1988 (1) TMI 27 - HC - Income Tax

Summary

Issues Involved:
The petitioner, a limited company, seeks a writ in the nature of certiorari for quashing the order dated February 17, 1984, passed by the Inspecting Assistant Commissioner of Income-tax (Assessment) directing the petitioner to get its account books audited by a special auditor.

Judgment Details:

Issue 1: Contravention of Legal Provisions by Inspecting Assistant Commissioner (Assessment)
The petitioner contends that the Inspecting Assistant Commissioner (Assessment) acted in contravention of legal provisions and instructions by directing the petitioner to get its account books audited by a special auditor. The court considered the legal provisions under section 142(2A) of the Income-tax Act, 1961, and the instructions issued by the Department. Referring to the case of Swadeshi Cotton Mills Company Ltd. v. CIT [1988] 171 ITR 634, the court emphasized the requirement of objective assessment rather than subjective satisfaction for determining the necessity of a special audit. It was noted that the complexity of account books should be the basis for such a decision. The court found that the direction to get the account books audited by the nominee of the Commissioner of Income-tax was not erroneous, especially considering the provisional nature of the balance-sheet and profit and loss account submitted by the assessee.

Issue 2: Audit of Account Books
After the impugned order, the petitioner got its account books audited by chartered accountants for the assessment years 1979-80 and 1980-81. The court suggested that the audited books could be presented to the Inspecting Assistant Commissioner (Assessment) for examination. If found correct, the earlier order could be modified with the approval of the Commissioner, potentially relieving the petitioner from further audits by the Commissioner's nominees.

Conclusion:
The court concluded that the direction given by the Inspecting Assistant Commissioner (Assessment) was not in contravention of legal provisions or instructions issued by the Central Board of Direct Taxes. As a result, the writ petition was dismissed, with no order as to costs, and the stay order granted earlier was vacated.