2004 (9) TMI 11 - HC - Income Tax

Writ petition challenging special audit dismissed due to petitioner's contradictory conduct.

The court dismissed the writ petition challenging the direction for a special audit under section 142(2A) based on the petitioner's contradictory conduct ... Audit - The communication dated March 25, 2004, whereby the Assessing Officer directed the petitioner to get its accounts audited by the special auditor is under challenge. – petition is dismissed Issues:Challenge to the direction for special audit under section 142(2A) based on lack of examination of accounts by Assessing Officer, financial burden on assessee, lack of opportunity for furnishing details, and failure to satisfy conditions precedent.Analysis:The petitioner challenged the direction for a special audit under section 142(2A) by the Assessing Officer, arguing that the accounts were not examined before ordering the special audit. The petitioner relied on various cases to support the argument that the special audit places a financial burden on the assessee without proper justification. Additionally, the petitioner contended that there was insufficient opportunity given to furnish details and the conditions precedent for the order were not met. However, the Revenue's senior counsel justified the order, pointing out discrepancies in documents provided by the assessee during assessment. The senior counsel highlighted that the tax audit report was deemed unreliable, and essential information such as valuation details and division-wise financials were not submitted despite specific requests. The Revenue also noted the complexity in apportioning expenses and the need to verify interest claims during the assessment year.In its judgment, the court considered the arguments presented by both parties. The court observed that the petitioner initially accepted the direction for a special audit, as evidenced by a letter requesting an extension to submit the audit report. However, shortly after this acceptance, the petitioner filed a writ petition challenging the order. The court found the petitioner's conduct contradictory and held that by accepting the direction initially and then seeking an extension, the petitioner had disentitled itself from relief in extraordinary jurisdiction. Consequently, the court dismissed the writ petition without delving into the merits of the arguments presented during the hearing.In conclusion, the court's decision was based on the petitioner's conduct, which indicated acceptance of the special audit direction before later challenging it through a writ petition. This inconsistency led the court to dismiss the petition without further examination of the substantive issues raised by both parties regarding the necessity and justification for the special audit under section 142(2A).