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2014 (1) TMI 1190 - HC - Income TaxValidity of proceedings u/s 142(2A) of the Act – Special audit -Opportunity of being heard – Held that:- The exercise of power to direct special audit depends upon the satisfaction of the Income-tax Officer with the added approval of the Commissioner - But he must be satisfied that the accounts of the assessee are of a complex nature and in the interests of the Revenue, the accounts should be audited by a special auditor - The special auditor is also an auditor like the company's auditor, but he has to be nominated by the Commissioner and not by the company - The accounts are again to be audited at the cost of the company - This is the substance of the statutory provisions - The power cannot be lightly exercised - The satisfaction of the authorities should not be subjective satisfaction - It should be based on objective assessment regard being had to the nature of the accounts - The nature of the accounts must indeed be of a complex nature. Relying upon the pleadings of the parties, the provisions of section 142(2A) of the Act and the principles of law laid down Swadeshi Cotton Mills Company Limited Versus Commissioner Of Income-Tax And Another [1987 (3) TMI 20 - ALLAHABAD High Court] - A.O. should reconsider the issue as to whether a direction should be issued under Section 142(2A) of the Act after considering the objections of the assessee and affording a reasonable opportunity of being heard, in terms of Section 142 (2A) of the Act - It is only after the A.O. reaches to a fair conclusion after considering the reply given by the petitioner, and affording an opportunity of hearing, the CIT as approving authority will consider whether the special audit is required to be carried out for the purposes of understanding the accounts maintained by the assessee – Decided in favour of Assessee.
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