Sahara moves SC against IT Dept order

NEW DELHI: Sahara Group has moved the Supreme Court, challenging the order of the Income Tax Department to appoint a chartered accountant to conduct an audit of the accounts of some of its firms.

The move follows rejection of its petition by the Delhi High Court, which upheld the government's decision to appoint KG Somani and Co as special auditor to check the books of Sahara India and its residuary non-banking firm, Sahara India Financial Corporation.

The high court had held the appointment as a step toward completion of assessment proceedings.

Sahara India had moved the high court seeking quashing of the order passed by the Commissioner of Income Tax, Delhi, that directed the company to get its accounts audited by chartered accounts. The petition was dismissed in October.

The company alleged that the order passed by the Commissioner of Income Tax violated the principles of natural justice as it was not given an opportunity of being heard by the authorities.

Neither books of account nor any issue/query was called for between the commencement of assessment proceedings in February 2005 and the date of the order in March 2006, it added.

Sahara India, in its petition filed through counsel Sujata Kurdukar, stated that the upholding of the order by the high court would mean that the company would have to undergo a special audit year after year till it is in the business.

"Such an interpretation would give licence to the assessing officer to direct special audit without any application of mind," the petition added.

The company contended that the order directing special audit was bad in law as the IT Commissioner had delegated his quasi-judicial functions of making an assessment to the special auditor.

According to Sahara India, it had filed a return on an income of Rs 11.40 crore for 2003-2004 along with a statutory audit and tax audit reports certifying that accounts were being maintained on mercantile system of accounting.

The Income Tax Department earlier had issued an order for transferring all the tax matters of the Lucknow-based company to Delhi.

Sahara's petition challenging the transfer of the records was dismissed by the Lucknow bench of Allahabad High Court in February this year.