Sant Asharamji Ashram v. Deputy Commissioner of Income Tax
2017-04-26
B.N.KARIA, M.R.SHAH
body2017
DigiLaw.ai
JUDGMENT : M.R. Shah, J. 1. By way of this petition under Article 226 of the Constitution of India, petitioner - assessee - Sant Asharamji Ashram has prayed for an appropriate writ, direction and order to quash and set aside the impugned order passed under Section 142(2A) of the Income Tax Act, 1961 (hereinafter referred to as "IT Act") by which by a detailed and speaking order for AY 2009-10 to 2015-16, the Assessing Officer has ordered to get the accounts of the assessee for the aforesaid assessment years to be audited by the Special Auditors. 2. Facts leading to the present Special Civil Application in nut-shell are as under: 2.1 That the assessment proceedings under Section 153C of the IT Act for AY 2009-10 to 2014-15 and the assessment proceedings under Section 143(3) of the IT Act for AY 2015-16 are pending before the Assessing Officer. That the petitioner Trust is/was run and managed by one Shri Asharam Bapu and his son Narayan Sai against whom number of criminal cases are pending. That approximately 40,000 papers in 45 gunny bags in the case of Asharam Bapu and Narayansai Group were seized by the Police Authority. That the Income Tax Authority requisitioned the said documents under Section 132 of the IT Act in the case of Asharam Bapu and Narayansai Group on 09.03.2015 from Police Authorities, Surat. That on the basis of the same, the petitioner Trust was served with the notice under Section 153C of the IT Act for block period i.e., AY 2009-10 to 2014-15 and also the notice under Section 143(3) of the IT Act for the AY 2015-16. That the petitioner assessee was required to furnish the return of income under Sections 153C and 143(3) of the IT Act for the aforesaid years. That the petitioner - assessee was served with the questionnaire by way of notice on the basis of requisitioned material, statements and loose papers etc. That the petitioner - assessee was also asked to furnish various details such as ledger accounts, bank statements, confirmatory letters from unsecured depositors etc. Huge donation in the form of cash was found to be deposited which was found to be unaccounted.
That the petitioner - assessee was also asked to furnish various details such as ledger accounts, bank statements, confirmatory letters from unsecured depositors etc. Huge donation in the form of cash was found to be deposited which was found to be unaccounted. During the course of block assessment for the aforesaid period and section 143(3) proceedings, the AO was of the opinion that looking to the complexity and multiplicity nature of material, the account of the assessee for the aforesaid period are required to be audited by the Special Auditor. Therefore, a detailed and speaking show-cause notice under Section 142(2A) of the IT Act was prepared on 18.10.2016, on the basis of the requisition in the case of Sant Asharamji Ashram and the same was issued to the petitioner. The petitioner - assessee was given the opportunity of being heard as required in proviso to Section 142(2A) of the IT Act and the assessee was called upon to show cause as to why the account for AY 2009-10 to 2015-16 may not be audited by the Special Auditor under Section 142(2A) of the IT Act. That the hearing for the aforesaid purpose was fixed on 25.10.2016. It appears that after having been served with the aforesaid notice, the petitioner - assessee vide communication dated 24.10.2016 sought for the adjournment which was granted and the next date was fixed on 01.11.2016. That again the petitioner - assessee asked for the adjournment. Again a last opportunity was granted to the petitioner and the next date of compliance was fixed on 07.11.2016. Again the petitioner filed adjournment application without any compliance. However, considering the endorsement made on the earlier letter/communication dated 01.11.2016 that this was the last opportunity, no further order adjourning the matter was passed. As it was found that the petitioner is totally non-compliant and non-cooperative and trying to drag this matter to the last minutes and it was a time barred matter, the Assessing Officer made a proposal for special audit to Principal Commissioner of Income Tax for approval. That the petitioner again filed an adjournment application dated 17.11.2016, without filing any reply/objections. That thereafter the learned Principal Commissioner of Income Tax granted the approval of special audit in the case of the petitioner - assessee on 23.11.2016.
That the petitioner again filed an adjournment application dated 17.11.2016, without filing any reply/objections. That thereafter the learned Principal Commissioner of Income Tax granted the approval of special audit in the case of the petitioner - assessee on 23.11.2016. That thereafter the impugned direction/order has been passed for special audit under Section 142(2A) of the IT Act for the AY 2009-10 to 2015-16. 2.2 Feeling aggrieved and dissatisfied with the impugned order passed by the learned Assessing Officer under Section 142(2A) of the IT Act appointing the Special Auditor for AY 2009-10 to 2015-16, the petitioner - assessee has preferred the present Special Civil Application under Article 226 of the Constitution of India. 3. Shri S.N. Soparkar, learned Senior Advocate has appeared on behalf of the petitioner and Shri Manish Bhatt, learned Senior Advocate has appeared on behalf of the Revenue. 4. It is vehemently submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner that while passing the impugned order the Assessing Officer has not recorded any satisfaction/any reason to form opinion for special audit, as required under Section 142(2A) of the IT Act. It is vehemently submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner that before passing any order under Section 142(2A) of the IT Act of special audit, the Assessing Officer is required to record the reason to form an opinion for special audit as required under Section 142(2A) of the IT Act. 4.1 It is vehemently submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner that for the purpose of invoking jurisdiction under Section 142(2A) of the IT Act, the Assessing Officer is required to form an opinion that having regard to the nature of 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 business activity of the assessee and the interest of revenue, it is necessary to have special audit. It is submitted that in the present case the Assessing Officer has failed to form any such opinion and record satisfaction in that effect.
