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TMI Blog2016 (7) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding an order of assessment dated 1.8.2012 framed under section 143(3) of the Act by learned Additional Commissioner of Income Tax, Range-18, New Delhi inspite of the fact that the same was barred by limitation and as such deserved to be quashed as such in light of various settled judicial pronouncements. 1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that since pre-conditions for invoking the provisions contained in section 142(2A) of the Act were not satisfied in the instant case and, the directions for issue of special audit were with a mere motive to extend the period of limitation, therefore reference was without jurisdiction and order of assessment so made in pursuance thereto was barred by limitation. 1.2 That the learned Commissioner of Income Tax (Appeals) ought to have appreciated that there was no complexity involved with regard to the books of accounts and the directions for special audit could not have been issued for drawing legal inferences particularly having regard to the fact that the method of accounting and manner and mode of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emained with the appellant in case of transfer of shares and even the funds were also provided by the appellant to finance the purchase etc. and as such theoretical, hypothetical and notional addition sustained is wholly unjustified and untenable in law. 2.4 That the learned Commissioner of Income Tax (Appeals) has also erred in proceedings to uphold the addition on wholly irrelevant, extraneous and immaterial consideration that alleged real net worth of eight wireless companies increased substantially after the 2G license was granted by the DOT and as such, addition sustained is not in accordance with law. 2.5 That further finding of the learned Commissioner of Income Tax (Appeals) that "assessee company has deliberately transferred the 75% stake in eight wireless companies at the face value of Rs. 10/- per share only when the real net worth of the shares were @ Rs. 179.73 per share at which the Telenor had subscribed the shares of these eight wireless companies" is factually incorrect, wholly misconceived and is contrary to evidence on record and therefore, legally untenable. 2.6 That the finding of the learned Commissioner of Income Tax (Appeals) that "assessee has foregon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) has also failed to appreciate written submissions alongwith evidence placed on record to establish that gain on disinvestment of shares of subsidiary companies to M/s. Tata Realty and Infrastructure Ltd. was "capital gain" and the approach adopted to regard the same as business income was "look through approach" which in essence lifted the corporate veil and was not permissible 3.5 That the finding that "the floating of subsidiary companies and sale of land through the sale of shares of the subsidiary companies is a regular practice and is a regular business of the assessee and therefore, the Assessing Officer was justified to treat the income of business income" is not only arbitrary but also shows the casual approach of the learned Commissioner of Income Tax (Appeals), in upholding the arbitrary addition. 4 That likewise the learned Commissioner of Income Tax (Appeals) has further erred in treating the capital gain of Rs. 478,50,42,117/- on disinvestment of shares of the following companies as business income of the appellant company: S.No. Name of the company Amount of gain (Rs.) 1. M/s. Mirik Developers Pvt. Ltd. 182,73,10,657 2. M/s Gibson Builders Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Appeals) has failed to appreciate that sum advanced by M/s. Shivalik Venture Pvt. Ltd. to the appellant company under a Memoandum of Understanding dated 13.09.2008 was a business advance and therefore, a commercial transaction and as such, beyond the scope of section 2(22)(e) of the Act. 6.2 That even otherwise, the learned Commissioner of Income Tax (Appeals) has failed to appreciate that since there were no accumulated profits at the beginning of the year in M/s. Shivalik Venture Pvt. Ltd., and as such the addition made by invoking section 2(22)(e) of the Act was wholly unjustified, misconceived and therefore, not taxable. 6.3 That the finding of the learned Assessing Officer that Memorandum of Understanding dated 13.09.2008 is a sham document without making any enquiries whatsoever from M/s. Shivalik Venture Pvt. Ltd. is contrary to facts and law, and therefore, unsustainable. 6.4 That without prejudice to the above and in the alternative, the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in not directing to reducing the amount of Rs. 33.19 crores being the amount of debit balance in the account of M/s. Shivalik Venture Pvt. Ltd. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the finding of the learned Commissioner of Income Tax (Appeals) that assessee has been unable to reconcile the discrepancy in the claim of expenses is factually incorrect, legally misconceived and thus untenable. 