JUDGMENT : AKIL KURESHI, J. 1. Petitioner, a private limited company, has challenged an order dated 31.03.2016 passed by the Deputy Commissioner of Income-tax, petitioner's Assessing Officer. 2. For the assessment year 2013-14, the petitioner filed the return of income on 28.09.2013 The Assessing Officer took such return into scrutiny. During such scrutiny assessment, the Assessing Officer issued a notice dated 08.03.2016 to the petitioner company, proposing to get the petitioner's accounts for the financial year 2012-13 relevant to assessment year 2013-14, audited by a special accountant. In such notice, he recorded that he had received information called for from the assessee. On verification of the record, he found that the Gujarat High Court had passed an order dated 30.03.2012, under which, five companies viz. Chanakya Buildcon Pvt. Ltd., Chanakya Infracon Pvt. Ltd., Takshashila Properties Pvt. Ltd., Takshashila Realities Limited and Youngstar Infracon Pvt. Ltd., were amalgamated with the Takshashila Gruh Nirman Pvt. Ltd. It was noticed that these five companies were initially the partnership firms already doing the business of real estate and construction which were later on converted into companies. It was noticed that the project in relation to which deduction under section 80IB of the Act was claimed, had changed hands and eventually, the deduction is being claimed in the hands of the present assessee. With this background, in the said notice, the Assessing Officer noted as under: “4. It is seen that the time of formation, or at a later date some of the partners brought land into the firms as their capital contribution. Before conversion to companies, the firms got the lands available in the books revalued and the amounts were credited in the current capital accounts of the partners. Consequent to amalgamation, the company has issued 6,00,000 equity shares at a fare price of Rs. 10/- and a premium of Rs. 390/- per share against the unsecured balances of Rs. 24 crore, treating the same as share application money and share premium. The fair market value of shares has been arrived by the company on ‘Discounted Cash Flow’ (DCF) method. The basis for free cash flow to equity is randomly taken by the company. 5. Conversion of 5 firms into companies, after revaluation of lands, merger of 5 companies with Takshashila Gruh Nirman Pvt. Ltd. Later with issue of equity shares against the balances of revaluation credits at a premium. The basis for free cash flow to equity is randomly taken by the company. 5. Conversion of 5 firms into companies, after revaluation of lands, merger of 5 companies with Takshashila Gruh Nirman Pvt. Ltd. Later with issue of equity shares against the balances of revaluation credits at a premium. Valuation of shares as Discounted Cash Flow method by estimating cash flows and adopting a random discounted rate for valuation. There is complex web of transactions in the group of firms namely introduction of land by some of the partners, revaluation of lands and crediting of amounts in the current accounts of all partners, conversion of firms in to companies which merged with the existing company, valuation of share by discounted cash flow method and allotment of shares against the amounts outstanding as unsecured loans at unreasonable premium, clubbed with multiple revaluation or properties over the years starting from 2008 to 2013 in various entities involves application of provisions of the Companies Act, application of Accounting Standards and examination of provisions of capital gains in the hands of various partners, firms and directors is involved. 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 specialized nature of transaction in the cases which finally of the assessee, and the interests of the revenue, am of the opinion that it is necessary to get the accounts audited by a Special Auditor from the point of view of taxation of capital gains and accounting of stock-in-trade at each stage of transfer so that there is no loss to the revenue out of the complex web of transactions involved.” 3. Based on these facts, in the said notice, the Assessing Officer called upon the petitioner to show cause why for the financial year 2012-13, relevant to assessment year 2013-14 accounts of the petitioner not be audited by an accountant as defined under section 288(2) of the Act. 4. In response to such notice, the petitioner replied under letter dated 10.03.2013 raising various objections including that the scheme of amalgamation has been approved by the High Court. In such proceedings, Income tax department was also a party. 4. In response to such notice, the petitioner replied under letter dated 10.03.2013 raising various objections including that the scheme of amalgamation has been approved by the High Court. In such proceedings, Income tax department was also a party. The assessee also contended that there is no question of complexity of accounts, volume of accounts or doubt about the correctness of accounts or the multiplicity of transactions which would warrant a special audit. The petitioner followed up these objections with another communication dated 18.03.2016, in which also, while passing the proposal for special audit, the petitioner contended that various transactions took place between the years 2008 to 2013 and that in any case, looking to the transactions, provisions of section 14 2(2A) could not be invoked. The petitioner relied on various decisions in support of such contentions. 