2006 (12) TMI 137 - SCH - Income Tax

Special Audit - Assessee contends that before any direction can be issued under section 142(2A) of the Income-tax Act, 1961 (in short the Act ) for special audit of the accounts of the assessee, there has to be a pre-decisional hearing and an opportunity has to be granted to the assessee for the purpose - Held that - A close reading of the decision shows that the observations in this regard appear to have been made in the context of the assessments in terms of section 158BC (block assessment) of the Act. Such assessments are relatable to a case when raid has been conducted at the premises of an assessee. Had that been so, limited to the facts involved in that case, we would have negatived the contentions of learned counsel for the petitioner. But, certain observations of general nature have been made. The effect of these observations appear to be that in every case where the Assessing Officer issues a direction in terms of section 142(2A) of the Act, the assessee has to be heard before such order is passed. This does not appear to us to be the correct position of law - Matter referred to larger bench.

Summary

The Supreme Court referred a matter to a larger Bench regarding the necessity of a pre-decisional hearing before issuing a direction for special audit under section 142(2A) of the Income-tax Act, 1961. The order for special audit will remain in effect during this referral process.