9911796707
TMI Blog2013 (6) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act has set in, and therefore no assessment order under Section 153A could be passed after 31.12.2009. The petitioner company has prayed to set aside all the actions taken by respondent nos.1 and 2 pursuance to the impugned order dated 28.1.2010. 2. The Prateek Resorts & Builders Private Ltd. (the petitioner) through its Director Mr. Getamber Anand has filed the other Writ Petition No.339 of 2010 against the order dated 18.2.2010 passed by the Asstt. Commissioner of Income Tax (Central Circle), Meerut (respondent no.1), directing the petitioner-company to get its accounts audited under Section 142 (2A) of the Income Tax Act, 1961 (the Act) for the financial years 2001-02 to 2007-08 relevant to assessment year 2002-03 to 2008-09 from M/s Tandon Seth & Co., Kanpur, nominated by the Commissioner of Income Tax (Central), Kanpur, with his previous approval communicated vide his letter dated 28.1.2010. The petitioner has also prayed for a direction in the nature of certiorari holding that the limitation for completing assessment under Section 153B of the Act has set in, and thus no assessment order under Section 153A could be passed after 31.12.2009. The petitioner company has also pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and issued notice to the ATS Infrastructure Ltd. under Section 153A/ 142 (i) (ii) and (iii) of the Act for the assessment years 2002-03 to 2008-09 (corresponding to financial year 2001-02 to 2007-08) vide notice dated 6.11.2009. 7. The Asstt. Commissioner of Income Tax (Central Circle) Meerut issued a show cause notice under Section 142 (2A) of the Act dated 7.12.2009 for the assessment year 2002-03 to 2008-09. The petitioner companies filed their reply to the notices on 14.12.2009. An order was, thereafter, passed on 18.12.2009 under Section 142 (2A) directing the petitioner to get the accounts audited by special auditor. The petitioner filed Writ Petition No.33 of 2010 on 11.1.2010 for setting aside the order. This High Court allowed the writ petition within two days at the stage of admission, and by its judgment dated 13.1.2010 set aside the order dated 18.12.2009 on the ground that the order directed special audit to be carried out does not contain any reasons, nor there is, from the order, appear any application of mind on the part of the officer concerned on the basis of the material available on record, and in the absence of the reasons in the order for the direction as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act could not be exercised. There appears to be a substance in the argument of learned counsel for the petitioner which requires consideration. Learned Standing Counsel prays for and is granted two weeks time to file counter affidavit. Rejoinder affidavit may be filed within two weeks thereafter. Connect with Writ Petition No. 339 of 2010. List in the week commencing 19.4.2010. Till the next date of listing, the operation of the order dated 28.1.2010 under Section 142 (2A) of the Act passed by the Assistant Commissioner of Income Tax, Central Circle, Meerut, Annexure-1 to the writ petition, and the assessment proceeding for the assessment years 2002-03 to 2008-09 shall remain stayed." 9. The Asstt. Commissioner of Income Tax Meerut, filed Special Leave to Appeal (C) No.6120 of 2011 from the judgment and order dated 13.1.2010 in Writ Tax No.33 of 2010. On 16.6.2012, the Supreme Court has passed the following order:- "Having heard learned counsel on both sides, we request the High Court to expeditiously hear and dispose of Writ Tax No.418 of 2010 within six weeks from today. We make it clear that the High Court will decide the matter on its own merits and merely because s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law. The observations, "however it will be open to the Asstt. Commissioner of Income Tax (Central Circle), Meerut to pass fresh order in accordance with law" will not extend the limitation curtailed by the Statute. In Rajendra Nath & Ors. v. CIT, Delhi, (1979 4 SCC 282 (pp 11 and 12) the Supreme Court held that a direction by statutory authority is in the nature of order requiring positive compliance. When it is left at the discretion of the statutory authority, whether or not to take action, it can not be described as a direction. 