5. This principle show cause notice and the petitioner's replies to the same were followed by further communications between the two sides. Eventually, by the order dated 31.03.2016, the Assessing Officer directed as under: “2. In connection with ongoing assessment proceedings in the case of the company, M/s. Takshashila Gruh Nirman Pvt. Ltd. (now known as Takshashila Realties Pvt. Ltd.) for A.Y. 2013-14, the Principal Commissioner of Income tax Ahmedabad-4, Ahmedabad vide his letter No. Pr.CIT4.HQ/142(2A)/2015-16/4600 dated 30.03.2016 has approved Special Audit u/s. 142(2A) of the Act of accounts of following concerns. 1. Takshashila Gruh Nirman Pvt. Ltd. for the AYs. 2013-14 and 2010-11 2. Firms [Chanakya Infrastructure, Chanakya Buildcon, Takshashila Gruh Nirman and Youngstar Infrastructure (Naroda)] for AY 2009-10 3. Companies [Chanakya Infacon Pvt. Ltd., Chanakya Buildcon Pvt. Ltd., Takshashila Properties Pvt. Ltd. and Youngstar Infracon Pvt. Ltd.] for AYs 2009-10 and 2010-11 For this purpose, the Principal Commissioner of Income tax Ahmedabad-4, has appointed M/s. P.K Ajmera & Co., Chartered Accountants, Ahmedabad on the panel of the department in this regard, a period of 120 days is allowed for completion of the said audit. 4. Considering the above, you are hereby directed to get the accounts audited u/s. 142(2A) from the aforesaid Chartered accountant within 120 days from today i.e. 31.03.2016 and furnish the audit report in the prescribed form duly signed and verified by the said Chartered Accountant. 4. Considering the above, you are hereby directed to get the accounts audited u/s. 142(2A) from the aforesaid Chartered accountant within 120 days from today i.e. 31.03.2016 and furnish the audit report in the prescribed form duly signed and verified by the said Chartered Accountant. You are directed to cooperate with the appointed Chartered Accountant and make available all necessary documents, evidences and books of accounts for all the financial years relevant to the above assessment years, to facilitate the work of special audit. The audit report prepared by the auditor should be as per Rule 14A and in the prescribed form No. 6B. In addition to same, the special audit should also consider the following…” 6. The Assessing Officer raised several issues, on which, the special auditor would look into. It is this order the petitioner has challenged in the present petition. The counsel for the petitioner raised following contentions: I. The requirement of special audit in terms of section 142(2A) of the Act did not arise in the facts of the present case since the accounts cannot be stated to be complex, voluminous or otherwise requiring such special audit. II. Counsel further submitted that the Assessing Officer without making any sincere effort and appreciating the accounts, straightaway called for the special audit, thereby throwing the burden on the petitioner. III. Counsel further submitted that in any case, the Assessing Officer could not have called for special audit for the other years in case of the assessee beyond the financial year 2012-13 and of other entities. 7. On the other hand, learned advocate Shri Nitin Mehta for the department opposed the petition contending that looking to the complex web of partnerships being converted into companies being ultimately amalgamated into one company, there was a need for special audit. The Assessing Officer after having given an opportunity of being heard to the petitioner, had passed the order recording reasons, which calls for no interference. Counsel submitted that the show-cause notice must be read as a whole and the proposal cannot be seen in isolation to canvas that the final order travel beyond the show cause notice. 8. Before dealing with the rival submissions, we may refer to the decision of the Supreme Court in case of Rajesh Kumar v. Deputy Commissioner of Income-Tax, (2006) 278 ITR 91 (SC) cited by the counsel for the petitioner. 8. Before dealing with the rival submissions, we may refer to the decision of the Supreme Court in case of Rajesh Kumar v. Deputy Commissioner of Income-Tax, (2006) 278 ITR 91 (SC) cited by the counsel for the petitioner. In such decision, the Supreme Court held that direction issued under section 142(2A) of the Act for special audit is not administrative in nature, but is in exercise of quasi-judicial powers. Any order which is likely to result in adverse civil consequences, must be proceeded by a show cause notice and a reasonable opportunity to the person likely to be so affected. It was further observed that the expression “having regard to” in section 142(2A) of the Act would indicate that the factor enumerated in the said section are not exhaustive. The Court held that such powers cannot be lightly exercised and the satisfaction of the authority should not be a subjective satisfaction, it should be based on objective assessment regard being had to the nature of accounts. 9. We may notice that this judgment was rendered when the provisions concerning special audit did not specifically provide for hearing the assessee before passing such an order. By insertion of the proviso to sub-section (2A) of section 142 with effect from 01.06.2007, it is now recognized that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard. Thus, the requirement of hearing is now statutorily included in sub-section (2A) of section 142 of the Act. One more statutory change which needs to be noted is that prior to insertion of the proviso to section 142(2D) also with effect from 01.06.2007, the expenses incidental to any audit was to be borne by the assessee. The proviso now provides that where any direction for audit under sub-section (2A) is issued on or after 1st day of June, 2007, such expenses shall be paid by the Central Government. Thus, the onerous requirement of the assessee covering