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TMI Blog2017 (4) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... edings under Section 153C of the IT Act for AY 200910 to 201516 is pending before the Assessing Officer. That the assessee is carrying on the business of trading in shares and securities as well as financing. That approximately 40,000/papers in 45 gunny bags in the case of Asaram Bapu and Narayansai Group were seized by the Police Authority. That the Income Tax Authority requisition in the said document under Section 132 of the IT Act in the case of Asaram Bapu and Narayansai Group on 09.03.2015 from Poilce Authorities, Surat. That on the basis of the same, the petitioner was served with the notice under Section 153 C of the IT Act for block period i.e AY 200910 to 201415 and the petitioner assessee was required to furnish return of income under Section 153 C of the IT Act for the aforesaid year. That the petitioner assessee was served with the questionnaire by way of notice under Section 142(1) dated 01.08.2016 on the basis of the requisitioned material, statements and loose papers etc. The petitioner assessee was also asked to furnish various details such as ledger accounts, bank statements, confirmatory letters from unsecured depositors etc. During the course of block assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit through the Special Auditor. [2.2] Feeling aggrieved and dissatisfied with the impugned order passed by the Assessing Officer passed under Section 142(2A) of the IT Act appointing Special Auditor for the AY 200910 to 201516, the assessee has preferred 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 assessee and Shri Manish Bhatt, learned Counsel has appeared on behalf of the Revenue. [3.1] The impugned order is challenged by the petitioner on the following grounds. (1) Insufficient opportunity. (2) All the conditions for appointment of Special Auditor under Section 142(2A) of the IT Act are not satisfied. (3) The Special Auditor is directed only with a view to extend the period of limitation to frame block assessment. [3.2] Shri Soparkar, learned Senior Advocate for the petitionerassessee has vehemently submitted that in the facts and circumstances of the case, the impugned order of appointing Special Auditor is bad in law, contrary to the provision of Section 142(2A) of the IT Act and in breach of principles of natural justice as suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior Advocate for the petitioner that as such the petitioner assessee has nothing to do with 40,000 pages of documents requisitioned and / or has nothing to do with Sant Shri Asharamji Ashram and Shadahaks whose name figured in the requisitioned document. It is submitted that therefore, in absence of proving relevance of such material, respondent has materially erred in directing the special audit. It is submitted that the respondent has not reached to the satisfaction in objective manner of directing the special audit. [3.9] Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner assessee has further submitted that from the affidavit in reply it appears that the objections submitted by the petitioner dated 26/28.11.2016 came to be considered and overruled by the Assessing Officer on 28.11.2016 and thereafter the proposal was made to the Commissioner. It is submited that as such vide communication dated 25.11.2016, the Assessing Officer closed the right of the petitioner to submit further objections and communicated to the petitioner that the show cause notice shall be considered on merit and on the basis of the material on record. It is submitted that therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition and quash and set aside the impugned order passed under Section 142(2A) of the IT Act. [4.0] Present petition is vehemently opposed by Shri Manish Bhatt, learned Counsel for the Revenue. [4.1] It is vehemently submitted by Shri Bhatt, learned Counsel for the Revenue that in the facts and circumstances of the case and looking to the complexity and multiplicity of transaction visavis the requisitioned material i.e. 40,000 papers found from 42 gunny bags, in which, there is ample material with the Assessing Officer connecting the petitioner assessee that the requisitioned material and the persons / Sadhak whose names figured in the requisitioned material, the Assessing Officer is justified in passing the order under Section 142(2A) of the IT Act for special audit for AY 200910 to 201516. [4.2] It is submitted that Section 142(2A) of the IT Act has been amended and all the conditions mentioned in the amended Section 142(2A) of the IT Act have been satisfied while passing the impugned order under Section 142(2A) of the IT Act. [4.3] It is submitted that the impugned order has been passed after giving an opportunity to the petitioner assessee as per proviso to Section 142( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case detailed showcause notice was served upon the petitioner by which the petitioner was called upon to show cause why for the reasons mentioned in the said showcause notice the order of special audit under Section 142(2A) of the IT Act may not be passed. It is submitted that thereafter as the petitioner failed to respond to the showcause notice and thereafter as the assessment was time barred matter, after preparing a detailed satisfaction note the proposal was sent to the Principal Commissioner of Income Tax and the Principal Commissioner of Income Tax after careful consideration of the material on record, thereafter has granted the approval. It is submitted that therefore the impugned order cannot be said to be in breach of the principles of natural justice as alleged and/or as contended on behalf of the petitioner. It is further submitted by Shri Bhatt, learned