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TMI Blog2006 (3) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... e 4(1), Mumbai, whereby he issued direction to the petitioner for a special audit under section 142(2A) for the assessment year 2003-2004. The order is challenged on the following grounds: (i) The Assistant Commissioner of Income-tax, Range 4(1), who passed the order giving direction to the petitioner for special audit under section 142(2A) for the assessment year 2003-2004 has no jurisdiction over the petitioner's case. (ii) That no hearing of any nature whatsoever was given to the petitioner prior to passing of the impugned order under section 142(2A). Learned counsel relied upon the following judgments: Peerless General Finance and Investment Co. Ltd. v. Deputy CIT [1999] 236 ITR 671 (Cal); West Bengal State Co-operative Bank Ltd. v. Joint CIT [2004] 267 ITR 345 (Cal); Muthoottu Mini Kuries v. Deputy CIT [2001] 250 ITR 455 (Ker) and U.P. State Handloom Corporation Ltd. v. CIT [2000] 245 ITR 192 (All), (iii) That by issuing the direction under section 142(2A) for a special audit, the Assessing Officer has abdicated his duty and the said directions are beyond the scope of section 142(2A) of the Income-tax Act, 1961. On the other hand, Mr. Kotangale, learned counsel appearing fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction of the Assessing Officer could have been done only within one month therefrom but that was not done. The communication between the petitioner and respondent No. 5 is only with regard to the filing of the return of income for the assessment year 2005-2006. The said communication has no relation to the return of income filed for the assessment year 2003-04. There is nothing on record that indicates that the assessment proceeding for the assessment year 2003-04 has been transferred from the Assistant Commissioner of Income-tax, Range 4(1), Mumbai, to the Deputy Commissioner of Income-tax, Pune. We, thus, find no merit in the submission of learned counsel for the petitioner that the Assistant Commissioner of Income-tax, Range 4(1), Mumbai, has no jurisdiction in respect of the assessment proceedings for the assessment year 2003-04. The contention (i) of learned counsel for the petitioner is overruled. Re.: Contention (ii): The contention of learned counsel that the petitioner must have been given an opportunity of hearing before passing the order under section 142(2A) for a special audit is based on a few decisions. The learned single judge of the Calcutta High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the nature and complexity of the accounts of the assessee and the interest of the Revenue it is necessary to direct special audit of the assessee's accounts. In our opinion, it is not necessary for the Assessing Officer to give a show-cause notice or give a hearing to the assessee before issuing the directions under section 142(2A). In our opinion, the direction under sub-section (2A) of section 142 is purely administrative in nature and not quasi-judicial. Moreover, in our opinion, such a direction does not have civil consequences. It does not affect the assessee's rights or liability. Hence, the decision of the Supreme Court in State of Orissa v. Miss. Dr. Binapani Dei, AIR 1967 SC 1269 does not apply. No doubt an administrative order if it has civil consequences can only be passed after giving opportunity of hearing, but in our opinion a direction under sub-section (2A) of section 142 does not have civil consequences because it does not affect his rights and does not create any liability against the assessee. It is only the assessment order which will create a liability. The purpose of the direction under sub-section (2A) of section 142 is to ensure that a correct assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er under section 142(2A) of the Income-tax Act, 1961. In so far as the present case is concerned, it would be seen that after the return of income was filed by the assessee on November 25, 2003, a notice under section 143(2) of the Income-tax Act was issued and served upon the petitioner on October 12/18, 2004. Pursuant thereto, the petitioner appeared through its chartered accountant and accounts officers from time-to-time in the proceedings before the Assessing Officer. On behalf of the assessee, it was admitted before the Assessing Officer in the proceedings on September 20, 2005, that the transaction with M/s. Utkal Investment Limited was very complicated and the matter needed to be considered with regard to the provisional agreement which also contained the non-compete agreement. Various queries that were raised by the Assessing Officer were not fully answered by the assessee. This aspect is reflected from the proceedings dated September 20, 2005. That there is complexity of accounts is evident from the consideration of the matter by the Assessing Officer and the Chief Commissioner of Income-tax-IV, Mumbai. In para. 14 of the reply affidavit filed by respondent No. 1, it is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner's claim for bad debt was unacceptable since the conditions as laid down by section 36(1)(vii) of the Income-tax Act, were not met. (ii) Commission payment: Huge expenses have been claimed by the petitioner on account of commission payments. On verification of such claim in the earlier year it was found that the petitioner was not in a position to justify either the genuineness or the necessity of the commission payment. (iii) Stock write off: The petitioner-company regularly claims write off of huge quantities of stock on account of alleged obsolescence. However, all such written off stock are thereafter found to be in the possession of the petitioner. A large number of items are manufactured by the petitioner. Accordingly, the determination of the claim of obsolescence becomes a very difficult exercise, (iv) Claim under section 80HHC: In terms of the decision of the hon'ble Supreme Court in the case of IPCA Ltd. it is the duty of the petitioner to establish that it had earned profit in its export activity. Since the petitioner is maintaining combined books of account, it is very difficult to correctly ascertain the profit arising out of its export activity." The tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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