Section 44AB of the income Tax Act, 1961 was introduced by section 11 of the Finance Act, 1985, i.e AY 1985-86.

The circular 337 dated : 01.04.1984 clearly states that the purpose of tax audit are the following :

• To ensure that the books of accounts and other records are properly maintained by the assessee ;

• To ensure that the books of accounts reflect the correct income of the tax payer and claims for deduction are correctly made to him ;

• To facilitate the administration of tax laws by a proper presentation of accounts before the tax authorities and

• To save the AO's time in carrying out routine verifications like checking correction of totals and verifying that purchase and sales are properly vouched or not.

It has been held in many cause laws that section 44AB is constitutionally valid and it is not violative of articles 14 and 19(1) (g) of the Constitution of India .-

i) A.S. Sharma .v. Union of India 1987 Tax LR 1161 (AP);
ii) T.S.Natraj .v.Union of India (1985) 155 ITR 81 (Kar)
iii) Abhay Kumar & Co .v. Union of India (1987) ITR 148 (Raj)

The Income Tax Act,1961, contains a number of provisions, which require audit for tax purposes, i.e. section 12A, 33AB, 35E, 44AB, 80HH, 80HHA, 80HHD, 80HHE, 80I, 80IA, 142(2A) etc.The tax authorities have their specific information requirements, which may not necessary be fulfilled by the general-purpose financial statements prepared by companies primarily for the use of shareholders. Special statements for the 'specific use' of tax authorities are therefore prepared in many cases and the auditors are called upon to report on them.

The audit to be conducted by CAs under the various provisions of the income Tax Act, 1961 is thus collectively referred to 'tax audit'. However, in common parlance section 44AB audit is popularly known tax audit.

The audit under all the above - mentioned sections of the Income Tax Act, 1961 is to be conducted by an 'accountant' as defined in the Explanation below section 288(2) of the Income - tax Act.

For this purpose, an accountant is defined as a chartered accountant within the meaning of the Chartered Accountants Act, 1949 and includes a person who, under secton 226(2) of the Companies Act, 1956 is entitled to be appointed as an auditor of a company.

Thus, any chartered accountant, whether on practice or not, is covered by the definition of the term 'accountant' for income tax purposes.However, it has authoritatively opined that under section 7 of the Charterted Accountants Act, 1949, any chartered accountant, who wishes to practice must hold a Certificate of Practice(COP)

And therefore it is very clear that no chartered accountant without the Certificate of Practice (COP) can audit the accounts even under the Income - tax Act.

Income Tax Practitioner can not beappointed as tax auditors. Since ITPs do not have same expertise as chartered Accountants in matters of accountants under section 44AB was upheld and the Supreme Court held that it is violative of article 19 of the Constitution - T.D.Venkata Rao v. Union of India 1999/103/Taxman621/237 ITR 315(SC)