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TMI Blog2023 (7) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and would be purely governed by the said statute. Payment of remuneration is also based on the factors prescribed in the Rules as discussed above. The nature of the assessment is not commercial but is a statutory nomination for the assistance of the AO and in effect the IT Department. IT Department cannot be termed as a buyer when it is nominating the accountant for conducting a Special Audit and neither can the CA Firm be termed as a supplier . The remuneration payable to the accountant cannot also be termed as consideration as the Special Audit is a statutory duty being performed by the accountant for and on behalf of the AO. The invocation of the provisions of the MSMED Act under such circumstances, in respect of Special Audit remuneration u/s 142(2D) would, therefore, not be tenable and is completely misplaced. MSMED Act has no applicability to the nature of the assignment which has been given to the Respondent/CA Firm. CA Firm may be registered as a Micro or Small enterprise and may be entitled to invocation of the jurisdiction of the MSMED Act for other purposes. Insofar as the assignment is one which is emanating from a statute i.e., u/s 142(2A) of the IT Act, the determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the submission of the final audit reports, the CA Firm raised four invoices in respect of the said audits. The grievance of the Special Auditor- CA Firm is that qua the invoices raised, the full payment has not been made. Further, in respect of one of the assignments the payment has not been received at all. 5. Under such circumstances, the CA Firm invoked the provisions of the MSMED Act and approached the MSEFC by way of references under Section 18 of the Act. 6. Pursuant to the said references, the matter was thereafter referred to the Delhi International Arbitration Centre (hereinafter 'DIAC') by the MSEFC vide the impugned reference orders and a retired judge of the Supreme Court was appointed as the Arbitrator in W.P.(C) No. 16294/2022. However, in W.P.(C) No. 13754/2019, the ld. Arbitrator was yet to be appointed. 7. The IT Department has preferred the present two writ petitions, challenging the impugned reference orders passed by the MSEFC on the ground that the MSEFC under the MSMED Act lacks jurisdiction to deal with claims raised by Special Auditors under Section 142(2A) in respect of the fee payable in terms of Section 142(2D) of the IT Act. Brief Facts 8. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia (Firm), Lucknow v. Commissioner of Income Tax, Delhi (Central)-1, New Delhi & Others' was disposed of. 17. In 2018, having not received the payment of its fee bill, the CA Firm filed a writ petition being W.P.(C) No. 1773/2018 titled 'M/s SBG & Co. vs. The Union of India & Ors.' before this Court, regarding the payment of its fees. 18. W.P.(C) No. 1773/2018, was disposed of vide order dated 26th February 2018, with a direction that the writ petition would be treated as a representation to the Competent Authority i.e., the IT Department in this case, which would inform the CA Firm about their decision on the fee within a period of eight weeks. 19. However, no such decision was made by the Competent Authority within the said period. Consequently, the CA Firm filed a contempt petition being CONT. CAS(C) 456/2018 titled 'SBG & Company v. B K S Pandya' before this Court. Further, an application was moved seeking extension of time to comply with the said order. 20. Finally, after various communications and submissions between the IT Department and the CA Firm, on 10th /11th July 2018, the IT Department passed the order under Section 142(2D) of the IT Act, determining the fee of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the details regarding the arbitration proceedings, such as filing of statement of claims as also other formalities pertaining to the arbitration proceedings. 28. In response to the same, while the CA Firm filed its statement of claim with DIAC, the IT Department vide letter dated 19th November 2019, challenged the jurisdiction of DIAC in terms of Section 293 of the IT Act. Further, it sought minimum 7 days' time to file the statement of claims and to suggest the names of Arbitrators. The IT Department, vide letter dated 12th December 2019, also informed the DIAC that it was in the process of filing a writ petition and requested that the proceedings be kept in abeyance till the outcome of the writ petition. 29. Thereafter, the IT Department filed the present writ petition. 30. Vide order dated 23rd December 2019, this Court stayed the impugned order dated 19th September 2019 along with the proceedings emanating therefrom. W.P. (C) 16294/2022 31. This petition deals with the Special Audit of three entities, in respect of which the CA Firm was nominated as a Special Auditor by the IT Department under Section 142(2A) of the IT Act. The three entities are: - (i) M/s Sahara Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the CA Firm with respect to the Special Audits of Oracle and Reverse, respectively. The amounts determined under Section 142(2D) of the IT Act by the IT Department are set out below. (i) Oracle at Rs. 67,50,000/- (exclusive of GST) i.e., Rs. 79,65,000/- (inclusive of GST (ii) Reverse at Rs. 60,90,000/- (exclusive of GST) i.e., Rs. 71,86,200/- (inclusive of GST) 38. However, at this stage, no remuneration was determined by the IT Department with respect to the Special Audit of SIFCL. 