12. In support of the bar of limitation Shri S.P. Gupta has relied on:- (i) Supdt. of Taxes, Dhubri and Ors. v. Onkarmal Nathmal Trust etc. etc. 1975 AIR 2065 (pp 14, 17, 18, 34 and 74). (ii) Sirajul Haq Khan and Ors. v. Sunni Central Board of Waqf-AIR 1959 SC 198 (pp 2, 3, 12, 19, 21, 22 and 24). (iii) Gokak Patel Volcart Ltd. V. Collector of Central Excise, (1987) 2 SCC 93 (pp.5) (iv) Hope Textile Ltd. & Ors. v. Union of India, 1995 Supp. (3) SCC 199 (v) P. Vittal Pai & Ors. v. Agricultural Income Tax Officer, ILR 1975 Kar 1175 (pp.115 and 117) (vi) CIT v. Shyamal Bhattacharyaji, 2007 (209) ITR 178- Question in issue at page 109 and finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Shri S.P. Gupta submits that the word complexity has been explained in para 13 of the judgment in Rajesh Kumar & Ors. v. Deputy CIT, (2007) 2 SCC 181, which would mean the state or quality of being intricate or complex or which is difficult to understand. The difficulty in understanding would however not lead the conclusion that the accounts are complex in nature. No order can be passed on whims or caprice of the income tax authorities. The Supreme Court has referred to Swadeshi Cotton Mills Co. Ltd. v. CIT, 171 ITR 634 (All.) and quoted the observations from that case, which state; "however, all that are difficult to understand should not be regarded as complex. What is complex to one may be simple to another. It depends upon one's level of understanding or comprehension. Sometimes what appears to be complex on the face of it may not be really so if one tries to understand it carefully. Therefore special audit should not be directed on a cursory look at the accounts. There should be an honest attempt to understand the accounts of the asessee" These observations were affirmed in Sahara India Firms v. CIT (Supra). 17. Shri S.P. Gupta submits that an enquiry relating to assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or accounting standards as notified under sub-section (2) have not been regularly followed, the Assessing Officer cannot resort to the powers under Section 142 (2A) of the Act. 19. Shri S.P. Gupta submits that even if the assessee does not comply with the notice under Section 142 (1) or Section 143 (2) or Section 144, the Assessing Officer can proceed to frame an assessment on the best of his judgment. In none of these situations he can exercise the powers directing special audit under Section 142 (2A). It is only in a case in which he finds that the accounts books are such that he cannot, or should not frame assessment, to the best of judgment, that he may resort to Section 142 (2A) of the Act. Such a situation will arise only when he has given an opportunity to the assessee to the account. He relies upon the observations in Sahara India (Firm) v. CIT (Supra) that before dubbing the accounts to be complex or difficult to understand, there has to be a genuine and honest attempt on the part of the Assessing Officer to understand the accounts maintained by the assessee; appreciate the entries made therein. In the event of any doubt he should assistance or explanation from the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to show that books of accounts were never examined by the Assessing Officer. He did not rely upon print outs and required original books of accounts. The petitioner has filed photocopy of the ordersheet entries of all the assessment years 2002-03 to 2008-09, which according to him were made available to him on 15.9.2010, and from these ordersheet entries, a strong case is sought to be made out that these entries, which are not countersigned by the authorized representative of the petitioner, would show that on none of the dates the authorized representative of the petitioner appeared or countersigned the entires and from this it is clear that the books of accounts were not examined by the Assessing Officer. He did not even examine the books of accounts of which print outs were provided by the petitioner in the presence of the authorized representative of the petitioner, nor any query regarding complexity of the books of accounts was ever raised or any opportunity was given to the authorized representative to explain the queries with reference to the books of accounts. 22. It is submitted that the show cause notice dated 20.1.2010 would show that the grounds taken up do not relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng experts to compute the taxable income. 25. Shri Bharat Ji Agrawal, learned Senior Counsel appearing for the income tax department submits that a search under Section 132 of the Act was conducted on 15th February, 2002 at the business premises of the petitioner-companies, in which the records were seized on 15/16th February, 2008. Following the search it is admitted in para 6 of the writ petition that the income tax department carried out extensive investigation for about ten months into the financial affairs of the companies and thereafter the records seized along with investigation report was handed over to the Asstt. Commissioner, Income Tax (Central Circle), Meerut, who is the Assessing Officer. The petitioner admits that the representative of the petitioner companies regularly participated in the proceedings and made available all the documents and account books as and when required by the income tax department. It is also admitted in para 7 of the writ petition that all the documents and account books as and when required by the income tax department were made available during the period of investigation from February, 2008 to December, 2008. The seized records were