ORIENTAL INSURANCE CO. LTD., vs. ASSISTANT COMMISSIONER OF INCOME TAX & ORS.

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W.P.(C)/1750/2020HC DelhiDLHC01012660202021 February 2023Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MS. JUSTICE TARA VITASTA GANJU2 pages
AI SummaryRemanded

What did the High Court hold?

The Delhi High Court held that the impugned direction for a special audit under Section 142(2A) of the Income Tax Act, 1961, for Assessment Year 2017-18, has been rendered inefficacious. This is because the Assessing Officer has already passed the assessment order under Section 143(3) read with 144B of the Act on 30.09.2022, during the pendency of the writ petition. The Court explicitly stated that the setting aside of the special audit direction was not on merits but due to this procedural circumstance. Consequently, the interim order that had stayed the special audit was vacated. The Court did not decide on the merits of the special audit itself.

What were the facts?

The petitioner, Oriental Insurance Co. Ltd., filed a writ petition before the Delhi High Court challenging a reference made to a Special Auditor under Section 142(2A) of the Income Tax Act, 1961, for Assessment Year 2017-18, vide a Direction/Terms of Reference dated 31.12.2019. The High Court had initially stayed the direction for the special audit. While the writ petition was pending, the Assessing Officer proceeded with the assessment proceedings and passed an assessment order under Section 143(3) read with 144B of the Act on 30.09.2022. This rendered the impugned direction for a special audit ineffective.

What were the issues?

1. Whether the direction for a special audit under Section 142(2A) of the Income Tax Act, 1961, for Assessment Year 2017-18, issued vide Direction/Terms of Reference dated 31.12.2019, is liable to be quashed? The petitioner sought to quash this direction. The revenue's contentions are not explicitly recorded in the judgment, but their participation as respondents implies opposition to the petitioner's prayer. The issue is framed as a question of law and mixed fact and law, turning on the interpretation and application of Section 142(2A) in light of subsequent events.

Which sections of the Income-tax Act were involved?

Section 142(2A),Section 143(3),Section 144B

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$~25 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1750/2020

ORIENTAL INSURANCE CO. LTD.

.....Petitioner

Through: Mr Mayank Nagi, Adv.

versus

ASSISTANT COMMISSIONER OF INCOME TAX & ORS.

..... Respondent Through: Mr Shailender Singh, Sr Standing Counsel with Mr Akash Saxena, Adv.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

HON'BLE MS. JUSTICE TARA VITASTA GANJU

O R D E R %

21.02.2023 [Physical Hearing/Hybrid Hearing (as per request)] 1. The substantive prayer made in the writ petition reads as follows: “a) A Writ of Certiorari or Writ, Order or Direction in the nature of Certiorari, or any other appropriate Writ, Order or Direction under Article 226 I 227 of the Constitution of India quashing the reference made to the Special Auditor u/s 142(2A) of the Act, for Assessment Year 2017-18, vide Direction/Terms of Reference dated 31.12.2019.

b) A Writ of Prohibition or Writ, order or direction in the nature of Prohibition, or any other appropriate Writ, order of direction under Article 226/227 of the Constitution directing status quo during the pendency of the present Writ.”

2.

While issuing notice in the writ petition, the coordinate bench of this Court had stayed the directions issued by the respondent/revenue for conducting a special audit qua the petitioner. W.P.(C) 1750/2020

1/2 This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/06/2026 at 12:09:37

3.

It appears, that while the writ petition was pending adjudication, the Assessing Officer (AO) continued with the assessment proceedings and passed the assessment order on 30.09.2022 under Section 143(3) read with 144B of the Income Tax Act, 1961 [in short, “Act”]. 4. Given this position, the impugned direction issued by the respondent/revenue to carry out the special audit has been rendered inefficacious. 5. Therefore, the impugned direction, whereby the special audit was ordered vis-a-vis the petitioner, by taking recourse to the provisions of Section 142(2A) of the Act concerning Assessment Year 2017-18 is set aside. 6. This of course, as is obvious, is not on merits, but on account of the circumstance noted above, which is that the assessment order has already been passed. 7. The Registry will scan and upload the copy of the assessment order dated 30.09.2022 which has been placed before us, so that it remains embedded in the case file. 8. Consequently, interim order dated 17.02.2020, which was made absolute on 31.01.2022 shall stand vacated. 9. List the matter 06.10.2023. RAJIV SHAKDHER, J

TARA VITASTA GANJU, J

FEBRUARY 21, 2023/pmc

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W.P.(C) 1750/2020

2/2 This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/06/2026 at 12:09:37

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