TMI Blog2006 (3) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... bai and others on July 27, 2004, and submitted that since the said writ petition has been admitted wherein the issue involved is whether before passing the order under section 142(2A) an opportunity of hearing needs to be given to the assessee or not and as in the present writ petition the said issue is also raised, this writ petition be also admitted. We thought that it would be better if we consider this aspect finally at the admission stage. Hence, we heard the matter accordingly. The petitioner seeks to challenge the order dated November 11, 2005, passed by the Assistant Commissioner of Income-tax, Range 4(1), Mumbai, whereby he issued direction to the petitioner for a special audit under section 142(2A) for the assessment year 2003-2004. The order is challenged on the following grounds: (i) The Assistant Commissioner of Income-tax, Range 4(1), who passed the order giving direction to the petitioner for special audit under section 142(2A) for the assessment year 2003-2004 has no jurisdiction over the petitioner's case. (ii) That no hearing of any nature whatsoever was given to the petitioner prior to passing of the impugned order under section 142(2A). Learned counsel r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbai. At no stage, before the Assistant Commissioner of Income-tax, Range 4(1), Mumbai, the petitioner challenged his jurisdiction on the ground that its case has been transferred to Pune. As a matter of law, it could not have been. Section 124(3)(a) of the Income-tax Act permits challenge to the jurisdiction of the Assessing Officer, inter alia, within one month from the date on which the assessee is served with the notice under section 143(2) of the Income-tax Act. As already indicated above, the notice under section 143(2) was served upon the assessee on October 12/18, 2004. In this backdrop, the challenge to the jurisdiction of the Assessing Officer could have been done only within one month therefrom but that was not done. The communication between the petitioner and respondent No. 5 is only with regard to the filing of the return of income for the assessment year 2005-2006. The said communication has no relation to the return of income filed for the assessment year 2003-04. There is nothing on record that indicates that the assessment proceeding for the assessment year 2003-04 has been transferred from the Assistant Commissioner of Income-tax, Range 4(1), Mumbai, to the Deput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not necessary for the Assessing Officer to issue a show-cause notice or give a hearing to the assessee before issuing the direction for special audit under section 142(2A). The Division Bench of the Allahabad High Court held that an order under section 142(2A) giving direction for special audit does not entail any civil consequences nor affects the rights of the assessee. Such order does not create any liability against the assessee. The Allahabad High Court held thus: "A bare perusal of sub-section (2A) of section 142 shows that all that is required therein is that the Assessing Officer should be of the opinion that in view of the nature and complexity of the accounts of the assessee and the interest of the Revenue it is necessary to direct special audit of the assessee's accounts. In our opinion, it is not necessary for the Assessing Officer to give a show-cause notice or give a hearing to the assessee before issuing the directions under section 142(2A). In our opinion, the direction under sub-section (2A) of section 142 is purely administrative in nature and not quasi-judicial. Moreover, in our opinion, such a direction does not have civil consequences. It does not affect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee examined by an independent auditor. That helps and assists him in assessing the income of the assessee. We find ourselves in agreement with the view of the Allahabad High Court in the case of Jhunjhunwala Vanaspati Ltd. [2004] 266 ITR 657 and respectfully disagree with the view of the Calcutta High Court in the cases of Peerless General Finance and Investment Co. Ltd. [1999] 236 ITR 671 and West Bengal State Cooperative Bank Ltd. [2004] 267 ITR 345 and the view of the Kerala High court in the case of Muthoottu Mini Kuries [2001] 250 ITR 455. In our opinion, the assessee is not required to be heard before passing an order under section 142(2A) of the Income-tax Act, 1961. In so far as the present case is concerned, it would be seen that after the return of income was filed by the assessee on November 25, 2003, a notice under section 143(2) of the Income-tax Act was issued and served upon the petitioner on October 12/18, 2004. Pursuant thereto, the petitioner appeared through its chartered accountant and accounts officers from time-to-time in the proceedings before the Assessing Officer. On behalf of the assessee, it was admitted before the Assessing Officer in the procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act. The accounting year followed by the petitioner under the Companies Act is the calendar year and the accounting year for tax purpose is the financial year. In addition to the above various issues, the fact of merger of M/s. Chicago Pneumatic Ltd., with the petitioner-company in the past has made the examination of the accounts further complex in nature. Further, there are many issues in the return of income for the assessment year 2003-2004 which are complex and require thorough examination, some of which are as under: (i) Bad debts: On examination of the earlier year's claim for bad debts it was found that the petitioner's claim for bad debt was unacceptable since the conditions as laid down by section 36(1)(vii) of the Income-tax Act, were not met. (ii) Commission payment: Huge expenses have been claimed by the petitioner on account of commission payments. On verification of such claim in the earlier year it was found that the petitioner was not in a position to justify either the genuineness or the necessity of the commission payment. (iii) Stock write off: The petitioner-company regularly claims write off of huge quantities of stock on account of all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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