10 That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in upholding disallowance of sum of Rs. 66,43,500/- representing alleged short deduction of TDS on service tax by invoking section 40a(ia) of the Act. 10.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that section 40a(ia) of the Act is wholly inapplicable on alleged short deduction of income tax and as such, disallowance made is perse without jurisdiction. 10.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the allegation that there was short deduction of TDS on account of service tax is factually and legally misconceived and therefore, no disallowance was warranted under section 40a(ia) of the Act. 10.3 That even otherwise, in any case, no disallowance was warranted under section 40a(ia) of the Act as the entire sum stood paid during the year. 11 That the learned Commissioner of Income Tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was in the nature of business income and not income from house property. 8 On the facts and circumstances of the case and in law, ld. CIT(A) erred in deleting the addition of Rs. 1,68,54,000/- made on account of disallowance of processing charges on the loan taken by Unitech Power Transmission Ltd. (UTPL) without appreciating that the said loan was actually availed by UTPL and not by the assessee company. 9 On the facts and circumstances of the case and in law, ld. CIT(A) erred in deleting the addition of Rs. 20,91,39,405/- on account of disallowance of proportionate interest expenses in respect of investment of Rs. 260.26 crors made by assessee in its subsidiary M/s Unitech Overseas Ltd. without appreciating that judgment in the case law of S.A. Builders Ltd. vs. CIT 288 ITR 1 was not final and the said investment was not legal in the first place. 10 On the facts and circumstances of the case and in law, ld. CIT(A) erred in deleting the addition of Rs. 1,59,39,46,799/- due to disallowance of interest payment to Tata Reality & Infrastructure Ltd. without appreciating that there were not enabling clauses in the MOU between assessee and TRIL for such interest payment. 11 On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conditions of Part 2(6) of Instruction Number 1076 for selecting case for special audit as there was allegation of tax deviation as the Assessing Officer has received information from the Investigation Wing that the assessee is involved in 2G scam vide remand report of the Assessing Officer dated 18.4.2013 and 2.5.2013 is factually incorrect, legally misconceived and unsustainable. In essence the challenge in each of the above grounds is that the reference for special audit u/s 142(2A) of the Act was illegal and therefore consequently the order of assessment is barred by limitation. 8 The factual matrix emanating from record is that return of income for the instant assessment year was filed on 29.9.2009 declaring an income of Rs. 1334,87,70,381/- u/s 139(1) of the Act. The return of income was selected for scrutiny and various replies were furnished in response to notices/questionnaire issued by Addl. CIT, Range-18, New Delhi. In the notice u/s 142(1) dated 20.10.2011 one of the directions was to produce books of accounts. Accordingly the books of accounts were produced on 28.10.2011 and they were impounded vide order of the same date on the ground that books were voluminous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermine its taxability under the Act. The entire transaction was to be correlated with the fund flow and bank statement of the assessee. Similarly transactions of sale of shares of 8 Wireless Companies to M/s Cestos Unitech Wireless Pvt. Ltd. and Acorus Unitech Wireless Pvt. Ltd. were to be looked into and similar co- relation was to be made. This was necessary in view of the fact that that under similar transactions prices charged by the 8 Wireless Companies was 18 times higher than apparent sale consideration shown by the assessee. iii) Assessee has entered three share purchase agreement: (i) SPA with Unitech Limited, Millennium construction Pvt. Limited and Mirik Developers as confirming party who owned 45.00 Acres of land at Chennai. 