Court clarifies special auditor's role in Vodafone tax challenge

The court addressed challenges raised by Vodafone Mobile Services Limited against actions under Section 142(2A) of the Income Tax Act for the Assessment Years 2012-2013 and 2013-2014. It clarified the role of the special auditor, emphasizing limitations on adjudication and the need to focus on relevant assessment years. The court ensured compliance with terms of reference and previous judgments, directing the petitioner to cooperate with the special audit. The petitions were disposed of through a common order, with instructions for the audit to proceed in accordance with the court's directives.

---

---

Issues Involved:
1. Challenge to action under Section 142 (2A) of the Income Tax Act, 1961 for Assessment Years 2012-2013 and 2013-2014.
2. Concerns regarding terms of reference for the special audit.
3. Scope of the special auditor's role in relation to legal opinions and adjudication.
4. Verification of purchase of shares and premium paid by shareholders.
5. Possibility of re-opening old and settled issues during the special audit.
6. Compliance with the terms of reference and previous court judgments.

Analysis:

Issue 1: Challenge to action under Section 142 (2A) of the Income Tax Act
The judgment addresses the two writ petitions filed by Vodafone Mobile Services Limited challenging the action initiated by the Assessing Officer under Section 142 (2A) of the Income Tax Act for the Assessment Years 2012-2013 and 2013-2014. The court mentions that the petitions would be disposed of through a common order.

Issue 2: Concerns regarding terms of reference for the special audit
The petitioner expresses concerns about the terms of reference for the special audit. It is highlighted that the special auditor should limit the scope of the audit to the accounts and refrain from providing legal opinions. The court notes the petitioner's concerns but acknowledges that they do not object to the special audit itself.

Issue 3: Scope of the special auditor's role
The court emphasizes that the special auditor's role is limited and does not include adjudication. The Assessing Officer is responsible for making determinations and assessments in accordance with the law. The special auditor is expected to adhere to the provisions of Section 142(2A) as interpreted in various judgments by the Supreme Court and the Delhi High Court.

Issue 4: Verification of purchase of shares and premium paid by shareholders
An issue arises during the hearing regarding the verification of the purchase of shares and premium paid by shareholders of an amalgamating company. The petitioner raises concerns about the possibility of the special auditor reopening old and settled issues not relevant to the current assessment years. The court clarifies that the special audit should focus on the assessment years in question or earlier years as permitted by the Income Tax Act and Rules.

Issue 5: Compliance with terms of reference and previous court judgments
The court ensures that the special audit will be conducted in accordance with the terms of reference provided by the respondents in their affidavit. The special auditor is instructed to consider the court's order and previous decisions while conducting the audit. The writ petition is disposed of based on the statements made by the parties, with the petitioner required to appear before the special auditor on a specified date for the audit to commence.

This comprehensive analysis of the judgment covers all the issues involved and provides a detailed insight into the court's decision and directives regarding the challenges raised by Vodafone Mobile Services Limited.

---