handed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for getting the accounts audited under Section 142 (2A), to which written reply was given by the assessee on 14.12.2009, and after considering the reply, the proposal was sent by A.O. on 15.12.2009 to the Commissioner of Income Tax seeking approval for special audit. On 18.12.2009 the Commissioner of Income Tax gave his approval after which on the same day the letter was issued by the Assessing Officer directing the assessee to get its account audited under Section 142 (2A). Shri Agrawal submits that the assessee's audited books of accounts, print out of the accounts, the seized materials and all the account books namely cash book, bank book, purchase book, general ledger, special ledger, editor's ledger, creditors' book and journal book for the assessment year 2002-03 to 2007-08 were before the Assessing Officer, which were examined by him and after due application of mind the Assessing Officer came to conclusion that there are complexities in the account books, which require special audit under Section 142 (2A) of the Act. 29. Shri Bharatji Agrawal submits that the High Court had quashed the earlier directions issued by the Assessing Officer on the grounds that reasons were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.Y. 03-04, it is noticed that it has shown opening inventory and work in progress as on 01/04/02 at Rs.23,42,84,049/-. Further, there is difference in other financial data/ figures also with respect to amount shown under the heads sundry creditors, advance from customers and material consumed (as on 31/03/02) as per Audited returns filed for the A.Y. 03-04 and 02-03 as these figures shown in the return for A.Y. 02-03 are different from that declared as comparative figures as on 31.3.02 in the return filed for A.Y. 03-04, the details of which is as under: As per return filed for A.Y. 03-04 As per return filed for A.Y. 02-03 Sundry Creditors 63,13,707/- 1,25,81,707/- Advance from Customers 11,28,26,305/- 11,60,58,305/- Material Consumed 5,38,88,140/- 4,10,75,940/- Further, from the examination of return and audit report filed along with the return for the A.Y. 05-06, it is noticed that assessee has shown to have repaid loan of Rs.68.50 lacs to its sister concern namely M/s ATS Construction & Maintenance P. Ltd. whereas the Auditor, in his audit report in Form No.3CD in Column 24 (b), has certified that the amount repaid to this sister concern during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be any doubt that true income of the asssessee cannot be determined from the books, a fact which the assessee also admits by declaring undisclosed income int he return filed as mentioned above. In order to determine the correct income of the assessee for Assessment Years 02-03 to 08-09, it is therefore, necessary to recast the entire accounts and prepare fresh accounts which will reflect the true and correct financial results of the company. Such recasting of accounts form a defective set of accounts obviously involves complex accounting process which cannot be done without the help of an expert in the field. It is precisely to deal with such complexity of accounts that the provisions of sec. 142 (2A) has been incorporated int he Act. It is needless to add that determination of correct income is the interest of revenue involved. The objections raised by the assessee in response to show cause dated 20.1.10 has already been dealt with earlier in this order and it is clear from the discussion made above that the assessee has raised general and unsubstantiated objection. Thus, having regard to the nature and complexity of your accounts and in the interest of revenue, I hereby dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly misplaced. He admits that the assessment had to be completed within 21 months. Where the Assessing Officer finds genuinely and honestly that the accounts are complex, and require special audit, the last date of limitation gets extended upto the period when the special audit is completed with an addition of 60 days for assessment. He submits that the principle that no one should suffer on account of the orders of the Court, and that no one should draw any unfair advantage, which is principle of natural justice, the assessment would not be barred by limitation. Any undeserved advantage drawn, in the circumstances, has to be nutralised. He submits that remand proceedings can proceed without affected by limitation and for this purpose he has relied upon the observations of the Supreme Court in M/s Indian Air Gases Ltd. v. State of U.P., 2010 NTN (Vo.43) 208 (para 13) and Grindlays Bank Ltd. v. I.T.O. Calcutta, (1980) 2 SCC 191 (para 7). 