TMI Blog2013 (7) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... perate only in areas not covered by any law validly made; they do not supplant the law but supplement it - Order of Tribunal and lower authorities set aside - Following decisions of Sahara India (Firm) vs CIT [2008 (4) TMI 4 - Supreme Court], Rajesh Kumar vs. Deputy CIT [2006 (11) TMI 135 - SUPREME Court] and Commissioner of Income-tax, Delhi, Central-I v. Escorts Farms P. Ltd.[1989 (7) TMI 64 - DELHI High Court] - Decided in favour of assessee. - Income Tax Appeal No.-151 of 2008 - - - Dated:- 9-7-2013 - Hon'ble Sibghat Ullah Khan And Hon'ble Dr. Satish Chandra,JJ. For the Appellant : S. K. Garg, Ashish Bansal, Rahul Shukla For the Respondent : D. D. Chopra, Prashant Kumar,Sanjiv Sankhdhar JUDGMENT (Delivered by Hon'ble Dr. Satish Chandra, J) Present appeal is filed by the assessee under Section 260-A of the Income Tax Act, 1961 against the judgment and order dated 15.06.2007 passed by the Income Tax Appellate Tribunal, Lucknow in Income Tax Appeal No. 760 790/LUC/2005 for the assessment year 2001-02. On 20.08.2008, a Coordinate Bench of this Court has admitted the instant appeal on the following substantial questions of law: i. "Whether the Tribunal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter to the CIT (Central) Kanpur for seeking the approval to issue a direction for special audit under section 142 (2A) of the Act. He read out Section 142 (2A), which on reproduction, reads as under: "Section 142(2A)- If, at any stage of the proceedings before him, the Assessing 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 Chief 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 Chief 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 10[ Assessing] Officer may require" Learned counsel for the appellant further submits that the copy of the letter dated 08.03.2004 written by the A.O. was never served on the assessee. However, the CIT has granted the approval for issuance of a direction for special a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 142 (2A) barring the giving of reasonable opportunity to the assessee, the requirement of observance of the principles of natural justice is to be read into the said provision. Lastly, he made a request that the similar benefit may kindly be given to the assessee. On the other hand, Sri Prashant Kumar, learned counsel for the department has justified the orders passed by the authorities below. He submits that the opportunity of hearing was given to the assessee and books of accounts were rightly rejected. After hearing both the parties and on perusal of record, it appears that the books of accounts were properly audited under section 44AB. It is only after receiving the special audit report, the A.O. has rejected the books of accounts. It may be mentioned that in the case of Sahara India (Firm) vs. Commissioner of Income Tax and another (2008) 300 ITR 403 SC as well as in the case of Rajesh Kumar vs. Deputy CIT [2006] 287 ITR 91 SC, the Hon'ble Supreme Court observed that the word 'and' in section 142 (2A) relating to compulsory audit of accounts signifies conjunction and not disjunction. The twin conditions of "nature and complexity" and "the interests of the Revenue" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power excludes its application by express language. This Hon'ble Court in the case of Swadeshi Cotton Mills vs. CIT, [1988]171 ITR 634 observed that the power under section 142 (2A) cannot be lightly exercised. The satisfaction of the authorities should not be subjective satisfaction. It should be based on objective assessment regard being had to the nature of the accounts. The nature of the accounts must indeed be of a complex nature. The principles of natural justice are based on two principles : (i) nobody shall be condemned unheard (audi alterm partem); (ii) nobody shall be judge of his own cause (nemo debet judex in propria sua causa). Duty to assign reasons is, however, judge-made law. In the instant case, it is evident that the copy of the letter dated 08.03.2004 written by the A.O. was never served on the assessee. However, the CIT has granted the approval for issuance of the direction for special audit under the said provision. Had an opportunity given, the proper explanation might have been given by the assessee but that was not done, which is the violation of the principles of natural justice. It may be mentioned that in the case of the sister concern, this Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Farms P. Ltd., 1989 (180) ITR 0280 Del., the Court observed as under: "In our opinion, the decision of the Tribunal is correct when it stated that the effect of holding that the assessment was barred by time is that all further proceedings pursuant to the said decision would be infructuous. The Income-tax Officer gets jurisdiction to pass an assessment order if it is within limitation. If the assessment is barred by time, then any decision on merits would be of no consequence, and for the same reason, the decision, on merits, by the appellate authorities would also be of no consequence and would have to be ignored. This is exactly what the Tribunal has observed in the impugned order. For, if the assessment is barred by time, no effect can be given to the other decision on merits. If, however, the reference of the Department against the order passed in M.A. No. 4 of 1985 succeeds, then the decision on merits of the various appellate authorities would automatically remain." In view of the aforesaid facts and legal position, the appeal deserves to be allowed. The order passed by the Assessing Officer, First Appellate Authority and the Income Tax Appellate Tribunal are liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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