Counsel that in the present case during the assessment proceedings for the year under consideration the petitioner was totally non-cooperative. It is submitted that number of questionnaires were sent to the petitioner, however the petitioner was absolutely non-cooperative and failed to answer the questions whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was formed by the Assessing Officer that the accounts for the year in consideration are required to be audited through the Special Auditor is concerned, it is vehemently submitted that as such the show cause notice itself notes in great detail the requirements relating to complexity etc. It is submitted that as such the impugned order dated 15.12.2016 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 Note has been recorded by the Commissioner on the note-sheet 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 note-sheet 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose case the time allowed under subsection (1) of section 139] for furnishing the return has expired a notice 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and for any good and sufficient reason, extend the said period by such further period or periods as 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 subsection (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 accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid by the Central Government. As per subsection (3) of Section 142, the assessee shall be given an opportunity 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 Assessing Officer to arrive at correct taxable income and for which the Assessing Officer is authorized to direct the assessee to get books of account audited by the accountant authorized by the Assessing Officer, in case, Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial expansion of scope and ambit of Special Audit under Section 142(2A) of the Act with effect from 1st June, 2013. The amended section has been widened to include volume of accounts, 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 legislatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that every account or statement of income must be viewed with suspicion, distrust and scepticism. The past instances are mere warnings, for closer and more indepth scrutiny. It is also 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be audited by Special Auditor in the interest of Revenue, the impugned order is not required to be quashed and set aside, more particularly, when it is stated in the order that looking to the complexity and the multiplicity of transactions, accounts are required to be verified by the Special Auditor. Considering the object and purpose of Section 142(2A) of the IT Act, it appears that the accounts are required to be audited by the Special Auditor under Section 142(2A) of the IT Act with a view to facilitate the Assessing Officer in passing the Assessment order and with a view to arrive at right conclusion. [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 Principal Commissioner of Income Tax. We have perused the same. It appears that a detailed proposal with reasons why in the present case the accounts of the petitioner required special audit has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. [6.8] Now, so far as the submission on behalf of the petitioner that once the Assessing Officer vide communication dated 25.11.2016 closed the right of the petitioner to submit the objections / further objections, subsequent dealing with the objections on 28.11.2016 is with closed mind is concerned, the aforesaid has no substance. What is required to be considered is whether while making a proposal the Assessing Officer has dealt with the objections raised by the petitioner or not. Merely because earlier on 25.11.2016, the Assessing Officer observed and /or closed the right of the assessee to file the reply and thereafter haing received the objections before sending the proposal for approval to the Commissioner, the Assessing Officer dealt with / disposed of the same, it cannot be said that the disposal of the objections can be said to be with closed mind. On the contrary, if the Assessing Officer would not have disposed of the objections which were received by him before proposal was sent to the Commissioner, in that case, he would have been accused of non dealing with the objections. [6.9] Considering the aforesaid facts and circumstances and the object and purpose of spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be considered / verified visavis the assessee and other persons whose names figured in the requisitioned papers, and when considering section 142(2A) of the IT Act, when the the Assessing Officer has thought it fit to exercise powers under Section 142(2A) of the IT Act, it cannot be said that the Assessing Officer has committed any error and/or illegality. Specific reasons are given so mentioned in the showcause notice as to why and for what purpose the special audit is required. Therefore, in the facts and circumstances of the case, it cannot be said that the Assessing Officer has committed any error and/or illegality in passing the impugned order of special audit, in exercise of powers under Section 142(2A) of the IT Act. At this stage it is required to be noted that with respect to other assessees who are alleged to be connected with Asharam Bapu and Narayan Sai Group, on the very ground order under Section 142(2A) of the IT Act has been passed by the concerned Assessing Officer and the petitions (Special Civil Application Nos.1266/2017 and other allied petitions) challenging the order of Special Audit under Section 142(2A) of the IT Act have been dismissed by this Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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