Special audit safeguards under income-tax law were prima facie unmet, so the audit direction was stayed pending further hearing.

An interim stay was granted against an audit direction under section 142(2A) of the Income-tax Act after the Court found a prima facie absence of the Assessing Officer's requisite opinion on the need for special audit and doubt as to whether prior approval of the Chief Commissioner or Commissioner had been obtained in the manner required. The challenge also questioned the vires of section 142(2A), but the immediate relief turned on the apparent non-compliance with the statutory safeguards governing special audit. The audit direction was stayed pending affidavits and further hearing.

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Issues: Whether the interim order directing audit under section 142(2A) of the Income-tax Act, 1961 could be stayed at the interlocutory stage, and whether the impugned direction appeared to satisfy the statutory requirements of formation of opinion and prior approval.

Analysis: The petition raised a challenge to the vires of section 142(2A) and to the validity of the impugned direction requiring audit of accounts. The order records a prima facie view that the Assessing Officer had not formed the requisite opinion as to the necessity of special audit and that prior approval of the Chief Commissioner or Commissioner did not appear to have been obtained in the manner contemplated by the provision. On that prima facie assessment, and pending filing of affidavits and final hearing, interim protection was considered warranted.

Outcome: Interim relief was granted in favour of the petitioner and the direction for audit was stayed till the stated date or further order.

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