Friday, 14 December 2018

HC : Upholds special audit initiation on Patanjali citing complexities in accounts

Delhi HC dismisses Patanjali Ayurveda’s writ, upholds initiation of special audit u/s 142(2A) for AY 2010-11 citing complexity in the accounts; Rejects assessee’s stand that once its accounts were audited, tax audit report was filed, all the necessary information was submitted in response to scrutiny notices, AO’s inability to exert himself to inquire diligently cannot result in a special audit; Though HC acknowledges that AO cannot fall back upon special audit in all routine cases, it observes that “AO has carefully outlined what were the salient aspects in the accounts and returns of the assessee that needed to be looked into and made the impugned order directing special audit.”; Opines that AO correctly ordered special audit having regard to - maintenance of large number of imprest accounts involving sizeable amount for which expenditure details not furnished, revision of returns whereby income offered was reduced substantially, assessee’s ‘first-time’ claim of deduction u/s. 80-IC needed inquiry; Further notes that AO had referred to the three segments or sources of revenue of the assessee and had held that it is required to identify the method and the relevant accounting standard applicable for recognition of income from these revenues and also to ascertain the correctness of the income recognized.:HC 

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