It is submitted that in the present case the Assessing Officer has failed to form any such opinion and record satisfaction in that effect. In support of his above submissions, Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner has heavily relied upon the decision of the Allahabad High Court in the case of Prateek Resorts and Builders (P) Ltd. v. Assistant Commissioner of Income Tax, Central Circle, Meerut reported in 199 Taxmann.com 140 (Allahabad). 4.2 It is further submitted that even otherwise the impugned order passed by the Assessing Officer is a non-reasoned/non-speaking order. It is submitted that the respondent has failed to attribute a single circumstance/reason which leads to an opinion that account of the petitioner is required to be audited under Section 142(2A) of the IT Act. 4.3 It is further submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner that even otherwise some of the inquiry which is directed to be conducted vide impugned order under Section 142(2A) of the IT Act is completely unrelated to the account. It is submitted that the inquiries directed to be made in para Nos. 6(v), (xxiv), (xxv), (xxxi), (xxxii)-(xxxix), (x1-x1iii) are completely unrelated to account aspect. It is submitted that therefore for the aforesaid the special audit is not warranted. 4.4 It is further submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner that even otherwise before passing the impugned order under Section 142(2A) of the IT Act, reasonable opportunity of hearing has not been granted by the respondent. It is submitted that the respondent has not granted adequate time to the petitioner to represent its case. It is submitted that therefore the impugned order is in breach of principles of natural justice which deserves to be quashed and set aside. In support of his above submissions, Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner has heavily relied upon the following decisions of the Hon'ble Supreme Court, Punjab & Haryana High Court, Bombay High Court and Rajasthan High Court. "1. Sahara India (Firm) v. Commissioner of Income-tax, Central-1 [2008] 300 ITR 403 (SC) 2. Isolux Corsan India Engineering & Construction (P.) Ltd. v. Deputy Commissioner of Income-tax Circle 1(1), Gurgaon [2016] 287 CTR 92 (Punjab & Haryana) 3. Nickunj Eximp Enterprises (P.) Ltd. v. Assistant Commissioner of Income-tax [2012] 346 ITR 6 (Bombay) 4.
"1. Sahara India (Firm) v. Commissioner of Income-tax, Central-1 [2008] 300 ITR 403 (SC) 2. Isolux Corsan India Engineering & Construction (P.) Ltd. v. Deputy Commissioner of Income-tax Circle 1(1), Gurgaon [2016] 287 CTR 92 (Punjab & Haryana) 3. Nickunj Eximp Enterprises (P.) Ltd. v. Assistant Commissioner of Income-tax [2012] 346 ITR 6 (Bombay) 4. Khem Singh Sankhla v. Union of India [2004] 266 ITR 485 (Rajasthan)" 4.5 Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioner has submitted that the Assessing Officer could not have directed special audit under Section 142(2A) of the IT Act before considering books of account of the petitioner and/or without verifying the accounts and/or considering the complexity in the accounts. Making above submissions and relying upon above decisions, it is requested to admit/allow the present petition and quash and set aside the impugned order passed under Section 142(2A) of the IT Act. 5. Present petition is vehemently opposed by Shri Bhatt, learned Senior Advocate appearing on behalf of the respondent. It is submitted that in the present case the impugned order of special audit made under Section 142(2A) of the IT Act is absolutely just and in accordance with law and after following due procedure as required under Section 142(2A) of the IT Act. 5.1 It is further submitted by Shri Bhatt, learned Senior Advocate appearing on behalf of the respondent that reasonable opportunity has been given to the petitioner, prior to passing the impugned order under Section 142(2A) of the IT Act. However the petitioner did not avail of any of the opportunities and continued to ask for the adjournments without filing any reply and/or raising any objections to the show-cause notice. 5.2 It is further submitted that in the present case detailed show-cause notice was served upon the petitioner by which the petitioner was called upon to show cause why for the reasons mentioned in the said show-cause 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 show-cause 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 Senior Advocate 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 which were raised. 5.3 It is further submitted by Shri Bhatt, learned Senior Advocate appearing on behalf of the respondent that the petition challenges the order of special audit made under Section 142(2A) of the IT Act. 5.4 It is further submitted by Shri Bhatt, learned Senior Advocate appearing on behalf of the respondent that in the instant case, voluminous material contained in 42 gunny bags running into around 40000 + pages was requisitioned under Section 132A of the IT Act. It is submitted that verification and analysis of the said requisitioned material indicated direct nexus with the case of the petitioner. It is submitted that the requisitioned material in soft copy was provided to the petitioner on 06.05.2016. It is submitted that in relation to the said material, questionnaire with various annexures was issued on 18.07.2016 during the course of regular assessment proceedings. It is submitted that under further letter dated 01.08.2016, petitioner assessee was requested to file details. It is submitted that under further letter dated 22.08.2016, complete AIR information was provided and explanation thereof was called for from the assessee. It is further submitted that under letter dated 05.09.2016, the respondent provided complete details of the bank account and called upon the petitioner to render explanation. It is submitted that under letter dated 06.09.2016, the petitioner was called upon to provide details of each Sadhaks along with their names, nature of work etc. This was required with regard to co-relation with the requisitioned material. It is further submitted that under further letter dated 16.09.2016, copies of the statements of various persons were provided. It is submitted that as per the request made, under letter of 30.09.2016, the petitioner was again provided statements of various persons despite the fact that the same were already provided earlier.
