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of <h1>Special audit under s.142(2A) upheld after searches and seizures, limited to two assessment years; challenge dismissed</h1> HC upheld the validity of an order directing a special audit under s.142(2A) after searches and seizure of voluminous business records. The Inspecting ... Seeking approval for special audit as required under section 142(2A) - Legality of order for appointing special auditor u/s 142(2A) - HELD THAT:- In the present case, it is not disputed that there was a search in the business premises of the company leading to the seizure of voluminous records. The accounts of the company have been scrutinised by the Inspecting Assistant Commissioner. The report has been accepted upon consideration by the Commissioner of Income-tax. Special audit has been directed only in respect of two years, i.e., 1974-75 and 1975-76. The Inspecting Assistant Commissioner and the Commissioner of Income-tax with due regard to the nature of the account books have been satisfied that the accounts of the company are of a complex nature and that it is necessary in the interests of the Revenue that a special audit should be conducted. We do not think that there is any arbitrary exercise of the powers, The contention urged for the petitioner is, therefore, rejected. In the result, the petition fails and is dismissed. Issues involved: Validity of order appointing special auditor u/s 142(2A) of the Income-tax Act.Summary:The High Court of Allahabad considered a writ petition filed by a company challenging the appointment of a special auditor by the Income-tax Department u/s 142(2A) of the Income-tax Act. The company maintained separate books of account at various branches and its premises were searched in December 1975. The Inspecting Assistant Commissioner recommended a special audit due to the complex nature of the accounts, which was approved by the Commissioner of Income-tax. The company contested the validity of the order, arguing that there was no material to justify the special audit.The Court analyzed the relevant provisions of the Act, emphasizing that the power to direct a special audit should be based on objective assessment of the complexity of accounts. The term 'complexity' was discussed, highlighting the need for a thorough understanding before ordering a special audit. The Central Board of Direct Taxes issued guidelines for selecting cases for special audit under section 142(2A), specifying criteria for companies and non-company assessees.In this case, the Court noted that the accounts of the company were found to be complex after scrutiny by the authorities, justifying the need for a special audit. The Commissioner of Income-tax had accepted the recommendation based on the nature of the account books. The Court concluded that there was no arbitrary exercise of power and dismissed the petition, ordering the petitioner to pay costs. The advocate's fee was assessed at Rs. 500.In conclusion, the Court upheld the validity of the order appointing the special auditor under section 142(2A) of the Income-tax Act, emphasizing the importance of objective assessment in determining the need for a special audit based on the complexity of accounts.
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