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2015 (6) TMI 292 - ALLAHABAD HIGH COURT

2015 (6) TMI 292 - ALLAHABAD HIGH COURT - TMI - Validity of assessment audited under Secion 142(2A) - Held that:- Issuance of order of re-assessment under Section 142 (2A) of the Act, the Assessing Officer had issued notices to the assessee but in none of them the opinion formed by the Assessing Officer for special audit of petitioner's accounts for the assessment year 2012-13, in regard to the nature and complexity of the accounts and the interest of revenue has been disclosed. Hon'ble Supreme .....

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e requirement of Section 142 (2A) of the Act and, therefore, it is not sustainable. In the result, the order dated 11.03.2015 is hereby quashed with the liberty to the Assessing Officer to pass a fresh order in terms of the provisions of Section 142(2A) of the Act. - Misc. Bench No. - 3355 of 2015 - Dated:- 29-5-2015 - Hon'ble Shri Narayan Shukla And Hon'ble Rajan Roy,JJ. For the Petitioner : Abhinav Mehrotra, Atma Ram Verma For the Respondent : Manish Misra ORDER (Delivered by Hon'b .....

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for special audit has been made without examining the books of accounts of the assessee, which is in violation of principles of natural justice. It has been stated that the order impugned is illegal and beyond jurisdiction as it has been issued beyond period of limitation which has expired on 31.03.2015. It has been submitted that the direction of special audit of the accounts cannot be issued unless the books of accounts of the petitioner have been inspected. In this case, the concerned author .....

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ing the order impugned for re-assessment. In this case, the question for adjudication was whether a pre-decisional hearing was required to be given to the assessee before passing the order under sub section 2A of Section 142 of the Act. The Hon'ble Supreme Court has considered the scope of Section 142(2A) of the Act as under: "6. A bare perusal of the provisions of sub-section (2A) of the Act would show that the opinion of the Assessing Officer that it is necessary to get the accounts o .....

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g the said provision is to assist the Assessing Officer in framing a correct and proper assessment based on the accounts maintained by the assessee and when he finds the accounts of the assessee to be complex, in order to protect the interests of the revenue, recourse to the said provision can be had. The word "complexity" used in Section 142 (2A) is not defined or explained in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. Vs. C.I.T. (1998) 171 ITR 634 (All.) , it is a nebulou .....

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difficult to understand, there has to be a genuine and honest attempt on the part of the Assessing Officer to understand accounts maintained by the assessee; appreciate the entries made therein and in the event of any doubt, seek explanation from the assessee. But opinion required to be formed by the Assessing Officer for exercise of power under the said provision must be based on objective criteria and not on the basis of subjective satisfaction. There is no gainsaying that recourse to the said .....

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he previous approval, envisaged in the Section is not turned into an empty ritual. Needless to emphasise that before granting approval, the Chief Commissioner or the Commissioner, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the Assessing Officer. The approval must reflect the application of mind to the facts of the case." The Supreme Court further held that the order under Section 142(2A) does entail civil consequen .....

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, the requirement of observance of principles of natural justice is to be read into the said provision. Accordingly, we reiterate the view expressed in Rajesh Kumar v. Dy. CIT (2006) 157 TAXMAN 168." A Division Bench of this Court in Purvanchal Vidhut Vitran Nigam Ltd v. Union of India (2010) 188 TAXMAN 355 (ALL.) followed the judgment of the Supreme Court given in Sahara India's case (supra) and held that the proceedings under Section 142(2A) of the Act is not strictly a judicial proce .....

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rticle 226 of the Constitution of India, in a writ jurisdiction, this Court can consider whether there was material for the issue of direction and not the sufficiency of the material." In the case of Jhunjhunwala Vanaspati Ltd v. Assistant Commissioner of Income-tax (2004) 137 TAXMAN 214 (All.), the Division Bench of this Court has held as under: "27. In our opinion, it is not necessary for the Assessing Officer to give a show cause notice or give a hearing to the assessee before issui .....

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fter giving opportunity of hearing, but in our opinion a direction under Sub-section (2A) of Section 142 does not have civil consequences because it does not affect his rights and does not create any liability against the assessee. It is only the assessment order which will create a liability. The purpose of the direction under Sub-section (2A) of Section 142 is to ensure that a correct assessment order is passed so that the Revenue is not deprived of its dues. Hence, we do not agree with learne .....

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edients of Section 142 (2A) of the Act are that the Assessing Authority must form an opinion with regard to the nature and complexity of the accounts, which has been done. Per contra Mr. Siddharth Dhaon, learned counsel for the revenue has submitted that without disputing the proposition of law that before before issuing an order under Section 142(2A) of the Act, the principles of natural justice has to be followed, has submitted that admittedly the petitioner was issued a show cause notice, the .....

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ut the correctness of the accounts, multiplicity of transactions in the accounts or specialized 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, nominat .....

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of being heard." In Sahara India's case (supra), the Hon'ble Supreme Court has held that the opinion of the Assessing Officer to get the accounts of assessee audited by an Accountant has to be formed only by having regard to: (i) the nature and complexity of the accounts of the assessee; and (ii) the interests of the revenue. Thus, the twin conditions of "nature and complexity of the accounts" and "the interests of the revenue" are the prerequisites for exercise .....

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