TMI Blog2016 (7) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee : Shri Salil Aggarwal, Adv., Gautam and, CA and Shjalesh Gupta, CA For the Department : Shri Dilip Shivpuri Ruchir Bhatia ORDER Per I. C. Sudhir: Judicial Member These cross appeals preferred by assessee and revenue are directed against the order of learned CIT(A)-XXI, New Delhi dated 16.8.2013 and relate to assessment year 2009-10. 2. The appellant-assessee is a public limited company engaged in the business of construction and development of real estate projects. For the assessment year under consideration, it filed a return declaring an income of ₹ 922,30,17,671/- on 29.9.2009, which came to be assessed at an income of ₹ 3361,18,87,560/- in an order dated 1.8.2012 under section 143(3) of the Act. On appeal, learned CIT(A) granted part relief to the appellant and hence the appeals before us. 3. In the assessee s appeal in ITA No. 5180/D/2013 the grounds of appeal raised are as under: 1 That 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 Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t value and as such, notional addition so made and upheld is in utter disregard of the settled principles of law and is liable to be deleted. 2.2 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that share price of ₹ 179 per share did not even represent the fair market value of the shares sold by the appellant company since issue of fresh share capital by eight wireless companies was in no manner comparable with transfer of existing shares by the appellant company. 2.3 That the learned Commissioner of Income Tax (Appeals) has overlooked that sale of shares by the appellant company of eight wireless companies and subscription of fresh equity shares of eight wireless companies by M/s Telenor Asia Pte Ltd. was non comparable for various reasons like there was time gap between the two transactions, the share sold by the appellant were encumbered shares whereas fresh shares issued were free, the economic interest always remained 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration, the appellant company had invested in shares and disinvested shares of various companies which were land owning companies could not be a ground much less a valid ground to suggest that income derived by the appellant company from disinvestment of shares had nexus with the trading activities and therefore the treatment of gain on disinvestment of shares as business income is wholly untenable. 3.3 That the finding of the authorities below that share transactions were ordinarily in the line of business of the appellant company and with dominant intention of earning profit on re-sale of shares overlooks the nature of investments accepted by the revenue in the preceding assessment years and in any case, once such investments were duly disclosed as investments in the books of accounts, there could be no valid justification to suggest and conclude that income on disinvestment of investments was business income of the appellant company. 3.4 That the learned Commissioner of Income Tax (Appeals) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to various judicial pronounce and as such, same is legally unsustainable. 5.2 That the learned Commissioner of Income Tax (Appeals) while upholding addition, has failed to appreciate that once the transaction has been entered into between two independent parties which is supported by comparable instances of transactions of sale of adjoining area of land and then by no stretch of imagination, it could be validly held in absence of any material to the contrary that there was any understatement of consideration thereby, hypothetical, notional, theoretical addition sustained overlooks the business expediency of the of the appellant company is wholly misconceived and misplaced. 5.3 That the finding that, assessee is in the business of floating subsidiaries, purchasing of land, development of land and subsequent sale of land through the sale of shares of the subsidiary companies and as such, it is normal business income of the assessee evidently shows complete lack of appreciation on the part of the learned Commissioner of Income Tax (Appeals) of the factual matrix of the case of the appellant company and judicial position and therefore, the ground alone the addition sustaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant company. 7.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the finding of the learned Assessing Officer that waiver of ₹ 6,22,50,000/- in respect of interest already charged to Profit Loss Account is taxable u/s 41(1) and waiver of principal amount of loan amounting to ₹ 13,23,01,374/- is chargeable as income u/s 28 of the Act 1961, is legally and factually misconceived and therefore, unsustainable. 