TaxTMI 
TaxTMI 
2010 (5) TMI 277
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.... No. 1 called its senior partner, Shri Dhanesh Chand, sought acceptance of the assignment and fixed remuneration at the scale prescribed by the Institute. However, in the appointment letters issued to the petitioner there was no mention of the remuneration payable to it. The petitioner, therefore, accepted the assignment, subject to the condition that the remuneration would be paid to it as per the scale prescribed by the Institute. It is also the case of the petitioner that soon after receipt of the acceptance letter sent by it, a meeting of respondents Nos. 1 to 3 was convened in the chamber of respondent No. 1 which was attended by one Shri R. S. Dubey, on behalf of respondent No. 3, and the remuneration payable to the petitioner at the scale prescribed by the Institute was fixed in that meeting. The petitioner completed the assignment for the financial year 2002-03 and raised a bill of Rs. 49,94,419, based upon the scale prescribed by the Institute. The bill was duly paid by respondent No. 3 and the petitioner also paid the service tax, which it had recovered from respondent No. 3 in respect of that bill. The petitioner was, thereafter, asked to give justification for the bill ....
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....No. 3 demanded a refund of Rs. 8,80,995 from the petitioner. Since respondent No. 1, despite the request of the petitioner, has not recalled the orders passed by him fixing the remuneration at Rs. 20 lakhs each for the financial years 2002-03 and 2003-04, the petitioner is seeking quashing of those orders and payment of the balance amount to him, along with interest thereon. He is also seeking a direction to respondent No. 1 to take steps in terms of section 142(2D) of the Act in case of default by respondent No. 3 in making payment to the petitioner. 3. The petition has been contested by the respondents. Respondents No. 1 and 2 in an affidavit filed by Shri Rajesh Kumar, Assistant Commissioner of Income-tax have stated that the impugned order was passed in the presence of the representative of the petitioner who had consented to the same and the petitioner, is, therefore, estopped from challenging the said order. They have denied that respondent No. 1 had fixed the remuneration payable to the petitioner at the scale prescribed by the Institute, before nominating it as the special auditor. It has also been claimed that the order was passed by respondent No. 1 having regard t....
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....s on which the remuneration is to be calculated after the work is completed and conveying the same to him. Taking such a view would amount to giving an arbitrary power to the Chief Commissioner or the Commissioner, as the case may be, to fix any fee which he may decide to fix irrespective of the quantum of the work and the scale on which the remuneration is to be determined taking the quantum of work into consideration. This, to our mind is not the scheme of section 142(2D) of the Act. 7. It is not in dispute that while granting approval to the Assessing Officer for conducting special audit for respondent No. 3 for the assessment year 2003-04, Mr. S. Pradhan, Commissioner of Income-tax, (Central)-1, New Delhi, had, in the file of the Department, directed that the charges of the audit would be based on the guidelines of the ICAI with regard to the audit. Admittedly, a similar direction was given by him on December 26, 2009, while granting approval for special audit in respect of the assessment year 2004-05. 8. It was not disputed before us by respondents Nos. 1 and 2 that the petitioner had conveyed formal acceptance to its appointment as special auditor for the financial year 200....
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.... that the decision of the Commissioner, to fix the remuneration of the petitioner at the scale prescribed by the Institute, was not conveyed to it. The scheme of the Act, in our view, does not envisage any consent being obtained from the assessee in respect of the remuneration payable to the special auditor nor does it envisage any consultation with him before determining the said remuneration. The decision of the Chief Commissioner/Commissioner, with respect to the remuneration payable to the special auditor is final and binding upon the assessee. 10. The case of the petitioner in this regard is that in a meeting, held in the chamber of respondent No. 1, Mr. R. S. Dubey, representative of respondent No. 3 was informed not only of the appointment of the petitioner as special auditor, but also that the remuneration will be payable to it, at the scale prescribed by the Institute. Respondent No. 3 has not filed the affidavit of Shri R. S. Dubey to controvert the averment made by the petitioner in this regard. This averment has not been made for the first time in the writ petition. As noted earlier in its letter dated April 3, 2007, the petitioner specifically averred that in the meet....
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.... and the higher slab, but he could not have fixed any remuneration lower than that calculated on the basis of the lower slab. 11. The main contention of the respondents is that in the meeting held on April 10, 2007, the petitioner had agreed to accept the fee at Rs. 20 lakhs per year. A perusal of the minutes of that meeting would show that it was a joint meeting to consider the remuneration of the special auditors for three assessees, namely, Sahara India (Firm), Sahara Airlines Limited and respondent No. 3 Sahara India Financial Corporation Limited and the special auditors, appointed for all the three companies, were present in the meeting. As per the minutes of the meeting, after taking into consideration various factors, including the guidelines, issued by the Institute relating to the fee structure, payment made by the assessee for the regular audit under section 44AB or statutory orders, nature of the work and fee paid in the past, the fee of Rs. 20 lakhs for each year was mutually agreed upon and Mr. R. S. Dubey gave his consent for that fee. What these minutes imply is that the amount of Rs. 20 lakhs for each year was mutually agreed between the petitioner and the assessee....
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....rs dated July 26, 2007 for the financial year 2002-03 and dated September 18, 2007 for the financial year 2003-04 were passed by respondent No. 1 much after the letter dated April 11, 2007 had been received by the Department from the petitioner. Presuming that the petitioner had consented to respondent No. 3, to accept the remuneration at Rs. 20 lakhs each year, that consent was withdrawn by it much before the orders in question were passed by respondent No. 1. Once the letter dated April 11, 2007, denying the alleged mutual consent, was received by the Department, it was not permissible for respondent No. 1 to act upon that consent/mutual agreement for the purpose of determining the remuneration in exercise of his power under section 142(2D) of the Act. He, in that case, was required to determine the remuneration of the petitioner in terms of the scale approved by the Institute for such work, in view of the decision already taken by him, while approving the special audit of respondent No. 3 and appointing the petitioner to undertake the special audit. He could, at best, have fixed the charges at Rs. 30 lakhs per year in case the charges, if calculated on the basis of the sca....