2000 (3) TMI 8 - HC - Income Tax

Audit of accounts - petitioners were directed to get their accounts audited and furnish the report of such audit in the prescribed form duly signed and verified by the chartered accountant - The petitioners failed to perform their duty and obligation to produce the account books and relevant information which were complex in nature before the income-tax authorities for the assessment of income-tax leaving no option to the Assessing Officer but to exercise his powers under section 142(2A). - Such an action was genuinely required in the interests of the Revenue. We are definitely of the view that the special audit, having regard to the complexity of accounts, is relevant for the assessment proceeding. Petition of assessee is dismissed

Summary

Issues Involved:
1. Jurisdiction of the authority passing the impugned order.
2. Objective assessment of the complexity of accounts.
3. Examination of account books by the authority.
4. Completion of the examination of account books post the impugned order.

Detailed Analysis:

Jurisdiction of the Authority Passing the Impugned Order:
The petitioners contended that the impugned order was signed by an authority, Mr. M.C. Baurai, who had no jurisdiction over the petitioners as he was on leave and another officer, Mr. M.K. Singhania, had taken over. The court clarified that both Mr. Baurai and Mr. Singhania had concurrent jurisdiction over the matter. The definition of "Assessing Officer" under section 2(7A) of the Income-tax Act, 1961, includes officers with relevant jurisdiction by virtue of directions or orders issued under section 120. Hence, the contention that Mr. Baurai had no jurisdiction was found to be misconceived.

Objective Assessment of the Complexity of Accounts:
The petitioners argued that the objective assessment of the complexity of accounts was not made, and the satisfaction arrived at was not based on objective material, thus suffering from non-application of mind. The court referred to the requirements under section 142(2A) of the Income-tax Act, which necessitate an opinion based on the nature and complexity of the accounts and the interests of the Revenue. The court cited the Calcutta High Court's decision in Peerless General Finance and Investment Co. Ltd. v. Deputy CIT, emphasizing that the opinion must be based on objective considerations. However, in the present case, the court found that the petitioners did not produce the account books, and the impugned order was based on the available material, indicating sufficient complexity.

Examination of Account Books by the Authority:
The petitioners claimed that the complexity of the accounts could be verified from the account books, which were never examined by the authority passing the impugned order. The court noted that the petitioners themselves admitted the complexity by stating that the number of depositors exceeded two crores, with more than 1,200 branches, making it impossible to scan the entire list of depositors. The court held that the petitioners' failure to produce the account books could not be used to argue against the necessity of a special audit.

Completion of the Examination of Account Books Post the Impugned Order:
The petitioners contended that even after passing the impugned order, the examination of the account books had not been completed. The court observed that the petitioners had not fulfilled their duty to produce the account books and relevant information, leading to the necessity of a special audit. The court emphasized that the special audit was in the interests of the Revenue and relevant for the assessment proceedings. The petitioners were required to get their accounts audited by a chartered accountant and furnish the report to the income-tax authorities.

Conclusion:
The court concluded that the petitioners' arguments were without merit. The special audit was justified due to the complexity of the accounts and was necessary for the assessment proceedings. The writ petitions were dismissed, and the petitioners were directed to comply with the special audit requirements.

Petition dismissed.