Spot Memos Quashed Due to Procedural Lapses in Audit Proceedings Without Logical Conclusion Since 2018

The HC allowed the writ appeal, quashing spot memos issued in March 2021 by the audit department due to procedural lapses. The Court found that proceedings initiated since 2018 had not been taken to a logical conclusion, raising concerns about fairness. While refraining from ruling on whether CERA audit could be conducted on a private entity as premature, the Court directed the 5th respondent to review appellants' previous submissions, provide a personal hearing, and make a merit-based decision in compliance with law. The appeal was disposed of without costs.

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Issues:
Challenge to jurisdiction of audit department in issuing communications and spot memos; Allegations of unfair treatment and repeated summonses without logical conclusion; Enforceability of spot memos issued without due process; Prematurity of ruling on CERA audit against private entity; Direction for department to conclude proceedings fairly.

Analysis:
The appellants contested the jurisdiction of the 7th respondent, Sr. Audit Officer, in issuing communications and spot memos, citing a Bombay High Court decision. They raised concerns over repeated summonses since 2018 without logical conclusions, questioning the fairness of treatment by different wings of the department. The High Court noted that proceedings were not taken to a logical end, emphasizing the need for due process in case of alleged irregularities. The Court found the spot memos issued in March 2021 unenforceable due to procedural lapses.

The Court refrained from ruling on whether a CERA audit could be conducted on a private entity, deeming it premature given the ongoing proceedings since May 2018. Emphasizing the importance of concluding proceedings fairly, the Court directed the concerned authority to consider the appellants' submissions and provide a personal hearing. Notably, the Court highlighted the lack of allegations against the appellants for non-cooperation with earlier summonses.

Consequently, the Court allowed the writ appeal, quashing the spot memos issued in March 2021. The 5th respondent was directed to review the appellants' previous replies and make a decision based on merit and legal compliance after affording a personal hearing to the authorized representative. The appeal and connected application were disposed of without costs, with instructions for expeditious provision of a certified copy of the order upon compliance with legal formalities.

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