TMI Blog1998 (4) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... it. The aggrieved petitioner has filed this petition under article 226/227 of the Constitution of India seeking the quashing of the abovesaid order. 2. The principal submission of Shri G.C. Sharma, the learned senior advocate for the petitioner, has been that in view of the total sales in the business of the petitioner having exceeded ₹ 40 lakhs, the accounts of the petitioner have already been audited as ordained by section 44AB of the Act and, hence, there was no occasion for directing the special audit. It was further submitted that sub-section (2A) in section 142 was introduced by the Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976. However, section 44AB of the Act has been introduced by the Finance Act, 1984 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt facts therefrom. 4.1 The assessee is a Ltd. company deriving income from manufacturing and sale of audio cassettes, video cassettes, TV, compact discs and related components. Return declaring nil income was filed on 30-11-1995. On total sales of ₹ 97.08 crores, profit of ₹ 7.18 crores has been disclosed, but after claiming deductions under sections 80HH, 80HHC, 80-I and 80-IA, net income has been shown at Nil. 4.2 The assessee has claimed royalty expenses of ₹ 49.03 lakhs. These expenses are lump-sum payment for acquisition of rights of songs of various films purchased from various producers during the year. After purchase of rights, a catalogue number is given to a particular song and its production is made and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a position to file quantitative analysis/details of very many relevant things including the following : (i)of audio cassettes with mention of production, sales, closing stock, sales realisation; (ii)of closing stock and production in respect of audio cassettes manufactured in earlier years; (iii)of cassettes manufactured in earlier years but sold in current year; (iv)of closing stock of production in respect of video cassettes manufactured in earlier years; (v)of machines with details as to make and capacity and maximum production which could be made from these machines; and so on. 4.5 At one place the Assessing Officer records in his brief notes: Assessee has disclosed profit of ₹ 6.44 crores on total sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... components is transferred and adjusted in such a manner that abnormal profits are shown in some units to claim deductions. Namoli unit is about 25 Km from Noida. Assessee has admitted only assembly of blank audio cassettes manually there and all the components are transferred from other units. Only nominal expenses are claimed in Namoli unit but profits of ₹ 6.44 crores on manual assembly of blank audio cassettes are shown, just to claim deductions under sections 80HH and 80-I. Intention of the Legislature is to encourage manufacturing activity in particular areas. Intention of the Legislature is not to encourage diversification of assembly work from existing units to other units just to claim deductions under sections 80HH and 80-I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of all assessees. The stipulation of compulsory audit is evidently conceived with the twin purpose of having vigilance of the accounts of the assessees in higher income brackets to detect evasion, if any, and lubricating expeditious assessment. The power under section 142(2A) can be invoked when the assessing authority finds that the accounts are complicated and it must be stated that in view of section 44AB, the recourse to section 142(2A) is confined to assessees having turnover or transactions below ₹ 40 lakhs or gross professional receipts below ₹ 10 lakhs. The overlapping in certain situations does not render the provision invalid or superfluous and the contention is untenable. (p. 262) 7.1 We have two observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts of the assessee to be complex, by having the services of a special auditor at hand. Special audit can also be ordered so as to protect the interest of the revenue. Such objects may or may not be achieved by the audit contemplated by section 44AB. 9. In the case at hand, the detailed note put up by the Assessing Officer though styled as brief note provides a forceful illustration of a case where in spite of an audit under section 44AB resort to special audit under section 142(2A) becomes a must. We have also perused Form No. 3CD and Form 6B referable to sections 44AB and 142(2A). In our opinion, the latter form contemplates more intensive information being made available to the Assessing Officer than what is done by the form ..... X X X X Extracts X X X X X X X X Extracts X X X X
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