2004 (10) TMI 30 - HC - Income Tax

Fee of special auditor (chartered accountant) - fixation of the remuneration of the auditors - Order made by the Commissioner of Income-tax u/s 142(2D) - order speaks about the maintenance of a diary of work done with details of time allocation of the audit work. The Commissioner of Income-tax after a careful consideration of all the aspects of the cases and work done by the auditors fixed the fees at Rs. 5 lakhs. was appointed as a special auditor to examine the matters and to submit a report. - It should not be forgotten that the chartered accountant is a professional and so far as fees are concerned ordinarily it would differ from person to person. However, in the instant case, we are of the opinion that the fees have been charged as per the norms laid down by the All India Institute of Chartered Accountants - we cannot interfere with the order made by the Commissioner of Income-tax u/s 142(2D) - assessee is directed to pay the amount to the chartered accountant within a period of four weeks with interest at the rate of 15 per cent, from the date of submitting the bill.

Summary

Issues:
Challenge against the order made by the Commissioner of Income-tax under section 142(2D) of the Income-tax Act, 1961 regarding appointment of a special auditor and determination of fees.

Analysis:
The judgment pertains to petitions challenging an order made by the Commissioner of Income-tax under section 142(2D) of the Income-tax Act, 1961. The order was issued following an earlier order under section 142(2A) appointing a chartered accountant as a special auditor due to complexities in the accounts of the assessees post a search conducted under section 132 of the Act. The special audit was required for various purposes such as preparing accounts, verifying transactions, ascertaining asset reflection, quantifying expenses, and verifying unaccounted transactions. M/s. Dhanesh Gupta and Co. was appointed as the special auditor, and after completing the audit, submitted a bill for Rs. 9,81,540 including service tax. The Commissioner of Income-tax, after considering all aspects and work done, fixed the fees at Rs. 5 lakhs, as per the provisions of section 142(2D) where the determination of expenses, including remuneration, is final.

The petitioners contended that the bill was inflated without basis, while the chartered accountant defended the bill's appropriateness based on professional standards and work complexities. The chartered accountant explained challenges faced in maintaining separate records due to scattered information and defended the bill's accuracy. The Commissioner of Income-tax justified the fees based on verified work done by the auditor, as affirmed by the Assessing Officer. The court emphasized that it's not an appellate body but ensures the fee determination is objective, considering the case's nature, complexity, and total hours spent. The court found the fees in line with norms set by the Institute of Chartered Accountants, as confirmed by the Revenue in an affidavit, and upheld the Commissioner's order under section 142(2D) as valid.

Therefore, the court dismissed both petitions and directed the assessee to pay the chartered accountant within four weeks with interest. The court's decision was based on the objective fee determination process and adherence to professional norms, concluding that the Commissioner's order was valid under the Income-tax Act, 1961.

End of Analysis