It is further submitted that under further letter dated 16.09.2016, copies of the statements of various persons were provided. It is submitted that as per the request made, under letter of 30.09.2016, the petitioner was again provided statements of various persons despite the fact that the same were already provided earlier. 5.5 It is further submitted by Shri Bhatt, learned Senior Advocate appearing on behalf of the respondent that in response to the above correspondence, under letter of 21.07.2016, the petitioner feigned ignorance about the queries raised in the questionnaires. It is submitted that under letter dated 12.08.2016, the petitioner admitted that the documents belonged to it but feigned ignorance as to how the same reached third parties. It is submitted that significantly, the petitioner also admitted that the information sought was voluminous. It is submitted that under letter dated 26.08.2016, the petitioner treated regular returns as returns filed pursuant to notice under Section 153C of the IT Act. It is submitted that though the notice under Section 153C was issued on 01.02.2016, returns pursuant thereto came to be filed only on 26.08.2016. It is submitted that under letter dated 09.09.2016, the petitioner expressed its inability to furnish details relating to Banking queries. It is submitted that under letter dated 12.09.2016, the petitioner stated that the statements supplied in CD were not readable and sought hard copies, though the hard copies of the statements was already provided under letter dated 16.09.2016. 5.6 It is submitted that based on the voluminous record, which did pertain to the petitioner also and since the petitioner never came forward to assist the Assessing Officer, detailed show-cause notice dated 18.10.2016 was issued proposing special audit. It is submitted that show-cause notice enumerates in great detail the above aspects, as also the nexus between the requisitioned documents and the case of the petitioner. 5.7 It is further submitted by Shri Bhatt, learned Senior Advocate appearing on behalf of the respondent that the following sequence of events would show that even in those proceedings, the petitioner was interested in delaying the matter and was never interested in giving effective objections. 18.10.2016 Show-cause notice issued to the assessee as to why the reference under section 142(2A) of the IT Act should not be made.
18.10.2016 Show-cause notice issued to the assessee as to why the reference under section 142(2A) of the IT Act should not be made. In this notice, exhaustive details with regard to non-cooperation of the assessee during assessment proceedings as also the aspect of complexity and voluminous material have been clearly demonstrated. 24.10.2016 The petitioner filed an adjournment application. On the said application itself, an endorsement is made that the next date of hearing was fixed on 01.11.2016. The representative of the petitioner noted this aspect. 01.11.2016 The petitioner again on the adjourned date, filed an adjournment application. On the letter itself, an endorsement is made by the respondent that the next date of hearing is fixed on. 07.11.2016 No further adjournment shall be granted. The representative of the petitioner noted this endorsement. The petitioner again filed adjournment application on the same lines. 15.11.2016 Since the petitioner was only interested in procrastination since from beginning of assessment proceedings and not making any submissions, a satisfaction was recorded on 15.11.2016 and request was made to the Principal Commissioner of Income Tax, Central to accord approval. 17.11.2016 As usual, another letter seeking adjournment was received from the petitioner. 23.11.2016 The Principal Commissioner of Income Tax, Central after detailed scrutiny and application of mind granted approval 28.11.2016 Impugned intimation issued to the petitioner to get the accounts audited. 5.8 It is further submitted by Shri Bhatt, learned Senior Advocate appearing on behalf of the respondent that in view of the above, a clear opinion was formed by the Assessing Officer that having regard to the nature and complexity of the accounts, volume of the accounts, doubts about correctness of the accounts, multiplicity of transactions as also the specialized nature of business activity of the petitioner assessee and considering the interest of revenue, the matter was required to be referred under section 142(2A) of the IT Act. It is submitted that as mandated under the said provision, approval of the Principal, CIT (Central) was also obtained. It is submitted that the Principal (CIT) has not granted approval mechanically but has evaluated entire facts and in the note-sheet has recorded independent satisfaction. 5.9 It is further submitted that from the above stated sequence it is apparent that under the proviso to section 142(2A) of the IT Act, reasonable opportunity was also provided to the petitioner.
