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Audit can be directed without hearing of assessee

Special audit can be directed without providing an opportunity of personal hearing to assessee
Proviso to section 142(2A) does not envisage any personal hearing to assessee before an passing of an order for special audit.

In the instant case the assessee-company was opposed to the proposal of special audit on the ground that there were no complexities in the accounts and contented that proviso to section 142(2A) provides an opportunity of personal hearing to assessee.

The HC held as under:

1) The requirement of personal hearing is normally not seen as necessary concomitant to a reasonable opportunity of being heard. The same depends on the statutory provisions from which such right flows, the nature of the proceedings and the consequences likely to follow from such proceedings;

2) The proviso to section 142(2A) does not envisage any personal hearing before an order under sub-section (2A) can be passed. The said proviso only requires giving a reasonable opportunity of being heard to the assessee. Such reasonable opportunity ordinarily would not include right of personal hearing;

3) It was strongly argued by assessee that the very fact that the AO believed that the accounts were complex, it meant that the issues were complex and the personal hearing was required. This contention was misconceived. Complexity of accounts and complexity of the question whether accounts were complex or not were two totally different things;

4) Thus, a clear distinction had to be drawn between the two. Whether the accounts were complex so as to call for special audit was one aspect. Another aspect was whether the question to ascertain if the accounts were complex was itself a complex question. This would have a bearing on whether personal hearing was necessary. Thus, assessee’s contention of personal hearing was rejected;

5) Coming to the question of validity of the order on the premise of complexity and the requirement of interest of revenue, it was noticed that the assessee had been given previous notice under section 142(1) with respect to its accounts. For a long time the assessee did not comply with such notices;

6) The authorities had highlighted several aspects of the matter to indicate that the accounts were complex and that interest of revenue would be served if the special audit report was obtained. The various points on which the AO desired that the auditor should make a report itself would demonstrate that the accounts were complex;

7) The AO had sufficient material at his command to form an opinion that the accounts were complex and that it was in the interest of the revenue to get them audited by the special auditor. Thus, there was no merit in instant petition and the same was to be dismissed. - NEESA LEISURE LTD. V. DY. CIT [2013] 35 taxmann.com 216 (Gujarat)

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