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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 ..... 2013 issued by the opposite party no.2 (Annexure 1 to this writ petition) and further be pleased to restraint the opposite parties from proceeding further in any manner in pursuance to the impugned order dated 28.03.2013 issued by the Opposite Party No.2 (Annexure 1). C] Issue any other appropriate writ, order or direction which the Hon'ble Court may deem just, fit and proper in the facts and circumstances of the case. D] Award the costs of the petition to the petitioner." Shorn off unnecessary details the facts of the case are as under : The petitioner is a Government Company, registered under Section 617 of the Companies Act, 1956. The entire paid up share capital is held by the Government of Uttar Pradesh. The object of the petitioner's company is to promote the interest of the members of the Scheduled Caste and Scheduled Tribes or Backward Classes and schemes connected therewith and accordingly, the income arising from that activity is exempted under Section 10 (26B) of the Income Tax Act, 1961 [hereinafter referred to as the "Act"] The books of accounts of the petitioner are audited by the statutory auditors duly appointed by the Comptroller & Auditor General of India as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner ought to have given an opportunity as per law but no such opportunity was given to the petitioner. Thus, the impugned order is liable to be set-aside. To strengthen his aforesaid arguments, Mr. Mathur has relied upon the cases of Rajesh Kumar and others versus Deputy Commissioner of Income-Tax and others reported in [(2007) 2 SCC 181 and Sahara India (Firm), Lucknow versus Commissioner of Income-Tax, Central-I and another reported in [(2008) 14 SCC 151]. Refuting the assertion of the petitioner, Mr. D.D. Chopra, learned Counsel for the opposite parties submits that the order for special audit has been passed on the grounds that (i) the assessee has not charged percentage @ 12.5% in its many of its projects; (ii) the value of work done differs in the two audit reports furnish by the assessee; (iii) during the year, the assessee has changed the accounting policy from accrual basis to cash basis in respect of interest earned on bank deposits; and (iv) the accounts have not been prepared as per AS-7 (revised). On the strength of the decisions rendered in U.P. State Industrial Development Corpn. Ltd. versus Chief Commissioner of Income-tax : [(2011) 203 Taxman 337/15 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the section, keeping in view the facts and circumstances of the case. In the case of Gurunanak Enterprises vs. CIT and Anr, (2003) 180 CTR (Del) 203 : (2003) 259 ITR 637 (Del), the Division Bench of the Hon'ble Delhi High Court has held as under : "A bare perusal of the provision would show that the opinion of the AO has to be formed only by having regard to : (i) the nature and complexity of the accounts of the assessee; and (ii) the interests of the Revenue. The word 'and' signifies conjunction and not disjunction. In other words, the twin conditions of 'nature and complexity of the accounts' and 'the interests of the Revenue' are the pre-requisites for exercise of power under s. 142(2A). Although the object behind enacting the said provision is to assist the AO in framing the assessment when he finds the accounts of the assessee to be complex and is to protect the interest of the Revenue recourse to the said provision cannot be held by the AO merely to shift his responsibility of scrutinising the accounts of an assessee to determine his true and correct income, on to an auditor. True that an order under the said provision cannot be passed on the ipse dixit of the AO me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AB. The two provisions are consistent.' 8.1. In our opinion, even this observation does not advance the petitioner's case before us. The learned Judge has held the two provisions to be consistent and not hit by the rule of double jeopardy. The specific object behind enacting sub-s. (2A) into s. 142 is to assist the AO in framing an assessment when he finds the accounts of the assessee to be complex, by having the services of a special auditor at hand. Special audit can also be ordered so as to protect the interest of the Revenue. Such objects may or may not be achieved by the audit contemplated by s. 44AB." The above enunciated principle clearly shows that there has to be objective consideration and application of mind by the Assessing Officer, based upon the material and proper examination of the books of account produced by the assessee, before a direction, as contemplated under Section 142(2A), can be issued to the assessee. In the present case, during pendency of the assessment proceedings, the reply filed by the assessee was found to be unsatisfactory. After examination of the books of account and the documents, the Assessing Officer was of the opinion that it would be in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account of the assessee and not the other records available before the Assessing Officer for examination or otherwise. The complexity of accounts of the assessee is to be determined not only by the books of account, but even by other documents which are available, in the course of an assessment and at any stage subsequent thereto may become available to the Assessing Officer. To give a narrow meaning to the expression 'accounts' so as to confine it to the books of account, submitted by the assessee simplicitor, would amount to giving an interpretation which would completely defeat the very object of the section. The mere fact that the petitioner has submitted audited account and, therefore, there is no occasion for directing special audit, is also of no help to the petitioner. Submission of audited accounts per se would not oust the jurisdiction or authority of the Assessing Officer to pass such a direction. Of course, he is expected to issue directions after due application of mind and in accordance with the principles aforenarrated. The Assessing Officer, while applying his mind, to the facts and circumstances of the case, need not confine himself only to the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous concerned staff of the units. Any delay in preparing/checking these consumption statements and any legal issues arising there-from causing undue delay in realizing dues from concerning staff, affects recoverability of the said amounts. A sum of Rs.NIL (Prev. Yr. Rs.18,60,740.04) has been provided for/written off as Bad & Doubtful Debts on this account during the year. (Refer Note No. 11.00, 24.00 & 29.00 of 'Notes of accounts'). (iii)Interest on investment out of unutilized government funds has been treated as funds received from government and the same is partly disclosed as 'Current Liabilities' and remaining taken to profit & loss account as 'Other Income'. Since interest accrued on funds employed by the company out of its own resources and that of unutilized government funds has not been separately identified, the company has, as a consistent practice since earlier years, bifurcated interest on fixed deposits with banks and interest on saving accounts maintained at head office on the basis of formula adopted by it. (Refer Policy No. 4.00 of 'Accounting Policies' & Note No. 12.00 of 'Notes on accounts.) Due to non-availability, the Company was unable to provide GO dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy No. 7.04 & Notes on account No. 23.00) There is another change in policy in accounting for VAT refundable from Commercial Tax Authorities as per Annual Returns & VAT Audit Reports of the Units. The Corporation has not accounted for the same as refund receivable and simultaneously no credit has been given to the respective clients account. Therefore, Current Assets (VAT Refund Receivable) as well as Current Liabilities (Client Account) are understated by Rs.20,27,371.00 (Prev. Yr. NIL)." Thus, from perusal of the above report, it reflects that Auditor have pointed out many infirmities in the Assessee's acccount. In Purvanchal Vidyut Vitran Nigam Ltd. Versus Union of India reported in 329 ITR 508 (Alld.), it has been held that the object behind enacting Section 142 (2A) is to assessed the assessing officer in framing a correct and proper assessment based on the accounts maintained by the assessee and when the assessing officer finds the accounts of the assessee to be complex, in order to protect the interest of the revenue. Further it was held that where the opportunity has been given to the assessee and their proper reason for framing the opinion that the nature of the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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