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TMI Blog2019 (4) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of its books or documents. So far as the reasons given by the AO are concerned, this Court is of the opinion that the NPCC s argument that the conclusion amounts to mere pretence is unwarranted. The extract of the order clearly reflect the AO s reasoning. The inability of the assessee to provide particulars with respect to various units (in regard to each of which it had claimed substantial deductions by way of expenses) as well as the adverse remarks made by the NPCC s auditor do amount to voluminous evidence which also present complexity of the accounts that needed a close scrutiny. This Court is of the opinion that there is no merit in the writ petition. Furthermore, a perusal of the original file produced by the Revenue would disclose that even as late as in the third week of January, the special auditor designated by the AO, was repeatedly calling for details; the AO had sought for the order to be kept in abeyance. This Court had stayed the direction to conduct special audit. In these circumstances, the time during which the present writ petition was pending, i.e. 17.01.2019 till today shall be excluded for the purpose of computing the period of limitation to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 electronically by the Revenue outlining the ten key points and calling for information which included evidence regarding adverse comments given by the auditor; party-wise details of the liabilities showing in the balance sheet under the head trade-payables, security deposits, advances from project authorities, interest accrued and due on advances from project authorities along with respective ledger accounts of parties and their confirmation; copy of sales tax/VAT returns for the year with details of the sales tax payment; project-wise details of entire works undertaken during the year with separate profit and loss accounts of each projects; write-ups of the modus operandi of business and comments on method of accounting of receipts and expenses. The petitioner submits that it could furnish the information on 11.12.2018. According to NPCC, the queries were satisfactorily replied. 4. On 18.12.2018, a Show Cause Notice (SCN) was issued by the Revenue proposing a special audit, under Section 142 (2A), stating as follows: a. The NPCCC had not replied to the adverse comments of the auditors satisfactorily and thus the issues and apprehensions raised by the auditors remained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the report of the CAG on financial statements and audit report of the auditors for AY 2015-16 expressing satisfaction. With respect to the adverse comments, specifically the assessee relied upon a chart. With respect to the query regarding the head trade-payables, security deposits and advances from project authorities, it was stated that the relevant material was already furnished but the copy of the ITR, audit report, balance sheet and P L Account of the parties were not available with it. It was further explained that as far as the copy of sub-contractor and evidences for the competitive bidding for selection of sub-contractor was concerned, the record was very voluminous and difficult to arrange. Regarding long term liabilities, current liabilities and other liabilities, the NPCC submitted that the liabilities as shown in the balance sheet are the cumulative figures of current as well as the past many years, some of which were disputed and arbitration cases are going on. It was stated that the balances shown in liabilities are identified and unit/party wise detail was attached along with reply to the SCN. Regarding cessation of liabilities, it was explained that such a decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts or multiplicity of transactions in the accounts. Safeguard in the form of approval by the Principal Commissioner is also required. 10. Learned counsel submits that the mere fact there are numerous documents involved, would neither make them complex nor voluminous so as to justify the special audit. Likewise multiple transactions per se cannot be the basis of invoking the power to direct the special audit. It is urged that the special audit is an aid to assessment proceedings. It is also contested that no evidence was submitted to verify the liabilities shown in the balance sheets. Learned counsel urged that unit-wise details of trade payables security deposits and advance was submitted to the Revenue on 11.12.2018 and further details of advances unit-wise travel expenses details of advertising bills exceeding `1 crore etc. were furnished. The employee benefit expenses with names of employees, their relevant particulars etc. were furnished on 26.12.2018. 11. After the filing of the petition, the NPCC filed and relied upon an additional affidavit dated 01.02.2018, which inter alia reads as follows : 2. That the Petitioner has challenged the Impugned Order signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be tested in the light of actual evidence. Mr. Bhatia denied allegations of denial of natural justice and submitted that though there may be a dispute with respect to the receipt of the annexure to the order (outlining the terms of reference to the special auditor) even then, assuming the petitioner were correct, it could always have approached the Revenue and obtained a copy of it. Counsel also produced the original file and submitted it for consideration of the court. 