the Supreme Court held that greater latitude is permissible in the classification of assessees and otherwise in taxing statutes.

8. In Garg (R.K) v. Union of India, [1982] 133 ITR 239, the Supreme Court, while upholding the constitutional validity of the Special Bearer Bonds Act, surveyed the earlier decisions regarding the principles churned time and again with reference to article 14 and held that (at p. 254):

“the classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation”.

9. In the context of permissibility of greater leeway in the laws touching on economic activities, it is held as follows (at p. 255):

“Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. It has been said by no less a person than Holmes J. that the Legislature should be allowed some play at the joints, because it has to deal with complex problems which do not admit of solution through any doctrine or strait jacket formula and this is particularly true in the case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the Legislature.”

10. In addition to the traditional approach from the perspective of concept of reasonable classification in conjunction with the nexus to the object, another dimension is evolved in E.P Royappa v. State of Tamil Nadu, (1974) 4 SCC 3 : AIR 1974 SC 555, wherein it is held as follows (at p. 583):

“Equality is a dynamic concept with many aspects and dimensions and it cannot be ‘cribbed, cabined and confined’ within traditional and doctrinaire limits. From a positivistic point of view, equality is the antithetic to arbitrariness. In fact, equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is, therefore, violative of article 14.”

11. This new approach evolved in Royappa's case, (1974) 4 SCC 3 : AIR 1974 SC 555. for the first time gained currency and was followed in subsequent decisions streamlined by finer facets.

12. The great equalising principle enshrined in article 14 of the Constitution envisages equal treatment to persons similarly situated and circumstanced. Article 14 does not frown upon reasonable classification founded upon rational distinction having affinity to the object sought to be achieved. The differential treatment or approach is immune from attack if such treatment comprises the twin doses of reasonable classification or grouping and such compartmentalisation bears legitimate relatability to the object sought to be fulfilled. It is not possible to mould or fashion the manifold situations with absolute equality and, therefore, logical differentiation does not incur the displeasure of article 14. Arbitrariness breeds inequality and an arbitrary act or provision is necessarily a breach of article 14.

13. Shri Ashok stressed that income-tax practitioners and advocates are equally efficient to conduct audits and section 44AB conferring exclusive domain to chartered accountant is discriminatory. Audit is a systematic and meticulous scrutiny of accounts with reference to the receipts and disbursements and vouchers and allied matters and submission of a report surveying the financial outlay and highlighting the lapses or infirmities in the maintenance of accounts or utilisation of funds. The report submitted by the auditor on an in-depth probe into the transactions with reference to accounts and other matters is expected to mirror the correct state of affairs. The controversy is whether chartered accountants alone can be named for the purpose of the statutory audit envisaged under section 44AB. Under the Chartered Accountants Act, 1949, and the Chartered Accountants Regulations, 1964, a person to be enrolled as a chartered accountant must attain eligibility in the prescribed practical training also. Apart from subject's comprising audit, cost accounting, preparation of balance-sheet and allied matters, chartered accountants should receive practical training under an experienced chartered accountant. The prescription of subjects in conjunction with practical training is focussed upon scrutiny of accounts and preparation of report reflecting the correct state of affairs. The chartered accountant, qualifying himself in what is generally called a tough examination, is expected to have expertise and proficiency in audit after such intensive study coupled with the articles of association. The qualifications for eligibility to be enrolled as income-tax practitioners and advocates are entirely different. The qualification for income-tax practitioners is a B.Com degree or diploma and for advocates it is the law degree. A study in B.Com supplies fringe and elementary rudiments of accounting but the specialised study of accounts and audit is not prescribed for the B.Com degree. The syllabus of subjects for the study of law is different and far removed from the subjects intimate with audit. The compulsory audit for companies followed up by a report postulates the presentation of a current and correct get-up of the transactions and facilitates the shareholders and other interested persons to have a close-up of the state of affairs of the company. In Institute of Chartered Accountants of India v. P.K Mukerjee, [1968] 38 Comp Cas 628, the Supreme Court with regard to the role of chartered accountants held as follows (at p. 634):

“In other words, the auditing was intended for protection of the beneficiaries and the auditor was expected to examine the accounts maintained by the trustees with a view to inform the beneficiaries of the true financial position. The auditor is, in such a case, under a clear duty towards the beneficiaries ‘to probe into the transactions’ and to report on their true character. In our opinion, the legal position of the auditor in the present case is similar to that of the auditor under the Indian Companies Act, 1956. In such a case the audit is intended for the protection of the shareholders and the auditor is expected to examine the accounts maintained by the directors with a view to inform the shareholders of the true financial position of the company.”

14. Income-tax practitioners and auditors cannot be considered on par with chartered accountants regarding expertise and excellence in audit. It is contended that the income-tax practitioners, advocates and chartered accountants are considered and treated alike under section 288 and, therefore, there is no logic for this differentiation. Section 288 enumerates the diverse categories of persons entitled to attend on behalf of the assessees before the heirarchy of authorities under the Act and apart from other persons income-tax practitioners, advocates and chartered accountants are mentioned. A glance at the list of persons set out in sub-section (2) of section 288 reveals that the persons who are expected to make an effective and genuine representation and having an over-view knowledge of the affairs of the assessee are authorised to represent without reference to any specialised proficiency in taxation or otherwise. It is patent that all those categories are lined up on an equal footing under section 288 for the purpose of representation of the case of the assessee and this equal eye should be confined to the purpose of representation only and it cannot be expected of advocates and income-tax practitioners with their background of education and academic attainment to give a good account of themselves in audit. Equally,-chartered accountants cannot be credited with legal education. Chartered accountants constitute a distinct group and income-tax practitioners and advocates cannot be equated with them in so far as audit is concerned and as such section 44AB is not violative of article 14 of the Constitution. In Nataraj v. Union of India, [1985] 155 ITR 81 and Mohan Trading Co. v. Union of India, [1985] 156 ITR 134, the Karnataka and Madhya Pradesh High Courts, respectively, took the same view.

15. The object of section 44AB is to have a detailed scan of accounts of assessees in higher income brackets so that the detection of evasion, if any, may yield attractive dividends regarding exigibility to tax. Further, the compulsory audit facilitates the assessing authority to get at a neat epitome of the transactions without the necessity of devoting considerable time to scrutiny of accounts and transactions. The audit report contributes to expeditious and accelerated assessments and detection of evasion. The stipulation of audit by chartered accountants has a legitimate affinity to the object sought to be achieved. Learned counsel for the petitioner contended that by diverting their clientele to the corridors of chartered accountants for the purpose of audit, the petitioners lose their grip over them and there is a remote possibility of such assessees unfolding themselves from the nest of chartered accountants. This contention is far-fetched and not founded upon proximity to a realistic approach. It is further contended that section 44AB is superfluous as recourse to section 142(2A) of the Act serves the purpose. Section 142(2A) enables the assessing authority to direct the accounts to be audited in the event of complexity of the accounts. This power can be exercised in respect of all assessees. The stipulation of compulsory audit is evidently conceived with the twin purposes of having vigilance of the accounts of the assessees, in higher income brackets to detect evasion if any and lubricating expeditious assessment. The power under section 142(2A) can be invoked when the assessing authority finds that the accounts are complicated and it must be stated that in view of section 44AB, the recourse to section 142(2A) is confined to assessees having turnover or transactions below Rs. 40 lakhs or gross professional receipts below Rs. 10 lakhs. The overlapping in certain situations does not render the provision invalid or superfluous and the contention is untenable.

16. In the result, the writ petitions are dismissed. No costs.