39. The IT Department, thereafter, released the following payments: - (i) Reverse- Rs. 64,55,400/- (Rs. 60,90,000/- plus GST @ 18% i.e., Rs. 10,96,200/- less IT TDS of Rs. 6,09,000/- less GST TDS of Rs. 1,21,800/-) (ii) Oracle-Rs. 71,55,000/-(Rs. 67,50,000/- plus GST @ 18% i.e., 12,15,000/- less ITTDS of Rs. 6,75,000/- less GST TDS of Rs. 1,35,000/-). 40. The said payments were treated a part-payment of the total fee amount. The CA Firm sought the payment of the balance amounts along with interest in terms of the provisions of the MSMED Act. Thus, the CA Firm was aggrieved by the amount of fee as determined and paid by the IT Department in terms of Section 142(2D) of the IT Act. 41. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the proceedings emanating therefrom, the IT Department filed the present petition. 49. Vide order dated 25th November 2022, this Court stayed the impugned reference orders dated 10th December 2021 along with the proceedings emanating therefrom. 50. It is of import to note that during the course of the proceedings in the present petitions, the IT Department passed an order dated 8th May 2023 under Section 142(2D) of the IT Act with respect to the Special Audit of SIFCL determining the remuneration at Rs. 15,25,000/- which it submitted before the Court. Submissions Submissions by the Petitioner 51. On behalf of the Petitioner, Mr. Ruchir Bhatia, ld. Counsel has made the following submissions: A. That the role of the Special Auditor under Section 142(2A) of the IT Act is determined by the Principal Chief Commissioner or the Chief Commissioner or other similarly placed senior officials of the Income Tax Department. The remuneration is also to be fixed by the senior officials of the IT Department after taking into consideration the nature of the assignment, the kind of work done and the total time that is reasonably to be spent. B. That the Special Auditor appointed under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be applicable and would not be attracted in this case inasmuch as the Act itself would apply only if the conditions under Section 15 and the definition of 'buyer' under Section 2(d) of the MSMED Act are satisfied. The Petitioner/IT Department cannot be termed as a 'buyer' within the meaning of the MSMED Act as there is no 'consideration' which has been paid. There is also no agreement but a 'nomination' which has been made by the IT Department. Since the MSMED Act itself is not attracted in the present case, Section 24 of the said Act would have no application. H. That there is no conflict between Section 18 and Section 24 of the MSMED Act and the provisions of the IT Act. I. That insofar as Section 24 of the MSMED Act is concerned, reliance is placed on Section 293 of the IT Act to argue that none of the orders made under the IT Act can be agitated by way of a civil suit in a civil court. Since arbitral proceedings are in the nature of civil proceedings, Section 293 of the IT Act would be a complete bar for the MSEFC to exercise jurisdiction in the present case. Reliance was placed on 'Commissioner of Income Tax v. Parmeshwari Devi Sultania (1998) 97 Taxmann 269 (SC)' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents have not challenged the same by way of a writ petition. P. That there has been no delay by the IT Department in approaching this Hon'ble court by way of the present writ petitions. Further, it is submitted that the proceedings before an authority lacking inherent jurisdiction are nullity and thus, void ab initio. 52. On 17th March 2023, the Court directed both the parties to bring their respective computations of the amounts paid/payable for their perusal. On the next date i.e., 16th March 2023, Respondent No. 2/CA Firm handed over the computation of the amounts paid and payable as directed by the Court. 53. Mr. Bhatia, then handed over the tabulated details of the amounts determined and paid to the CA Firm under Section 142(2D) of the IT Act regarding the four Special Audit assignments. 