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2014 (4) TMI 78 - HC - Income TaxDirection of special audit challenged – Pre-conditions u/s 142(2A) not satisfied - Whether or not keeping in view the nature and complexity of accounts and the interest of Revenue direction for special audit is justified – Held that:- No merit in the contention raised by the petitioner that related party transactions or reasonableness of interest paid to the petitioner on loans and advances by its subsidiary was an issue which was never raised in the show cause notice and therefore, there was violation of principles of natural justice. This question was specifically raised in the show cause notice and answer or reply was called for. The claim of the petitioner was that he has complied with all the queries. Thus it is accepted and admitted position that detailed queries in writing and orally were raised. This shows due application of mind and focus on the issues and aspects that arose for consideration. The AO had applied his mind to various aspects like nature of accounts, method of maintaining accounts, entries recorded etc. and reached the conclusion that the accounts were complex and it was in the interest of the Revenue that special audit u/s 142 (2A) of the Act, should be directed - in the past also special audit was directed but the AO has not directed special audit in the assessment year without examining the accounts for the year, the entries made, peculiarity involved etc. Special audit has not been directed for getting over the limitation or in routine. The business transactions have become more complicated and accounting entries more complex than ever before - This may be one of the causes why possibly the frauds could not be detected in some cases - Indeed such cases have made the audit work more comprehensive, intrusive and investigative - Ethical managements may at times regard such enquiries as an unwarranted intrusion or a hounding approach - Section 142(2A) does not permit fishing or roving inquiry approach or a witch hunt but is a regulated provision which accepts the need and necessity of the Assessing Officer to take help of an expert accountant i.e. a Chartered Accountant, a person who is academically qualified and has practical experience to understand accounts and unearth tax evasion or furnishing of inaccurate particulars etc. The provision balances the right of the Revenue with the inconvenience which the assessee may face – AO are not Chartered Accountants and when required and permissible, can take help and assistance from the qualified specialists to complete the assessment and determine the taxable income of an assessee – thus, there is no merit in the appeal – Decided against Assessee.
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