100% shares of Mirik Developers and held by Unitech Limited. Millennium construction Pvt. Limited purchases 100% shares holding of Mirik Developers from assessee company along with all assets (moveable and immoveable) and liabilities at a consideration of Rs. 1,97,97,60,693/-. As per clause 3.2 (a) of the agreement, it was mentioned that Rs. 1,82,78,10,657/- is towards purchase price of sale shares @ Rs. 36,556.21 per share. And at clause 3.2 (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and showing loss amounting to (Rs. 13,17,56,705/-) from main activity of business from real estate in computation of total income, definitely requires elaborate and extensive search of accounting details under section 142(2A) of the I.T. Act 1961 to assist assessment proceedings to vindicate the interest of revenue. vii.) Assessee company has transferred 75% of its shares in 8 Unitech Wireless companies to three subsidiary companies viz. Simpson Unitech Wireless Pvt. Limited, Cestos Unitech Wireless Pvt. Limited and Acorus Unitech Wireless Pvt. Limited at par value of Rs. 10 on 30.01.2009. whereas Telenor Asia Pte (Singapore based company) had purchased share of 8 Unitech Wireless companies at around same time @ Rs. 179/- per share (including 10/ face value and Rs. 169/- as premium). The share consideration amounting to Rs. 1645.65 crores arising out of this transaction have not been offered to tax and has also not been reflected in books of accounts. viii) Waiver of loan amounting to Rs. 19.45 cr.: Assessee has claimed deduction on a/c of waiver of loan amounting to Rs. 19.45cr. Taken from Fortis Investment Management (India) Pvt. Ltd by treating it as capital receipt, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with a motive to make fishing and roving enquiries and, with an ulterior motive to extend the period of limitation; c) That directions for Special Audit were in complete infraction of Instruction No. 1076, dated 12th July, 1977 issued by CBDT, which provides for the Guidelines for selection of cases for audit under section 142(2A) of the Act; and d) That learned CIT did not apply his mind at all as regards the pre-requisite for grant of prior approval and, mechanically granted the approval for appointment of special auditors. 10. It was contended that the above submission now also finds support from the audit report of learned Special Auditor. It was submitted that, all what has been done is to draw adverse legal inferences on the facts as stated by the assessee company and recorded in the books of accounts of the appellant company. The AO however did not find any merit in the above contentions raised by the appellant company. It has been held that complexity of books of accounts is to be decided by the AO and not by the appellant company. It has been held that release of books of accounts on 16.11.2011 does not warrant any inference that books of accounts were not complex e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to special audit on reference u/s 142(2A) of the I.T. Act, 1962. It has also been held in the case of Rajesh Kumar, Prop. Surya Trading vs. Dy. CIT (2005) 275 ITR 641 (Del) that the expression 'accounts of the assessee' covers not only the books of account of the assessee but also other documents which are available in the course of an assessment and at any stage subsequent thereto, that may become available to the Assessing Officer." 11 On appeal, the contention was again rejected by the CIT(A) on following basis; "I have considered the order of the AO and the submissions of the assessee and I do not find any merit in the submissions of the assessee. The assessee had raised the similar issues before the AO during the course of assessment proceedings and AO had clarified all the facts and circumstances vide the order of the AO. The AO has clearly mentioned in the order the various complexities involved in this case. AO has also mentioned in the order that the audit report was received on 4.6.2012 and the assessment has been completed with the time limit of 60 days on 1.8.2012 as provided u/s 153 read with Explanation 1. The assessee also fulfilled the conditions of para 2(VI) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the same manner year after year; b) the department has not found the same to be complex in the earlier year even though scrutiny assessments made; c) the appellant carried on the same business activity and maintained the accounts in the exactly similar manner in the current year as it had maintained in the earlier year; d) the financial statements of Appellant Company for the subject year have been duly audited by the statutory auditors after verification of the books of account and other relevant documents maintained by the Company; and e) perusal of the notice issued for special audit would show that there is no complexity in the accounts of the assessee. 13 The learned counsel in support of the above submission further submitted that in the instant year, percentage of expenses claimed is the lowest and the profit declared in the instant year is the highest. A chart furnished in support of the above is as under: Sr. No. Financial year Sales Total expenses Profit Job & Construction i) 2004-05 18.05 15.50 (85.82%) 2.46 (14.18%) 13.96 (77.34%) ii) 2005-06 18.65 16.12 (86.47%) 2.52 (13.53%) 14.31 (76.72%) iii) 2006-07 16.35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors in this regard. Further, as stated earlier, all the income/expenses reporter therein are normal income/expenses earned/incurred by any person carrying on similar business activities and thus, the accounts of Appellant Company cannot be said to be complex merely on account of such income/expense heads. Therefore, since there is no complexity in the accounts of Appellant Company conduct of special audit in the instant case would be unwarranted and unjustified. 