2004 (4) TMI 60 - HC - Income Tax

Appointment of special auditor by the CIT, under section 142(2A) - there are allegations of huge misappropriation of the society s funds directly or indirectly made by the assessee in favour of close relatives of the founder members of the society. Also fictitious expenses appear to have been claimed under the different heads of expenses debited in the income and expenditure account. The donations received by the assessee are also to be examined in the light of their proper utilisation for charitable purposes - Additional Commissioner therefore recommended that the Assessing Officer may consider the case for special audit under section 142(2A) - In our opinion, the view taken by the Additional Commissioner cannot be said to be arbitrary

Summary

Issues:
Challenge to the appointment of special auditor under section 142(2A) of the Income-tax Act, 1961.

Analysis:
The petitioner sought a writ of certiorari to quash the appointment of a special auditor by the Commissioner of Income-tax under section 142(2A) of the Income-tax Act, 1961. The allegations included misappropriation of society's funds, fictitious expenses, and improper utilization of donations. The Additional Commissioner recommended a special audit due to suspicions of funds diversion. The court noted that it does not act as an appellate authority over the Assessing Officer's opinion under section 142(2A), citing the Jhunjhunwala Vanaspati Ltd. case where judicial restraint in interfering with administrative directions was emphasized. The court emphasized the need for judicial restraint in such matters, as discussed in the Pushpak Jyoti case, and dismissed the petition based on these principles.

This judgment dealt with the challenge to the appointment of a special auditor under section 142(2A) of the Income-tax Act, 1961. The court examined the allegations of misappropriation of funds and fictitious expenses, leading to suspicions of funds diversion. The Additional Commissioner's recommendation for a special audit was based on these suspicions. The court emphasized that it does not function as an appellate authority over the Assessing Officer's opinion under section 142(2A), citing previous cases to highlight the principle of judicial restraint in such matters. The court dismissed the petition in line with the established jurisprudence on administrative decisions related to special audits.