It is submitted that the Principal (CIT) has not granted approval mechanically but has evaluated entire facts and in the note-sheet has recorded independent satisfaction. 5.9 It is further submitted that from the above stated sequence it is apparent that under the proviso to section 142(2A) of the IT Act, reasonable opportunity was also provided to the petitioner. It is further submitted by Shri Bhatt, learned Senior Advocate that looking to the incriminating requisitioned material, had the case not been sent for special audit, it would have resulted into high pitched assessment on account of duplication which would also not have been in the interest of the petitioner. It is in these circumstances, a fair attempt has been made within the four corners of law, to determine and establish the true state of income of the petitioner. 5.10 It is further submitted by Shri Bhatt, learned Senior Advocate appearing on behalf of the respondent that in the present case as such the principles of natural justice has been complied with to the fullest. Requisite opinion has been formed based on the material available on record. 5.11 Now, so far as the submission/contention of the petitioner that the impugned order does not disclose the recording of the opinion and/or it does not reflect that any opinion 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 28.11.2016 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 has been recorded by the Commissioner on the note-sheet which can be seen from the file produced before the Court.
It is further submitted that as such a detailed proposal was sent to the Commissioner. It is further submitted that thereafter a satisfaction 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, thereafter, the Commissioner has granted the approval which came to be subsequently communicated by the Assessing Officer to the petitioner. It is submitted that therefore the procedure as required to be followed under Section 142(2A) of the IT Act has been followed after giving opportunity to the petitioner and thereafter having been satisfied the requirement of special audit in the case of the petitioner for the AY 2009-10 to 2015-16 and thereafter a detailed proposal was sent to the Commissioner and thereafter having prepared a satisfaction note and having been satisfied, thereafter the proposal for special audit has been approved. Making above submissions and relying upon the following decisions, it is requested to dismiss the present petition. "1. Living Media v. Commissioner of Income Taxmann.com 225 ITR 268 (SC) 2. Takshashila Realties Private Limited v. Deputy Commissioner of Income Tax (Spl. Civil Application No. 2920/2017, Paras 16, 17) 3. Fedco (P) Limited v. S.N. Bilgrami & Ors. AIR 1960 SC 415 (Para 9) 4. Neesa Leisure Limited v. Deputy Commissioner of Income Taxmann.com 35 Taxmann.com 216 (Paras 14, 21, 22) 5. U.P. Samaj Kalyan Nigam Limited v. Commissioner of Income Tax, Lucknow 34 Taxmann.com 184 (paras 14, 20) 6. DLF Limited v. Additional Commissioner of Income Tax 366 ITR 390 (Paras 7, 10, 26) 7. Ulhas Securities Private Limited v. Deputy CIT Special Civil Application No. 1266/2017 (Dated 13.02.2017) 8. Sahara India Real Estate Corporation Limited & Ors. v. Securities and Exchange Board of India and Anr. (2013) 1 SCC 1 9. A.S. Motors Private Limited v. Union of India & Ors. (2013) 10 SCC 114 " 6. Heard learned Counsel appearing for respective parties at length.
Sahara India Real Estate Corporation Limited & Ors. v. Securities and Exchange Board of India and Anr. (2013) 1 SCC 1 9. A.S. Motors Private Limited v. Union of India & Ors. (2013) 10 SCC 114 " 6. Heard learned Counsel appearing for respective parties at length. At the outset it is required to be noted that the impugned order of special audit has been passed by the Assessing Officer in exercise of powers under Section 142(2A) of the IT Act and therefore, while considering the legality and validity of the impugned order passed under Section 142(2A) of the IT Act, section 142 of the IT Act (including section 142(2A) of the IT Act) is required to be referred to and considered, which reads as under: "142.
Inquiry before assessment.- (1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 or in whose case the time allowed under sub-section (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 sub-section (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 sub-section 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 sub-section (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 sub-section, (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 the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require : Provided that (a) the previous approval of the Joint Commissioner shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts; (b) the Assessing Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year. (2) For the purpose of obtaining full information in respect of the income or loss of any person, the Assessing Officer may make such inquiry as he considers necessary.
(2) For the purpose of obtaining full information in respect of the income or loss of any person, the Assessing Officer may make such inquiry as he considers necessary. (2A) If, at any stage of the proceedings before him, 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 specialised nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require : Provided 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. (2B) The provisions of sub-section (2A) shall have effect notwithstanding that the accounts of the assessee have been audited under any other law for the time being in force or otherwise. (2C) Every report under sub-section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer : Provided that the Assessing Officer may, suo motu, or on an application made in this behalf by 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 sub-section (2A) is received by the assessee.
