Law:

Section:

Section 142 of the Income-tax Act, 1961 - Assessment - Inquiry before assessment - Assessment year 2003-04 - Whether as long as there is some material that stares in face of Assessing Officer which more or less compels an order of special audit under section 142(2A), he can pass an appropriate order without necessarily having any interaction with assessee on complexity of its accounts - Held, yes - Whether if material before Assessing Officer is not so obvious as would warrant passing of an order under section 142(2A), it is only then that Assessing Officer would need to have an interaction with assessee - Held, yes Section 142 of the Income-tax Act, 1961 - Assessment - Inquiry before assessment - Assessment year 2003-04 - Whether where proposal of special audit under section 142(2A) itself showed that same had been prepared after perusal of case records and there was due application of mind in formation of that proposal, order passed under section 142(2A) could not be interferred with - Held, yes FACTS The assessee, a residuary non-banking company, engaged in the business of deposit mobilization. The assessee was residuary following the mercantile system of accounting. The assessee filed its return along with a statutory audit report, tax audit report and statement of accounts declaring some income. During the assessment proceedings, when the jurisdiction over the assessee and its associate firm was transferred from ACIT, Lucknow to the Assessing Officer (R-2) in Delhi, it challenged the order thereof by filing a writ petition. The High Court, however, dismissed the same. On appeal, the Supreme Court also dismissed the same. Consequently, the Assessing Officer, after adjourning the assessment proceedings at the assessee's instance from time to time, ultimately passed an order under section 142(2A) asking both the assessee as well as its firm to have their accounts audited by certain chartered accountant's firm appointed by him. In the instant writ petitions challenging the said orders, the assessee contended that the principles of natural justice had not been complied with inasmuch as it was not heard before order was passed and that there was no application…

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