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TMI Blog2017 (6) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act for AY 2009-10 to 2014-15 and the assessment proceedings under Section 143(3) of the IT Act for AY 2015-16 are pending before the Assessing Officer. That the petitioner Trust is / was run and managed by one Shri Asharam Bapu and his son Narayan Sai against whom number of criminal cases are pending. That approximately 40,000 papers in 45 gunny bags in the case of Asharam Bapu and Narayansai Group were seized by the Police Authority. That the Income Tax Authority requisitioned the said documents under Section 132 of the IT Act in the case of Asharam Bapu and Narayansai Group on 09.03.2015 from Poilce Authorities, Surat. That on the basis of the same, the petitioner Trust was served with the notice under Section 153C of the IT Act for block period i.e AY 2009-10 to 2014-15 and also the notice under Section 143(3) of the IT Act for the AY 2015-16. That the petitioner assessee was required to furnish the return of income under Sections 153C and 143(3) of the IT Act for the aforesaid years. That the petitioner - assessee was served with the questionnaire by way of notice on the basis of requisitioned material, statements and loose papers etc. That the petitioner - assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 142(2A) of the IT Act for the AY 2009-10 to 2015-16. [2.2] Feeling aggrieved and dissatisfied with the impugned order passed by the learned Assessing Officer under Section 142(2A) of the IT Act appointing the Special Auditor for AY 2009-10 to 2015-16, the petitioner - assessee has preferred the present Special Civil Application under Article 226 of the Constitution of India. [3.0] Shri S.N. Soparkar, learned Senior Advocate has appeared on behalf of the petitioner and Shri Manish Bhatt, learned Senior Advocate has appeared on behalf of the Revenue. [4.0] It is vehemently submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner that while passing the impugned order the Assessing Officer has not recorded any satisfaction / any reason to form opinion for special audit, as required under Section 142(2A) of the IT Act. It is vehemently submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner that before passing any order under Section 142(2A) of the IT Act of special audit, the Assessing Officer is required to record the reason to form an opinion for special audit as required under Section 142(2A) of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice which deserves to be quashed and set aside. In support of his above submissions, Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner has heavily relied upon the following decisions of the Hon'ble Supreme Court, Punjab & Haryana High Court, Bombay High Court and Rajasthan High Court. 1. Sahara India (Firm) vs. Commissioner of Incometax, Central1 [2008] 300 ITR 403 (SC) 2. Isolux Corsan India Engineering & Construction (P.) Ltd. vs. Deputy Commissioner of Incometax Circle 1(1), Gurgaon [2016] 287 CTR 92 (Punjab & Haryana) 3. Nickunj Eximp Enterprises (P.) Ltd. vs. Assistant Commissioner of Incometax [2012] 346 ITR 6 (Bombay) 4. Khem Singh Sankhla vs. Union of India [2004] 266 ITR 485 (Rajasthan) [4.5] Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner has submitted that the Assessing Officer could not have directed special audit under Section 142(2A) of the IT Act beofre considering books of account of the petitioner and/or without verifying the accounts and/or considering the complexity in the accounts. Making above submissions and relying upon above decisions, it is requested to admit/allow the present petition and q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Senior Advocate appearing on behalf of the respondent that in the instant case, voluminous material contained in 42 gunny bags running into around 40000 + pages was requisitioned under Section 132A of the IT Act. It is submitted that verification and analysis of the said requisitioned material indicated direct nexus with the case of the petitioner. It is submitted that the requisitioned material in soft copy was provided to the petitioner on 06.05.2016. It is submitted that in relation to the said material, questionnaire with various annexures was issued on 18.07.2016 during the course of regular assessment proceedings. It is submitted that under further letter dated 01.08.2016, petitioner assessee was requested to file details. It is submitted that under further letter dated 22.08.2016, complete AIR information was provided and explanation thereof was called for from the assessee. It is further submitted that under letter dated 05.09.2016, the respondent provided complete details of the bank account and called upon the petitioner to render explanation. It is submitted that under letter dated 06.09.2016, the petitioner was called upon to provide details of each Sadhaks along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. 18.10.2016 Showcause notice issued to the assessee as to why the reference under section 142(2A) of the IT Act should not be made. In this notice, exhaustive details with regard to noncooperation of the assessee during assessment proceedings as also the aspect of complexity and voluminous material have been clearly demonstrated. 24.10.2016 The petitioner filed an adjournment application. On the said application itself, an endorsement is made that the next date of hearing was fixed on 01.11.2016. The representative of the petitioner noted this aspect. 01.11.2016 The petitioner again on the adjourned date, filed an adjournment application. On the letter itself, an endorsement is made by the respondent that the next date of hearing is fixed on. 07.11.2016 No further adjournment shall be granted. The representative of the petitioner noted this endorsement. The petitioner again filed adjournment application on the same lines. 