Validity of Special Audit Upheld under Income-tax Act: Extension Valid, Lack of Cooperation Led to Dismissal

The court upheld the validity of proceedings under section 142(2A) of the Income-tax Act, 1961, for a special audit of the petitioner's accounts. It found the reasons recorded by the Assessing Officer justified due to the complexity of the company's accounts. Additionally, the extension of the period for submission of the special audit report was deemed valid under section 142(2C) as the Assessing Officer can extend the period for valid reasons. The petitioner's lack of cooperation with the appointed Chartered Accountant led to the extension. The petition was dismissed for lacking merit, with no costs imposed.

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Issues involved: Challenge to validity and legality of proceedings under section 142(2A) of the Income-tax Act, 1961; Extension of period for submission of special audit report under section 142(2A).

Validity of proceedings under section 142(2A): The petitioner challenged the initiation of proceedings by issuance of notice under section 142(2A) of the Income-tax Act, 1961, for a special audit of its accounts for the assessment year 1990-91. The court noted that the Assessing Officer, with the approval of the Chief Commissioner/Commissioner, can direct a special audit if necessary. The reasons recorded by the Assessing Officer were found to be justified, indicating the necessity for a special audit due to the nature and complexity of the company's accounts.

Extension of period for special audit report: Another argument raised was regarding the extension of the period for submission of the special audit report under section 142(2A). The petitioner contended that no application was filed for extension, thus the extension by the Assessing Officer was erroneous. However, the court pointed out that under section 142(2C), the Assessing Officer can extend the period for valid reasons, not exceeding 180 days from the date of direction under section 142(2A). It was noted that the petitioner's lack of cooperation with the appointed Chartered Accountant led to the extension of the submission period. Consequently, the petition was dismissed as lacking merit, with no costs imposed.

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