2023 (10) TMI 565 - HC - Income Tax

Special audit u/s. 142 (2A) - objection of petitioner that there is no material to show that interest of Revenue was adversely affected hence the special audit was not helpful - Challenge on the ground that order is subjective satisfaction, is non-speaking and has been mechanically passed - HELD THAT - The power vested in the Assessing Officer and the approving authority are wide enough to include within its ambit all such matters where complexity of accounts, volume of accounts, doubts about correctness of accounts, multiplicity of transactions and specialized nature of business are involved, besides the pre-dominant element of interest of the Revenue. From the very language of sub-section (2A) of Section 142, it is obvious that the same is worded in language which is very wide and inclusive. The paramount interest seems to be to avoid evasion of tax and to prevent the defaulter from slipping out of income tax nets. Thus, the provision u/s. 142(2A) is to be read liberally in favour of the Revenue with the only safeguard of prior opportunity of being heard to the assessee which in the present case has been complied with. The objection of petitioner that there is no material to show that interest of Revenue was adversely affected hence the special audit was not helpful, has no legs to stand in view of element of public interest being pre-dominant in the object behind special audit. Petition dismissed.

Summary

Issues:
The petition challenges orders granting approval for special audit under section 142(2A) of the Income Tax Act, 1961 to audit the petitioner's account.

Challenge to Impugned Order:
The petitioner argues that the impugned order lacks objective satisfaction, is non-speaking, and was mechanically passed. It is contended that as a government-owned body, the petitioner is not a private assessee and thus manipulation of accounts is unlikely. The petitioner relies on various court decisions to support their challenge.

Revenue's Response:
The Revenue contends that the petitioner was given due and sufficient opportunity as required by law before the approval for special audit was granted. Show cause notices were issued, and the petitioner's representative appeared for a personal hearing. The Revenue also cites a decision of the Gujarat High Court to support their position.

Competent Authority's Findings:
After considering submissions from both parties, the competent authority tentatively concluded that a special audit was warranted in the interest of revenue. The approval for special audit was granted based on these findings, and a CA firm was nominated to conduct the audit.

Court's Analysis:
The court finds that the competent authority applied its mind and considered both the petitioner's response and the Revenue's comments before granting approval for special audit. The court emphasizes the public interest aspect of special audits and notes that the provision under section 142(2A) is to be interpreted liberally in favor of revenue. The court dismisses the petitioner's objection regarding the lack of adverse impact on revenue.

Case Law Analysis:
The court distinguishes the case law cited by the petitioner, noting that the judgments do not directly apply to the present case where due opportunity was provided to the petitioner. The court finds that the books of accounts were perused to some extent by the Revenue, justifying the need for a special audit.

Conclusion:
After considering all arguments and evidence, the court concludes that there is no illegality or impropriety in the impugned order. The court declines to interfere with the order and dismisses the petition.