15.11.2016 Since the petitioner was only interested in procrastination since from beginning of assessment proceedings and not making any submissions, a satisfaction was recorded on 15.11.2016 and request was made to the Principal Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation are required to be audited through the Special Auditor is concerned, it is vehemently submitted that as such the showcause notice itself notes in great detail the requirements relating to complexity etc. It is submitted that as such the impugned order dated 28.11.2016 is only a communication by the Assessing Officer directing the petitioner to have its books of account subjected to special audit. It is submitted that there is no requirement under the law / section that such intimation is required to contain reasons. It is further submitted that as such a detailed proposal was sent to the Commissioner. It is further submitted that thereafter a satisfaction has been recorded by the Commissioner on the notesheet which can be seen from the file produced before the Court. It is submitted that after considering the detailed proposal and after having been satisfied by preparing a satisfaction note on the notesheet and thereafter having been satisfied that in the present case looking to the complexity and in the interest of revenue, accounts are required to be audited through Special Auditor, thereafter, the Commissioner has granted the approval which came to be subsequently communi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requiring him, on a date to be therein specified, (i) where such person has not made a return within the time allowed under subsection (1) of section 139 or before the end of the relevant assessment year], to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or : Provided that where any notice has been served under this subsection for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not made a return within the time allowed under subsection (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this subsection, (ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or (iii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s he thinks fit ; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under subsection (2A) is received by the assessee. (2D) The expenses of, and incidental to, any audit under subsection (2A) (including the remuneration of the accountant) shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner (which determination shall be final) and paid by the assessee and in default of such payment, shall be recoverable from the assessee in the manner provided in Chapter XVIID for the recovery of arrears of tax : Provided that where any direction for audit under sub15 28 section (2A) is issued by the Assessing Officer on or after the 1st day of June, 2007, the expenses of, and incidental to, such audit (including the remuneration of the Accountant) shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with such guidelines as may be prescribed and the expenses so determined shall be paid by the Central Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity of being heard in respect of any material gathered on the basis of any inquiry under subsection (2) or any audit under subsection (2A) and proposed to be utilised for the purposes of the assessment. Thus, from the aforesaid provision, it appears that object and purpose of special audit is as such to facilitate the AO to arrive at correct taxable income and for which the AO is authorized to direct the assessee to get books of account audited by the accountant authorized by the AO, in case, AO is of the opinion that books of accounts are complex in nature and there are multiplicity of transactions, for which, accounts are required to be audited through Special Auditor. As observed herein above and even as per subsection (3) of Section 142 ample opportunity shall be available to the assessee to make submission/ comments on the report of the Special Auditor and therefore, there shall not be any prejudice caused to the assessee if the accounts are ordered to be audited through Special Auditor under Section 142(2A) of the IT Act. With this, challenge to the impugned order is required to be considered. [6.2] Identical question came to be considered by the Delhi High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubts about correctness of accounts, multiplicity of transactions in the accounts or specialised nature of business activity of an assessee. These amendments by Finance Act, 2013 with effect from 1st June, 2013, substitute the words "nature and complexity of accounts of the assessee". We are not concerned with the said amendment in the present case as the impugned order in question directing special audit was passed on 25th March, 2013, before the amendments became WPC 2363/2013 Page 9 of 21 effective. We are, therefore, primarily concerned with whether or not keeping in view the nature and complexity of accounts and the interest of Revenue direction for special audit is justified for the reasons set out in the order dated 25th March, 2013. (We have not examined the constitutional validity of the amended provisions and we express no opinion on the said aspect). 