TaxTMI 
TaxTMI 
2013 (8) TMI 524
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.... with section 12 of the Act. The return was accompanied with an audited statement of account, tax audit report in form no.3 CD under section 44AB of the Act. The notice for assessment was issued on 19th of July, 2006, in response thereof the petitioner appeared and sought adjournment. During the course of assessment proceedings, the Assessing Authority raised number of queries which could not be replied by the petitioner fully. Only part compliance was made. A show cause notice under section 142 (2A) dated 12th of November, 2007 was served on the petitioner for making reference to get the books of account audited by a chartered accountant having regard to the nature of complexity of accounts of the assessee and the interest of the Revenue. Cause was shown which was not found satisfactory. The reference was made by the Assessing Authority to the Commissioner of Income Tax who vide his order dated 18th of December, 2007 found that there are various complexities in the accounts of the assessee and it is not possible to arrive at the correct income of the assessee on the basis of the tax audit report furnished with the return of the income. Consequently, it granted the approval for get....
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....ment proceeding for the immediately preceding Assessment Year is still pending as the petitioner who was under an obligation to approach the Department along with the certified copy of the judgment delivered in the above referred writ petition failed to approach. The assessment matter is still pending consideration. We find that the said writ petition was allowed on the point that before passing of the order under section 142 (2A) opportunity of hearing was not afforded to the petitioner. Meaning thereby, this Court did not examine the merits of the order. The petitioner, therefore, cannot derive any advantage from the judgment of the writ court delivered for the immediately preceeding Assessment Year. Then, it was submitted that proper opportunity of hearing was not afforded before passing of the impugned order and at any rate, the Assessing Authority had no occasion to form an opinion that due to complexity of the accounts, the report of special auditor is required. Elaborating the argument, it was submitted that the report of petitioner's auditor is already on record. It was further submitted that the matter was taken up for the first time by issuing notice dated 19th of July....
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....Tax Act. It further shows that the petitioner had submitted the print out of General Ledger Volumes-I and II of books of accounts on 12th of November, 2007 before initiation of proceedings under section 142 (2A) of the Act. The books of accounts submitted by the petitioner run approximately into 2500 pages of computer print. This negates the above contention of the petitioner that either proper opportunity of hearing was not given or power under section 142 (2A) was exercised just to get the extension of the prescribed limitation. Reliance was placed Swadeshi Cotton Mills Limited V.Commissioner of Income Tax, (1988) 171 ITR 634 (All.) in support of contention that there is no complexity in the account books maintained by the petitioner. It has been held that the exercise of power to direct the special audit depends upon the satisfaction of the Assessing Officer with the added approval of the Commissioner. But the Commissioner must be satisfied that the accounts of the assessee are of complex nature and in the interest of revenue the accounts should be audited by the special auditor. The special auditor is also an auditor like the company's auditor but he has to be nominated by t....
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....he Authority is migrating to the mercantile system of accounting it is not possible to qualify the effect, if any, due to deviations. The significant Accounting Policies and Notes on accounts adopted in the preparation and presentation of financial statements from a part of the final accounts. The auditor in the audit report at serial nos. 12 (a) and (b) has observed as follows: 12. (a) Method of valuation of closing stock employed in previous year. At Cost. All attributable costs incurred in the form of construction, development, electrification, etc. are included under Work-in-progress and have been apportioned to this head on the basis of certain percentage, the balance being charged off to expenses in the Income & Expenditure Account as some part has been incurred in the development of Kanpur City. Therefore, value of unsold properties is included in Work-in-progress and are at cost. The Authority has also not valued its assets and properties fully as they stood on 31.3.2004. The process of identification and quantification of all assets is under process. The effect of such determination, quantification and reconciliation on the accounts can not be ascertain....
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....5.2 In order to verify correctness of claim made by the assessee, it was required to furnish project wise details of inventory of opening and closing stock, details of sale and purchase which is very vital to determine whether the assessee had ventured into such activity with a profit motive or not. The assessee has neither furnished these details before the auditor nor did it comply with the requirements given vide notice u/s 142(1) dated 28.09.2007 coupled with the reminders given by the order sheet entry dated 24.10.2007 and 21.11.2007. The report of auditor is replete with qualifying remarks at various places which reveal that the assessee has not furnished vital information before the auditor. During the course of assessment proceedings, it has been claimed that there was no need to furnish such details as the income has to be computed u/s 11/12 of the Act. 5.3 The assessee has submitted copy of ledger account in 5 volumes but supporting vouchers of receipts and payment has not been submitted on the ground that there are voluminous records. In absence of vouchers, the correctness of state of affairs could not be verified and looking to the complexit....