Professional misconduct limits cannot justify arbitrary caps on tax audits or minimum fee restrictions, High Court rules.

A High Court held that professional misconduct under the Chartered Accountants Act cannot be used to impose arbitrary limits on legitimate professional work. The notification capping tax audit assignments at 30 per year was found to lack rational nexus with the statutory object, create an artificial and discriminatory classification, and unreasonably restrict the right to practise a profession. The notification fixing minimum audit fees and treating work accepted below that level as misconduct was also found to be outside the scope of regulating professional conduct, discriminatory between categories of practitioners, and arbitrary. Both notifications were struck down as unconstitutional, and the writ petitions were allowed.

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Issues: (i) Whether the notification restricting the number of tax audit assignments to be accepted by a practising chartered accountant in a financial year was valid. (ii) Whether the notification fixing minimum audit fees and treating acceptance of work below the prescribed fee as professional misconduct was valid.

Issue (i): Whether the notification restricting the number of tax audit assignments to be accepted by a practising chartered accountant in a financial year was valid.

Analysis: Section 22 of the Chartered Accountants Act, 1949 treats professional misconduct as an inclusive concept and its object is regulation of professional conduct, not control of the volume of legitimate professional work. A restriction that caps the number of audits a competent professional may undertake was found to have no rational nexus with the statutory purpose. The classification based on the number of audits was held to be artificial and discriminatory, and the limit of 30 tax audits per year was held to be unreasonable and arbitrary.

Conclusion: The notification limiting tax audit assignments was invalid and liable to be quashed, in favour of the petitioner.

Issue (ii): Whether the notification fixing minimum audit fees and treating acceptance of work below the prescribed fee as professional misconduct was valid.

Analysis: The fixing of a minimum professional fee was held to be outside the legitimate scope of regulating professional misconduct. Fee charged by a chartered accountant was treated as a matter of professional discretion depending on the work done, and not on population of the place or number of partners in a firm. The classification was held to be unrelated to the object of the Act and discriminatory as between different categories of practising chartered accountants and firms. The restriction was therefore held to infringe the fundamental right to practise a profession and to be arbitrary.

Conclusion: The notification prescribing minimum audit fees was invalid and liable to be quashed, in favour of the petitioner.

Final Conclusion: Both impugned notifications were struck down as unconstitutional, arbitrary and illegal, and the writ petitions were allowed.

Ratio Decidendi: A professional regulatory body cannot, under the guise of defining professional misconduct, impose arbitrary limits on the number of legitimate professional engagements or fix minimum fees in a manner unrelated to the statutory object and lacking rational nexus with the regulation of professional conduct.

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