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ca.bhupendrashah (FCADISA)     01 July 2008


is there a provision for second audit u/s 142[ 2A]?


 2 Replies

Prakash Yedhula (Lawyer)     01 July 2008

In terms of Section 142(2A), if during the proceedings before an assessing officer, he is of the opinion that

1. having regard to the nature and complexity of accounts of the assessee, and

2. in the interest of the revenue.

it is necessary to get the accounts of the assessee audited by an accountant as defined in the explanation before section 288(2), he may do so after obtaining the approval of the Chief Commissioner or Commissioner in this regard. The audit report should be in the form prescribed and should, apart from the particulars set forth in the form, contain such particulars as the assessing officer may require.

The audit is to be completed within the time frame prescribed by the assessing officer, which period may be extended by him subsequently up to a period of 180 days from the date, the direction is received by the assessee.

The expenses including fees should be paid by the assessee, and in default may be recovered from him in the manner provided for arrears of tax.

The assessee should be given an opportunity to be heard in respect of any matter gathered during the enquiry u/s 142(2A).

The judicial view regarding the power of an assessing officer to order a special audit u/s 142(2A) is that once the assessing officer on an objective assessment considers that an order u/s 142(2A) is necessary and both the ingredients i.e complexity of accounts and the conduct of an audit being in the interest of revenue are satisfied, no interference with the order is called for. The fact that an audit under section 44AB of this Act or an audit under any other statute has already been carried out cannot be a bar to the assessing officer invoking his powers under this section.

Form and particulars prescribed

The audit report is to be submitted in prescribed Form 6B. Most of the particulars contained are similar to those contained in Form 3CD. The only distinct clauses are clause 8, where details of expenditure resulting in any benefit or amenity to

1. a director
2. person who has substantial interest in the company
3. relative of such person are to be given.

Further, expenses in respect of assets, which are used wholly or partly for persons referred to above are required to be given,. The other distinct details are in clauses 12 and 13, which require particulars of loans taken by the assessee from banks, financial institutions, and others and the details of security/ collateral security offered.

Shree. ( Advocate.)     02 July 2008



Rajesh Kumar and Others v D.C.I.T. and

Others (SC)

Income Tax Act, 1961 – Appointment of an

auditor for special audit of accounts in terms

of s. 142(2A) – Held, Bombay High Court

and the Delhi High Court, are not correct in

classifying a direction issued under s. 142(2A)

of the Act as administrative in nature – When

the books of accounts have been produced

and examined, the assessing officer would

be proceeding to make the ultimate order of

assessment – An appeal against the order of

assessment would not serve any real purpose

as the appellate authority would not go into

such a question since the direction issued

under s. 142(2A) of the Act is not an appellate

order – Appeal allowed.


Another case:

. Messrs Sahara India Financial Corporation

Limited v CIT, Delhi, Central – I and others


Income Tax Act, 1961 – Order directing

Petitioners to have special audits conducted

under s. 142 (2A) relevant for the assessment

year 2003-04 – Held, direction to conduct a

special audit under s. 142 (2A) is not a final

order and does not determine any right,

obligation or liability of any of the parties

– There need not be such rigid compliance

with the principles of natural justice –

Decision taken to order a special audit under

s. 142 (2A) is unexceptionable, and given the

limited scope of jurisdiction, cannot interfere

in the order passed – Petitions dismissed.





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