Court dismisses petitions challenging special audit orders under Income Tax Act; upholds natural justice principles.

The court dismissed the writ petitions seeking to quash various orders and notices related to a special audit under Section 142(2A) of the Income Tax Act, 1961. It held that the Principal Commissioner of Income Tax had provided the petitioner with sufficient opportunities to be heard, meeting the requirements of natural justice. The court found no merit in the petitioner's objections raised post-special audit completion and noted the availability of appeal before the Commissioner of Income Tax. Consequently, the writ petitions were dismissed, and no costs were awarded.

---

---

Issues Involved:
1. Quashment of various orders and notices related to special audit under Section 142(2A) of the Income Tax Act, 1961.
2. Compliance with the principles of natural justice and the requirement of pre-decisional hearing under Section 142(2A).
3. Validity of the approval process for special audit by the Principal Commissioner of Income Tax.

Detailed Analysis:

1. Quashment of Various Orders and Notices:
The petitioners sought the quashment of the order dated 22.12.2017, referral letters dated 17.11.2017, show cause notice dated 30.11.2017, and the approval dated 22.12.2017 for special audit under Section 142(2A) of the Income Tax Act, 1961, for Assessment Years 2010-11 to 2016-17. The court examined the procedural history, including the search and seizure operation conducted on 07.01.2016, subsequent scrutiny assessment proceedings, and the issuance of multiple notices to the petitioner.

2. Compliance with Principles of Natural Justice and Pre-Decisional Hearing:
The petitioners argued that the Assessing Officer failed to provide a reasonable opportunity of hearing before directing a special audit, contrary to the law laid down by the Supreme Court in Rajesh Kumar V/s. Deputy Commissioner of Income-tax and Sahara India (Firm) V/s. Commissioner of Income-tax, Central-I. They contended that the principle of 'Audi alteram partem' was not observed at the pre-decisional stage. The court noted that the Principal Commissioner of Income Tax granted reasonable opportunities to the petitioner twice before making the reference to the special auditor.

3. Validity of the Approval Process for Special Audit:
The court analyzed Section 142(2A) of the Income Tax Act, which mandates that the Assessing Officer must form an opinion regarding the necessity of a special audit based on the nature and complexity of accounts, and the interests of the revenue. This opinion must be approved by the Principal Commissioner of Income Tax. The court emphasized that the Principal Commissioner is the authority taking the substantive decision for special audit and must provide an opportunity to the assessee. The court found that the Principal Commissioner had complied with this requirement by granting two opportunities to the petitioner.

Conclusion:
The court concluded that sufficient compliance with the proviso to Section 142(2A) was made, as the Principal Commissioner of Income Tax provided the petitioner with reasonable opportunities to be heard. The petitioner's objections regarding the procedure followed were not raised until after the completion of the special audit. Consequently, the writ petitions were dismissed due to lack of merit, and the court noted that the petitioner had the statutory remedy of appeal before the Commissioner of Income Tax. The assessment order was passed on 13.08.2018, rendering the writ petitions infructuous.

Final Judgment:
The writ petitions were dismissed, and a copy of the order was directed to be kept in related writ petitions. No costs were awarded.

---