TMI Blog1980 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 6,37,49,940. In regard to the aforesaid returns and revised returns pursuant to notices issued under s. 142(1) of the I.T. Act (hereinafter referred to as " the Act ") requiring it to produce accounts, documents and information, etc., it claims to have furnished all such records, accounts and documents as were required from time to time by the respondent-ITO, Special Ward, Ghaziabad. 'By means of a communication dated 17th December, 1977, addressed to the principal officer of the petitioner-company, the respondent intimated to him that " having regard to the nature and complexity of the accounts of M/s. Swadeshi Polytex Ltd., Ghaziabad, and in the interest of revenue I am of the opinion that it is necessary to do so, I direct you u/s. 142(2A) of the I.T. Act, 1961, with the previous approval of the Commissioner of Income-tax, Meerut, to get the accounts audited by Sri K. Annadhanam of M/s. Khanna and Annadhanam, Chartered Accountants, New Delhi, who has been approved by the Commissioner of Income-tax, Meerut, to conduct the audit of your company, vide his order dated December 15, 1977 .... a copy of which has already been sent to you..." By means of this very letter, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts. The allegations are too many as contained in paragraphs 20 and 21 of the petition filed against the company in the Allahabad High Court. If an audit is to be conducted, necessarily these matters are to be kept in view and cannot be brushed aside. If I start dealing with these matters, it will be, apart from the fact that it is an investigation, interfering with the matter which is now sub judice being before the High Court for their decision. It is certainly not proper for me to conduct the audit or an investigation into the company's affairs when these very matters are the subject-matter of the litigation before the High Court. In view of the position, you will appreciate that it is not proper to undertake the audit under section 142(2A) of the Act and 1, therefore, submit that I will not be in a position to conduct the audit of the accounts of Swadeshi Polytex Ltd. You will appreciate that when a matter is before the High Court, no person other than the High Court can give a decision on the point and it would not be proper for any outsider to give a verdict or a decision or investigate into a matter which is before the High Court. Please note that my disinclination to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... your aforesaid letter and particularly the fact that you have come up to me almost near the expiry of time granted, I hereby extend the time already granted up to 180 days from the date of receipt of my directions dated 17-12-77 by you. Please ensure that the audit report is furnished within the aforesaid time so that consequences that may follow on non-compliance of the direction are avoided. With respect to the circumstances placed by the auditors before you, you should take steps, if so advised by your legal advisers, that may be necessary so as to ensure compliance of my direction in the period above mentioned. In order to enable you to seek proper advice in the matter and to take steps that you may be advised, I have given you the maximum time that is permitted by the income-tax statute. " A letter dated 23rd February, 1978, was thereafter addressed on behalf of the petitioner-company to the respondent, the relevant portion of which is as follows : "You will thus find that the work of the audit was not taken in hand by the auditor and, therefore, the question of informing you of any of our difficulties in advance does not arise in this case. It is the auditor who have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act was passed by him in accordance with the requirements of law. It has been disclosed in the counter-affidavit that on the basis of warrants of authorisation issued by the Director of Inspection (Inv.), New Delhi, searches under s. 132(1) of the Act were conducted on 23rd December, 1975, at various offices of the petitioner-company and the residences of its officers during which, besides cash, incriminating documents were seized disclosing considerable tax evasion by the petitioner. In the rejoinder-affidavit the allegations made in the petition have been reiterated and it is unnecessary to set out in any detail the assertions mentioned therein. The basic contention of Sri Jagdish Swarup, learned counsel representing the petitioner, is that in view of the fact that the chartered accountant nominated by the Commissioner had himself declined to carry out the audit of the accounts of the petitioner-company in spite of its having co-operated with him in every manner required, it cannot be held to have failed to comply with the direction issued under sub-s. (2A) of s. 142 and consequently s. 144(b) of the Act could not be pressed in aid for the purposes of making a best ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his report in accordance with an order passed in exercise of a statutory power could not by any stretch of imagination be even remotely considered to be an act of interference with the pending proceedings in this court. Even during the hearing of this petition not even a faint endeavour was made to justify the stand taken by the chartered accountant. It may further be stated that though in the writ petition there are allegations that the respondent mala fide issued directions under s. 142(2A) no prayer is contained in the petition challenging the direction dated 17th December, 1977, and no arguments were advanced supporting the vague and unjustified assertions. Section 142 of the Act, to the extent relevant for our purposes, runs as follows: "142. (2A) If, at any stage of the proceedings before him, the Incometax Officer, having regard to the nature and complexity of the accounts 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 Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether the word fails " which occurs in cls. (a), (b) and (c) of s. 144 of the Act implies within it the idea of wilfulness or default on the part of an assessee or s. 144(b) is attracted irrespective of the existence or otherwise of any justification which had the consequence of the petitioner's inability to comply with directions issued under s. 142(2A) of the Act. The word " fails " is undefined in the Act and is one of common parlance. It is well established that where the language of a section is plain and unambiguous, it is not open to courts to read into it limitations which are not there based on an a Priori reasoning, as to the probable intention of the legislature. Such intention can be gathered from the words actually used in the legislation and what is unexpressed has the same value as to what is unintended. This principle has been given effect to in Mahadeolal Kanodia v. Administrator-General of West Bengal [1960] AIR 1960 SC 936 and CIT v. Smt. Sodra Devi [1957] 32 ITR 615 (SC). If the contention of Sri Jagdish Swarup were to be accepted, it would necessitate our introducing words in s. 144 which Parliament chose not to employ. Acceptance of the contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort is not itself available to us but relying on a decision of the Australian Court in Marousson v. Southern Shipping Co. Ltd. [1962] ALR 758, the following passage occurs in Words and Phrases Legally Defined, vol. 2, 2nd edn., at page 218 (Column 2) : Australia.-" [Section 60(1) of the Excise Act 1901-1966 (Corn.), deals with circumstances where a person who has or has been entrusted with the possession, custody or control of excisable goods which are subject to the control of the Customs 'fails' to keep those goods safely.) 'Safely' seems to mean safe from loss or destruction : for the subject is excise duty, not the condition of the goods. The provision is pointed at the loss of goods involving the loss of excise duty...... The hypothesis is that by the loss of the goods duty has been escaped. There must be some doubt whether the destruction of the goods was also contemplated but upon the words of the section destruction is certainly covered. It is said, however, for the defendant that 'fail ' involves some want of care, some neglect or default. Considering the objects of the Provision and the Place it takes, this ground must 'fail'. It means to place on the person havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment on the ground (i) that he was prevented by sufficient cause from making the return required under sub-section (2) of section 139, or (ii) that he did not receive the notice issued under sub-section (1) of section 142 or sub-section (2) of section 143, or (iii) that he had not a reasonable opportunity to comply, or was prevented by sufficient cause from complying, with the terms of any notice referred to in clause (ii), the Income-tax Officer shall, if satisfied about the existence of such ground, cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of section 143 or section 144...... It is significant that while in contingencies contemplated by cls. (a), (b) and (c) of s. 144, an assessee can apply on sufficient cause being shown for cancellation of the assessment, he has no such right in a case where he fails to comply with a direction issued under sub-s. (2A) of s. 142. This clearly indicates that the reasons which result in the omission on the part of an assessee to comply with a direction issued under s. 142(2A) are wholly irrelevant. The failure thus may be on account of reasons within or without his contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve of the Bill was to curb these evils. In the Bill which was presented before the Lok Sabha on 9th May, 1973, cl. 39, by which s. 139 of the Act was sought to be amended, was in the following terms. " 39. In section 139 of the Income tax Act (i) after subsection (1), the following sub-sections shall be inserted, namely: (1A) Every person other than a company, (i) carrying on any business, whose total sales, turnover or receipts exceed or exceeds five hundred thousand rupees or whose profits before deducting the tax payable under this Act exceed fifty thousand rupees, in any previous year, or (ii) carrying on any profession, whose total receipts exceed five hundred thousand rupees or whose income before deducting the tax payable under this Act exceeds fifty thousand rupees, in any previous year, shall, while furnishing a return of his income, also furnish a report of the audit of the accounts on which such return is based." Clause 44 by which s. 142 of the Act was proposed to be amended ran as follows (p. 52): " 44. In sub-section (1) of section 142 of the Income-tax Act, for the words, brackets and figures 'or upon whom a notice has been served under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Taxation Laws (Amend.) Act, 1975. The history of the legislation also consequently leads, in our judgment, to the inevitable conclusion that the word " fails " occurring in s. 144(b) does not involve any want of care, neglect or default on the part of an assessee but places on him an absolute duty to comply with the requirements of a direction issued under s. 142(2A) and in the event of his or its omission to do so the assessee incurs the liability to a best judgment assessment under s. 144(b) of the Act. The power to make a best judgment assessment was enlarged by the amending Act to achieve the declared object of Parliament. The principle of interpretation that a taxing statute should be, in the event of any ambiguity, interpreted in favour of the assessee has no application to the instant case in view of the clear language used in s. 142(2A) of the Act. An order under s. 142(2A) has to be passed if the ITO is of the opinion that it is necessary to do so " having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue ". It is the interests of the revenue that is of paramount importance and consequently the provisions must be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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