54. Order dated 8th May 2023 passed by the IT Department, was also placed before this Court, in respect of the final assignment in respect of which the fee was yet to be determined, determining the remuneration under Section 142(2D) of the IT Act at Rs. 15,25,000/-. Submissions by Respondent No. 2 55. On the other hand, on behalf of the Respondent No. 2- CA Firm, Mr. S.B. Gupta, appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the proviso, it would be unconstitutional and violative of Article 14. Reliance is also placed on the salutary principle of natural justice that no man can be a judge in his own cause to argue that the IT Department cannot be judging its own case as to whether the determination is final. Reliance is placed upon two decisions of the ld. Supreme Court in 'J. Mohapatra & Co and Anr. v. State of Orissa & Anr. [Civil Appeal No. 6814/1981]' as also 'Union of India & Anr v. Tulsiram Patel & Ors. [Civil Appeal No. 6814/1981]'. F. That in terms of Section 293 of the IT Act, it is only the availment of a remedy before the Civil Court which is barred. Reliance is placed upon the Gujarat High Court Judgment which has also been upheld by the Supreme Court in 'Principal Chief Engineer v. Manibhai and Brothers (Sleeper)[FA No. 637 of 2016]' to argue that the MSEFC is not a judicial authority let alone a civil court. G. That the appointment under Section 142(2A) of the IT Act is not a statutory appointment since it fastens the duty upon the Assessee to get its accounts audited from the nominated CA concern. It does not cast any obligation on the CA firm to compulsorily carry out the audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted that there lies no remedy in the IT Act against the order under Section 142(2D) of the same, and thus the Respondent cannot be left remediless and would be entitled to explore alternate remedies that it may be eligible for. P. That the present petitions are not maintainable on account of non-maintainability of writ jurisdiction during arbitral proceedings. Further as the jurisdiction of the MSEFC over the dispute was not challenged before the MSEFC the writ jurisdiction is not maintainable. He relies upon the decision in 'BHEL v. MSEFC [W.P.(C) 10886/2016]', wherein the ld. Single Judge of this Court has held that if the jurisdiction is not challenged before the MSEFC, the same cannot be raised in a writ petition. Analysis & Findings Maintainability 56. Insofar as the maintainability of the present writ petitions is concerned, though, this Court is exercising jurisdiction under Article 227 of the Constitution of India, in view of the decision in Surender Kumar Singhal & Ors. v. Arun Kumar Bhalotia & Ors', [2021 SCC OnLine Del 3708: (2021) 279 DLT 636] the position that emerges is that if there is complete lack of jurisdiction in the arbitral tribunal, a writ petition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into existence by or under statute to decide dispute arising with reference to that particular statute or to determine controversy referred to it. The tribunal may be a statutory tribunal or tribunal constituted under the provisions of the Constitution of India. Section 9 of the Civil Procedure Code vests into the Civil Court jurisdiction to entertain and determine any civil dispute. The constitution of tribunals has been with intent and purpose to take out different categories of litigation into the special tribunal for speedy and effective determination of disputes in the interest of the society. Whenever, by a legislative enactment jurisdiction exercised by ordinary civil court is transferred or entrusted to tribunals such tribunals are entrusted with statutory power. The arbitral tribunals in the statute of 1996 are no different, they decide the lis between the parties, follows Rules and procedure conforming to the principle of natural justice, the adjudication has finality subject to remedy provided under the 1996 Act. Section 8 of the 1996 Act obliges a judicial authority in a matter which is a subject of an agreement to refer the parties to arbitration. The reference to arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf not be applicable, would constitute an exceptional circumstance. Thus, the issue as to whether the MSEFC had jurisdiction ought to be considered at the threshold itself inasmuch as, if the provisions of the MSMED Act, 2006 have no application, the Petitioner cannot be subjected to the lengthy arbitral proceedings under the said Act which also entails various other consequences including extremely high rates of interest under Section 16 of the Act. In order to avoid further complications and delay in adjudication by the competent forum, the question as to jurisdiction thus deserves to be considered at this stage itself. 58. The genesis of these two writ petitions are four nominations by the Income Tax Department of the Respondent No. 2 - SBG & Co., a CA firm, for conducting the Special Audit of four entities under Section 142(2A) of the IT Act. 59. In terms of the nomination letters issued to the CA Firm, Special Audit was to be conducted by the CA Firm and a report was to be submitted within the period prescribed by the IT Department. The nomination letters do not give any details as to the monetary payments to be made to the CA Firm. Clearly, the same were to be governed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as a special auditor for the Income Tax Department for carrying out special audit of Sahara India (Firm). The Respondent no. 2 carried out the audit and since its statutory fee under Section 142(2D) was not paid, it was constrained to file a WP (C)1773/2018 titled M/s S.B.G. & Co. vs. The Union of India & Ors. before this Court for seeking directions to the Petitioner for the payment of its dues. The said petition was disposed of with directions that the writ petition be treated as a representation to the Competent Authority who would examine and inform the petitioner about their decision on the fee within a period of eight weeks of receipt of the order. In compliance of directions issued by this Court, the Respondent No. 2 has been paid fees of Rs. 33,84,000/- on 01.09.2018. Subsequently, Respondent no. 2 has filed a claim before the MSME Council for recovery of the amount of Rs. 1,11,37,500/- along with interest at the rate and in the manner as per the provisions of sections 15 and 16 of the Micro, Small & Medium Enterprises Development Act, 2006. In the said proceedings, an attempt was made by the Council to conciliate between the parties under Section 18 of the Act. