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TMI Blog1999 (7) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in a position to look into the accounts of all the branches when the assessee is not in a position to produce all the books of account maintained by all the 43 branches of the assessee, then whether it can be said that the impugned order under section 142(2A) is without application of mind. Sub-section (2A) of section 142 reads as under : "(2A) if, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the Chief Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require." 3. There is no dispute that the Assessing Officer with the approval of the Commissioner or the Chief Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 40 lakhs of rupees, no special auditor can be appointed under sub-section (2A) of section 142 as the accounts have already been audited under section 44AB. 6. The learned counsel for the assessee submits that in case the assessee fails to produce the documents, assessment can be completed under section 144 and there is no need to appoint special auditor. Even in the assessment year 1993-94 a special auditor was appointed and in the report he found that income disclosed by the assessee was more than what had been found by the special auditor. Though the Assessing Officer did not accept that report and huge additions were made and those additions were deleted subsequently, therefore, he submits no purpose will be served by appointment of a special auditor under section 142(2A) and the assessee will be unnecessarily burdened with the fees of the special auditor that run into lakhs of rupees. 7. On the other hand, the learned counsel for the revenue submits that considering the nature and complexity of the accounts and as the assessee is not prepared to produce all the books of account and the material on which the books of account are prepared, the appointment of special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer has any other information necessitating special audit." In that case, the action of the Assessing Officer for appointment of special auditor under section 142(2A) has been upheld, but it was observed that after seeing the accounts the Assistant Commissioner had formed his opinion that the appointment of special auditor was a necessity. 10. In the case of Peerless General Finance Investment Co. Ltd. (supra), the appointment of special auditor was challenged by the assessee and this Court considered the facts of the case, that the appointment of special auditor has been proposed by the Assessing Officer on the ground that there was litigation between the assessee and the RBI and also between the assessee and the department. The learned Trial Judge, in this case, found that the litigations had nothing to do with the assessment of income of the assessee and, therefore, that cannot be the basis for appointment of special auditor. Therefore, that order of appointment of special auditor under section 142(2A) was set aside and quashed. 11. There is no doubt that before appointment of the special auditor there should be a ground that in the interest of the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarified to see whether these claims/expenditures were for the purpose of business and can be allowed under the Act and if so, to what extent. The assessee-company has purchased leaf tobacco worth Rs. 66.33 crores from All India Tobacco Co. Ltd., paper board worth Rs. 30.20 crores from Bhadrachalam Paper Board Ltd. and made payment of Rs. 11.45 crores on account of contractual obligation. Whether the expenditures are genuine or whether the expenditures are hit by any of the provisions of the Act that can be said only when there is verification from the material on which the accounts of the assessee and its branches are prepared. The assessee-company has also received share premium of Rs. 65.55 crores. Details thereof have not been furnished. 13. The assessee has claimed deduction of Rs. 22.27 crores while computing the taxable income, but no proper accounts and details thereof have been furnished. 14. The assessee has further debited Rs. 2,579.63 crores against the excise duty, but no details or break-up of the same have been furnished. The assessee-company has claimed deduction of Rs. 21,65,67,763 under section 43B which represents duties and taxes, but not debited in the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and recommended the matter for appointment of a special auditor to the Chief Commissioner. The Chief Commissioner has also issued a notice to the assessee on 5-3-1999 vide Annexure L asking the assessee to either appear in person or through authorised representative on 12-3-1999 and submit his objections, if any, against appointment of special auditor for the assessment year 1996-97. On 12-3-1999 written submissions were filed questioning the authority of the Chief Commissioner giving approval, in addition to the objections raised in the written submissions the summary of submissions made to the Chief Commissioner, was also annexed. 