TMI Blog2017 (3) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... f Revenue, the impugned order is not required to be quashed and set aside, more particularly, when it is stated in the order that looking to the complexity and the multiplicity of transactions, account are required to be verified by the Special Auditor. Considering the object and purpose of Section 142(2A), it appears that the accounts are required to be audited by the Special Auditor under Section 142(2A) with a view to facilitate the AO in passing the impugned order. Thus no reason to interfere with the impugned order passed by the AO. - SPECIAL CIVIL APPLICATION NO. 1266 of 2017 - - - Dated:- 13-2-2017 - MR. M.R. SHAH AND MR. B.N. KARIA FOR THE PETITIONER : MR SN DIVATIA, ADVOCATE FOR THE RESPONDENT : MR. MAINSH BHATT, LD. SR. ADV WITH MRS MAUNA M BHATT, CAVEATOR ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. By way of this petition under Article 226 of the Constitution of India, the petitionerassessee has prayed for an appropriate writ, direction and order to quash and set aside the impugned order dated 15.12.2016 passed under Section 142(2A) of the Income Tax Act directing to appoint Special Auditor for AY 2009-10 to 2015-16. 2.0. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts are duly audited, there seems no need for another audit by special audit. It was submitted that even the regular assessment to have been carried out on the basis of such annual account and therefore, also there is no need for special audit. It was further submitted that the various queries raised in the communication dated 14.10.2016 have been replied for almost five years out of 7 years and same can very well be verified during the assessment proceedings and the AO is having much more authority and powers as compared to special auditor and therefore, there is no need for special audit in connection with the issue raised in communication dated 14.10.2016. It appears that thereafter the said objection came to be disposed of by the AO vide order / communication dated 5.12.2016. That thereafter, AO sought approval of the Principal CIT (Central Circle), Ahmedabad who accorded approval vide his letter dated 14.12.2016. That thereafter, AO has passed impugned order dated 15.12.2016 appointing Special Auditor for AY 2009-10 to 2015-16. 2.3. Feeling aggrieved and dissatisfied with the impugned order passed by the AO passed under Section 142(2A) of the Act appointing Special Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted by Shri Divatia, learned advocate for the petitioner that the respondent has directed the Special Auditor as per para 6 of the impugned order to verify various claims, purchase of assets, eligibility for exemptions etc. which are taken care of in the tax audit and do not require special audit. It is submitted that special audit cannot be directed for preparing new books of accounts as per the directions of AO. 3.7. It is further submitted by Shri Divatia, learned advocate for the petitioner that during the block assessment and the AO has served the questionnaire upon assessee for which, the AO has passed the order of special audit, which have been answered by the assessee. It is submitted that therefore, the purpose for special audit will be taken care by the AO during the block assessment. 3.8. It is further submitted by Shri Divatia, learned advocate for the petitioner that as such the petitionerassessee has nothing to do with 40,000/- pages of documents requisitioned and / or has nothing to do with the Sant Shri Asharamji Ashram and Shadahaks whose name figured in the requisitioned document. It is submitted that therefore, in absence of proving relevance of such mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the Revenue that object and purpose of special audit is to facilitate the AO in arriving at right conclusion and to arrive at correct taxable income. It is submitted that even after the report is submitted by the special auditor considering Section 142 of the Act, thereafter the assessee shall be given the opportunity to make submission on the report of the special auditor and he shall be furnished copy of the report of the special auditor. It is submitted that therefore, as such no prejudice shall be caused to the assessee if the account for the period between the 2009-10 to 201415 are audited by the special auditor. It is further submitted that merely because the AO can consider and / or verify the audited account and / or account of the assessee are audited again is no ground not to appoint special auditor under Section 142(2A) of the Act. It is submitted that if the AO is of the opinion that books of account are complex in nature and there is multiplicity of transactions, AO is justified in passing the order under Section 142(2A) of the Act. 4.5. It is submitted that in the present case there are ample evidence in the requisitioned material (42000 objection recovered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not made a return within the time allowed under subsection (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this subsection, (ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or (iii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require : Provided that- (a) the previous approval of the Joint Commissioner shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts ; (b) the Assessing Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year. (2) For the purpose of obtaining full information in respect of the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07, the expenses of, and incidental to, such audit (including the remuneration of the Accountant) shall be determined by the Chief Commissioner or Commissioner in accordance with such guidelines as may be prescribed 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 subsection (2) or any audit under subsection (2A) and proposed to be utilised for the purposes of the assessment. (4) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year. 6.2. At this stage, it is required to be noted that Section 142 (2A) of the Act has been amended w.e.f. 1.6.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Section 142(2A) of the Act is enabling provision to help and assist the Assessing Officer to complete the scrutiny assessment with the assistance of an accountant. In para 10, 11, 26 and 27, the Delhi High Court has observed as under: 10. Aforesaid rulings when appraised and reflected, state that while examining the question of complexity in accounts, we have to apply the test of reasonable man by ‟ replacing the word and qualities of a reasonable man, with the word and qualities of a reasonably competent Assessing Officer. The question of complexity of accounts has to be judged applying the yardstick or test; whether the accounts would be WPC 2363/2013 Page 8 of 21 complex and difficult to understand to a normal assessing officer who has basic understanding of accounts etc., without the aid, assistance and help of a special auditor. Thus due regard has to be given to nature and character of transactions, method of accounting, whether actuarial were adopted for making entries, basis and effect thereof, etc., though mere volume of entries might not be a justification by themself as volume and complexity are somewhat different. Accounts should be intricate and diffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on the payrolls or employed by the assessee. In order to ensure reliability and accuracy, enterprises resort to internal audit and an external audit which can be a statutory audit. Internal audits are normally conducted in house generally by acquainted or qualified accountants. Statutory audit is compulsory under WPC 2363/2013 Page 19 of 21 the Companies Act , 1956 or when stipulated by the Act and accounts have to be audited by a qualified Chartered Accountant. Chartered Accountants are not ordinary accountants but specialists who have successfully undergone academic study and have extensive practical experience and trained for the said work. Curriculum requires articleship under a mentor who is himself a Chartered Accountant with some years of experience. As opposed to an ordinary accountant, a Chartered Accountant with his experience and academic background is in a better position to investigate, examine and scrutinize entries and records of financial transactions. Calibre and competence of Chartered Accountants is of a high degree and should not and cannot be equated with the capability of an ordinary accountant or a normal person having knowledge or acquainted with accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition from Asharam Bapu and others. It appears that many of the persons with whom the petitioner assessee has transaction/ relation/ dealing are common and therefore, it cannot be said that the persons/ Shadahaks named in the requisition material are alien to the petitionerassessee. Under the circumstances, when large number of papers are required to be considered / verified visavis assessee and other persons whose names figured in the requisitioned papers and when considering Section 142(2A) of the Act, the AO has thought it fit to exercise of powers under Section 142(2A) of the Act, it cannot be said that the AO has committed any error and / or illegality. It is required to be noted that impugned order has been passed after given an opportunity to the petitioner assessee and having satisfied with respect to the complexity and multiplicity of transactions. 9.0. Now, so far as the contention on behalf of the petitioner assessee that one of the requirement for exercising the powers under Section 142(2A) of the Act that the AO must be satisfied in interest of revenue, the account is required to be audited by the Special Auditor is concerned, it is required to be noted that consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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