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Allowed, subject to all just exceptions. The application shall stand disposed of W.P.(C)16294/2022 & CM APPL. 50997/2022 (Interim Stay) 1. Notice. Although the second respondent is stated to have been placed on advance notice, none has appeared on its behalf when the matter was called. Consequently, let learned counsel for the petitioner take steps for service upon the said respondent through all permissible modes including via approved courier service. The said respondent may also file its reply within a period of six weeks from today. The petitioner shall have four weeks thereafter to file a rejoinder. 2. Prima facie, and for the reasons which stand recorded in the order of the Court passed in W.P.(C) 13754/2019, the Court finds itself unable to sustain the impugned order passed by the Micro Small & Medium Enterprises Facilitation Council ["MSME Council"]. Matter requires consideration. 3. Till the next date of listing, there shall be stay of all further proceedings initiated pursuant to the impugned order dated 10 December 2021 passed by the Micro & Small Enterprises Facilitation Council. 4. Let the matter be called again on 03.05.2023." 64. In effect, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is provided with a single legal framework. As of now, the medium industry or enterprise is not even defined in any law. 2. In view of the above-mentioned circumstances, the Bill aims at facilitating the promotion and development and enhancing the competitiveness of small and medium enterprises and seeks to-- (a) provide for statutory definitions of "small enterprise" and "medium enterprise". (b) provide for the establishment of a National Small and Medium Enterprises Board, a high-level forum consisting of stakeholders for participative review of and making recommendations on the policies and programmes for the development of small and medium enterprises. (c) provide for classification of small and medium enterprises on the basis of investment in plant and machinery, or equipment and establishment of an Advisory Committee to recommend on the related matter. (d) empower the Central Government to notify programmes, guidelines or instructions for facilitating the promotion and development and enhancing the competitiveness of small and medium enterprises. (e) empower the State Governments to specify, by notification, that provisions of the labour laws specified in clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctors Pvt. Ltd. & Anr. etc. v. Assam State Electricity Board & Ors. etc. (2019) 19 SCC 529. The said judgment deals with the incidence of payments, however, in the process it discusses the provisions of Delayed Payments Act, 1993. The relevant portion of the judgment is set out below: "28. Before we consider the issues which have arisen in these appeals it is necessary to notice the provisions of the Act, 1993. In the Parliament, the Government of India made a policy statement on small scale industries. It was also announced that suitable legislation would be brought to ensure prompt payment of money by buyers to the small industrial units. An Ordinance, namely, the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Ordinance, 1992 was promulgated by the President on 23.09.1993. To replace the Ordinance, The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 was introduced in the Parliament. The Statement of Objects and Reasons of the Act throws considerable light on the prevalent situation and the remedially measures which was sought in the legislation. In the Statement of Objects and reasons following was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyer shall be liable to pay compound interest (with monthly interests) at the rate mentioned in section 4 on the amount due to the supplier. Section 6. Recovery of amount due.