Court upholds special auditor appointment under Section 142(2A) as justified and reasonable

The court dismissed the writ petition, upholding the appointment of a special auditor under Section 142(2A) as justified and legally sound. It was determined that no show-cause notice or hearing was necessary before issuing the order, and the remuneration set for the special auditor was deemed reasonable. The request to declare Section 142(2A) unconstitutional was not addressed due to the lack of arguments presented on this matter.

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Issues Involved:
1. Quashing of the impugned order dated March 19, 1999.
2. Declaration of Section 142(2A) of the Income-tax Act as unconstitutional.
3. Justification of the special audit under Section 142(2A).
4. Requirement of a show-cause notice or hearing before ordering a special audit.
5. Excessiveness of the remuneration fixed for the special auditor.

Detailed Analysis:

1. Quashing of the Impugned Order Dated March 19, 1999
The petitioner contended that the order dated March 19, 1999, appointing M/s. Kapoor Tandon and Company for a special audit under Section 142(2A) was passed mechanically without any application of mind and without considering the petitioner's reply to the notice dated January 29, 1999. The court reviewed the records and found that the Assessing Officer (AO) had indeed formed an opinion based on the complexity of the accounts and the interests of the Revenue, which was subsequently approved by the Commissioner of Income-tax. The court held that the preconditions for appointing a special auditor were fulfilled and the order did not suffer from any infirmity.

2. Declaration of Section 142(2A) of the Income-tax Act as Unconstitutional
The petitioner sought a declaration that Section 142(2A) of the Income-tax Act is null, void, inoperative, and unconstitutional. However, the court noted that the petitioner's counsel did not advance any arguments on this issue, and therefore, the court did not address this question.

3. Justification of the Special Audit under Section 142(2A)
The petitioner argued that there was no complexity in the accounts and the interests of the Revenue were not at stake. The court reviewed the proposal and the sanction order, which highlighted anomalies and the complexity of the accounts. The court cited several precedents, including Swadeshi Cotton Mills Co. Ltd. v. CIT, Peerless General Finance and Investment Co. Ltd. v. Deputy CIT, and Living Media Ltd. v. CIT, to support the view that the AO's decision was based on objective satisfaction and relevant considerations. The court concluded that the special audit was justified.

4. Requirement of a Show-Cause Notice or Hearing Before Ordering a Special Audit
The petitioner contended that no show-cause notice or opportunity of hearing was given before the special audit order. The court referred to the case of Jhunjhunwala Vanaspati Ltd. v. Asst. CIT, which held that a direction under Section 142(2A) is administrative and does not require a show-cause notice or hearing. The court agreed with this view and held that the petitioner was not entitled to a show-cause notice or hearing before the special audit order.

5. Excessiveness of the Remuneration Fixed for the Special Auditor
The petitioner argued that the remuneration of Rs. 5,00,000 fixed for the special auditor was excessive and unjustified. The court considered the nature of the petitioner's activities and the voluminous documents and books maintained by it. The court held that the remuneration was not excessive or unjustified given the circumstances.

Conclusion
The court dismissed the writ petition, holding that the order dated March 19, 1999, appointing a special auditor under Section 142(2A) was justified and did not suffer from any legal infirmity. The court also held that no show-cause notice or hearing was required before passing the order and that the remuneration fixed for the special auditor was reasonable. The petitioner's request to declare Section 142(2A) unconstitutional was not addressed as no arguments were advanced on this issue.

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