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TMI Blog2001 (1) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner had been directed by the second respondent to appear before him on a specified day and to produce the documents, accounts and other details on which he relied in support of the returns filed. It is averred that the petitioner's authorised representative had presented himself with the connected records and as the second respondent was not available on that day, no hearing had been held. Thereafter no opportunity for hearing had been given, but exhibit P-7 had followed. The said order passed under section 142(2A) of the Income-tax Act, 1961 required the petitioner to get their accounts, pertaining to the previous years relevant to the assessment years, audited by a chartered accountant nominated. It had been claimed that such direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ented before the second respondent, but no hearing took place and the appointment of an auditor did not satisfy the requirements of fairness. According to him, the statute postulated not a subjective satisfaction of the officer but an objective assessment. The Assessing Officer had not bothered to examine the returns or to understand the nature of the accounts that had been presented before him. The petitioner had also relied on the decision reported in Swadeshi Cotton Mills Company Ltd. v. CIT [1988] 171 ITR 634 (All) as also the decision of the Calcutta High Court in Peerless General Finance and Investment Co. Ltd. v. Deputy CIT [1999] 236 ITR 671. It had been highlighted, with reference to the above two decisions, that an objective asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. It had also been shown that the current accounts of the partners showed a debit balance of Rs. 1,36,47,472 as on March 31, 1997, and this was unreasonable. It was in the above circumstances that the proposal had been made for getting the accounts audited. It was only after recording the suggestion and fitness of the case that exhibit P-7 had been passed and therefore it did not suffer from any infirmity. It is stated that the assessee appeared before the Commissioner of Income-tax on November 7, 2000, and as there was no cashbook or ledger forthcoming a query had been put to him and the answer was that such documents were not maintained. The system of accounting was complicated and in the absence of primary documents the decision wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the parties had been decided but only a statutory audit was contemplated. The authority of the decision reported in Aligarh Muslim University v. Mansoor Alikhan, AIR 2000 SC 2783; [2001] 98 FIR 93, which laid down that the principles of natural justice were not so absolute, so as to compel in every case a hearing irrespective of the facts that were to be gatherable, also had been cited in sup port of his submission. He also drew the distinction between sections 142(2A) and 142(3) contending that there was a specific directive in the latter, which showed that a right of hearing was not there as far as the present stage of enquiry is concerned. Counsel appearing on behalf of the petitioner, Sri P. Balakrishnan, in his reply, submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aft and this was also a matter that could be explained, if opportunity had been granted. According to him, there was no necessity for expending a large sum for auditing the accounts and as the orders had caused disability on the petitioner and would have led to civil consequences and un affordable expenditure, the principles of natural justice demanded that he should have been heard. He has also submitted that the first respondent had not given an opportunity to examine the matter in a full fledged manner and had acted on the report of the Assessing Officer. After hearing the arguments on both sides, on the facts of the case, I am of the opinion that exhibit P-7 had been passed without proper justification. When the statute prescribed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifficulty in appreciating the entries in every case, it was not healthy to refer the matter to a chartered accountant as an explanation could have been obtained from the assessee or from his authorised representative under section 142(1) of the Act. This sufficiently safeguards the interests of the assessee and it is in evidence that the Assessing Officer was aware of it and notice was served on the assessee, and according to him, only because there was no response he had come to the conclusion that permission from the Commissioner of Income-tax has to be obtained for a fresh audit. This in fact shows that it was not because of the complexity of accounts that such a decision was taken. And it is not a contingency referred to in section 142( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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