Centre, IT to reply on Vodafone plea against special audit notice

New Delhi: Delhi High Court on Thursday sought the Centre's response on Vodafone's plea challenging an Income Tax notice asking the company to show cause why its 2011-12 financial records not be subjected to special audit to arrive at the total income for assessment year 2012-13.

A bench of justices S Muralidhar and Vibhu Bakhru issued notice to the government and the IT department seeking their replies by March 21 to the plea which also challenges the amendment to section 142(2A) of IT Act that says the assessing officer can seek a special audit in certain circumstances.

Vodafone Mobile Services Ltd has contended that referring a company for special audit is akin to a stigma on it and this power ought to be exercised only after satisfying the twin conditions of "complexity in the accounts and protecting interests of the revenue".

Senior advocate P Chidambaram, appearing for Vodafone, contended that issuance of show cause notice to refer their accounts to special audit was done to "save" the department from "limitation" and to pass an assessment order by March 31.

He said the company was willing to waive defence of limitation and the IT department can take its own time to assess their accounts without referring it for special audit.

The court then asked the government to take instructions on Vodafone's submission and listed the matter for hearing on March 21.