(2D) The expenses of, and incidental to, any audit under sub-section (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 XVII-D for the recovery of arrears of tax : Provided that where any direction for audit under sub-section (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 accordance with such guidelines as may be prescribed and the expenses so determined shall be paid by the Central Government. (3) The assessee shall, except where the assessment is made under section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any inquiry under sub-section (2) or any audit under Sub-section (2A) and proposed to be utilised for the purposes of the assessment.
(3) The assessee shall, except where the assessment is made under section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any inquiry under sub-section (2) or any audit under Sub-section (2A) and proposed to be utilised for the purposes of the assessment. (4) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year." 6.1 At this stage, it is required to be noted that Section 142(2A) of the IT Act has been amended w.e.f. 01.06.2013 and it provides that if at any stage of the proceedings before him, 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 specialised business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner...., direct the assessee to get the accounts audited by an accountant, nominated by the Principal Chief Commissioner or Chief Commissioner... in this behalf. It also further provides that 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. As per Section 142(2A) of the IT Act, the provisions of sub-section (2A) shall have effect notwithstanding that accounts of the assessee have been audited under any other law for the time being in force or otherwise. Section 142(2C) of the IT Act provides that every report under Sub-section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer. Section 142(2D) of the IT Act (as amended) also provide that the expenses of, and incidental to, such audit shall be paid by the Central Government.
Section 142(2C) of the IT Act provides that every report under Sub-section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer. Section 142(2D) of the IT Act (as amended) also provide that the expenses of, and incidental to, such audit shall be paid by the Central Government. As per sub-section (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 sub-section (2) or any audit under sub-section (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 AO to arrive at correct taxable income and for which the AO is authorized to direct the assessee to get books of account audited by the accountant authorized by the AO, in case, AO 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 sub-section (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) of the IT Act. With this, challenge to the impugned order is required to be considered. 6.2 Identical question came to be considered by the Delhi High Court in the case of DLF Limited and Another (supra). In the said decision, the Delhi High Court has considered the scope, ambit and powers of the AO while passing order under Section 142(2A) of the IT Act. In the said decision, it is observed that Section 142(2A) of the IT Act is enabling provision to help and assist the Assessing Officer to complete the scrutiny assessment with the assistance of an accountant. In paras 10, 11, 26 and 27, the Delhi High Court has observed as under: "10.
In the said decision, it is observed that Section 142(2A) of the IT Act is enabling provision to help and assist the Assessing Officer to complete the scrutiny assessment with the assistance of an accountant. In paras 10, 11, 26 and 27, the Delhi High Court has observed as under: "10. Aforesaid rulings when appraised and reflected, state that while examining the question of complexity in accounts, we have to apply the test of reasonable man by replacing the word and qualities of a reasonable man, with the word and qualities of a reasonably competent Assessing Officer. The question of complexity of accounts has to be judged applying the yardstick or test; whether the accounts would be complex and difficult to understand to a normal assessing officer who has basic understanding of accounts etc., without the aid, assistance and help of a special auditor. Thus due regard has to be given to nature and character of transactions, method of accounting, whether actuarial were adopted for making entries, basis and effect thereof, etc., though mere volume of entries might not be a justification by them self as volume and complexity are somewhat different. Accounts should be intricate and difficult to understand. Every scrutiny assessment entails investigation and verification of the books of accounts, genuineness of the transactions or entries reflected in the books, computation of income etc. It is an exercise which demands expertise and a degree of skill to understand the accounts and decipher whether true and full income has been disclosed; whether there has been jugglery in the accounts or camouflage has been adopted. No undesirable assumptions should be made and a return filed is presumed to be correct, but a deep and in depth scrutiny depending upon the facts may be warranted. Section 142(2A) is an enabling provision to help and assist the Assessing Officer to complete scrutiny assessment with the help of assistance of an accountant. 11. There has been substantial 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".
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 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 legislation is to facilitate investigation and proper determination of the tax liability. The importance and relevancy of the legislation cannot be underestimated and it is a power available with the Assessing Officer to aid and assist him. Accounts should be accurate and provide real time record of the financial transactions of the assessee. Preparation of accounts is the work of the accountant on the payrolls or employed by the assessee. In order to ensure reliability and accuracy, enterprises resort to internal audit and an external audit which can be a statutory audit. Internal audits are normally conducted in house generally by acquainted or qualified accountants. Statutory audit is compulsory under the Companies Act, 1956 or when stipulated by the Act and accounts have to be audited by a qualified Chartered Accountant. Chartered Accountants are not ordinary accountants but specialists who have successfully undergone academic study and have extensive practical experience and trained for the said work. Curriculum requires article ship under a mentor who is himself a Chartered Accountant with some years of experience. As opposed to an ordinary accountant, a Chartered Accountant with his experience and academic background is in a better position to investigate, examine and scrutinize entries and records of financial transactions.
