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2018 (9) TMI 1179 - HC - Income TaxValidity of special audit of the accounts u/s 142(2A) - whether there has to be a pre-decisional hearing and an opportunity has to be granted to the assessee for the purpose? - Held that - The requirement of pre-decisional heairng was met as Principle Commissioner of Income-tax (Central), Bhopal, before deciding the issue of approval for Special Audit gave the opportunity to the petitioner. The petitioner has not made any objection regarding procedure followed by the Assessing Officer or by the Principal Commissioner of Income Tax (Central), Bhopal, in the entire process of Special Audit till the completion of Special Audit and only after the fact that the accounts have been verified by the Special Auditor, the present writ petitions have been filed on 04.04.2018. On 13.08.2018, it was pointed out that no assessment order was passed and the period for assessment is going to expire today, ie., 13.08.2018, we issued notice to the Revenue and directed that the assessment proceedings may go on, but no final order shall be passed without the leave of this Court. On the next date of hearing, learned counsel for the Revenue has submitted that the assessment order has been passed on 13.08.2018 and the petitioner is having statutory remedy of appeal before the Commissioner of Income-tax and submitted that the writ petitions are rendered infructuous. Considering the law laid down in the case of Sahara India (Firm) V/s. Commissioner of Income-tax, Central I (2008 (4) TMI 4 - SUPREME COURT), so also the fact that Principal Commissioner of Income-tax granted two opportunities to the petitioner vide show cause notice dated 30.11.2017 and letter dated 11.12.2017, we are of the view that sufficient compliance of the proviso to Section 142(2A) has been made. We are also unable to persuade ourselves to agree with the proposition canvassed by the learned Senior counsel for the assessee.
Issues Involved:
1. Quashment of various orders and notices related to special audit under Section 142(2A) of the Income Tax Act, 1961. 2. Compliance with the principles of natural justice and the requirement of pre-decisional hearing under Section 142(2A). 3. Validity of the approval process for special audit by the Principal Commissioner of Income Tax. Detailed Analysis: 1. Quashment of Various Orders and Notices: The petitioners sought the quashment of the order dated 22.12.2017, referral letters dated 17.11.2017, show cause notice dated 30.11.2017, and the approval dated 22.12.2017 for special audit under Section 142(2A) of the Income Tax Act, 1961, for Assessment Years 2010-11 to 2016-17. The court examined the procedural history, including the search and seizure operation conducted on 07.01.2016, subsequent scrutiny assessment proceedings, and the issuance of multiple notices to the petitioner. 2. Compliance with Principles of Natural Justice and Pre-Decisional Hearing: The petitioners argued that the Assessing Officer failed to provide a reasonable opportunity of hearing before directing a special audit, contrary to the law laid down by the Supreme Court in Rajesh Kumar V/s. Deputy Commissioner of Income-tax and Sahara India (Firm) V/s. Commissioner of Income-tax, Central-I. They contended that the principle of 'Audi alteram partem' was not observed at the pre-decisional stage. The court noted that the Principal Commissioner of Income Tax granted reasonable opportunities to the petitioner twice before making the reference to the special auditor. 3. Validity of the Approval Process for Special Audit: The court analyzed Section 142(2A) of the Income Tax Act, which mandates that the Assessing Officer must form an opinion regarding the necessity of a special audit based on the nature and complexity of accounts, and the interests of the revenue. This opinion must be approved by the Principal Commissioner of Income Tax. The court emphasized that the Principal Commissioner is the authority taking the substantive decision for special audit and must provide an opportunity to the assessee. The court found that the Principal Commissioner had complied with this requirement by granting two opportunities to the petitioner. Conclusion: The court concluded that sufficient compliance with the proviso to Section 142(2A) was made, as the Principal Commissioner of Income Tax provided the petitioner with reasonable opportunities to be heard. The petitioner's objections regarding the procedure followed were not raised until after the completion of the special audit. Consequently, the writ petitions were dismissed due to lack of merit, and the court noted that the petitioner had the statutory remedy of appeal before the Commissioner of Income Tax. The assessment order was passed on 13.08.2018, rendering the writ petitions infructuous. Final Judgment: The writ petitions were dismissed, and a copy of the order was directed to be kept in related writ petitions. No costs were awarded.
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