9911796707
TMI Blog2010 (8) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... eir accounts by an accountant nominated by the Chief Commissioner of Income-tax, Calcutta-3 (CCIT) in respect of the assessment year 1987-88. The order was passed onJune 12, 2007, a copy of which has been made annexure P9 to the writ petition. 2. The dispute which led to passing of the impugned order originated in the year 1989 when the petitioner was directed through its principal officer to furnish certain information specified in a notice issued onDecember 29, 1989, in respect of the said assessment year. For the subject assessment year, the petitioner had filed their return declaring loss of Rs. 5,48,58,580, along with audited annual report, as well as tax audit report. It is pleaded in the petition that provisional assessment in respect of the petitioner's return was made under section 141A of the Act and the Assessing Officer had directed refund of a sum of Rs. 1,42,22,980. The petitioner claims to have furnished their response to the notice datedDecember 29, 1989but it appears that the authorities were not satisfied with such response. OnAugust 27, 1990another notice was issued detailing the particulars on which the income-tax authorities wanted further information/clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and verified in the prescribed manner information called for as per the enclosed letter of even date and on the points or matters specified therein before me at my office at Aayakar Bhawan, 5th Floor, P-7 Chowringhee Square, Kolkata-69 on January 15, 2007 at 2." 4. This communication was issued by the Deputy Commissioner of Income-tax of the relevant circle. 5. It appears that the matter was attended to onJanuary 17, 2007, instead ofJanuary 15, 2007, as submitted on behalf of the petitioner. The contention of the respondent authorities, however, is that none had appeared on behalf of the petitioner on that date. Another notice under the same provision was issued onApril 19, 2007, requiring the petitioner to disclose certain information in the prescribed manner. This letter stipulates: "Sir/Madam, In connection with the assessment for the assessment year 1987-88 you are required to: (a) . . . (b) . . . [c] **furnish in writing and verified in the prescribed manner information called for as per the enclosed letter of even date and on the points or matters specified therein before me at my office at Aayakar Bhawan, 5th Floor, P-7 Chowringhee Square, Kolkata-69 on April 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writing onJune 11, 2007, to the said proposal indicating that there was no necessity of appointment of special auditor and outlined their reason on the basis of which the proposal for special audit was being resisted by them. On June 12, 2007, an order was passed by the Chief Commissioner of Income-tax nominating Sri Somnath Bhattacharaya, to act as accountant within the meaning of section 142(2A) of the Act for audit of the accounts of the petitioner in respect of the subject financial year. The Assessing Officer, being the Deputy Com-missioner of Income-tax had passed the order directing special audit on the following grounds: "The assessee-company, M/s. Indian Aluminium Co. Ltd. is engaged in the business of manufacturing aluminium products. The assessee has units at various places in the country. In the revised return of income filed onMarch 7, 1999, the assessee company claimed loss of Rs. 5,94,83,914. The assessee has claimed total expenditure, i.e., Rs. 23,731.41 lakhs broadly under four head. The main item of expenditure, i.e., Rs. 17,815.71 lakhs has been shown in the head of `cost of sales'. Further, substantial expenditure has been claimed under sub-heads like `power a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These are two judgments of the hon'ble Supreme Court in the cases of (i) being Rajesh Kumar v. Deputy CIT reported in [2006] 287 ITR 91 (ii) Sahara India (Firm) v. CIT reported in [2008] 300 ITR 403 (SC) and a decision of the hon'ble single judge of this court in the case of West Bengal State Co-operative Bank Ltd. v. Joint CIT reported in [2004] 267 ITR 345 (Cal). It has also been argued by Dr.Pal that in the present case, the factual position did not justify invocation of power under the provisions of section 142(2A). He submitted that there was no complexity of the accounts involved in the case of the petitioner in respect of the subject assessment year. 10. Complaint has been made on behalf of the petitioner that the letter datedJanuary 11, 2007, did not contain any enclosure. A letter, however, addressed to the petitioner containing the points on which information was sought has been annexed to the affidavit-in-opposition marked "C", originating from the office of the Deputy Commissioner of Income-tax, Special Range-13. In this letter, the petitioner has been asked to disclose informations against thirty-three subject heads. The case of the income-tax authorities is that suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub7f section (2) of section 288, nominated by the Chief Com-missioner 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 :Provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a rea-sonable opportunity of being heard." 14. The hon'ble Supreme Court in the case of Rajesh Kumar [2006] 287 ITR 91 held that without giving an opportunity of hearing, such order could not be passed. Another Bench of the court of the hon'ble Supreme Court took a different view. The matter was thereafter referred to a three-judge Bench of the hon'ble Supreme Court. The Bench comprising of three hon'ble judges of the Supreme Court in the decision of Sahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of explanation and clarification which may be required by the special auditor on various issues with relevant data, document, etc., which in the normal course, an assessee is required to explain before the Assessing Officer. Therefore, special audit is more or less in the nature of an investigation and in some cases may even turn out to be stigmatic." 16. Now, that the necessity for complying with the principles of natural justice on the part of the income-tax authorities stands established even after the amendment of the aforesaid provision, I shall examine the question as to whether there has been actual violation of the principles of natural justice in this case. 17. Mr. Shome, learned senior advocate appearing for the income-tax authorities has submitted that in the present case notices were issued and the petitioner was actually heard. He refers to the notices dated11 January 2007and20 April 2007and refers to the order sheet recording the proceeding of25 April 2007. He further submits that before approving the proposal, the Chief Commissioner of Income-tax had also given opportunity of hearing to the petitioner. The income-tax authorities have also disputed allegation tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f them was not satisfied, no order could be passed. If the attention of the Commissioner could be drawn to the fact that the underlying purpose for appointment of the special auditor is not bona fide he might not have approved the same. Assuming that two sets of accounts were being maintained the same would not mean that the nature of accounts is difficult to understand. It could have furthermore not been shown that the power is sought to be exercised only for an un authorized purpose, viz., for the purpose of extension of the period of limitation as pro-vided for under Explanation 2 to section 158BE of the Act. An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the Assessing Officer if he was found to have adopted a wrong approach or posed a wrong question unto himself. He could have been asked to complete the process of assessment within the specified time so as to save the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference has been made by the Chief Commissioner of Income-tax in the order of approval and the proposal are made available to the assessee only at the stage of hearing on the question of granting approval, that would not constitute sufficient opportunity so far as the assessee would be concerned, to enable them to effectively resist grant of approval. Under these circumstances, in my opinion, the principles of natural justice were breached, as the petitioner was not given sufficient opportunity to present their case at the approval stage before the Chief Commissioner of Income-tax. were also advanced before me that there was no complexity of the accounts involved in the present case that would have warranted initiation of proceeding under section 142(2A) of the Act. Several authorities were cited by the learned counsel appearing for the respective parties on that point. Mr. Shome referred to the decisions of the hon'ble Supreme Court in the case of Living Media Ltd. v. CIT [2002] 255 ITR 268 a decision of a Division Bench of this court in the case of Joint CIT v. I. T. C. Ltd. reported in [1999] 239 ITR 921 and a Bench decision of the hon'ble Delhi High Court in the case of Gurunan ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
