1998 (1) TMI 61 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of assessing authority for block assessment under section 158BC.
2. Validity of nominating an accountant under section 142(2A) of the Income-tax Act.
3. Constitutional validity of section 142(2A).
4. Applicability of principles of natural justice in approving the accountant nomination.
5. Exorbitant fee of the accountant under section 142(2D).

Analysis:

1. The petitioner challenged the jurisdiction of the assessing authority to conduct the block assessment under section 158BC after the time limit had expired. The court had earlier directed that any assessment under section 158BC should not be given effect without court's permission. The petitioner filed a writ questioning the authority's decision to nominate an accountant under section 142(2A).

2. The petitioner argued that the assessing authority had no basis to nominate an accountant as the necessary condition of forming an opinion was not met. The petitioner contended that the approval granted by the Commissioner for the accountant nomination was mechanical, lacked application of mind, and violated principles of natural justice as the petitioner was not heard. The petitioner also claimed that since their accounts were already audited under section 44AB, there was no need for another audit.

3. The court found that the assessing authority had indeed formed an opinion based on the appraisal report, justifying the accountant nomination under section 142(2A. The court noted that the approval by the Commissioner was based on this report. The court highlighted the need to consider the application of the "prejudice test" in determining if the approval violated natural justice principles.

4. Despite the absence of a requirement for pre-hearing under section 142(2A), the court indicated a need for a detailed examination of the provision's construction and its alignment with principles of natural justice. The court referenced a previous case to emphasize that the power under section 142(2A) could be invoked in complex accounting situations.

5. The court declined to stay the special audit under section 142(2A, citing the need to presume the provision's validity until determined otherwise. However, the court granted an interim stay on 50% of the accountant's fee, deeming it prima facie excessive. The final determination of the appropriate fee was deferred to the writ petition's final hearing.

This detailed analysis of the judgment addresses the various issues raised by the petitioner and provides a comprehensive overview of the court's findings and decisions on each point.