ITAT Quashes Assessment Orders on Grounds of Invalid Special Audit Reference: Allows Appeals of Legal Heirs

The Income Tax Appellate Tribunal (ITAT) has quashed the assessment orders passed against the legal heirs of a deceased taxpayer. The tribunal's decision was based on the ground that the reference to a "special audit" under Section 142(2A) of the Income Tax Act was invalid. A special audit is a detailed audit of a taxpayer's accounts ordered by the tax department. The ITAT found that the conditions for ordering such an audit were not met in this case. Since the entire assessment was based on the findings of this invalid special audit, the tribunal ruled that the assessment orders themselves were legally unsustainable. This judgment is a significant relief for the legal heirs, as it nullifies the tax demand. It also emphasizes that the department must follow the due process of law strictly before ordering a special audit.