Initiation of special audit of ‘Patanjali Ayurveda’ due to complexity in accounts is justified: Delhi HC
a) The assessee-company (Patanjali Ayurveda Ltd.) had filed its income-tax returns. The revenue passed an order directing its special audit, inter alia, stating complexity in the accounts of the assessee.
b) Assessee had filed instant appeal against impugned order of directing special audit.
The High Court held in favour of revenue as under:
1) It was found that the assessee was maintaining accounts of imprest with various persons. The assessee was asked to file the details of such imprest accounts and also to show cause that while maintaining the accounts on the mercantile basis, why the imprest accounting (cash basis) was followed.
2) Assessee submitted details of imprest accounts in the names of various persons but could not justify the ‘maintenance of such a large number of imprest accounts. In this connection the assessee replied that the distance of all the three units from each other was 14-55 km. So, looking to the distances between the three units, it was necessary for the company to maintain imprest account.
3) However, the assessee failed to justify the effect of the various imprest-accounts on the method of accounting and the complexity in its accounts.
4) Further, the assessee claimed deduction under section 80I-C. It was perused from computation of income that the amount of exemption claimed under section 80I-C differed in both original and revised returns.
5) It was beyond imagination or understanding as to how the assessee computed two different amounts of deduction for claiming deduction under section 80-IC when there were audited books of account.
6) This shows that the books of account were not completed and correctly maintained in normal course of business activities of the assessee and financial results could not be relied upon. –  101 taxmann.com 46 (Delhi)