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TMI Blog2010 (5) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner, as the case may be, to fix any fee which he may decide to fix irrespective of the quantum of the work and the scale on which the remuneration is to be determined taking the quantum of work into consideration. This, to our mind is not the scheme of Section 142(2D) of the Act. Under the Scheme of the Act, the assessee has no role to play in determination of the remuneration by the Commissioner of Income Tax and it has to pay, to the Special Auditor, whatever amount is determined by the Commissioner. Hence, the mutual agreement between the Auditor and the assessee in no case could have been the sole basis of the order passed by him. Of course, there could be no objection to the Commissioner accepting any amount agreed to by the Special Auditor, in case the amount otherwise determined by him was found to be higher than the amount agreed to by the Auditor. But, before doing that he must apply his mind to all the factors and determine the amount which in his opinion should be paid to the Auditor. CIT is directed to re-determine the remuneration of the petitioner on the basis of the scale approved by the Institute for the nature of the work carried out by the petitioner. If, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it had recovered from respondent No. 3 in respect of that bill. The petitioner was, thereafter, asked to give justification for the bill raised by it. The petitioner furnished justification stating therein that the fee was to be charged as per the scale approved by the Institute and that the Commissioner of Income-tax had also confirmed payment of fee at that scale. A meeting was then held in the office of respondent No. 1 on April 10, 2007, which was attended by Shri K.G. Somani, special auditor of Sahara India, and Mr. R. K. Nahata, special auditor of Sahara Airlines Limited, who had no concern with the audit of respondent No. 3 Sahara India Financial Corporation Limited. Respondent No. 1 left the meeting at about 1.00 p.m. saying that the meeting should continue in his presence. In the meeting Mr. Somani and Mr. Nahata, who were the special auditors for Sahara India and Sahara Airlines Limited respectively, agreed to accept fee of Rs. 20 lakhs each for each financial year that were assigned to them for special audit. The representative of the petitioner, however, did not agree to that figure. However, in the minutes drawn by the Additional Commissioner of Income-tax, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nominating it as the special auditor. It has also been claimed that the order was passed by respondent No. 1 having regard to the scale of fee prescribed by the Institute in this regard. 4. In their counter-affidavit filed through one Mr. J. B. Roy, respondent No. 3 has stated that the noting made by respondent No. 1 in the order-sheet cannot be construed as fixation of remuneration payable to the special auditor. As regards the meeting alleged to have taken place in the office of respondent No. 1 shortly after acceptance of assignment by the petitioner, it has been stated that in the meeting Mr. R. S. Dubey was only introduced to Mr. Dhanesh Chand, partner of the petitioner firm and the remuneration was not discussed. Respondent No. 3 has denied any kind of pressure on the petitioner in agreeing to the fee of Rs. 20 lakhs in the meeting held on April 12, 2007. Admitting payment of Rs. 48,80,995 to the petitioner, respondent No. 3 has claimed that it was entitled to refund of the excess payment made by it to the petitioner. 5. Section 142(2D) of the Act provides that the expenses of, and incidental to, any audit under sub-section (2A) including the remuneration of the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1 and 2 that the petitioner had conveyed formal acceptance to its appointment as special auditor for the financial year 2002-03, vide letter dated March 20, 2006, which was duly received in the office of the Assistant Commissioner of Income-tax, (Central)-I on March 21, 2006. Similarly, formal acceptance for the appointment as special auditor for the financial year 2003-04 was conveyed to the Commissioner, vide letter dated December 29, 2006, which was received in the office of the Deputy Commissioner of Income-tax, Central Circle-6 on January 3, 2007. Admittedly, the petitioner submitted its bill amounting to Rs. 49,44,419 in respect of the special audit for the financial year 2002-03. Admittedly, on being asked to justify the amount claimed in the bill, the petitioner wrote a letter dated April 3, 2007 to the Deputy Commissioner of Income-tax, Central Circle-6, stating therein that the scale of fee for the audit work was discussed with him, the Commissioner of Income-tax (Central)-I, Additional Commissioner of Income-tax and Mr. R. S. Dubey where it was confirmed by the Commissioner of Income-tax that the fee would be in accordance with the scale prescribed by the Institute an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the writ petition. As noted earlier in its letter dated April 3, 2007, the petitioner specifically averred that in the meeting held in the office of respondent No. 1, Mr. R. S. Dubey was informed that the fee would be paid to it in accordance with the scale prescribed by the Institute. No other officer of respondent No. 3 can be in a position to deny this factual averment made by the petitioner. Respondents Nos. 1 and 2 have also not filed an affidavit of any officer present in that meeting to controvert this averment. In its counter-affidavit, respondent No. 3 has not disputed the meeting, claimed by the petitioner. The plea taken by respondent No. 3 in this regard is that in the meeting, Mr. R. S. Dubey was only introduced to Mr. Dinesh Chander Gupta, partner of the petitioner and that the issue of remuneration was not discussed in that meeting. Considering that the factum of such a meeting having taken place has been admitted by respondent No. 3, no affidavit of Mr. R. S. Dubey has been filed in reply to the averments made by the petitioner and this averment also finds mention in the letter written by the petitioner to the Department on April 3, 2007, we are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e minutes imply is that the amount of Rs. 20 lakhs for each year was mutually agreed between the petitioner and the assessee. The case of the petitioner is that no such consent was actually given by its representative Mr. Dinesh Chand Gupta who attended the meeting on its behalf and that Mr. Gupta, who is a chartered accountant, had to sign the minutes at the request of those who attended the meeting. As noted earlier, the petitioner wrote a letter dated April 11, 2007 to respondent No. 1, informing him that the fee, based on minimum scale approved by the Institute, would be around Rs. 35 lakhs and there was no question of accepting the fee below Rs. 30 lakhs. It was further stated in the letter that the average of audit fee paid by the asses-see-company to its statutory auditors during the financial years 2002-03 and 2003-04 was Rs. 30,59,125 and they were agreeable that for the special audit done by them, the fee should not be less than Rs. 30 lakhs for each of the two years. Respondents Nos. 1 and 2 have not filed affidavits of any of the officers, who were present in the meeting held on April 10, 2007. Respondent No. 3 has also not filed the affidavit of Mr. R. S. Dubey, who a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at best, have fixed the charges at Rs. 30 lakhs per year in case the charges, if calculated on the basis of the scale approved by the Institute, came to more than Rs. 30 lakhs per year. 13. A perusal of the impugned orders dated July 26, 2007, and September 18, 2007, would show that it does not disclose any basis for fixing the remuneration of the petitioner at Rs. 20 lakhs per year, except noting that in the meeting held on April 10, 2007, the fee was mutually agreed at Rs.20 lakhs per year. Strangely, there is no reference to the letter of the petitioner dated April 11, 2007, in these orders. We fail to appreciate how respondent No. 1 could have relied upon the minutes of the meeting dated April 10, 2007, without even adverting to the averment made in that letter. Since the impugned orders July 26, 2007 and September 18, 2007 do not give any indication of the norm or scale, adopted by respondent No. 1 in deter-mining the remuneration payable to the petitioner, there is no escape from the conclusion that neither did he apply his mind at all to the scale approved by the Institute for such audit nor did he adopt any other formula or criteria for fixing the remuneration. The Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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