2018 (8) TMI 1727 - HC - Income Tax

Direction for special audit u/s 142(2A) - Request for amendment in the terms of reference 2018 (3) TMI 1629 - DELHI HIGH COURT - simultaneous special audit for all years - Held that - Terms and Reference modified

Summary

Issues:
Validity of special audit and terms of reference

Analysis:
The High Court considered multiple writ petitions addressing the issue of the validity of special audit and its terms of reference. The court directed that modified terms of reference for special audit are acceptable for the assessment years 2008-2009 to 2013-2014. The special audit under Section 142(2A) of the Income Tax Act, 1961 was scheduled to begin on 1.4.2018 for the AY 2008-2009, followed by subsequent years. The court ensured that interim orders staying special audit and assessment proceedings for specific years would continue until the audit for the immediate preceding year is completed. This approach aimed to avoid disputes and streamline the audit process. The court emphasized the need to prevent simultaneous audits for all years to avoid complications, inconvenience, and manpower issues. The parties were allowed to approach the assessing officer and special auditor based on audit or assessment orders from earlier years. Any unresolved issues could be brought to the court through an application in the ongoing writ petitions. The consent order did not impact pending advance pricing agreement proceedings, and the writ petitions were disposed of without costs.

Regarding the modified terms of reference for AY 2014-15, the court directed the examination of the assessee-company's accounts to identify and apportion expenses between exempted and non-exempted undertakings. The terms included scrutinizing expenses under different heads for compliance with TDS provisions, reviewing receivables and payables with the parent company, and allowing the special auditor to report any other relevant issues to the Assessing Officer. The court reiterated the importance of avoiding simultaneous audits for all years to prevent overlapping and unnecessary investigations. The parties were permitted to engage with the assessing officer and special auditor based on previous audit and assessment outcomes. In case of unresolved incidental issues, the parties could seek resolution through court intervention. The writ petition and application were disposed of based on the modified terms of reference and the principles outlined in the earlier order of 13.03.2018.