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2023 (7) TMI 382 - HC - Income TaxFee payable to CA Firms, for Special Audits directed u/s 142(2A) - CA Firm registered as MSME - Recovery of fees due from the Income Tax Department invoking the provisions of MSMED Act - interplay between the IT Act and the Micro, Small and Medium Enterprises Development Act ( ‘MSMED Act’) - Nomination of the Special Auditor by the IT Department - CA Firm, being on the panel of the Income Tax Department was nominated as a Special Auditor by the IT Department in four cases for carrying out Special Audit in terms of Section 142(2A) HELD THAT:- The nature of the Audit and the manner in which remuneration is to be determined would require domain expertise and knowledge which the MSEFC cannot possess. Function which is in effect delegated to the Audit firm is one which is exercised under the Income Tax Act and would be purely governed by the said statute. Payment of remuneration is also based on the factors prescribed in the Rules as discussed above. The nature of the assessment is not commercial but is a statutory nomination for the assistance of the AO and in effect the IT Department. IT Department cannot be termed as a ‘buyer’ when it is nominating the accountant for conducting a Special Audit and neither can the CA Firm be termed as a ‘supplier’. The remuneration payable to the accountant cannot also be termed as ‘consideration’ as the Special Audit is a statutory duty being performed by the accountant for and on behalf of the AO. The invocation of the provisions of the MSMED Act under such circumstances, in respect of Special Audit remuneration u/s 142(2D) would, therefore, not be tenable and is completely misplaced. MSMED Act has no applicability to the nature of the assignment which has been given to the Respondent/CA Firm. CA Firm may be registered as a Micro or Small enterprise and may be entitled to invocation of the jurisdiction of the MSMED Act for other purposes. Insofar as the assignment is one which is emanating from a statute i.e., u/s 142(2A) of the IT Act, the determination of the remuneration is solely the prerogative of the Commissioner or the Chief Commissioner. The same would not be liable to be called into question either in a civil court or in a commercial suit or civil suit as one of recovery of money. The nomination as a Special Auditor for the conduct of Special Audit is governed purely by the provisions of the Income Tax Act and Rules. This would, however, not bar the remedy of filing of a writ petition. The present is a case where there is a clear lack of jurisdiction in the MSEFC, which even failed to consider as to whether the MSMED Act would itself be applicable or not. MSMED Act would have no applicability, the impugned references by the MSEFC, of the claims raised by the Respondent/CA Firm to arbitration are not sustainable. The same are, accordingly, set aside.
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