8 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the addition of ₹ 92,116/- representing the purported difference between balance of M/s. Prime Construction as per the books of appellant company and as per the ledger of account furnished by M/s Prime Construction and brought to tax as income under section 41(1) of the Act. 8.1 That the finding of the learned Commissioner of Income Tax (Appeals) that there was no proper reconciliation of discrepancy and therefore, addition made is confirmed, is wholly unjustified and untenable, more particularly, when mere difference in balance as per the books of assessee and as per the books of creditors could not be a gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting the addition of ₹ 11,57,47,608/- on account of interest free loan given to the subsidiaries, without appreciating that Hon ble SC has itself stated that decision n the case of SA Builders needs reconsideration in Addl. CIT vs. M/s Tulip Star hotels Ltd. 2012 TIOL-42 SC IT dt. April 30, 2012. 3 On the facts and circumstances of the case and in law, ld. CIT(A) erred in deleting the addition of ₹ 29,5,92,000/- by directing to allow deduction u/s 80IB(10) without appreciating that as per lay-out plans the commercial area was exceeding the limit prescribed and the project has to be considered as a whole. 4 On the facts and circumstances of the case and in law, ld. CIT(A) erred in deleting and addition of ₹ 15,64,96,084/- wihich was made on the account of variation of rates of sale of flats without appreciating the prepondence of probability was against the assessee. 5 On the facts and circumstances of the case and in law, ld. CIT(A) erred in deleting and addition of ₹ 50 crores made by AO by holding the forfeiture of advance paid for purchase of hotels as a capital expenditure. 6 On the facts and circumstances of the case and in law, ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the impugned assessment. Shri Dilip Shivpuri, learned special counsel for the revenue appearing alongwith Shri Ruchir Bhatia did not have any objection to the aforesaid prayer made by the learned counsel for the appellant company. Accordingly, both the sides argued in respect of the aforesaid contention and written submissions alongwith paper book filed have been placed on record. No arguments on merits of the various issues raised in these appeals were either heard or are being disposed off by this order. 6 With this background, we now proceed to dispose off Grounds 1 to 1.3 in ITA No. 5180/D/2013 7 In Ground 1, the appellant company has contended that the order of assessment dated 1.8.2012 u/s 143(3) was barred by limitation.. In Ground 1.1 it has been contended that learned CIT(A) has failed to appreciate that pre-conditions for invoking the provisions contained in section 142(2A) of the Act were not satisfied in the instant case and direction for special audit were issued with a motive to extend the period of limitation, therefore reference was without jurisdiction. In Ground 1.2 it has been further contended that learned CIT(A) failed to appreciate that there was no c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 2500 crores. Later on this MOU was revised and according to which Unitech Ltd., its 6 project land owning companies agreed to transfer 100% shareholding in project land measuring to 49.159325 acres by way of sale of 100% paid up share capital of project land owning companies to TRIL at a consideration approx. ₹ 692.04 crore which was reduced to 601.00 crore and also land 49.159325 acres to 44.15 acres. The advance received by the assessee from TRIL was allegedly utilized for giving advance to eight wireless subsidiaries of the Unitech Ltd. The assessee company transferred share of its 6 subsidiaries companies possessing lands to TRIL. Part of shares of these were purchased at cost of par values and other part was purchased at exorbitantly higher price prior to 3-7 days of sale and sold at approximately same consideration. Shares of these 6 companies were purchased by the assessee 3 to 7 days before the transfer of these shares to TRIL. The source of payment in making these purchase were to be correlate with fund of the assessee. It was also to be examined, whether these entries were book- entries and whether any payment was actually been made to subsidiaries. In abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even the A/R was unable to tally/ show the ledger account detailing the above transaction with corresponding bank entries. Similar, issues were also crept out in other transactions with SPA with Unitech Limited, Advance Techno Solutions Pvt. Limited, Advance Techno Solutions Pvt. Limited and Luzone Developers. iv) Assessee company had purchased 14,04,000 shares (purchased @ ₹ 10/- per share on 05.06.2007) of Gurgaon Technology Parks Limited at a total consideration of ₹ 1,75,50,000/- and shown by- back transaction of the shares. Assessee did not produce original share certificates, stock register/ Investment register showing chronological order of sale and purchases of shares, number and dates of transactions when books accounts requisitioned. v) The assessee group has several hundred subsidiary/ associate companies. The transactions related to land purchased by the assessee company are routed through various group companies in a very intricate and complex manner. The same will have a substantial tax implication which is too complex to work out. Huge advance have been given to M/s Crimson Developers Pvt. Limited, Azors Properties Pvt. Limited, Zanskar Realty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on during the year under consideration and as such no completion certificate is there during the relevant year. The assessee filed a list of sales made on 31.03.2009, in which requisite information as called for in the questionnaire were not furnished. Further assessee was asked to furnish the actual cost- Excluding land the assessee had not filed the relevant information after repeated requests made by the AO. 9 The proposal for conducting special audit u/s 142(2A) of the Act was sent to the CIT, Delhi-IV on 5.12.2011. The CIT, Delhi-IV vide his order dated 8.12.2011 granted approval for getting the special audit done u/s 142(2A) of the Act. Vide directions u/s 142(2A) of the Act dated 8.12.2011, it was held that accounts of the appellant were complex and necessary orders were issued for audit of its accounts by an accountant within the meaning of section 288 of the Act. The special audit for A.Y. 2009-10 was conducted by M/s Dass Gupta and Associates, B-4, Gulmohar Park, New Delhi and report thereof was submitted on 4.6.2012. Subsequent to the aforesaid the assessee vide reply dated 27.6.2012 contended before the AO that assessment proceedings are barred by limitation. Relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in same due to the following reasons: That the prescribed form on which report u/s 142(2A) of the Income Tax Act 1961 has to be furnished is only in Form 6B and no other format on which auditor is required to give his report as per Rule 14A of the I.T. rules 1962 which states as under: The report of audit of the accounts of an assessee which is required to be furnished under sub-section (2A) of section 142 shall be in Form No. 6B. As per content of Form 6B of the Income Tax Rules, 1962 the Special Auditor has to confirm the followings: a) Whether balance sheet and profit and loss accounts for the year under consideration are in agreements with the books of accounts maintained by the assessee company; b) Apart from this the auditor has to obtain all information and explanation as are necessary for the purpose of audit and verify as to whether the said accounts reflects a true and fair view of the state of affairs of the assessee and reflects true and correct profits/loss of the company alongwith the particulars desired in Annexure to Form 6B and such other particulars as to Assessing Officer may desire in addition to the above. Hence the legislatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been also completed within time as provided u/s 153 vide the order of the AO and accordingly the action of the AO is confirmed. 12 Before us the learned counsel for the assessee submitted that according to section 153(1) of the Act, limitation period for framing an assessment is 21 months from the end of the relevant assessment year and, since the instant assessment is for assessment year 2009-10, the limitation date u/s 153(1) of the Act expired on 31.12.2011. It was submitted that 23 days prior thereto i.e. 8.12.2011, the directions were given for special audit u/s 142(2A) of the Act. It was submitted that the directions for special audit without satisfying the statutory provisions in section 142(2A) of the Act were with an attempt to extend the period of limitation and therefore the impugned order of assessment is barred by limitation. It was submitted that during the assessment proceedings the appellant regularly filed from time to time various replies on various dates and on 28.10.2011 the appellant also produced the books of accounts which were impounded holding that the accounts are voluminous and difficult to understand. It was submitted that a show cause notice date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.38 (11.22%) 31.06 (79.40%) v) 2008-09 57.73 46.45 (80.46%) 11.28 (19.54%) 40.48 (70.13%) 14 It was submitted that financial statements of appellant company for the impugned assessment 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 there is no adverse remark/finding of the statutory auditors with respect to the books of account of the company or transaction entered into by company. It was submitted that the appellant company is maintaining its books of accounts in the same manner year after year in the past years also the appellant also the appellant had prepared its books of accounts in the same manner, on which basis the assessing officer has passed the assessment orders and since there is no change in accounting method and since the profit declared in the instant year is the highest, the question of complexity does not arise in the impugned assessment year and thus, there was no need for special audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after finding that, assessee has furnished all replies to your questionnaire and, directions and also produced books of accounts. In fact all what has happened is 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 when referring it to a Special Auditor. It is submitted that, such books of accounts have duly been 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. 