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TMI Blog2013 (5) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... thermore, the proceedings under Section 142 (2A) of the Act is not strictly a judicial proceeding and, therefore, the elaborate reasoning is not required to be given. In the instant case, notice issued to the petitioner has contained issues in brief, which the A.O. thinks to be necessary and the reasons assigned therein is perfectly justified and opportunity has also been provided to the petitioner prior to impugned order. - Decided against the assessee. - Writ Petition No. 3492 of 2013 (M/B) - - - Dated:- 1-5-2013 - Rajiv Sharma And Arvind Kumar Tripathi (II), JJ. JUDGMENT Heard Sri Jaideep Narain Mathur, Senior Advocate, assisted by Sri Neerav Chitravanshi, Sri Anuj Kudesia and Sri Ashish Agarwal, learned Counsel for the petitioner and Sri D.D.Chopra, learned Counsel for the opposite parties. Through the instant writ petition under Article 226 of the Constitution of India, the petitioner prays for following reliefs : "A] Issue an order, direction or writ in the nature of certiorari quashing the impugned order 28.03.2013 issued by the Opposite Party No.2 (Annexure No. 1 to this writ petition), whereby opposite party no.3 has been appointed to conduct the audit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such, the Assessing Authority after obtaining necessary approval from the competent authority, issued a show cause notice under Section 142 (2) (A) of the Act for appointment of a Special Auditor for examining the books of accounts to which reply was tendered, but the reply so tendered was not found satisfactory and as such, orders were passed for appointment of a Special Auditor to audit the accounts books of the petitioner by M/s Mahendra Kumar Satya Company, Chartered Accountants, 4th Floor, Sri Ram Tower, Ashok marg, Lucknow, which in turn was directed to furnish a report of such audit in the prescribed form duly signed and verified by the Chartered Accountant. Being aggrieved by the said order, the instant writ petition has been filed. Mr. Jaideep Narain Mathur, Senior Advocate, appearing on behalf of the petitioner submits that the accounts which are maintained are not complex or not understandable. There is no basis for justification to get the same audited in exercise of the powers conferred under Section 142(2A) of the Act. Next he submitted that the impugned order dated 28.3.2013 passed under the aforesaid provisions of the Act reflects non-application of mind as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions, we would like to mention that it is a settled principle of law that while exercising its jurisdiction under Art. 226 of the Constitution of India, this Court does not sit as a Court of appeal and a patent illegality or lack of inherent jurisdiction in passing the impugned action/letter would be a limited ground for invoking the jurisdiction of this Court. Having heard Counsel for petitioner at great length as well as examining the facts and circumstances of the present case, we are of the considered view that impugned order dated 28.3.2013 does not suffer from a patent illegality or inherent lack of jurisdiction on the part of the Assessing Officer. There cannot be any dispute to the proposition that the competent authority under the provisions of the Act is vested with power to direct special audit, provided the conditions and requirements of Section 142 (2A) of the Act are satisfied. The provisions of this section contemplate that at any stage of the proceedings, the Assessing Officer having regard to the nature and complexity of accounts of the assessee and interest of the Revenue, is of the opinion that it is necessary to do so, he may with the previous approval of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epending on the availability of the abovesaid two facts. The provision does not use the words 'reason to believe'. Recording of reasons is not an essential requirement of the provision. The AO must obtain previous approval of the Chief CIT or the CIT. The intervention of such a high ranking authority is an in-built protection to the assessee again any arbitrary or unjust exercise of the power by the AO. It is not the case of the petitioner that such previous approval of the Chief CIT or the CIT has not been obtained. There is no allegation of mala fide. This Court would not in exercise of its writ jurisdiction sit in appeal over the formation of the opinion by the AO." Reference in this regard can also be made to the case of Super Cassettes Industries Ltd. vs. Asstt. CIT (1999) 102 Taxman 202 (Del), which reads as under : "8. In Abhay Kumar and Co.'s case (supra) validity of s. 44AB and s. 271B of the Act was under challenge. The learned Judge also interpreted s. 44AB. The emphasis was on the question whether this section was applicable to commission agents or not. The petitioners therein were commission agents. During the course of this judgment, the learned Judge had observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit under Section 142 (2A) is being sent to Commissioner, Income Tax, Lucknow. The order dated 14.3.2013 is reproduced as under : "Assessee's reply dated 7.3.2013 to show cause notice under Section 142 (2A) other replies documents filed by assessee are examined but not found satisfactory. The basis of charging centage from 0 to 12.5% is not clear. It is also not clear that revenue has been recognized by the assessee as per AS-7 (revised). As per AS-7 (revised) revenue from contract work should be recognized on the basis of percentage of completion method, however it appears that assessee has recognized revenue on deposit work as cost plus centage charges. Further, assessee has also charged method of accounting in respect of interest income. Having regard to the nature and complexity of assessee's accounts and considering it necessary in interest of revenue a proposal for special audit under Section 142 (2A) is being sent to CIT-II, through proper channel for kind approval." On receipt of the said proposal, the Commissioner had approved the proposal of the Assessing Officer and remitted the same to the Assessing Officer. Thereafter, impugned order was issued for special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple of natural justice. The facts of the aforesaid cases are not applicable in the instant case, insofar as discrepancies in maintaining the accounts have been pointed by statutory Auditor appointed by the Comptroller Auditor General of India vide his report dated 9.2.2011. Para-4 of the said report dated 9.2.2011 is produced as under :- "(i) Figure of Sundry Debtors, Sundry Creditors (Including head "Interest on unutilized funds"), Loans and Advances (Including Advance Income Tax, TDS, Service Tax VAT). Account of U.P. Government, Security (TDR) in hand, Balance in PLA in Lucknow Treasury, Advances (Client) and other liabilities are subject to confirmation, reconciliation and consequent adjustment, if any. (Refer Note No. 1.00, 7.00 19.00 of 'Notes on accounts') While making adjustments in Client Account with related WIP A/c, the Company came out with certain Client Heads where recovery was assessed as not possible. Therefore, an amount of Rs.13,35,702.59 (Prev. Yr. Rs.65,74,193.19) has been provided for as Bad Doubtful Debts during the year. (ii)No effect has been taken in the financial statement on account of shortage/excess which may arise after checking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s work-in-progress. The Company has, during the year, carried out an exercise and based on the same WIP to the extent of Rs.492.17 Cr. (Prev. Yr. Rs.345.12 Cr.) has been adjusted from Client account through Policy decision in this regard. It has been explained to us that during the year under audit the company has followed the system of adjustment of funds received against a project with the corresponding work in progress on the basis of internal documentation in respect of projects where completion certificate has not been received from the clients. Further, however, on the basis of information and explanation furnished to us, whereas some adjustments have been done during the year few adjustments have not been done for want of relevant information. Pending adjustments have resulted in overstatement of the figure of work in progress Rs.90,006.05 Lacs (Prev. Yr. Rs.1,30,195.79 Lacs). The amount of such overstatement have not been determined and disclosed by the company. (v) We would like to draw attention to 'Accounting Policy No. 7.00' which deviates from the Basic Accounting Principles to be strictly on "Accrual Concept" than on "Hybrid Concept"; Further, there is a chang ..... X X X X Extracts X X X X X X X X Extracts X X X X
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