2018 (10) TMI 1185 - HC - Income Tax

Appointment of special auditor - Denial of natural justice - no fair opportunity of hearing before passing of the order under Section 142 (2A) - Held that - Taking note of the reply filed by the petitioner, decision was taken by the Assistant Commissioner on 22.12.2017 appointing special auditor under Section 142 (2A). After having satisfied himself that considering the nature in complexity of accounts multiply all transactions in the accounts of the assessee and in the interest of revenue, special auditor was required to be appointed. Thus, the argument of the petitioner s counsel cannot be accepted that there was no opportunity given to the petitioner or that there was contravention of principle of natural justice while appointing the special auditor and on that count so far as the appointment of special auditor is concerned, is rejected. Reopening of assessment u/s 148 - validity of reason to believe - pakki rokad bahi foundin survey by the special auditor - Held that - Objections were submitted by the petitioner before the concerned Assessing Authority who has noted that said objections as have been argued before this Court and has reached to the conclusion that the reasons which have been assigned for reopening the assessment, are based on factual aspects which can be objected to or rebutted at the time of assessment. It has also been noted that as special auditor has already been appointed for the assessment year 2010-2011, the assessee would have a fair opportunity to rebut the reasons. Even otherwise prima facie there were sufficient reasons for reopening. - decided against assessee.

Summary

Issues:
1. Appointment of Special Auditor under Section 142 (2A) of the Income Tax Act, 1961.
2. Validity of the order issued under Section 148 of the Income Tax Act, 1961 for the assessment year 2010-2011.

Appointment of Special Auditor under Section 142 (2A) of the Income Tax Act, 1961:
The petitioner challenged the appointment of a Special Auditor for the assessment year 2010-2011 under Section 142 (2A) of the Income Tax Act, 1961, claiming a lack of fair opportunity of hearing. The Court observed that the petitioner did not object to the appointment of the Special Auditor, as evidenced by the petitioner's reply to the notice. The Assistant Commissioner appointed the Special Auditor considering the complexity of the accounts and transactions, in the interest of revenue. The Court rejected the petitioner's argument of a lack of opportunity or contravention of natural justice, upholding the appointment of the Special Auditor.

Validity of the order issued under Section 148 of the Income Tax Act, 1961 for the assessment year 2010-2011:
The petitioner contested the order issued under Section 148 for the assessment year 2010-2011, alleging that the reasons provided did not meet the standard of "reason to believe" but only amounted to a reason to suspect. The reasons for reopening the assessment were based on the findings of the Special Auditor appointed for the assessment year 2011-2012. The petitioner argued that the report of the Special Auditor for a different year should not be the sole basis for initiating proceedings under Section 148 for the year in question. The Assessing Authority, after considering the objections, concluded that the reasons for reopening were factual and could be challenged during assessment. The Authority also noted that since a Special Auditor had been appointed for the year in question, the assessee would have an opportunity to rebut the reasons. The Court upheld the order of reopening assessment and issuance of notice under Section 148 for the year 2010-2011, finding no grounds for interference with the decisions made by the Authorities concerned.

In conclusion, the Court dismissed the writ petition, affirming the appointment of the Special Auditor and the validity of the order issued under Section 148 for the assessment year 2010-2011. The reassessment was deemed necessary based on the findings and decisions made by the Authorities involved in the case.