Law:

Section:

Section 142 of the Income-tax Act, 1961 - Assessment - Inquiry before assessment - Assessment year 1998-99 - Assessee - A Statutory Corporation had branches all over India and was involved in activities of Container Freight Station (CFSs) and Inland Clearance Depot (ICDs) - In terms of notification of Government, part of income of assessee was exempted from tax while other part of it was taxable - It filed a return for relevant assessment year - Assessing Officer noticed that assessee had shown huge loans running into crores which created a doubt and thus, felt that having regard to nature and complexity of accounts and interest of revenue, it was a fit case for audit under section 142(2A) and consequently, he directed account of assessee to be audited - Whether it could not be said that Assessing Officer had not examined books of account and as such impugned order was beyond jurisdiction vested in Assessing officer under section 142(2A) - Held, yes - Whether since assessee had suffered no prejudice as a result of impugned order and also no assessment had been made which could ex facie show that opinion or satisfaction recorded by Assessing Officer lacked objectivity and was not in consonance with principles enunciated in section 142(2A), Assessing Officer was justified in directing for audit - Held, yes FACTS The assessee was a statutory corporation. It filed a return for the relevant assessment year. The Assessing Officer felt that having regard to the nature and complexity of the accounts and the interest of the revenue, it was a fit case for audit under section 142(2A). Consequently, he directed the accounts of the assessee to be audited, by an appointed auditor. The Assessing Officer also initiated blocking of the proceedings. The assessee unsuccessfully challenged the same before the Chairman, CBDT and before the Commissioner. On writ, the assessee prayed for quashing of the said order contending that the impugned order was not in conformity with section 142(2A) and its accounts were in no way complex so as to justify appointment of a special auditor; that its income being exempted under section 10(29), and the fact that it was carrying on similar…

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