16.4 It is thus submitted that, reference made was without jurisdiction in view of the following reasons. a) There was no complexity in the books of accounts of the appellant company. b) The appellant has not changed it's method of accounting and following the same method from many years. c) The order for special audit was made with a motive to make fishing and roving enquires and with an ulterior motive to extend the period of limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanations were sought for. Part I; Section 142(2A) i) Kaka Carpets v ACIT 224 Taxman 335 (All) ii) Isolux Corsan India Engineering Construction (P) Ltd. v DCIT 52 taxmann.com 400 iii) CIT v Subboji Rao Ch. 355 ITR 320 (Kar) Part II; Others i) Marc Bathing Luxuries Ltd. v ITSC 364 ITR 64 (Del) Proposition 4: Approval u/s 142(2A) by CIT should reflect application of mind and should not be mechanical i) Kaka Carpets v ACIT 224 Taxman 335 (All) Proposition 5: Validity of an order u/s 142(2A) can be challenged before the Hon ble Tribunal and once such reference is found to be invalid than the order of assessment is barred by limitation i) Sahara India (Firm) vs. CIT 300 ITR 403 (SC) ii) Bajrang Textiles v DCIT 83 TTJ 566 approved by Hon ble Rajasthan High Court in the case of CIT v Bajrang Textiles 294 ITR 561 iii) CIT v Vijay Kumar Rajendra Kumar Co. 271 ITR 337 (MP) iv) CIT v Subboji Rao Ch. 355 ITR 320 (Kar) Proposition 6: Approval granted by CIT is mechanical approval and is without application of mind and therefore, order u/s 142(2A) is unsustainable i) Signature Hotels (P) Ltd. v ITO 338 ITR 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reliance on the judgments in the case of Prateek Resorts Builders (P) Ltd. 199 Taxman 140 (Mag)(All) and Hind Samachar Ltd. v ACIT 335 ITR 227 (P H). It was thus prayed that reference for special audit was done to overcome the period of limitation and since, said reference was without jurisdiction and therefore, impugned proceedings are barred by limitation. 18 We have considered the arguments advanced by both the parties, perused the records of the case, and have gone through the case laws cited before us. The issue raised and agitated in the grounds is that the order of assessment dated 1.8.2012 u/s 143(3) of the Act is barred by limitation. Chapter XIV deals with procedure for assessment. Under the said Chapter, section 153 provides for time limit for completion of assessment and reassessments. Sub-Section (1) of Section 153 of the Act provides as under: 153 (1) No order of assessment shall be made under section 143 r section 144 at any time after the expiry of a) two years from the end of the assessment year in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n- (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 ending with the last date on which the assessee is required to furnish a report of such audit under that sub section or Shall be excluded Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-section (1), [(1A), (1B)] [(2)], (2A), and (4) available to the Assessing officer for making an order of assessment, reassessment or recomputation, as the case may be 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 accordingly:] 20 A perusal of the aforesaid clause (iii) to Explanation 1 shows that in computing the period of limitation the period commencing from the date on which the AO directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assessee is required to furnish a report of such audit under that sub-section or shall be excluded. Further proviso provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consideration, reads as under: [(2A) If 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 interest of the revenue, is of the opinion that it is necessary so to d, he may, with the previous approval of the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner of] Commissioner], direct the asessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the [Principal Chief Commissioner or] Chief Commissioner or [Principal 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 [Assessing] Officer may require: [Provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 section 142(2A) of the Act in view of the earlier judgment of Hon'ble Supreme Court in the case of Rajesh Kumar and Ors. vs. DCIT (supra). Their Lordships noted that in the case of Rajesh Kumar and Ors. vs. DCIT it has been held that principles of natural justice must be held to be implicit in section 142(2A) of the Act. It was noted that in the