16.2 In view of the above it is submitted that the Ld. AO made the proposal mechanically and, for abdicating the responsibility by directing the purported enquiries to be made, which ideally should have been done by herself. It is thus submitted that, show cause notice has been issued with a premeditated and predetermined opinion to direct the assessee to get is accounts audited u/s 142(2A) of the Act and thereby extend the period of limitation and as such, notice is issued only for collateral purposes. 16.3 Finally the appellant would like to submit that said appointment of special auditor is mere pretence so as to circumvent the period of limitation, particularly after finding that, assessee has furnished all repli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower under the provisions of section 142(2A) of the Act must be based on objective criteria and not on the basis of subjective satisfaction. It was submitted that no opportunity was granted before invoking the provisions of section u/s 142(2A) of the Act. The AR placed reliance on case laws under the following propositions: "Proposition 1: Non speaking order u/s 142(2A) of the Act is an order vitiated in the eyes of law and thus, deserves to be quashed i) Hind Samachar Ltd. v ACIT 335 ITR 277 (P&H) ii) Prateek Resorts & Builders (P) Ltd. v ACIT 199 Taxman 140 (Mag) Proposition 2: Order passed without recording reasons is unsustainable, since recording of reason is meant to serve the under principle, that justice must not only be done but it must also appear to have been done i) Bal Kishan Dhawan (HUF) v UOI 366 ITR 639 (P&H) ii) Kranti Associates (P) Ltd. v Masood Ahmed Khan (2010) 9 SCC 496 (SC) Proposition 3: Order u/s 142(2A) without giving an opportunity of being heard is invalid order, since detailed replies submitted by assessee were not considered as not further enquiries or explanations were sought for. Part - I; Section 142(2A) i) Kaka Carpets v ACIT 224 Taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the contention of the assessee that no opportunity of being heard was granted is also contrary to record as both AO and CIT had granted necessary and adequate opportunity during the assessment proceedings. Reliance was placed on the judgments of Hon'ble Delhi High Court in the case of AT&T Communication Services India (P) Ltd. v CIT 362 ITR 97 (Del.) and DLF Ltd. and Another v Addl CIT 366 ITR 390 (Del.). The learned counsel also made reference to the E-Book on Principles of Natural Justice. 17 In rejoinder submission the learned counsel for the assessee submitted that ITAT is duly competent to look into the aspect whether special audit u/s 142(2A) of the Act was being ordered correctly or not and on this proposition the learned counsel relied on the judgments in the cases of Sahara India Firm v CIT 300 ITR 403 (SC), CIT v Vijay Kumar Rajendra Kumar & Co. 271 ITR 57 (MP) and Bajrang Textiles v DCIT 83 TTJ 566 (Jodhpur) duly affirmed in 294 ITR 561 (Raj). It was submitted that order passed for special audit u/s 142(2A) of the Act should be a speaking order specifying the reasons for special audit i.e. satisfaction of AO should by objective and not subjective. He placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime limit for completion of assessment is 21 months from the end of the assessment year in view of the specific provisions contained in section 153(1) of the Act read with proviso to the said section. Accordingly, the limitation for framing an order of assessment under the aforesaid provison for the instant assessment year is 31.12.2011; whereas the instant assessment has been made on 1.8.2012. The learned counsel for the assessee contends that the limitation expired on 31.12.2011 and hence the impugned order of assessment is barred by limitation. On the other hand the learned counsel for the revenue opposes the submission of the appellant company on the ground that period of limitation stood extended in view of the directions for special audit u/s 142(2A) of the Act. Our attention has been drawn to clause (iii) of the Explanation 1 to Section 153(4) of the Act read with proviso to the aforesaid Explanation which mandates as under: "Explanation 1-In computing the period of limitation for the purposes of this section- (iii) the period commencing from the date on which the Assessing officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder that sub-section had to be excluded in terms of clause (iii) to Explanation 1 of section 153(4) of the Act. It was further submitted that since after the exclusion of the aforesaid period remaining period is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended by 60 days i.e. 6.6.2012 to 5.8.2012 and since the impugned order of assessment is dated 1.8.2012 therefore the order of assessment is not barred by limitation. The learned counsel of the assessee on the other hand opposes the aforesaid submission by contending that directions u/s 142(2A) were without jurisdiction and therefore such directions could not be a ground to extend the period of limitation. 