13. This Court has considered the original file which discloses that after receipt of SCN on 18.12.2018, reply was filed on 25.12.2018; the petitioner s representative approached the AO and submitted voluminous documents manually, in terms of a previous letter of the same day. The AO had proposed audit by letter of 25.12.2018 which was forwarded by the Additional Commissioner to the concerned Principal Commissioner. On 26.12.2018, the Principal Commissioner, by separate letter addressed to the Additional Commissioner granted approval which was then forwarded to the AO. The Court also noticed that the letter addressed by the AO seeking permission dated 24.12.2018 is a detailed one outlining and reproducing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were depressing and by way of comparison refers to the performance of the Engineering Projects India (EPI). The AO noticed that the income had not been reported by the assessee and it was only carrying losses and that if any positive result in the P L account existed it was on account of income from other sources. With respect to the company being sick, it was reasoned that there was nothing on record that showed heavy losses on account of huge burden of liabilities of earlier years. It was further noticed that that performance of EPI on the one hand compared to that of the NPCC was not justified since the bills of income etc. of EPI were not known. 16. The AO inter alia stated in the order that: 9.3 Huge trade liabilities shown in the balance sheet: S. No. Particulars Amount 1 Long term liabilities 8,69,55,84,345/- 2 Current liabilities 7,00,35,77,990/- 3 Other current liabilities 43,38,14,031/- During the course of assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it/party wise detail is attached herewith as (Annexure-6) for your kind reference please. It is further submitted that the assessee company is regularly writing back the liabilities when it is established that it is no more payable as all and no further litigation is pending. The liabilities written back during the year under consideration is ₹ 2,06,0,57251- and the same has been shown under head of other income (Note 17 to the financial statement) in profit and loss account and the same has also been taxed during the year under consideration. The assessee company submission on this account is perused and found untenable as it has not submitted any evidence so as to verify the genuineness of these liabilities. Furthermore it will not out of place to mention that the onus was on the assessee to furnish the evidence relating to identity and genuineness of these transactions. Furthermore, the assessee could have justified the genuineness of these liabilities by furnishing the evidences relating the payments of these liabilities in the subsequent years. Not only it should establish the identity and genuineness of these transactions. 9.4 Adverse comments of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany was a Sick Public Sector Undertaking within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA.) since 1980 till 2013. Even huge brought forwarded losses have been lapsed as there were on profit in the company for a long time. If you go through the 'Computation of Income' of the assessee, you will find each and every small disallowance has been added back to calculate the Taxable Income of the assessee. The assesses above mentioned submission does not find merit on the simple ground that each assessment year is a separate assessment year and the assessment proceeding has nothing to do with the past assessment years unless or until the transaction related to past year has an impact on the transactions and business affairs of the current year. 10. Further it is held by judicial authorities all over the country that assessing officer is duty bound to determine the correct income/loss of each assessment year of an assessee. The purpose of direction for special audit is to ensure that a correct assessment order is passed so that revenue is not deprived of its dues. The direction to the Assessee for compulsory audit of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.2018. In these circumstances, it cannot be said that there was no genuine attempt on part of the AO to understand the nature of the assessee s business; its method of accounting or to understand the nuances of its books or documents. So far as the reasons given by the AO are concerned, this Court is of the opinion that the NPCC s argument that the conclusion amounts to mere pretence is unwarranted. The extract of the order (para 9.3 to para 11) clearly reflect the AO s reasoning. The inability of the assessee to provide particulars with respect to various units (in regard to each of which it had claimed substantial deductions by way of expenses) as well as the adverse remarks made by the NPCC s auditor do amount to voluminous evidence which also present complexity of the accounts that needed a close scrutiny. 18. For the above reasons, this Court is of the opinion that there is no merit in the writ petition. Furthermore, a perusal of the original file produced by the Revenue would disclose that even as late as in the third week of January, the special auditor designated by the AO, was repeatedly calling for details; the AO had sought for the order to be kept in abeyance. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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