aforesaid judgment it was held as under: The hearing given, however, need not be elaborate. The notice issued may only contain briefly the issues which the Assessing Officer thinks to be necessary. The reasons assigned therefor need not be detailed ones. But, that would not mean that the principles of natural justice are not required to be complied with. Only because certain consequences would ensue if the principles of natural justice are required to be complied with, the same by itself would not mean that the court would not insist on complying with the fundamental principles of law. If the principles of natural justice are to be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be observed. It was concluded with regard to the question posed as under: 24. The upshot of the entire discussion is that the exercise of power under section 142(2A) of the Act leads to serious civil consequences and, therefore, even in the absence of express provision for affording an opportunity of pre-decisional hearing to an assessee and in the absence of any express provision in section 142(2A) barring the giving of reasonable opportunity to an assessee, 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 s case (supra). 25. It is pertinent to note that by the Finance Act, 2007, a proviso to sub-section (2A) has been inserted with effect from 1-6-2007, which provides that no direction for special audit shall be issued without affording a reasonable opportunity of hearing to the assessee. 25 Thereafter on application of the legal position to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 Explanation 1(iii) to sub-section (3) of section 153 of the Act was already over. It was thus directed that petitioners will not be entitled to urge before the appellate authorities 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 u/s 142(2A) of the Act. It has been specifically clarified that 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. 27 In other words it is quite apparent that the challenge to the validity of the orders u/s 142(2A) of the Act is maintainable before the appellate authority and it is opened to the appellant to urge before any appellate authority that the extended period of limitation is not maintainable because of an invalid order u/s 142(2A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of limitation but hereto it was neither challenged nor disputed that validly of directions cannot be challenged before the appellate authority so as to contend the assessment order is barred by limitation. 29 Similar view was expressed by Jodhpur Bench in the case of Bajrang Textiles v DCIT (supra). It was concluded in the said decision that accounts were not complex as required u/s 142(2A) of the Act and reference has been made with a sole motive to enhance the limit for making of the assessment. It was thus concluded reference made by the AO for special audit is without proper jurisdiction and assessment so made is barred by limitation. The aforesaid decision stands affirmed by the Rajahstan High Court in the case of CTT v Bajrang Textiles (supra) wherein it has been observed as under: The Tribunal after taking into consideration the record of proceedings and material on record has come to the conclusion that reference to the special audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und 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. Commissioner of Income Tax, Range-18, New Delhi read as under: F. No. Addl. CIT R-18/Spl.Audit-Unitech Ltgd.,11-12/1093 Dated: 9.12.2011 To, M/s Unitech Ltd. 6, Community Centre, Saket, New Delhi Subject: Special Audit u/s 142(2A) of the I.T. Act 1961 in the case of M/s Unitech Limited. A.Y 2009-10-regarding Sir, Please refer to the subject cited above Having regard to the nature and complexity of your accounts and interest of the revenue and being of the opinion, it is necessary so to do I hereby direct you to get your accounts audited u/s 142(2A) of the Income Tax Act 1961 for f.Y. 2008-09 pertaining to A.y. 2009-10 by M/s Dass Gupta and Associates, B-4, Gulmohar Park, New Delhi and to furnish a report on such audit in the prescribed performa duly signed and verified by the CA. The audit report u/s 142(2A) should be furnished by you to the undersigned within a period of 120 days from the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order, and the decision given must be supported by reasons, so that the superior Court is assured that it is in accordance with law and is not a result of caprice, whim, fancy, or reached on the basis of policy or expediency. Absence of reasons vitiates the conclusions. (See Mahabir Prasad Santosh Kumar v. State of U.P. AIR 1970 SC 1302; Travancore Rayons Ltd. v. Union of India AIR 1971 SC 862. In the Travancore Rayons case the order passed by the Government of India ran as under :- Government of India have carefully considered the points made by the applicants, but see no justification for interfering with the order under appeal 