33. We have considered the respective submissions and do not find any merit in the submissions of Shri S.P. Gupta. On the first point regarding limitation it is admitted that the limitation after its statutory curtailment to 21 months was going to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by sufficient cause from complying with it and therefore the assessment order should be cancelled. In that event, the fresh assessment made under s. 146 would not be fettered by the bar of limitation. Section 153(3)(i) removes the bar. But the appellant preferred the constitutional jurisdiction of the High Court under Article 226. If no order was made by the High Court directing a fresh assessment, he could contend as is the contention now before us, that a fresh assessment proceeding is barred by limitation. That is an advantage which the appellant seeks to derive by the mere circumstance of his filing a writ petition. It will be noted that the defect complained of by the appellant in the notice was a procedural lapse at best and one that could be readily corrected by serving an appropriate notice. It was not a defect effecting the fundamental jurisdiction of the Income- tax Officer to make the assessment. In our opinion, the High Court was plainly right in making the direction which it did. The observations of this court in Director of Inspection of Income-tax (Investigation), New Delhi and Another v. Pooran Mall & Sons and another(1) are relevant. It said: "The court in exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, the period of limitation shall not apply, while initiating proceedings thereafter. 37. The petitioner had invoked the powers of the High Court under Art.226 of the Constitution of India in challenging the directions under Section 142 (2A) of the Act for special audit, on the ground that no reasons were given in the order. The petitioner relied on the principles of natural justice to challenge the order. Having invoked the equity jurisdiction of the Court in which the Court did not go into any other question, and examined the issue of recording of reasons alone, the petitioners cannot draw any unfair advantage. The petitioners were aggrieved by the non-recording of reasons. They have not challenged the observations of the High Court, giving liberty to the department to proceed with fresh order in accordance with law. The petitioners thus cannot be permitted now on principles of equity, to challenge the fresh order on the ground of limitation. Any advantage gained in such circumstances must be nutralised. The prescription of limitation by itself should not be permitted to confer an advantage on the petitioner responsible for such delay. 38. If no order was made by the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oversight, the document indexed as Annexure No.5, and the covering page of Annexure No.6 could not be filed at the time of filing of the writ petition, and which is filed now with the supplementary affidavit. This document, which has material bearing on record was thus introduced after two and a half years of filing of the writ petition in which interim order was operating. The advantage gained by the petitioner by not filing this document can be easily noticed from the contents of this document, and which reads as follows:- "To, The Principal Officer M/s ATS Infrastructure Ltd. K-19, Sec-18, NOIDA Sir, Subject: Show cause notice for conducting Special Audit u/s 142 (2A) of the IT Act, 1961 in your case for the assessment year 02-03 to 08-09-reg- As your are aware, a search & seizure operation was conducted in the ATS Group of Cases on 15/02/08. In course of search, a sum of Rs.20 crores was surrendered by you as undisclosed income. Shri Geetamber Anand, the Managing Director of your company, in his statement recorded u/s 132 (4) of the IT Act in course of search has admitted that cash was being received as on money in sale of flats. Evidences to this effect has also been fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced the entire record before us, and from which we now find that not only in the first notice dated 7.12.2009, the large scale tax evasion as noticed, was attempted, which was sought to be concealed from this Court; the Assessing Officer had infact summoned the entire record, and had gone through the account books carefully before arriving at the findings that the accounts are complex, which he could not explain to the Court because the earlier writ petition was decided without calling for counter affidavit. He has now sufficiently explained these facts in the impugned order for special audit passed under Section 142 (2A) of the Act. 43. The petitioners are builders engaged in the construction and sale of residential and commercial flats. Their turn over exceeds hundreds of crores. Shri Getamber Anand, the Managing Director of ATS Infrastructure Ltd. surrendered 20 crores of rupees during the course of search. It was also stated by him that he accepted on money in respect of sale of flats and which was not recorded in the regular books of accounts. He has not retracted his statement, which was confirmed to be given by him. He was aware as Managing Director of the company of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he have a team of assistants to