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TMI Blog2021 (11) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011, the assessing officer formed an opinion that the case of the petitioner is a fit case for appointment of an auditor by invoking Section 142(2A) of the Income Tax Act and accordingly, obtained the prior permission from the Commissioner of Income Tax and disposed of the objection in proceedings dated 16.12.2011. In the present case, the proceedings dated 09.12.2011 was treated as a show cause notice for all purposes both by the Assessing Officer and by the Assessee/petitioner and the petitioner submitted his objections in detail on 15.12.2011 and thereafter, the approval from the Commissioner of Income Tax was obtained and the objections were disposed of on 16.12.2011. The further objections raised on 23.12.2011, were also disposed of by the Assessing Officer on 26.12.2011. This being the admitted facts between the parties, there is no reason to disbelieve the proceedings dated 09.12.2011, though it was not aptly worded, as rightly stated by the learned Senior counsel appearing on behalf of the respondents. In respect of the impugned order, the petitioner is bound to cooperate for the earlier completion of the Special Audit, enabling the authority to proceed in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said order dated 09.12.2011, cannot be considered as a show cause notice, as required under the provisions of the Act. When the initiation itself is improper, the final order dated 16.12.2011 cannot be sustained by the respondents. When the procedures contemplated at the first instance had been violated and even before receiving any objections or defence from the petitioner/assessee, for appointing an Auditor by invoking Section 142(2A) of the Income Tax Act, then the final order which is impugned in this writ petition, is liable to be set aside. 6. The arguments advanced in this regard are that in the proceedings dated 09.12.2011, the assessing authority formed a complete opinion and decided to appoint an Auditor to conduct the special audit under Section 142 (2A) of the Act and therefore, the objections received became an empty formality and thus, the opportunity as contemplated has not been provided, and the objections of the petitioner/assessee were not considered in its spirit and in these circumstances, the order impugned, is to be set aside. 7. In support of the said contention, the learned counsel for the petitioner relied on the judgment of the Hon'ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly. 10. This Court is of an opinion that show cause notices are issued by the competent authority only on the basis of the provisional decisions taken. Such provisional decision is necessarily to be taken in view of the fact that, in the absence of any such decision on certain grounds, the assessee would not be in a position to submit their objections. Therefore, a provisional decision containing certain reasons are also required for a show cause notice for fulfilling the requirement of a show cause notice. Such decision undoubtedly, will throw light on the issues as well as the grounds taken by the competent authority for initiation of any further proceedings. 11. Presuming if no such provisional decision is taken, while issuing the show cause notice, the consequences would be that the assessee may not be in a position to submit their objections. Then again the assessee has to approach the authority to know what is the allegation against which he should submit an objection? This exactly is the problem where the show cause notices are issued without any reasoning or provisional decision. It is in normal practice that, if a show cause notice is issued without any reason then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posing of the objections on 16.12.2011 and the petitioner/assessee submitted further representation on 23.12.2011 and said objections were also disposed of by the 2nd respondent on 26.12.2011, which is impugned in this writ petition. 15. Thus the proceedings initially issued was acted upon by the petitioner/assessee only as a show cause notice and objections were submitted and after affording an opportunity, final decision is taken and in this case, the approval from the Commissioner of Income Tax was obtained on 15.12.2011. 16. In this regard, the learned counsel for the petitioner/assessee raised an objection that on 09.12.2011 itself such an approval would have been obtained from the Commissioner of Income Tax. Contrarily, the approval was obtained on 15.12.2011 and thereafter, the objections were disposed of on 16.12.2011. 17. In this regard, it is to be considered that Section 142(2A) of the Income Tax Act contemplates that if at any stage of the proceedings before 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 speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions made through Bank accounts of POA holders are not commented in the Audit Report u/s 44AB. (d) Cash payments made are not entered in the books and whether the vouchers were produced in Audit is not known. Column No.17(A) of 3CD report annexed to Return of Income shows that cash payments were made. But there is no annexure enclosed nor disallowance made in the computation memo. (e) Cash payments made during the FY 2008-09, (AY:09-10) are per Survey Report works out to ₹ 55,54,700/-. But there is no qualification of such payment in the Audit Report. Through a letter dated 20.10.2011, the company asked to reconcile, it is unable to reconcile. (f) Transactions in the name of Shri D. Arul Muthiah of ₹ 1,29,00,000/- routed through Axis Bank Account No.258010200007070 and admitted as done for the company. However, audit report does not qualify such transactions done through intermediaries. 21. In paragraph no.3 of the said order dated 16.12.2011, the assessing officer has given reasons for the rejection of the objections filed by the writ petitioner, which reads as under: 3. Your reply dt. 15.12.2011 is gone through. After careful consideration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue deliberation of facts on record an objective decision was taken in passing orders u/s.142(2A). Hence, you are required to comply with the terms of the said notice u/s.142(2A) dated 16/12/2011. 25. In this background, let us now consider the judgment relied on by the petitioner. The principles regarding the pre-decisional hearing is the ruling of the Hon'ble Apex Court of the India. By applying the principles laid down in the case of Sahara India's case [cited supra], the facts in the present writ petition is to be considered. As far as the case before the Supreme Court is concerned, paragraph No.27 of the judgment records the same which reads as under: 27. Indubitably, before passing the said orders, no show-cause notice was given to the appellants. On the contrary, it appears from the record that on 9-3-2006, the appellants were required to furnish by 20-03-2006 details/explanation in respect of queries raised vide order sheet entry dated 16-2-2006 but in the meanwhile, the impugned orders were passed on 14-3-2006 itself. It is manifestly clear that when the impugned orders were made, the Assessing Officer had no occasion to have even a glimpse of the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed as a final decision taken by the competent authority. In the absence of recording such reasons, the assessee may not be in a position to file their objections and therefore, even while issuing the show cause notice, the provisional decision or allegations, are to be stated enabling the assessee to defend their case effectively. 29. The facts involved in the case decided by the Hon'ble Supreme Court of India i.e. Sahara India's case cannot be compared with the facts involved in the present case. In the present case, the proceedings dated 09.12.2011 was treated as a show cause notice for all purposes both by the Assessing Officer and by the Assessee/petitioner and the petitioner submitted his objections in detail on 15.12.2011 and thereafter, the approval from the Commissioner of Income Tax was obtained and the objections were disposed of on 16.12.2011. The further objections raised on 23.12.2011, were also disposed of by the Assessing Officer on 26.12.2011. This being the admitted facts between the parties, there is no reason to disbelieve the proceedings dated 09.12.2011, though it was not aptly worded, as rightly stated by the learned Senior counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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