8. The order was struck down on the ground that reasons for rejecting the points in appeal had not been disclosed in Bhagat Raja v. Union of India AIR 1967 SC 1606 the Supreme Court deprecated the practice of one word order of the type rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 the principle that reason is the soul of justice. i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or ` ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Carpets v ACIT (supra) following the above judgment has held as under: 26. In view of the above discussion, the pleadings of the parties, the provisions of section 142(2A) of the Act and the principles of law laid down by the Division Bench of this Court in the case of Swadeshi Cottons Mills Company Ltd. (supra), and by Hon'ble Supreme Court in the case of Rajesh Kumar (supra) and Sahara India (Firm) (supra) and the conclusions reached by us in paras 15,16, 17, 18, 19 and 21 above, we are of the view that A.O. should reconsider the issue as to whether a direction should be issued under Section 142(2A) of the Act after considering the objections of the assessee and affording a reasonable opportunity of being heard, in terms of Section 142 (2A) of the Act. It is only after the A.O. reaches to a fair conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, 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 company and assessee after seeking an adjournment on 4.5.2011 furnished another reply dated 16.5.2011. . At this stage it is noted that there was change in incumbent occupying the position of Addl. CIT, Range -18, New Delhi. A questionnaire was issued on 24.6.2011 and a reply thereto was furnished on 29.6.2011 by appellant company. Subsequently another questionnaire dated 1.8.2011 was issued and incompliance thereto reply was furnished on 9.8.2011 by the appellant company. Further questionnaires dated 23.8.2011, 30.8.2011, 8.9.2011 and 27.9.2011 were issued for compliance by the appellant company; replies dated 20.9.2011 and 27.9.2011 were furnished by the appellant company. Later an another questionnaire dated 12.10.2011 was issued and two replies dated 18.10.2011 were furnished by the appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant 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 Manager (Finance and Accounts) along with Sh. Shyam Porwal Manager (Accounts) had appeared for verification of the books of accounts and providing all clarification as considered appropriate in respect of such books of accounts. It was submitted that show cause was issued only for collateral purposes. A further detailed reply to each of the observation of show cause notice was also furnished by the appellant company. Subsequently the appellant furnished a letter dated 5.12.2011 to the learned CIT praying that an opportunity may be granted to the assessee company by confronting the basis on which directions for special audit are proposed to be issued so as to enable the assessee company to furnish its reply and grant a personal hearing. It appears that no further communication or any notice was issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 received was noted and, thereafter reconciled with the ledger and, the bank statements. No discrepancy was either then found on this ground or has now been stated in the notice. It is thus submitted that, your observation that, not even single entry could be cross checked is factually incorrect and, contrary to material on record. Infact, the ledger accounts, vouchers whose accounts have been cross checked by your goodself and, the inspectors deputed by you are also part of assessment records, details of which have been tabulated as Annexure C to this Reply. It may be stated here that, in the course of assessment proceedings Shri Kaushal Nagpal, Deputy General Manager, Accounts had also shown the entries from the books of accounts maintained in the computer. It is therefore submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w 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 misconceived. Madam, firstly you call for information without appreciating the nature and scope of the information and, once the assessee furnishes the same, it is branded as irrelevant and volumious. It is submitted that, the assessee is a public limited company having a turnover of ₹ 1837.08 crores, which has declared income of ₹ 956.44 crores and paid tax of ₹ 214.47 crores. The details of income declared and tax paid in the precedings five years is also tabulated hereunder: Amount (In Rupees Crores) S.No Assessment Year Turnover Declared Income (before Tax) Tax Paid Assessed Under section 1. 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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, a direction issued u/s 142(2A) of the Act. In this appeal there is no challenge to the directions u/s 142(2A) of the Act. The challenge is th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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