enter into the web; decipher the codes, and to demystify the procedures adopted in accounting methods to find out and arrive at the aggregate income to be assessed to tax. 46. In Rajesh Kumar v. Dy. CIT & Ors., (2007) 2 SCC 181 and in Sahara India (Firm), Lucknow v. CIT Central-I & Anr., (Supra) decided on 11th April, 2008 the Supreme Court has relied on Swadeshi Cotton Mills Co. Ltd. v. CIT, 171 ITR 634 (Alld.). In this judgment Hon'ble Mr. Justice K.J. Shetty explained the import of Section 142 (2A) as follows:- "K.J. Shetty, J. in Swadeshi Cotton Mills Company Limited v. Commissioner of Income-Tax and Another [171 ITR 634] succinctly laid down the import of the said provision in the following terms: "The exercise of power to direct special audit depends upon the satisfaction of the Income-tax Officer with the added approval of the Commissioner. But he must be satisfied that the accounts of the assessee are of a complex nature, and, in the interests of the Revenue, the accounts should be audited by a special auditor. The special auditor is also an auditor like the company's auditor, but he has to be nominated by the Commissioner and not by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Central Government and thus the exercise would not cause any prejudice to the petitioners. 48. We have examined the records produced by Shri Bharat Ji Agrawal and find that the assessee had filed reply dated 19.11.2009 before the A.O., in which the counsel appearing for the petitioners (Shri Deepak Kapoor) had produced print out of the accounts. This fact is mentioned in the ordersheet and thus the submissions that the books of accounts were not examined is not true. Besides the seized material was also available with A.O., which also form part of the accounts. The financial statements were also available with the A.O., which were also part of accounts of the assessee. The record further demonstrates that before giving directions to get accounts audited vide letter dated 7.12.2009, to which the assessee had submitted reply on 14.12.2009, first time directions were issued on 18.12.2009. Even at this stage detailed reasons were recorded on the file as well as in the letter written to the approving authority [CIT (Central), Kanpur] on 2.12.2009. 49. On the directions of the High Court another opportunity was given to the petitioners vide letter dated 20.1.2010 to which the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-09 (block assessment period) were issued calling for the details to which only part replies were filed to these notices. 52. The A.O. has mentioned in his letter to the approving authority that the data in the seized hard discs/ CDs could not be accessed as the account books were stated to be on the FCA package, which could not be opened as all the files were password protected. The petitioners inspite of being repeatedly asked did not produce accounting package and correct password to enable the A.O. to open the accounting files. Passwords given by the petitioner on 25.11.2009 were found to be incorrect. The petitioner admitted that it was the mistake and promised that the correct passwords will be provided by 27.11.2009, which were not provided. In the absence of these details the completed constructions and the work in progress could not be verified. The matter was, thereafter, referred to the valuation cell. From the correspondence received from valuation cell it was noticed that the petitioner was not cooperating with the Valuation Cell also and was not providing requisite details/ date, nor producing books of accounts, bills and vouchers and requested to withdraw the refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment recorded under Section 132 (4) of the Act had accepted that 30% of the sale consideration was taken as on money for various projects on account of sale/ cancellation and renovation of flats. The amount accepted as on money was not disclosed. 54. We do not agree with the submission of Shri S.P. Gupta, learned counsel appearing for the petitioners that in such a case it was open to the A.O. to proceed with the best judgment assessment under Section 144 and that the submission of incomplete accounts or the refusal to disclose true and correct accounts cannot be a ground for special audit under Section 142 (2A) of the Act. It is not a case, where the accounts produced were not examined. As discussed above after adopting non-cooperative attitude, finally copies of the accounts were produced along with the letter dated 19.11.2009. These accounts, however, were not sufficient to unwind the complex character of the methods adopted by the petitioners for working out the cost of the flats and the details of the sales. The Assessing Officer inspite of his best efforts was not able, in the absence of special audit, which could unwind the methods adopted by the petitioners, to assess the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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