21 The preliminary submission of the revenue viz-a-viz the aforesaid prayer of the appellant is that there can be no challenge to the directions u/s 142(2A) of the Act in this appeal and as such contention of the appellant company is misconceived. 22 To appreciate the above contention we seeks to notice the statutory provision contained in section 142(2A) of the Act. Section 142(2A) of the Act, as is relevant to the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 6[Principal Chief Commissioner or] Chief Commissioner or 6[Principal Commissioner or] Commissioner in accordance with such guidelines as may be prescribed8 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 utilized for the purposes of the assessment." 23 The aforesaid provision was subject matter of consideration in a judgment of three judges Bench of Hon'ble Supreme Court in the case of Sahara India (Firm) (supra). In that case the matter was placed before Bench in view of a common order dated 14.12.2006 passed by a two judges Bench to examine whether it is necessary to afford an opportunity of hearing to an assessee before ordering special audit in terms of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on required to be formed by the AO for exercise of power under the said provision must be based on objective criteria and not on the basis of subjective satisfaction. It was specifically observed that recourse to the said provision cannot be had by the AO merely to shift his responsibility of scrutinizing the accounts of an assessee and pass on the buck to the special auditor. In regard to the approval of CIT it was held that such an approval is an inbuilt protection and is not an empty ritual. It was thus observed 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 AO and the approval must reflect the application of mind to the facts of the case. Thereafter the question whether the principles of natural justice demand that an opportunity of hearing should be afforded to an assessee before an order under section 142(2A) of the Act was examined. Their Lordships concurring with the decision in Rajesh Kumar (supra) held that an order under section 142(2A) does entail civil consequences and therefore the rule of audi alteram partem is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the opinion that this Court should be loathe to quash the impugned orders. Accordingly, we hold that the law on the subject, clarified by us, will apply prospectively and it will not be open to the appellants to urge before the Appellate Authority that the extended period of limitation under Explanation 1(iii ) to section 153(3) of the Act was not available to the Assessing Officer because of an invalid order under section 142(2A) of the Act. However, it will be open to the appellants to question before the appellate authority, if so advised, the correctness of the material gathered on the basis of the audit report submitted under sub-section (2A) of section 142 of the Act. 30. In the result, both the appeals are allowed to the extent indicated above leaving the parties to bear their own costs." 26 A reading of the aforesaid makes it apparent that Their Lordships agreed with the submission of the learned Additional Solicitor General that interpretation be given prospective effect as otherwise the interest of revenue will be greatly prejudiced because the time to frame fresh assessment for the relevant assessment year by ignoring the extended period of limitation in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not expressly excluded. Now the law has been amended expressly providing for an opportunity The position continues to be the same. In that view of the matter, admittedly, in the instant case, the assessee was not heard before the order passed under Section 142(2A) of the Act. As rightly held by the Tribunal that, such a procedure was resorted to extend the period of limitation. Therefore viewed from any angle, the assessment order passed is void as being barred by limitation and the, Tribunal was justified in setting aside the order of the Appellate Authority".[underlined by us] 28 Further even in the case of CIT v Vijay Kumar Rajendra Kumar and Co. (MP) (supra), the ITAT quashed direction u/s 142(2A) of the Act since no opportunity of hearing was afforded to the assessee before issuing the direction for getting the audit done and since the accounts did not involve any complexity and held therefore the assessment made is barred by limitation. However though the Hon'ble High Court reversed the decision of Tribunal on the ground that the direction u/s 142(2A) of the Act was legal, proper and valid and legally sustainable and therefore the order of assessment within the period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh books rather than to conduct a special audit. This was on the face of it beyond the scope of provisions of section 142(2A) of the Income-tax Act. No authority has been given to the Assessing Officer to direct the preparation of fresh books by referring the matter to an auditor under special audit. Audit is for the purpose of satisfying one about authenticity and credibility of accounts prepared by the assessee but not for preparing new account books as per directions of Assessing Officers. Apparently, the Tribunal found that it was abuse of process by the Assessing Officer. The findings given by the Tribunal are findings of fact based upon the relevant material." 