2006 (8) TMI 145 - HC - Income Tax

Special audit - order passed under section 142(2A) - notice issued for appointing special auditor legality A bare perusal of sub-section (2A) of section 142 of the Income-tax Act, 1961, shows, it is not necessary for the Assessing Officer to give a show cause notice or a hearing to the assessee before issuing the direction under section 142(2A). - The purpose of the direction under sub-section (2A) of section 142 is to ensure that a correct assessment order is passed so that the Revenue is not deprived of its dues. in view of this, we do not find any illegality in the order passed under section 142(2A) - writ petition is, accordingly, dismissed in limine.

Summary

Issues:
Challenge to the appointment of a special auditor under section 142(2A) of the Income-tax Act for the assessment year 2003-04.

Detailed Analysis:

1. Appointment of Special Auditor:
The petitioner, a cooperative society, challenged the appointment of a special auditor under section 142(2A) of the Income-tax Act for the assessment year 2003-04. The petitioner contended that the assessing officer did not have sufficient material to appoint a special auditor and that the interests of the Revenue were not at risk since the accounts had already been audited under relevant provisions. The petitioner argued that the preconditions of section 142(2A) were not met, emphasizing that the complexity of accounts and Revenue interests must be established before ordering a special audit.

2. Arguments and Counter-Arguments:
The petitioner's counsel highlighted that in the previous year, no special auditor was appointed, and the mere voluminous nature of accounts does not justify a special audit. On the other hand, the standing counsel for the respondents argued that due to the petitioner's non-cooperation and the complexity of accounts, the assessing officer rightly proposed a special audit to safeguard Revenue interests. The standing counsel cited precedents to support the necessity of the special audit in such circumstances.

3. Judicial Analysis and Precedents:
The court examined the facts, noting that the petitioner had not fully complied with the notices and that previous years had seen special audits. The court upheld the assessing officer's decision, emphasizing that the officer's opinion was based on valid reasons and the interests of Revenue. The court distinguished a Calcutta High Court decision, stating that the present case met the requirements of section 142(2A). Citing previous judgments, the court clarified that the assessing officer's decision for a special audit is administrative, not quasi-judicial, and aims to ensure accurate assessment for Revenue protection.

4. Court's Decision:
Based on the analysis and precedents, the court dismissed the writ petition, finding no illegality in the appointment of the special auditor under section 142(2A) of the Income-tax Act. The parties were directed to bear their own costs, concluding the judgment.

In conclusion, the court upheld the appointment of the special auditor, emphasizing the necessity to safeguard Revenue interests and ensure accurate assessments, in line with the provisions of the Income-tax Act.