a) Petitioner-Chartered Accountant (CA) was engaged by the revenue authorities to conduct a special audit of a company. Audit Report was submitted and a huge addition of Rs. 720 crore was made.
b) CA submitted bill to the revenue for his professional services detailing 1315 man hours spent by his team. A total bill of more than Rs. 1 crore was raised taking average rate of manhour at Rs. 7500 per hour.
c) AO was of the view that time spent on lunch, refreshments, etc. should have been proportionately discounted from the bill. 85 per cent of the billed hours were considered by him as reasonable and accordingly reduced the average rate from Rs. 7500/hour to Rs. 4000/hour.
d) CIT(A) upheld the order of the AO. CA filed writ before the High Court:
High Court held as under:-
1) Unlike employees, professionals do spend 9 to 10 hours a day on their work, even at odd hours, and attend to their basic necessities in the remaining hours of the day. Exclusion of such necessary recess for consumption of food and refreshment, etc. for a person to render quality work was illogical.
2) It was noteworthy that the quality of the report had been assessed as 'very good' by the AO.
3) Audit work was rendered by the CA’s four partners, Chartered Accountants and other personnel i.e. by qualified assistants and semi-qualified assistants.
4) Notably, the work experience of the partners ranged from 3 to 27 years while the range permissible billing rate was between Rs. 3,500/- to Rs. 7,500/- and the rate of sitting could be correspondingly adjusted as per their regular sitting hours; instead it had arbitrarily been reduced to an average rate of Rs. 4,000/- per hour.
5) What the revenue was to assess was whether the special audit report was (i) within time, (ii) of the desired quality (iii) the billing was commensurate with the nature of inquiry and the quantum of the records to be looked into; etc.
6) If the audit report was of good quality and, inter alia, authored by a qualified professional having a fair number of years of experience then he/she might well be entitled to ask for the highest prescribed billing rate.  79 taxmann.com 415 (Delhi)