30 Having regard to the above discussion we have no doubt in our mind that the contention raised by the appellant is maintainable in this appeal. In otherwords, the appellants are entitled to urge, argue and plead that order of assessment is barred by limitation on the ground that direction u/s 142(2A) of the Act were invalid and not legally sustainable. 31 Having held so, we now examine the validity of the direction issued u/s 142(2A) of the Act. In the instant case, directions dated 9.12.2011 signed by Addl. Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary. It was concluded that once reasons are conspicuous by their absence in the impugned order u/s 142(2A) of the Act, the same does not meet the requirements of law. In the said case, the Hon'ble Court held that subsequent production of file containing a letter written to the Commissioner giving reasons for necessity of special audit and defect in the accounts found during the course of special audit for the preceding assessment years 2003-04 to 2006-07 does not mitigate the requirement of speaking order u/s 142(2A) of the Act. 34 Also the Hon'ble Allahabad High Court in the case of Prateek Resorts & Builders (P) Ltd. v. DCIT (supra) following the judgment of Hon'ble Supreme Court in the case of Sahara India (Firm) v CIT has held as under: "6.2 In view of the above, it is clear that for the issue of direction for audit under section 142(2)(a) there should be application of mind and objective satisfaction on the basis of material. The application of mind and objective satisfaction can only be examined when order reflects so by recording the reasoning. 7. The order is subject to scrutiny under Articles 136 and 226 of the Constitution. The order as such must be a speaking or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by superior Courts. h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds, the accounts proposed to audit under section 142(2A) were considered complex and on what considerations it was arrived that it is in the interest of revenue to direct audit of accounts. Mere reference to a prior approval of CIT does not satisfy the precondition of a "speaking order" containing reasons for invoking the provision of section 142(2A) of the Act. There is no reference to detailed replied furnished by the assessee during the proceedings 37 Having regard to the above it is held that in the impugned order reasons are clearly invisible and conspicuous by their absence. In other words, order is bereft of any reason. It is stated here that reasons are heart and soul of an order, as they facilitate the process of judicial review and therefore in absence of any reason much less cogent, clear and succinct reasons order u/s 142(2A) of the Act is held to be bad in law and without proper jurisdiction. 38 Also, even the approval u/s 142(2A) by learned CIT should reflect application of mind and should not be mechanical as held by the judgment of Hon'ble Supreme Court in the case of Sahara India (Firm) vs. CIT (supra). The Hon'ble Allahabad High Court in the case of Kaka Carpet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the present case there has been no application of mind by the Additional Commissioner before granting the approval." 40 From the facts on record and material available with us, it is noted that in the instant case return was filed by the appellant company on 29.9.2009 declaring an income of Rs. 922.30 crores. Subsequent to the said return of income notice was issued on 23.8.2010 u/s 143(2) selecting the case for scrutiny. A reply enclosing the audited financial statements and other documents including tax audit report was furnished on 14.9.2010. Thereafter notices u/s 142(1)/143(2) dated 18.10.2010 along with questionnaire was served on the appellant company. Also, another questionnaire dated 3.11.2010 was issued to the appellant company. It is noted that replies dated 18.10.2010, 28.10.2010, 3.11.2010, 23.11.2010, 29.11.2010 and 6.12.2010 were furnished in compliance to the questionnaire issued to the appellant company. Subsequently on 3.3.2011 another questionnaires was issued to the appellant company for compliance on 8.4.2011. The appellant furnished replies dated 7.4.2011 and 8.4.2011 in compliance to the aforesaid questionnaire dated 27.4.2011 issued to the appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of accounts and method of