the expenditure for special audit has now been done away with. 10. With this background, we may recall the Assessing Officer had noted his tentative reasons why he proposed to call for a special audit in case of the petitioner for the financial year 2012-13. Thus, the onerous requirement of the assessee covering the expenditure for special audit has now been done away with. 10. With this background, we may recall the Assessing Officer had noted his tentative reasons why he proposed to call for a special audit in case of the petitioner for the financial year 2012-13. These reasons included, inter-alia, the grounds that several partnership firms engaged in the business of construction and development of projects were from stage to stage converted into private limited companies. Five such private limited companies merged through amalgamation into one single company which was approved by the High Court. The projects concerning which deduction under section 80IB of the Act was claimed, changed hands between these different entities from time to time. The Act of merger also led to valuation and revaluation of shares, introduction of land by some of the partners, revaluation of lands and crediting of accounts in the current account of the partners and later on, conversion of the firms which eventually merged with the existing company. In the opinion of the Assessing Officer, such properties had undergone multiple revaluation over the years from 2008 to 2013, which involve the application of the provisions of the Companies Act and the accounting standards provided therein. He was therefore of the opinion that having regard to the nature and complexity of the accounts, volume of accounts etc, it was necessary to get the accounts audited by the special auditor. 11. It was on the basis of such reasons, after hearing the petitioner and considering the objections that the Assessing Officer passed the impugned order. In such order, however, he provided for special auditor, not only concerning financial year 2012-13 of the assessee, but also for the financial year 2009-10 and significantly also called for special audit of various other firms and companies, which ultimately, as noted above, amalgamated into a single company. 12. Insofar as the direction for auditing the company's account for the assessment year 2012-13, we see the same is backed by proper materials on record and reasons recorded by the Assessing Officer. Even during the course of the assessment, multiple queries had exchanged between the Assessing Officer and the assessee concerning the accounts of the assessee. 12. Insofar as the direction for auditing the company's account for the assessment year 2012-13, we see the same is backed by proper materials on record and reasons recorded by the Assessing Officer. Even during the course of the assessment, multiple queries had exchanged between the Assessing Officer and the assessee concerning the accounts of the assessee. It was eventually that the Assessing Officer was prompted to issue notice dated 08.03.2016 His formation of the belief that looking to the complexity and volume of the accounts, a special audit was called for, therefore, cannot be faulted. 13. The matter however does not rest here. In the impugned order, he expanded the scope of special audit and directed the special audit not only for the financial year 2009-10 in case of the assessee, but also called for special audit of various other entities for number of years. This, in our opinion, was simply impermissible. We are doubtful whether while processing the return of an assessee for a particular year, in exercise of powers under section 142(2A) of the Act, the Assessing Officer can call for special audit of a financial year other than one which is relevant to the assessment year in question. In any case, no such direction could have been issued without any proposal in the show cause notice. We may recall the only proposal in the show cause notice was that the Assessing Officer upon failure of the assessee to satisfy him otherwise, would call for special audit for the financial year 2012-13. There was no further proposal that he may expand the scope of special audit for any other years as well. His recording of background facts of multiple transactions in earlier years, must be seen as demonstrating the nature of complexity in accounts and without there being any specific proposal in this respect, cannot be read as giving a reasonable opportunity to the petitioner to oppose why special audit for other years should not be called for. 14. Same logic would apply in respect of the direction for special audit in case of other entities. Here also, admittedly there was no proposal in the show cause notice. 14. Same logic would apply in respect of the direction for special audit in case of other entities. Here also, admittedly there was no proposal in the show cause notice. If the case of the Revenue is that, such entities having merged, it is the petitioner alone who would respond to any proposal for the special audit in respect to such entities, there is no such indication in the show cause notice and at any rate, no proposal for special audit in respect of such entities. 15. The direction contained in the impugned order concerning the special audit in case of the petitioner for the assessment year 2012-13 being severable, can be saved. 16. In the result, the petition is allowed in part. Except for direction for special audit of the petitioner company for the assessment year 2013-14, direction for special audit for the remaining years in case of the petitioner and all other entities is quashed. Petition disposed of accordingly.