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TMI Blog2018 (6) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... is bereft of any reason. It is stated here that reasons are heart and soul of an order, as they facilitate the process of judicial review and therefore in absence of any reason much less cogent, clear and succinct reasons order u/s 142(2A) of the Act is held to be bad in law and without proper jurisdiction. Since the extended period was taken under the guise of Special audit, which is held without proper jurisdiction, the time so taken cannot be counted and the period does not get extended. - Decided in favour of assessee - ITA Nos. 154 to 157/Chd/2013 - - - Dated:- 15-6-2018 - SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER For The Assessee : Shri. Ashwani Kumar For The Department : Shri Manu Malik ORDER PER DR.B.R.R.KUMAR, A.M. : All the above appeals have been filed by Assessee against the order of the Ld. CIT(A)-I, Ludhiana dt. 29/11/2012. 2. Year wise grounds of appeal are reproduced hereunder: Grounds of Appeal in ITA No. 154/Chd/2013 for the A.Y. 2005-06: 1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in upholding the assessment framed u/s 153C read with sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in not adjudicating on the following grounds:- ( a) disallowance of ₹ 8,732/- by resort to provisions of section 40A(3). ( b) a sum of ₹ 5,315/- on account of alleged interest received by the appellant. ( c) a sum of ₹ 8,585/- on account of payment of insurance of car Grounds of Appeal in ITA No. 156/Chd/2013 for the A.Y. 2007-08: 1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in upholding the assessment framed u/s 153C read with section 143(3) by the Ld. Deputy Commissioner of Income Tax, Central Circle-Ill, Ludhiana is against law and facts on the file in as much as the very initiation of proceedings u/s 153C is bad in law. 2. That the assessment framed is bad in law in as much as the assessment has been framed by total disregard of principles of natural justice. 3. That the Ld. CIT(A) has erred in law and on facts in upholding the directions by the Ld. Assessing Officer to the appellant for getting the accounts audited by a special auditor u/s 142(2A) and the assessment framed thereafter. The assessment made deserves to be quashed in as much as the Special Auditor has trav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the incriminating document found and seized which belongs to the assessee who is a sister concern of M/s Chet Ram Ravi Kumar proceedings under section 153(C) were initiated and the assessment under section 153(C) has completed on 28/07/2010 : The sequence of events are as under: 24/10/2007 : Action under section 132(1) initiated 11/11/2009 : Notice under section 143(2) was issued 08/12/2009 : Show cause was issued for conducting special 14/12/2009 Audit under section 142(2A) 21/12/2009 : Reply to the show cause by the assessee 23/12/2009 : Approval for special audit u/s 142(2A) obtained 29/12/2009 : Letter was issued to the assessee 30/12/2009 : Due date for completion of assessment 31/05/2010 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are in toto as per the points raised from a) to f) mentioned in the show cause notice (refer para 1 of this order). 9. Consequent to the order issued by the Assessing Officer the report of the Special Auditor was submitted on 31/05/2010. 10. The Assessing Officer has mentioned certain salient points regarding the Special Audit which are as under: a) The Auditor was not provided the required information and explanation necessary for the purpose of the audit. b) The assessee did not care to reply to various letters issued by the auditor during the course of the audit. c) No proper books of accounts maintained and kept by the assessee. d) The examination by the auditor further revealed that evidences like proper bills/vouchers for items debited/credited in the Profit and Loss accounts not produced, suggesting the non availability of the same. e) The auditor, therefore, based his report on the books of account produced and documents seized during the course of the search. 11. During the hearing before us the Ld. AR argued that the Special Audit conducted was only to extend the time to complete the assessment inspite of all compliances required by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be accepted. Further referring to point no. e) wherein it was mentioned to redraw the balance sheet, P L Account to arrive at a correct picture cannot be said to be a function under audit or special audit as per the Income Tax Act,1961. 13. Referring to the provisions of Section 142(2A) as defined in the Income Tax Act,1961, the Ld. AR argued that there was no reference to the nature and complexity of the accounts which is the pre-requirement for ordering Special Audit. To conclude he argues that the entire reasons given by the Assessing Officer revolve around non cooperation on the part of the assessee, difficulty in working out the undisclosed income within a short span of a week time and no complexity of accounts was brought about. 14. Against the arguments of the Ld. AR Shri. Manu Malik CIT(DR), vehemently argued that the assessee has not complied to the notices issued and the contumacious conduct of the assessee in non cooperation to provide any details, in the absence of correct books of accounts, the ordering of special audit is the only action which is available to the Assessing Officer in determining the undisclosed income. He argued that since the books are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red Accountant with his experience and academic background is in a better position to investigate, examine and scrutinize entries and records of financial transactions. 16.1 He further argued that the entire events shows a high degree of non cooperation on the part of the assessee in extending statutory compliance and keeping in view the nature and complexity of the accounts the Special audit under section 142(2A) was rightly ordered to be conducted. 16.2 Rebutting the arguments of the Ld. DR, Ld. AR argued that no case was made by the Assessing Officer regarding the nature and complexity of the accounts while ordering the Special Audit. 17. We have heard Ld. Representatives of both the parties and perused the material available on record. 18. The provisions of Section 142(2A) of the Income Tax Act,1961 provides for ( 2A) If, at any stage of the proceedings before him, the [Assessing] Officer, having regard to [the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, and] the interests of the revenue, is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any valid ground for referring a case to Special Audit. In the case of AT T Communication Services India Pvt. Ltd. the Hon ble High Court of Delhi upheld the validity of Special Audit even though books of accounts were not called for examination by the Assessing Officer because the Assessing Officer has given a reasoned satisfaction regarding the method of accounting showing the complexity of accounts and referring the terms of identifying the accounting standard applied for recognition of income. Thus we hold that even when books of account have not been called for satisfaction as to the nature and complexity of accounts of the assessee is a sine-qua-non for directing the assessee to get the accounts audited by an accountant as defined in the explanation below Sub Section (2) of Section 288. 20. Having gone through the reasons as well as the terms of reference given, we find that the Assessing Officer has nowhere mentioned about method of accounting or nature of complexity of accounts. It was relied only on non cooperation during the post search proceedings, during the assessment proceedings reconciliation of loose papers redrawing of balance sheet and P L Account, and recon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble High Court of Delhi held that examining the impugned order in the present case, it is apparent that the order is non speaking order and gives no reasons for arriving at the conclusion that having regard to the nature and complexity of assessee's accounts and interest of the revenue, the AO was of the opinion that accounts are to be audited u/s 142(2A) of the Act. The order is silent as to on what basis and on what grounds, the accounts proposed to audit under section 142(2A) were considered complex and on what considerations it was arrived that it is in the interest of revenue to direct audit of accounts. Mere reference to a prior approval of CIT does not satisfy the precondition of a Speaking order containing reasons for invoking the provision of section 142(2A) of the Act. There is no reference to detailed replied furnished by the assessee during the proceedings. 22. Having regard to the above it is held that the impugned order reasons are clearly invisible and conspicuous by their absence. In other words, order is bereft of any reason. It is stated here that reasons are heart and soul of an order, as they facilitate the process of judicial review and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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