Prior scrutiny of accounts before referring them for special audit is sine qua-non and if the same has not been done the direction for special audit is bad in law and hence assessment framed becomes nullity

Jyoti Traders Vs DCIT (ITAT Mumbai)- In our view the conditions precedent for passing an order u/s.142(2A) of the Act directing the Assessee to get its account audited by a special auditor viz., the satisfaction of the AO having regard to the nature and complexity of the accounts of the assessee and the interest of the revenue, that is necessary get the assessee’s account audited by a special auditor is not fulfilled in the present case and therefore the reference to special audit is held to be invalid.

Consequently, the extended time available for passing the order of assessment in terms of Sec.158BE of the Act cannot also be availed by the AO. The order of assessment is therefore held to be barred by limitation. The order of assessment is therefore invalid and the consequent action u/s.263 of the Act setting aside such invalid assessment cannot also be sustained.

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