accounting, there is no justification to resort to section 142(2A) of the Act. It was submitted that a show cause notice is a pretence to circumvent the period of limitation. It was submitted that after having received and, examined all relevant information/evidence including books of accounts over a period of 15 months running into at least 30 replies supported by enclosures and, forming an opinion in respect of disallowances/additions proposed to the returned income, the proposal to issue directions for special audit is to extend the period of limitation and is thus clear case of abdication of responsibility. It was submitted that in the notice there is no specific allegation which either alleges or establish that there is complexity in books of accounts of the appellant company. A reference was drawn to the reply dated 16.11.2011 wherein the assessee had pointed out that books of accounts were already examined and verified and during the course of discussion either no explanation was sought or any adverse comments were made, since there was no complexity noted in the accounts maintained. It was pointed out that Shri Kaushal Nagpal, Deputy General M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings the assessee company had appeared and got the entries in the books of accounts verified. The details of such entries in the books of accounts, as verified by you in the course of assessment proceedings have been separately stated as Annexure'C' to this Reply. Infact, it may be stated here that, one of the ledger account examined was of M/s CIG Unitech Properties (P) Ltd.. A copy of the ledger account is enclosed as Annexure 'D' to this Reply. It is submitted that, a reading of the same will show that, it is clear and specific i.e. Rs. 75 crores had been received and out of which Rs. 22.40 crores have been repaid and balance of Rs. 52.60 crores is outstanding at the close of the year. Hence, it is evident that, there are complete narrations as to the nature of payment. However, your goodself since wanted to verify the above receipts and, payments from the bank statements, it was stated that, name of the bank is not stated in the narration and same can only be known from the books of accounts maintained in the computer and also from the vouchers of the assessee company. Accordingly, from the books of accounts, the bank account from which the the payment was either made or receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt register. It is submitted that, as regards investments register assessee has already produced share certificate for your perusal on 4.11.2011 and which were duly reconciled with the details of investments furnished by assessee company. It is submitted that details so furnished along-with annual report are at pages 31 to 154 of Annexure 1 to Reply dated 23.11.2011. Apart from the above, details of investment furnished vide reply dated 18.10.2011 are comprehensive detail giving complete particular as to the name of company, no. of shares, opening and, closing balance, purchase price, sale price, profit/loss thereon, Thus all necessary details as recorded in investment registers has already been furnished and on which there is no adverse observation. Infact in the entire show cause notice not a word has been stated in respect of detail, so maintained and furnished and yet adverse inference has been drawn for collateral purposes. In any case, the investment register duly certified by the company secretary is being furnished at pages 1 to 77 of Annexure 3 to Reply dated 23.11.2011. Lastly, even the observation that, assessee is filing irrelevant and voluminious detail is also misco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company to furnish its reply and grant personal hearing. Since, the AO has already issued show cause notice in this respect to the assessee, it was not necessary to disclose the same to the assessee again. However personal hearing was granted, Shri Gautam Jain and Shri Ajay Rastogi, CAs appeared on behalf of the assessee on 8.12.2011. they were heard." 43 From the above it is apparent that despite the appellant seeking the basis on which directions for special audit is proposed to be issued, the learned CIT dispensed with that precondition and granted approval which itself vitiates the whole process of granting approval. It is thus apparent that neither the AO nor the learned CIT disclosed the basis of approval after the objection as raised by the appellant to the show cause notice u/s 142(2A) of the Act and hence the order dated 9.12.2011 is a vitiated order. 44 Furthermore, the judgments relied upon by the revenue also do not lead us to take different view of the matter The first judgment relied upon is the case of Rajesh Kumar and Ors v CIT (supra). In this case the Hon'ble Court has held in para 34 that the order of assessment can be subject matter of an appeal; and not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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