TaxTMI 
TaxTMI 
2017 (3) TMI 113
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....approximately 40,000/-papers in 45 gunny bags in the case of Asaram Bapu and Narayansai Group were seized by the Police Authority. That the Income Tax Authority requisition in the said document under Section 132 of the Act in the case of Asaram Bapu and Narayansai Group on 09.03.2015 from Poilce Authorities, Surat. That on the basis of the same, the petitioner was served with the notice under Section 153 C of the Act for block period i.e AY 2009-10 to 201314 and the petitioner assessee was required to furnish return of income under Section 153 C of the Act for the aforesaid year. That the petitioner assessee was served with the questionnaire by way of notice under Section 142(1) dated 18.07.2016 on the basis of the requisition material, statements and loose papers etc. The petitioner assessee was also asked to furnish various details such as ledger accounts, bank statements, confirmatory letters from unsecured depositors etc. During the course of block assessment for the aforesaid period, AO was of the opinion that looking to the complexity and multiplicity nature of material and the account of the assessee for the aforesaid period are required to be audited by the Special Auditor.....
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....The impugned order is challenged by the petitioner on the following grounds. (1). Insufficient opportunity. (2). All the conditions for appointment of Special Auditor under Section 142(2A) are not satisfied. (3). The Special Auditor is directed only with a view to extend the period of limitation to frame block assessment. 3.2. Shri Divatia, learned advocate for the petitionerassessee has vehemently submitted that in the facts and circumstances of the case, the impugned order of appointing Special Auditor is bad in law, contrary to the provision of Section 142(2A) of the Act and in breach of principles of natural justice as sufficient opportunity has not been given to the petitionerassessee. 3.3. It is vehemently submitted by Shri Divatia, learned advocate for the petitionerassessee that notice dated 11.11.2016 was served upon the petitioner assessee on 17.11.2016, thereafter petitioner assessee asked for 15 days time to respond to the same as a five years material was required to be considered. However, the AO granted only 10 days time and therefore, the petitioner assessee could file their reply dated 31.11.2016 and the detailed reply could not be filed by the asses....
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....hat in the interest of Revenue and / or to protect the interest of the Revenue again are required to be audited through special auditor. It is submitted that in absence of such case / claim, the impugned order under Section 142(2A) of the Act is not sustainable as the conditions for special audit under Section 142(2A) of the Act are not satisfied. Making above submission, it is requested to allow / admit the present Special Civil Application and grant the relief as prayed for. 4.0. Present petition is vehemently opposed by Shri Manish Bhatt, learned counsel for the Revenue. 4.1. It is vehemently submitted by Shri Bhatt, learned counsel for the Revenue that in the facts and circumstances of the case and looking to the complexity and multiplicity of transaction visavis the requisitioned material i.e. 40,000/-papers found from 42 gunny bags, in which, there is ample material with the AO connecting the petitioner assessee that the requisitioned material and the persons / Sadhak whose names figured in the requisitioned material, the AO is justified in passing the order under Section 142(2A) of the Act for special audit for AY 2009-10 to 2015-16. 4.2. It is submitted that Sectio....
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....orrect taxable income and the extent of real fund flow and to identify the real persons whose funds are being rotated, the AO is justified in passing the order of special auditor under Section 142(2A) of the Act. Making above submissions and relying upon the decision of the Delhi High Court in the case of DLF Ltd and Another vs. Additional Commissioner of Income Tax And Another reported (366) ITR 390 (Delhi) and Section 142(2A) of the Act, it is requested to dismiss the present petition. 5.0. In reply, Shri Divatia, learned advocate for the petitionerassessee has submitted that the decision of the Delhi High Court in the case of DLF Ltd and Another (supra) shall not be applicable to the facts of the case on hand. 6.0. Heard the learned advocates for the respective parties at length. 6.1. At the outset, it is required to be noted that the impugned order has been passed by the AO of special audit in exercise of powers under Section 142(2A) of the Act. Therefore, while considering the legality and validity of the impugned order passed under Section 142(2A) of the Act, Section 142 of the Act is required to be referred to and consider, which read as under: "142. Inquiry befo....
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....roval of the Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below subsection (2) of section 288, nominated by the Chief 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 been given a reasonable opportunity of being heard. (2B) The provisions of subsection (2A) shall have effect notwithstanding that the accounts of the assessee have been audited under any other law for the time being in force or otherwise. (2C) Every report under subsection (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer : Provided that the Assessing Officer may, suo motu, or on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further pe....
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....ntant. It also further provides that Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard. As per Section 142(2A) of the Act every information under subsection (2A) shall be furnished by the assessee to the Assessing Officer. As per subsection 142(2D) the expenses of any audit under subsection (2A) including the remuneration of the accountant shall be paid by the Central Government (after 1.6.2007). As per subsection (3) of Section 142, the assessee shall 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. Thus, from the aforesaid provision, it appears that object and purpose of special audit is as such to facilitate the AO to arrive at correct taxable income and for which the AO is authorized to direct the assessee to get books of account audited by the accountant authorized by the AO, in case , AO is of the opinion that books of accounts are complex in nature and there are multiplicity of transactions, for which,....
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....gglery in the accounts or camouflage has been adopted. No undesirable assumptions should be made and a return filed is presumed to be correct, but a deep and in depth scrutiny depending upon the facts may be warranted. Section 142(2A) is an enabling provision to help and assist the Assessing Officer to complete scrutiny assessment with the help of assistance of an accountant. 11. There has been substantial expansion of scope and ambit of Special Audit under Section 142(2A) of the Act with effect from 1st June, 2013. The amended section has been widened to include volume of accounts, doubts about correctness of accounts, multiplicity of transactions in the accounts or specialised nature of business activity of an assessee. These amendments by Finance Act, 2013 with effect from 1st June, 2013, substitute the words "nature and complexity of accounts of the assessee". We are not concerned with the said amendment in the present case as the impugned order in question directing special audit was passed on 25th March, 2013, before the amendments became WPC 2363/2013 Page 9 of 21 effective. We are, therefore, primarily concerned with whether or not keeping in view the nature and complexi....
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....ings, cover up or evasion of taxes. Financial statements and accounts are coming under increasing scrutiny and investigation. A Chartered Accountant is a financial investigator and prober, is required to be curious, tenacious and well conversant to identify and unearth frauds, misreporting and wrong claims in the accounts. 27. The aforesaid observations should not be construed as a general expression or opinion, that every account or statement of income must be viewed with suspicion, distrust and scepticism. The past instances are mere warnings, for closer and more indepth scrutiny. It is also a fact that WPC 2363/2013 Page 20 of 21 the business transactions have become more complicated and accounting entries more complex than ever before. This may be one of the causes why possibly the frauds could not be detected in some cases. Indeed such cases have made the audit work more comprehensive, intrusive and investigative. Ethical managements may at times regard such enquiries as an unwarranted intrusion or a hounding approach. Section 142(2A) does not permit fishing or roving inquiry approach or a witch hunt but is a regulated provision which accepts the need and necessity of the A....