Curriculum requires article ship under a mentor who is himself a Chartered Accountant with some years of experience. As opposed to an ordinary accountant, a Chartered Accountant with his experience and academic background is in a better position to investigate, examine and scrutinize entries and records of financial transactions. Calibre and competence of Chartered Accountants is of a high degree and should not and cannot be equated with the capability of an ordinary accountant or a normal person having knowledge or acquainted with accounts. Off late there has been demand for increased public scrutiny of accounts, inspite of statutory audit. Enron and other cases abroad and Satyams case in India have highlighted the need and necessity to have controls and system of checks, perhaps even beyond scope of traditional audit. Financial statements and accounts are being increasingly exiguously examined to rule out possibility of wrong doings, cover up or evasion of taxes. Financial statements and accounts are coming under increasing scrutiny and investigation. A Chartered Accountant is a financial investigator and prober, is required to be curious, tenacious and well conversant to identify and unearth frauds, misreporting and wrong claims in the accounts. 27. The aforesaid observations should not be construed as a general expression or opinion, 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 in-depth scrutiny. It is also a fact that 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.
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 permissible, therefore, can take help and assistance from the qualified specialists to complete the assessment and determine the taxable income of an assessee." 6.3 In the present case the Assessing Officer has thought it fit to get account audited by the Special Auditor, as requisitioned materials are to the extent of 40000 papers found from 45 gunny bags which were requisitioned from Asharam Bapu and others. It appears that from 42 gunny bags, cheques, promissory notes, blank allotment letters, purchase/sale deeds as security against loans were found. The name of the petitioner with others appear in the master ledger. A search and seizure action under Section 132(1) of the IT Act was conducted at various places including Ahmedabad, Surat, Vadodara and other cities across the country on beneficiaries of transactions uncovered from requisitioned material. A huge cash inflow and outflow were prima facie not found in the regular books of account. Large number of existing bank accounts in the name of Sadhaks, KYC documents of bank accounts and NSCs, KVPs revealed the address is that of Ashram Bapu. Use of 7 companies for laundering of cash and use of 5 proprietary concerns for laundering of cash are detected. Diversion of funds for real estate purpose has been detected. The books of account show receipts from donation and Dan Patra, however the donation receipts as per the books of account are found to be meager whereas the donation receipts as per the requisitioned material are found to be very huge. Therefore, from the requisitioned materials it has been prima facie revealed that the Trust had diverted its funds in making advances of cash loan and interest charged thereon. That thereafter the assessment proceedings under Section 143(3) of the IT Act read with Section 153C for the AY 2009-10 to 2014-15 and under Section 143(3) of the IT Act for AY 2015-16 has been initiated. It has been found that during the block assessment proceedings/scrutiny assessment proceedings, there is a total non-cooperation on the part of the petitioner - assessee.
It has been found that during the block assessment proceedings/scrutiny assessment proceedings, there is a total non-cooperation on the part of the petitioner - assessee. Therefore, looking to the huge material requisitioned to the extent of 40000 papers found from 45 gunny bags and looking to the complexity and multiplicity in transactions, when the Assessing Officer has thought it fit to get the accounts audited by the Special Auditor and thereafter after having been satisfied that the accounts are required to be audited through Special Auditor and after obtaining appropriate approval from the Principal Commissioner, thereafter when the order of special audit under Section 142(2A) of the IT Act has been passed, it cannot be said that the Assessing Officer has committed any error and/or illegality. It is required to be noted that the impugned order has been passed after giving an opportunity to the petitioner - assessee and thereafter having been satisfied with respect to complexity and multiplicity of transactions. 6.4 Now, so far as the submission on behalf of the petitioner that impugned order is in breach of principles of natural justice inasmuch as no reasons are stated in the impugned order under Section 142(2A) of the IT Act and no satisfaction is recorded in the impugned order while ordering special audit is concerned, at the outset it is required to be noted that before passing the order under Section 142(2A) of the IT Act, a detailed show-cause notice has been served upon the petitioner and the petitioner - assessee was called upon to show cause why the accounts for the AY 2009-10 to 2014-2015 and 2015-16 may not be got audited through special audit. The show-cause notice contained the detailed reasons which are running into approximately 31 pages. That thereafter except asking for adjournment the petitioner had not raised any objection. The petitioner filed the adjournment application without having any submission/reply/objection. Thus, there was non-cooperation at the stage of section 142(2A) show-cause notice also. At this stage it is required to be noted that even during the block assessment proceedings, the petitioner had been non-cooperative. That thereafter the Assessing Officer sent the proposal to the Principal Commissioner of Income Tax for approval by preparing a detailed note and submitting why in the case of petitioner - assessee, there is a requirement of special audit.
