Section 142(2A)

Section 142(2A) — the law in short

What the courts have decided on section 142(2A), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Sahara India (Firm) v CIT Supreme CourtCuts both ways
  The AO ordered a special audit of my books without hearing me first. Is that direction valid?
  No. A direction under s.142(2A) carries serious civil consequences, so the assessee must be given a reasonable opportunity of being heard before it is issued, even though the section as it then stood said nothing about a hearing. The post-audit hearing under s.142(3) is no substitute, because it reaches only the audit material and not the validity of the direction.
• PCIT v Praveen Sawhney High CourtHelps taxpayerValidity unconfirmed
  The Department says my search assessment is in time because it made a reference to a foreign tax authority and gets a year excluded under s.153B. The reference was for years the treaty did not cover. Does the exclusion still apply?
  No. Clause (ix) of the Explanation to s.153B excludes the time taken on a reference for exchange of information only where the reference is made in terms of the agreement under s.90 or s.90A. A request made outside what the treaty permitted is not such a reference, gives no exclusion, and the assessments were time-barred. Twenty-nine Revenue appeals were dismissed.
• Nokia India P Ltd v Addl CIT High CourtHelps departmentValidity unconfirmed
  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?
  From the date of the order. The Delhi High Court held that the starting point of the exclusion in clause (iii) of Explanation 1 to section 153 is the date on which the Assessing Officer directs the assessee to get the accounts audited, and not the date on which the assessee receives that direction. It also held that an order under section 142(2A) is communicated for this purpose when it is sent out, so a direction signed and despatched on the last day of limitation is in time even though it reaches the assessee later. The writ petition was dismissed and the assessment proceedings were held not to have abated.
• Delhi Development Authority v Union of India High CourtHelps taxpayerValidity unconfirmed
  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?
  No — not on that reasoning. Section 142(2A) is not a provision by which the Assessing Officer delegates to a chartered accountant the scrutiny and verification he is himself required to do. The reasons recorded must be genuine and must have a nexus with the statutory requirements, and where the officer lifted the assessee's own notes of accounts verbatim as his reasons, that disclosed non-application of mind and the directions were quashed for every year. Note the amendment: for the years before this Court (AY 2003-04 to 2009-10) the section spoke only of the nature and complexity of the accounts and the interests of the revenue, and the holding that a large number of entries is not by itself complexity is a construction of that text. The section as it now stands, substituted by the Finance Act 2023 with effect from 1 April 2023, lists volume of the accounts as an independent trigger.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.