18. Dr. Pal, the learned senior counsel appearing for the assessee, has submitted that CST instead of giving approval to the proposal of the Assessing Officer after hearing, he sent that proposal to the Chief Commissioner for approval under section 142(2A). The Chief Commissioner has not given him hearing and approved the proposal of the Assessing Officer for appointment of special auditor that should not have been done. Mr. Roy Choudhury the learned counsel for the revenue, submits that by a notice of the Chief Commissioner the assessee was direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h have been produced, it cannot be said that it has not been considered. The written submissions not only were filed in response to the notice of the Chief Commissioner but were considered also. Therefore, it cannot be said that the Chief Commissioner has not given any opportunity to the assessee to make submissions against the order of approval for appointment of special auditor. There is, therefore, no case is made out that the principles of natural justice were violated. Therefore, it cannot be said that opportunity has not been given before approval of the appointment of the special auditor by the Chief Commissioner. 23. Dr. Pal, the learned counsel for the appellant, further submits that on 12-3-1999 the Chief Commissioner was not available for hearing. As stated above, when the written submissions were given, no further hearing was required and no specific requirement was there in the notice for personal hearing. Even otherwise this allegation of the learned counsel for the assessee will be either accepted or denied in the counter filed by the revenue. That was not before the learned Single Judge. Therefore, we have no comments on the allegation whether the Chief Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The interest of the assessee has been protected, that no assessee should unnecessarily be harassed by the Assessing Officer, that is why the duty has been cast on the senior officers of the department, i.e., the Commissioner or the Chief Commissioner, that without the approval of either the Commissioner or the Chief Commissioner, the Assessing Officer has no power to appoint the special auditor to look into the accounts of the assessee. Therefore, in our view, the power conferred on the Assessing Officer and the approval of the Commissioner and the Chief Commissioner is not confined to any turnover in business or profession. There is no limit or any bar on account of the amount of receipts either in business or profession. This power has been conferred on the Assessing Officer to do justice with the assessee and also to protect the interest of the revenue. 27. The learned counsel for the appellant, Dr. Pal, further submits that though the hearing was given by the Commissioner, but a proposal for the appointment of the special auditor under section 142(2A) has been given by the Chief Commissioner. We perused the relevant materials on record. There is no dispute on the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in pursuance of the order of the Learned Single Judge, the Assessing Officer has issued fresh notice/letter dated 20-4-1999, to the assessee to produce the relevant papers and documents which form the basis of the accounts in all the 43 branches such as, profit and loss account, balance sheet, trial balances, books of account and bank statements of some dividends of the company referred at page 2 of the notice and some transactions in the Leaf Tobacco Division up to 30-11-1996. Also the material recording the pre-deposit of Rs. 170 crores during the financial year relevant to the assessment year 1995-96, the details relating to loss of Rs. 14.88 crores - details recording the excise duty amount of Rs. 2,579 crores, the details of purchases worth Rs. 66 crores from the two concerns of this assessee-company and similar type of relevant records referred at page 4 from paragraph 11 onwards till paragraph 27. 29. The learned counsel appearing for the appellant submits that it is not possible to produce the records and because the record is voluminous and more than a truck-lorry load, it cannot be produced. Therefore, he objected to the requirement of the Assessing Officer under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r be stopped to verify and examine those entries ? Our answer obviously is in the negative. He cannot be stopped in case he found that there is a possibility of escapement of income and there is a possibility of bogus claims. The Assessing Officer has the power to verify the entries of the accounts which are based on the material with the assessee, having 43 branches all over the country. The assessee-appellant as well as the revenue are of the view that it is not possible and the interest of the revenue may suffer in case the income is not properly assessed. It is pertinent to note that in December, 1996, there was a search in offices, business premises and factories throughout the country and illegal transactions worth more than Rs. 200 crores were found, in such case the scrutiny of accounts and relevant material is all the more necessary to satisfy whether the entries made in the accounts are genuine. If it is not possible for the Assessing Officer, in view of the nature and complexity of the accounts, the Assessing Officer can ask for the approval of the appointment of special auditor. 31. The appointment of a special auditor is not only in the interest of the revenue but so ..... 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