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TMI Blog2005 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting special audit under section 142(2A) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for the block period April 1, 1996 to December 18, 2002. The petitioners are challenging the validity of this direction on the ground that the same has been issued without application of mind and recording any reason whatsoever in the assessment proceedings or otherwise. It is also the contention of the petitioners that the provisions of section 142(2A) of the Act cannot relate to any other record except books of account of the assessee. Thus, the order being beyond the scope of the relevant provision is even without jurisdiction. In order to examine the merits of these contentions, reference to basic facts giving rise to the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act. The audit may be completed within 60 days of issue of this letter without fail. In this respect you are required to co-operate with the auditor to facilitate the timely completion of the audit as required under law. The expenses of and incidental to the aforesaid audit including the remuneration of the auditors shall be determined by the Commissioner of Income-tax, Central-III, New Delhi, and will be paid by you to the aforesaid auditor. Necessary approval has already been taken from the Commissioner of Income-tax, Central-III, New Delhi, in the matter." It is this direction of the respondent-Department, which is impugned in the present writ petition on the grounds above noted and also on the fact that the petitioners had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings, the Assessing Officer having regard to the nature and complexity of accounts of the assessee and the interests of the Revenue, is of the opinion that it is necessary to do so, he may with the previous approval of the specified authority direct the assessee to get the accounts audited by an accountant defined in the Explanation below section 288(2) of the Act. The discretion vested in the Assessing Officer thus is of wider magnitude and of course has to be exercised in consonance with the provisions of the section, keeping in view the facts and circumstances of the case. In the case of Gurunanak Enterprises v. CIT [2003] 259 ITR 637, the Division Bench of this court held as under: "A bare perusal of the provision would show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration and not on the basis of subjective satisfaction." Still in another case of Ramesh Chand Industries Ltd. v. Union of India [1998] 100 Taxman 570 (Delhi), the Division Bench of this court held as under: "A bare reading of the provision shows that all that is required for initiation of special audit is formation of the opinion that it is necessary so to do depending on the availability of the above said two facts. The provision does not use the words 'reason to believe.' Recording of reasons is not an essential requirement of the provision. The Assessing Officer must obtain previous approval of the Chief Commissioner or the Commissioner. The intervention of such a high ranking authority is an in-built protection to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacting sub-section (2A) into section 142 is to assist the Assessing Officer in framing an assessment when he finds the accounts of the assessee to be complex, by having the services of a special auditor at hand. Special audit can also be ordered so as to protect the interests of the Revenue. Such objects may or may not be achieved by the audit contemplated by section 44AB." The above enunciated principles clearly show that there has to be objective consideration and application of mind by the Assessing Officer, based upon the material and proper examination of the books of account produced by the assessee, before a direction, as contemplated under section 142(2A), can be issued to the assessee. In the present case, there was search and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called upon to explain the same in relation to the books of account for the financial year 2002-2003. A sum of Rs. 10,81,000 was stated to be seized from the assessee by the Director of Investigation under section 132 of the Act on October 31, 2002, which was not shown in the books of account and the assessee was required to show why the same be not treated as unexplained income for the financial year 2001-2002. A large number of amounts were referred to, in the same manner in this questionnaire. Thereafter the answer to the questionnaire was not found to be satisfactory by the Assessing Officer and thereupon he issued the impugned direction for special audit. In these circumstances, we cannot hold that there was no application of mind by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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