At this stage it is required to be noted that even during the block assessment proceedings, the petitioner had been non-cooperative. That thereafter the Assessing Officer sent the proposal to the Principal Commissioner of Income Tax for approval by preparing a detailed note and submitting why in the case of petitioner - assessee, there is a requirement of special audit. The same was sent through Joint Commissioner of Income Tax (through proper channel) and thereafter after preparing a detailed satisfaction note, the Principal Commissioner of Income Tax has approved the proposal of the Assessing Officer for special audit and thereafter the impugned order under Section 142(2A) of the IT Act has been passed. Therefore, in the facts and circumstances of the case, it cannot be said that reasonable opportunity of hearing was not granted to the petitioner and/or the impugned order under Section 142(2A) of the IT Act is in breach of principles of natural justice. At this stage the decision of the Hon'ble Supreme Court in the case of A.S. Motors Private Limited (Supra) is required to be referred to. It is observed and held by the Hon'ble Supreme Court in the said decision that the rules of natural justice are not rigid, immutable or embodied rules that may be capable of being put in straitjacket nor have the same been so evolved as to apply universally to all kind of domestic tribunals and enquiries. It is further observed that what the Courts in essence look for in every case where violation of the principles of natural justice is alleged is whether the affected party was given reasonable opportunity to present its case and whether the administrative authority had acted fairly, impartially and reasonably. It is further observed that the doctrine of audi alteram partem is thus aimed at striking at arbitrariness and want of fair play. It is further observed in the said decision that while considering the allegation of breach of principle of natural justice, nature of enquiry and contextual situation to be sent to adjudge whether principles of natural justice has been substantially complied with. It is further observed that issue of a show-cause notice and disclosure of material on the basis of which action is proposed to be taken can be said to be in compliance with requirement of fairness.
It is further observed that issue of a show-cause notice and disclosure of material on the basis of which action is proposed to be taken can be said to be in compliance with requirement of fairness. Applying the law laid down by the Hon'ble Supreme Court in the aforesaid decision to the facts of the case on hand as a detailed show-cause notice was issued before passing the order under Section 142(2A) of the IT Act and there has been disclosure of material on the basis of which the special audit under Section 142(2A) of the IT Act was proposed and thereafter, after following due procedure as required, when the order of special audit has been passed, it cannot be said to be in breach of principles of natural justice. Under the circumstances, none of the decisions relied upon by the learned Counsel for the petitioner referred to hereinabove shall be applicable to the facts of the case on hand. 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 been sent by the Assessing Officer. The same was sent through the proper channel i.e. office of the Joint Commissioner of Income Tax and thereafter, after preparing a detailed satisfaction note, the proposal has been approved by the Principal Commissioner of Income Tax. The satisfaction note demonstrates application of mind by the Principal Commissioner of Income Tax agreeing with the proposal of the Assessing Officer for special audit. The proposal and the satisfaction note has been shown to the learned Counsel appearing on behalf of the petitioner. Under the circumstances, it cannot be said that while granting approval there is non-application of mind by the Principal Commissioner of Income Tax.
The proposal and the satisfaction note has been shown to the learned Counsel appearing on behalf of the petitioner. Under the circumstances, it cannot be said that while granting approval there is non-application of mind by the Principal Commissioner of Income Tax. By preparing a detailed satisfaction note and having been satisfied that in the present case looking to the multiplicity and complexity of transactions and in the larger interest of Revenue, the special audit is required, thereafter the proposal has been approved and thereafter the Assessing Officer has passed the impugned order. 6.6 Now, so far as the submission on behalf of the petitioner that the approval does not reflect the satisfaction and except giving approval nothing is mentioned in the approval is concerned, at the outset it is required to be noted that what is produced on record is the forwarding letter/communication granting the approval of the Principal Commissioner of Income Tax. As observed hereinabove there is a detailed satisfaction note prepared by the learned Principal Commissioner of Income Tax which as observed hereinabove demonstrates the due application of mind. 6.7 Now, so far as the submission on behalf of the petitioner that no sufficient opportunity of being heard was given to the petitioner inasmuch as the petitioner was not communicated whether the application of the petitioner dated 07.11.2016 for adjournment has been accepted or not is concerned, it is required to be noted that as such while granting adjournment on 01.11.2016 the petitioner was specifically informed and told that the next date is fixed on 07.11.2016 and that no further adjournment shall be granted and therefore, he was told to make proper compliance on 07.11.2016. Despite the above the petitioner again asked for the adjournment. As while granting adjournment on 01.11.2016 the petitioner was specifically informed that no further adjournment shall be granted, naturally thereafter the petitioner was not required to inform again and again. At this stage it is required to be noted that even thereafter also nothing was done by the petitioner between 07.11.2016 to 23.11.2016 i.e. after the adjournment application dated 07.11.2016, to know whether adjournment application is granted or not. Under the circumstances when the opportunity was given to the petitioner and thereafter the petitioner failed to avail such an opportunity, thereafter it is not open for the petitioner to make grievance that no sufficient opportunity has been given.