26. Powers under Section 142(2A) have to be exercised in terms of the legislative provisions. The object and purpose behind the legislation is to facilitate investigation and proper determination of the tax liability. The importance and relevancy of the legislation cannot be underestimated and it is a power available wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso a fact that WPC 2363/2013 Page 20 of 21 the business transactions have become more complicated and accounting entries more complex than ever before. This may be one of the causes why possibly the frauds could not be detected in some cases. Indeed such cases have made the audit work more comprehensive, intrusive and investigative. Ethical managements may at times regard such enquiries as an unwarranted intrusion or a hounding approach. Section 142(2A) does not permit fishing or roving inquiry approach or a witch hunt but is a regulated provision which accepts the need and necessity of the Assessing Officer to take help of an expert accountant i.e. a Chartered Accountant, a person who is academically qualified and has practical experience to understand accounts and unearth tax evasion or furnishing of inaccurate particulars etc. The provision balances the right of the Revenue with the inconvenience which the assessee may face. Assessing Officers are not Chartered Accountants and when required and permissible, therefore, can take help and assistance from the qualified specialists to complete the assessment and determine the taxable income of an assessee. [6.3] In the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 142(2A) of the IT Act has been passed, it cannot be said that the Assessing Officer has committed any error and/or illegality. It is required to be noted that the impugned order has been passed after giving an opportunity to the petitioner - assessee and thereafter having been satisfied with respect to complexity and multiplicity of transactions. [6.4] Now, so far as the submission on behalf of the petitioner that impugned order is in breach of principles of natural justice inasmuch as no reasons are stated in the impugned order under Section 142(2A) of the IT Act and no satisfaction is recorded in the impugned order while ordering special audit is concerned, at the outset it is required to be noted that before passing the order under Section 142(2A) of the IT Act, a detailed showcause notice has been served upon the petitioenr and the petitioner - assessee was called upon to show cause why the accounts for the AY 200910 to 20142015 and 201516 may not be got audited through special audit. The showcause notice contained the detailed reasons which are running into approximately 31 pages. That thereafter except asking for adjournment the petitioner had not raised any objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of which action is proposed to be taken can be said to be in compliance with requirement of fairness. Applying the law laid down by the Hon'ble Supreme Court in the aforesaid decision to the facts of the case on hand as a detailed showcause notice was issued before passing the order under Section 142(2A) of the IT Act and there has been disclosure of material on the basis of which the special audit under Section 142(2A) of the IT Act was proposed and thereafter, after following due procedure as required, when the order of special audit has been passed, it cannot be said to be in breach of principles of natural justice. Under the circumstances, none of the decisions relied upon by the learned Counsel for the petitioner referred to hereinabove shall be applicable to the facts of the case on hand. [6.5] Now, so far as the submission on behalf of the petitioner that the Principal Commissioner of Income Tax has mechanically granted the approval to the proposal made by the Assessing Officer is concerned, the same has no substance. Learned Counsel appearing on behalf of the Revenue has placed before the Court entire file from the office of the Assessing Officer as well as the Prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above the petitioner again asked for the adjournment. As while granting adjournment on 01.11.2016 the petitioner was specifically informed that no furhter adjournment shall be granted, naturally thereafter the petitioner was not required to inform again and again. At this stage it is required to be noted that even thereafter also nothing was done by the petitioner between 07.11.2016 to 23.11.2016 i.e. after the adjournment application dated 07.11.2016, to know whether adjournment application is granted or not. Under the circumstances when the opportunity was given to the petitioner and thereafter the petitioner failed to avail such an opportunity, thereafter it is not open for the petitioner to make grievance that no sufficient opportunity has been given. [6.8] Now, so far as the submission on behalf of the petitioner for the directions issued in the impugned order of special audit under Section 142(2A) of the IT Act, special audit is not required and/or it is not the function of the auditor is concerned, it is required to be noted that the directions are required to be considered as a whole. The petitioner cannot pick and choose one or two directions. The reasons for special a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 142(2A) of the IT Act and at the time order under Section 142(2A) of the IT Act is whether any proceedings are pending before the AO or not? Notice under Section 148 of the IT Act i.e., reassessment proceedings can be said to be the proceedings pending before the AO, and therefore, if at that stage of proceedings [in the present case, reassessment proceedings before him], the Assessing Officer, having regard to the multiplicity of transactions in the account or specialized nature of the business activities of the assessee and the interest of the Revenue, is of the opinion that it is necessary to so to do, he may pass an order under Section 142(2A) of the IT Act; subject to compliance with the procedure, as required under Section 142(2A) of the IT Act. Therefore, in the facts and circumstances of the case, it cannot be said that the impugned order is contrary to Section 142(2A) of the IT Act. [6.11] Now so far as submission made on behalf of the petitioner that the Assessing Officer cannot direct special audit under Section 142(2A) of the IT Act before calling for the accounts from the petitioner in the assessment proceedings and without doubting the accounts and/or c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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