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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the orders directing special audit under section 142(2A) of the Income-tax Act, 1961 were valid, and whether the petitioners were denied the opportunity required before such direction.
Analysis: The survey material, impounded books and computer data disclosed mixed and incomplete accounts across the three societies, with no separate and reliable bifurcation of receipts, payments and expenditure. The competent authorities issued a show-cause notice, considered the petitioners' reply, afforded a hearing before approval was granted, and recorded objective satisfaction that the nature of the accounts, their complexity and the interest of revenue justified special audit. The challenge based on alleged breach of natural justice failed because the petitioners had been heard before approval and before the audit direction was issued. The contention that the auditor was being asked to prepare fresh books was also rejected, as the direction only required verification and reconciliation of existing material.
Conclusion: The special audit directions and the approval thereto were held to be lawful and sustainable, and the challenge was rejected.
Ratio Decidendi: A direction for special audit is valid when, on objective criteria and after affording a pre-decisional hearing, the authority records satisfaction that the accounts are complex and that special audit is necessary in the interest of revenue.
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