Under the circumstances when the opportunity was given to the petitioner and thereafter the petitioner failed to avail such an opportunity, thereafter it is not open for the petitioner to make grievance that no sufficient opportunity has been given. 6.8 Now, so far as the submission on behalf of the petitioner for the directions issued in the impugned order of special audit under Section 142(2A) of the IT Act, special audit is not required and/or it is not the function of the auditor is concerned, it is required to be noted that the directions are required to be considered as a whole. The petitioner cannot pick and choose one or two directions. The reasons for special audit is multiplicity and complexity in the transactions and in the interest of Revenue. As observed hereinabove 40,000 papers/material contained in 45 gunny bags are required to be tallied and considered vis-à-vis different persons and even the petitioner - assessee. At this stage it is required to be noted that the petitioner has not alleged any malafides. 6.9 Considering the aforesaid facts and circumstances and the object and purpose of special audit under Section 142(2A) of the IT Act and considering the object and purpose of amending section 142(2A) of the IT Act and looking to the multiplicity and complexity of transactions found from 40000 papers/material requisitioned from 42 gunny bags, it cannot be said that the impugned order is absolutely illegal and/or contrary to section 142(2A) of the IT Act. At this stage it is required to be noted that the impugned order has been passed on 28.11.2016 and the present petition has been filed on 01.02.2017. It is reported that there is a non-cooperation on the part of the petitioner again and even he has not cooperated the Special Auditor also. It is reported that on the basis of the material available, the Special Auditor has as such prepared a report. However, because of the pendency of the petition, no further steps are taken. In any case as observed hereinabove, there is no illegality committed by the Assessing Officer in ordering the special audit under section 142(2A) of the IT Act.
It is reported that on the basis of the material available, the Special Auditor has as such prepared a report. However, because of the pendency of the petition, no further steps are taken. In any case as observed hereinabove, there is no illegality committed by the Assessing Officer in ordering the special audit under section 142(2A) of the IT Act. 6.10 Insofar as the submissions on behalf of the petitioner that in the present case, Notice under Section 148 of the IT Act for AY 2010-2011 was issued on 15th December 2016 and immediately after five days only, Notice under Section 142(2A) of the IT Act was given, and therefore, the impugned Order under Section 142(2A) of the IT Act is bad in law, as no opportunity has been given as per the decision of Hon'ble Supreme Court in the case of GKN Driveshafts [India] Limited (Supra) is concerned, it is required to be noted that the objections raised against the re-assessment proceedings/notice under Section 148 of the IT Act are altogether a different proceeding. The notice under Section 148 of the IT Act and the objections to be raised against the reassessment are altogether a different and distinct proceedings then the Order under Section 142(2A) of the IT Act. What is required to be considered while passing an order under Section 142(2A) of the IT Act and at the time order under Section 142(2A) of the IT Act is whether any proceedings are pending before the AO or not? Notice under Section 148 of the IT Act i.e., re-assessment proceedings can be said to be the proceedings pending before the AO, and therefore, if at that stage of proceedings [in the present case, re-assessment proceedings before him], the Assessing Officer, having regard to the multiplicity of transactions in the account or specialized nature of the business activities of the assessee and the interest of the Revenue, is of the opinion that it is necessary to so to do, he may pass an order under Section 142(2A) of the IT Act; subject to compliance with the procedure, as required under Section 142(2A) of the IT Act. Therefore, in the facts and circumstances of the case, it cannot be said that the impugned order is contrary to Section 142(2A) of the IT Act.
Therefore, in the facts and circumstances of the case, it cannot be said that the impugned order is contrary to Section 142(2A) of the IT Act. 6.11 Now so far as submission made on behalf of the petitioner that the Assessing Officer cannot direct special audit under Section 142(2A) of the IT Act before calling for the accounts from the petitioner in the assessment proceedings and without doubting the accounts and/or considering the complexity in the accounts is concerned, it is required to be noted that as per amended Section 142(2A) of the IT Act, apart from the nature and complexity of the accounts, etc., even in case of multiplicity of transactions or otherwise nature of the business activity of the assessee and in the interests of the Revenue, the Assessing Officer can pass an order for special audit, in exercise of powers under Section 142(2A) of the IT Act. Therefore, while forming an opinion to get the accounts audited by Special Auditor; considering the specialized nature of business activities of the assessee, and/or while considering the multiplicity of transactions, there need not be any books of account before the Assessing Officer. In the present case, the Assessing Officer has thought it fit to get the account audited by the Special Auditor as requisitioned material are to the extent of 40,000 papers in 45 gunny bags, which were found during the search conducted of the premises of Asharam Bapu and others and the Trust. Under the circumstances, when large number of papers are required to be considered/verified vis-à-vis the assessee and other persons whose names figured in the requisitioned papers, and when considering section 142(2A) of the IT Act, when 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 show-cause 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.
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. 6.12 In view of the above and for the reasons stated above, we see no reason to interfere with the impugned order passed by the Assessing Officer ordering special audit under Section 142(2A) of the IT Act in exercise of powers under Article 226 of the Constitution of India. 7. In view of the above and for the reasons stated above, present petition fails and the same deserves to be dismissed and is, accordingly, dismissed. Notice is discharged.