- (1) The amount due from a buyer, together with the amount of interest calculated in accordance with the provisions of sections 4 and 5, shall be recoverable by the supplier from the buyer by way of a suit or other proceeding under any law for the time being in force. (2) Notwithstanding anything contained in sub- section (1), any party to a dispute may make a reference to the Industry Faciliation Council for acting as an arbitrator or conciliator in respect of the matters referred to in that sub- section and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996 ) shall apply to such dispute as if the arbitration or conciliation were pursuant to an arbitration agreement referred to in sub- section (1) of section 7 of that Act. 31. Section 3 creates a statutory liability of buyer to make payment. The statutory liability is to the effect that where any supplier supplies any goods to any buyer, the buyer shall make payment, therefor on or before the date agreed upon between him and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere for the benefit of Suppliers and Buyers were expected to make prompt payments, failing which, notwithstanding any agreement, buyers were saddled with the liability of higher rates of interest. 70. Coming to the MSMED Act, Chapter V of the Act specifically deals with delayed payments to 'suppliers' who are Micro and Small Enterprises. Chapter V comprising of Section 15 to Section 25 is clear in its title which reads as under: 'CHAPTER V: DELAYED PAYMENTS TO MICRO AND SMALL ENTERPRISES' 71. Chapter V of the MSMED Act specifically deals with delayed payments to Suppliers who are Micro and Small Enterprises. Sections 15 to 18 deal with payments including the liability to pay higher interest as discussed below. 72. In order to facilitate and ensure that the Micro and Small enterprises do not unnecessarily struggle to recover payments which are due to them, special provisions have been made in Sections 15 to 18 of the MSMED Act. For the said provisions to be applicable, the amount ought to be due and payable by a Buyer to a Supplier. 73. The definition of buyer under Section 2(d) of the MSMED Act reads as under: - "Section 2(d)- "buyer" means whoever buys any goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank. Section 17: Recovery of amount due. For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16." 76. A perusal of Section 16 of the MSMED Act makes it clear that the provision contemplates the following: (i) payment of compound interest; (ii) with monthly rests; (iii) at three times the bank rate. 77. In case of disputes regarding the payments arising out of an agreement between the parties, the MSMED Act also provides for reference to the MSEFC under Section 18. The same reads as under: "Section 18: Reference to Micro and Small Enterprises Facilitation Council. (1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council. (2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial Audit under Section 142(2A) of the IT Act 80. Under the IT Act, an Assessee has to file returns as specified in the Act and the Rules. The said returns ought to be verified as provided for in Section 140 of the IT Act. The Assessee may also make self -assessment under the provisions of Section 140A of the IT Act. Thereafter, the IT Department is to undertake assessment of the tax payable. 81. Under Section 142 of the IT Act, the IT Department may, undertake an enquiry for the purpose of making the assessment. For the said purpose, the IT Department may call for the return of income in respect of which the Assessee is assessable, the production of any documents, accounts or information and a statement in respect of the assets and liabilities of the Assessee. For the purpose of obtaining full information with respect to the income or loss of any person, the Assessing Officer ('AO') can, under Section 142(2), make such enquiry as considered necessary. 82. In the process of making such enquiry in order to carry out the assessment proceedings, Section 142(2A) of the IT Act, contemplates the nomination of an accountant by the Commissioner or by other high-ranking officials of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s may be specified by the Assessing Officer: Provided that the Assessing Officer may, suo motu, or on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under sub-section (2A) is received by the assessee. (2D) The expenses of, and incidental to, any audit or inventory valuation under sub-section (2A) (including the remuneration of the accountant or the cost accountant, as the case may be) shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner (which determination shall be final) and paid by the assessee and in default of such payment, shall be recoverable from the assessee in the manner provided in Chapter XVII-D for the recovery of arrears of tax : Provided that where any direction for audit or inventory valuation under sub-section (2A) is issued by the Assessing Officer on or after the 1st day of June, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in sub-rule (2) shall be specified in terms of the number of hours required for completing the report. (4) The Accountant referred to in sub-section (2A) of section 142 shall maintain a time-sheet and shall submit it to the Chief Commissioner or Commissioner, along with the bill. (5) The Chief Commissioner or the Commissioner shall ensure that the number of hours claimed for billing purposes is commensurate with the size and quality of the report submitted by the Accountant." 