TaxTMI 
TaxTMI 
2010 (8) TMI 394
X X X X Extracts X X X X
X X X X Extracts X X X X
....s tax audit report. It is pleaded in the petition that provisional assessment in respect of the petitioner's return was made under section 141A of the Act and the Assessing Officer had directed refund of a sum of Rs. 1,42,22,980. The petitioner claims to have furnished their response to the notice datedDecember 29, 1989but it appears that the authorities were not satisfied with such response. OnAugust 27, 1990another notice was issued detailing the particulars on which the income-tax authorities wanted further information/clarification. Correspondence was being exchanged between the petitioner and the income-tax authorities in this regard but the income-tax authorities were still not satisfied with the response of the petitioner. Eventually by a communication issued on February 27, 1991, the petitioner was informed that audit had been proposed in the case of the petitioner in accordance with the provisions of section 142(2A) of the Act, and Shri P. M. Narielwala, chartered accountant of M/s. S. R. Batliboi and Co. was being appointed as the nominated accountant under the said provisions of the Act. This order was challenged by the petitioner before this court by filing a writ petit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther notice under the same provision was issued onApril 19, 2007, requiring the petitioner to disclose certain information in the prescribed manner. This letter stipulates: "Sir/Madam, In connection with the assessment for the assessment year 1987-88 you are required to: (a) . . . (b) . . . [c] **furnish in writing and verified in the prescribed manner information called for as per the enclosed letter of even date and on the points or matters specified therein before me at my office at Aayakar Bhawan, 5th Floor, P-7 Chowringhee Square, Kolkata-69 on April 25, 2007 at 1.30 p.m." 6. The case of the petitioner is that no enclosure was given to the said letters but the representative of the petitioner had attended the hearing on the respective dates and filed all the details before respondent No. 1 in the form of a paper book. This again has been disputed by the learned counsel for the income-tax authorities in course of hearing. Thereafter, the Deputy Commissioner of Income-tax, Headquarters-III, Kolkata, informed the petitioner in writing on behalf of the Chief Commissioner of Income-tax, Calcutta 3, that proposal had been received by the Chief Commis....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... passed the order directing special audit on the following grounds: "The assessee-company, M/s. Indian Aluminium Co. Ltd. is engaged in the business of manufacturing aluminium products. The assessee has units at various places in the country. In the revised return of income filed onMarch 7, 1999, the assessee company claimed loss of Rs. 5,94,83,914. The assessee has claimed total expenditure, i.e., Rs. 23,731.41 lakhs broadly under four head. The main item of expenditure, i.e., Rs. 17,815.71 lakhs has been shown in the head of `cost of sales'. Further, substantial expenditure has been claimed under sub-heads like `power and fuel' (Rs. 5,605.50 lakhs) and `salary, wages and bonus' (Rs. 2,028.33 lakhs). In addition, the expenses under sub-head `other expenditure' are at Rs. 413.89 lakhs. The case was selected for scrutiny and the Assessing Officer requested the assessee to submit certain details in order to examine the claims of the assessee. The assessee has filed details from time to time but these submissions are mostly in the nature of unit-wise numerical break-up of the expenses and the detailed evidences including bills and vouchers in respect of all items were ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that there was no complexity of the accounts involved in the case of the petitioner in respect of the subject assessment year. 10. Complaint has been made on behalf of the petitioner that the letter datedJanuary 11, 2007, did not contain any enclosure. A letter, however, addressed to the petitioner containing the points on which information was sought has been annexed to the affidavit-in-opposition marked "C", originating from the office of the Deputy Commissioner of Income-tax, Special Range-13. In this letter, the petitioner has been asked to disclose informations against thirty-three subject heads. The case of the income-tax authorities is that such requisition was sent to the petitioner along with the notice datedDecember 29, 1989, but the petitioner did not respond to such requisition. 11. Further case of the petitioner is that the notice issued by the income-tax authorities on April 19, 2007, which required the petitioner to disclose information/particulars on April 25, 2007, did not specify that the said date was fixed for hearing on the aspect of appointment of a chartered accountant in terms of section 142(2A) of the Act. It has been urged that at the time ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....articulars 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 been given a rea-sonable opportunity of being heard." 14. The hon'ble Supreme Court in the case of Rajesh Kumar [2006] 287 ITR 91 held that without giving an opportunity of hearing, such order could not be passed. Another Bench of the court of the hon'ble Supreme Court took a different view. The matter was thereafter referred to a three-judge Bench of the hon'ble Supreme Court. The Bench comprising of three hon'ble judges of the Supreme Court in the decision of Sahara India (Firm) [2008] 300 ITR 403 sustained the view taken by the hon'ble Supreme Court in the case of Rajesh Kumar [2006] 287 ITR 91. The other amendment which was introduced to the aforesaid provision was that the fees of the statutory auditor was to be paid by the income-tax authorities. The said provision, as it originally stood, required the assessee to pay the fees of the statutory auditor. 15. It was sought to be argued on behalf of the income-tax authorities that since there was no ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s established even after the amendment of the aforesaid provision, I shall examine the question as to whether there has been actual violation of the principles of natural justice in this case. 17. Mr. Shome, learned senior advocate appearing for the income-tax authorities has submitted that in the present case notices were issued and the petitioner was actually heard. He refers to the notices dated11 January 2007and20 April 2007and refers to the order sheet recording the proceeding of25 April 2007. He further submits that before approving the proposal, the Chief Commissioner of Income-tax had also given opportunity of hearing to the petitioner. The income-tax authorities have also disputed allegation that any paper book containing the documents had been filed. In any event it is their case that the reply to the queries was required to be filed as per format. This was admittedly not done. 18. On the argument that the proposal was not made available to the petitioner and the reason for sending the proposal was not communicated to them, the stand of the income-tax authorities is that the reason for which such audit was proposed was communicated to the petitioner's repr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o be exercised only for an un authorized purpose, viz., for the purpose of extension of the period of limitation as pro-vided for under Explanation 2 to section 158BE of the Act. An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the Assessing Officer if he was found to have adopted a wrong approach or posed a wrong question unto himself. He could have been asked to complete the process of assessment within the specified time so as to save the Revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of account and/or the entries made therein. While exercising his power, the Assessing Officer has to form an opinion. It is final so far as he is concerned albeit subject to approval of the Chief Commissioner or the Commissioner, as the case may be. It is only at that stage he is required to consider....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere breached, as the petitioner was not given sufficient opportunity to present their case at the approval stage before the Chief Commissioner of Income-tax. were also advanced before me that there was no complexity of the accounts involved in the present case that would have warranted initiation of proceeding under section 142(2A) of the Act. Several authorities were cited by the learned counsel appearing for the respective parties on that point. Mr. Shome referred to the decisions of the hon'ble Supreme Court in the case of Living Media Ltd. v. CIT [2002] 255 ITR 268 a decision of a Division Bench of this court in the case of Joint CIT v. I. T. C. Ltd. reported in [1999] 239 ITR 921 and a Bench decision of the hon'ble Delhi High Court in the case of Gurunanak Enterprises v. CIT [2003] 259 ITR 637. I am of the opinion that since I am satisfied that the principles of natural justice stood breached in the case of the petitioner, the point as to whether the facts of this case or the nature of accounts justified as special audit ought to be re-examined by the Chief Commissioner of Income-tax upon giving the petitioner a fresh hearing. I do not think it is necessary to deal with the de....