Yes, under s.142(2A), but only on specified grounds, only with the prior approval of a Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner, and only after giving you a hearing. The report is due within a period fixed by the officer, extendable to an outer limit of 180 days, the cost is borne by the Central Government, and the whole period is excluded from the limitation for completing the assessment.
Section 142(2A) lets the Assessing Officer direct that the assessee get his accounts audited by an accountant nominated by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, and furnish a report in the prescribed form. The grounds were widened by the Finance Act, 2013 and now cover the nature and complexity of the accounts, the volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts, and the specialised nature of business activity of the assessee — in each case having regard also to the interests of the revenue.
The grounds are not a formality. The Supreme Court's approach is that the officer must make a genuine and honest attempt to understand the accounts himself before invoking the section; s.142(2A) is not a device for shifting the officer's own responsibility onto an outside auditor. That has been the position since Rajesh Kumar v. DCIT, 287 ITR 91 (SC), affirmed by the larger bench in Sahara India (Firm) v. CIT.
There are two safeguards. The first is approval: the Assessing Officer cannot issue the direction on his own, and the approving authority's satisfaction has to be a real application of mind. Sahara India described an approval that is 'an empty ritual' as not satisfying the section. Appellate authorities cannot direct a special audit themselves — the power belongs to the Assessing Officer, or to a Joint Commissioner exercising the functions of an Assessing Officer.
The second is the hearing. The proviso requires that the assessee be given a reasonable opportunity of being heard before the direction is issued. Sahara India held that even though the section did not originally say so in terms, principles of natural justice have to be read into it, because a special audit direction carries serious civil consequences — the assessee has to open his books to an outsider and live with an extended assessment window. A direction issued without a pre-decisional hearing is open to challenge by writ.
On timing, s.142(2C) lets the Assessing Officer fix the period for furnishing the report, and allows extension both on the assessee's application and on the officer's own motion, but the aggregate period cannot exceed 180 days from the date the direction is received. On cost, s.142(2D) puts the auditor's remuneration and the incidental expenses on the Central Government, determined by the Principal Chief Commissioner or Chief Commissioner — the assessee does not pay the nominated auditor's fee.
The sting is in limitation. The Explanation to s.153 excludes, in computing the period for completing the assessment, the time from the date the direction is issued to the last date on which the assessee is required to furnish the report — or, where the direction is challenged, up to the date of the court's order. If, after that exclusion, less than sixty days of limitation remain, the period is extended to sixty days. So a special audit direction can add the better part of six months, plus the duration of any writ, to the department's time to assess. That is often the real reason a direction is issued late in the limitation period, and it is a point worth taking if the timing looks tactical rather than substantive.
A special audit direction is expensive in disruption even though it is free in fees, and it hands the department extra months of limitation. Because it is issued mid-assessment and is not an appealable order, the only practical remedy is a writ, and the writ has to be filed quickly. The grounds — approval, hearing, and whether the officer really tried to understand the books — have to be identified at the direction stage.
Has the Supreme Court settled whether the s.144C nine-month DRP process runs over and above the s.153 limitation?
The AO ordered a special audit of my books without hearing me first. Is that direction valid?
Are proceedings before the Dispute Resolution Panel outside the ordinary limitation for completing an assessment?
A different Assessing Officer finished my assessment from where the last one left off, without offering me a rehearing. Does s.129 give me a right he was bound to offer?
The Assessing Officer has directed a special audit under s.142(2A) reciting that my accounts are voluminous and need detailed verification. Is that enough?
Our amalgamation was sanctioned by the NCLT after we had already filed the return, and the AO is pressing on with the assessment on that pre-merger return. Does s.170A stop him?
You are an eligible assessee with a transfer pricing adjustment and the faceless unit passed a final order instead of a draft. What relief will the court give?
The special audit direction was passed inside the limitation period but served on me afterwards. Does the section 153 exclusion run from the date of the order or from the date I received it?
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