87. A combined reading of Section 142(2A) to 142(2D) of the IT Act as also Rule 14B of the IT Rules would show that a panel of accountants is maintained by the IT Department. The empaneled accountants are fully aware of the nature of the assignment when the nomination is made. Such accountants are also aware of the finality which is attached to the determination of the remuneration under Section 142(2D) of the IT Act. 88. The IT Department usually calls for Expressions of Interest ('EOIs') from the accountants. Upon the submission of the EOI, the nomination is effected. The accountant is under no obligation to accept the nomination as held in 'Dhanesh Gupta and Co v. Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 390 (Del)'. The relevant portion of Pratius Merchants Pvt. Ltd. (supra) reads: "6.1 At this stage, it is required to be noted that section 142(2A) of the Income-tax Act has been amended with effect from June 1, 2013 and it provides that if at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialised business activity of the assessee, and the interests of the Revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner...., direct the assessee to get the accounts audited by an accountant, nominated by the Principal Chief Commissioner or Chief Commissioner in this behalf. It also further provides that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard. As per section 142(2A) of the Income-tax Act, the provisions of sub-section (2A) shall have effect notwithstanding that the accounts of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat while examining the question of complexity in accounts, we have to apply the test of 'reasonable man' by replacing the word and qualities of a reasonable man, with the word and qualities of a reasonably competent Assessing Officer. The question of complexity of accounts has to be judged applying the yardstick or test; whether the accounts would be complex and difficult to understand to a normal Assessing Officer who has the basic understanding of accounts etc., without the aid, assistance and help of a special auditor. Thus, due regard has to be given to the nature and character of transactions, method of accounting, whether actuarial were adopted for making entries, basis and effect thereof, etc., though mere volume of entries might not be a justification by themselves as volume and complexity are somewhat different. Accounts should be intricate and difficult to understand. Every scrutiny assessment entails investigation and verification of the books of account, genuineness of the transactions or entries reflected in the books, computation of income etc. It is an exercise which demands expertise and a degree of skill to understand the accounts and decipher whether true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accounts have to be audited by a qualified Chartered Accountant." 91. A perusal of the decision extracted above shows that the purpose of Special Audit is for helping and assisting the AO. It is also for the purpose of facilitating the assessment and for proper determination of the tax liability after arriving at a correct taxable income. In effect, therefore, the Special Audit is made for and on behalf of the AO owing to the complexity of the transactions and such other factors as are set out under Section 142(2A) of the IT Act. 92. After completion of the Special Audit, the Chief Commissioner or the Commissioner plays a very crucial role in the determination of remuneration. Rule 14B (5) stipulates that the number of hours claimed by the accountant for billing purposes has to be commensurate with the size and quality of the report submitted by the accountant. This provision clearly shows that the invoice, which may be raised by the accountant, is not to be straightaway accepted. The Chief Commissioner or the Commissioner is required to assess various factors, including: - (i) The nature of the work assigned to the accountant (ii) The quantum of work (iii) The duration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute i.e., under Section 142(2A) of the IT Act, the determination of the remuneration is solely the prerogative of the Commissioner or the Chief Commissioner. 100. The same would not be liable to be called into question either in a civil court or in a commercial suit or civil suit as one of recovery of money. The nomination as a Special Auditor for the conduct of Special Audit is governed purely by the provisions of the Income Tax Act and Rules. This would, however, not bar the remedy of filing of a writ petition. 101. The present is a case where there is a clear lack of jurisdiction in the MSEFC, which even failed to consider as to whether the MSMED Act would itself be applicable or not. 102. Insofar as Audits under Section 142(2A) are concerned, the IT Act would have to be reckoned as the Special Act and the MSMED Act as the general Act dealing with MSME disputes. Thus, in the facts and circumstances as discussed above, the Income Tax Act would thus prevail over the provisions of the MSMED Act. 103. In view of the fact that the MSMED Act would have no applicability, the impugned references by the MSEFC, of the claims raised by the Respondent/CA Firm to arbitration are not sust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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