AI Drafter 
TaxTMI 
TaxTMI 
2002 (5) TMI 7
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.... to file the return of block period. These firms filed the returns of undisclosed income for the block period in response to the aforesaid notices on March 22, 2002. Notice was issued to the third petitioner on March 12, 2002. The third petitioner also filed a return in response to the notice. While all the aforesaid proceedings were continuing, a direction under section 142(2A) of the Act was issued by the Assessing Officer directing the petitioners to get a special audit done of accounts on April 22, 2002. The petitioners claimed that such direction was issued without recording his satisfaction and without framing his opinion in respect of the nature and complexity of accounts. The petitioners claim that the books of account of all the aforesaid firms were seized on April 7, 2000, the date of search. During this entire period, no whisper of complexity in the account books was ever raised. Such contingency is not reflected in the various notices issued and the questionnaire supplied to the petitioner. The Assessing Officer was required to complete the assessment on or before April 30, 2002, as that was the statutory time limit. It is claimed by the petitioners that on April ....
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.... from the Commissioner of Income-tax by the Assessing Officer. Further, there was nothing on record to suggest that any exercise as required under the Act was undertaken by the Assessing Officer. The issuance of directions by the Assessing Officer under section 142(2A) at the directions of the Commissioner of Income-tax are vitiated being arbitrary and against the judicial system. The petitioners claim that such directions have been issued without any scrutiny having been made. The account books of the petitioners were left with the Assessing Officer for almost two years. The Assessing Officer had not utilised this occasion to scrutinise such account books. As such, he could not have concluded that the accounts involved complexity. Before a drastic action like the one impugned was ordered, it was necessary that the Assessing Officer should have exercised his jurisdiction properly and undertaken the scrutiny of papers available with him. The Assessing Officer has chosen to go for a less cumbersome method in ordering audit by issuing directions instead of doing scrutiny himself. Such directions have been issued mechanically without giving a speaking order. The seized documents whi....
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....sions of the courts: H.P. State Forest Corporation Ltd. v. CIT (Joint) [2001] 252 ITR 833 (HP); Peerless General Finance and Investment Co. Ltd. v. Deputy CIT [1999] 236 ITR 671 (Cal) and Swadeshi Cotton Mills Co. Ltd. v. CIT [1988] 171 ITR 634 (All). This has further been submitted by the petitioners that the documents sought to be audited are all seized documents, whereas under the provisions of the Act only accounts can be ordered to be audited and not all the other documents. By passing such an order, the Assessing Officer has abrogated his powers to scrutinise the documents. It has further been claimed by the petitioners that the auditors have been appointed on extraneous considerations. The appointed auditor was the person who came along with the Commissioner and, therefore, this is colourable exercise of powers. It has also been claimed by the petitioners that before passing the order of special audit, no opportunity of hearing was provided as it envisages civil additional liability in terms of payment of audit fees, etc. Such burden of fees is determined by the petitioners and, therefore, exercise of jurisdiction of the Assessing Officer is without jurisdiction. I ....
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....e-tax. Such an assertion as contained in paragraph 11 of the writ petition is more in the form of a derivative conclusion from the manner of proceedings as alleged to have taken place on April 10/11, 2002. The allegations in paragraph 11 of the writ petition fall short of establishing the fact that the directions have been issued under the instructions of the Commissioner of Income-tax. There is no foundation available on record to suggest that orders have been passed under the directions of the Commissioner of Income-tax by the Assessing Officer, so much so, the statements contained in paragraph 11 of the writ petition also do not make out any cause for personal information of the petitioners. It only states that: "The petitioners came to know from the Assessing Officer himself that he would be issuing directions, under section 142(2A) of the Income-tax Act by getting the special audit of accounts." This statement does not show that the Assessing Officer himself has told that he has done so on the instructions of the Commissioner of Income-tax. May be the petitioner added certain things by imagination and thus concluded that the order was passed under the instructions of the....
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....ide the books of account, then the necessary corollary of this submission is that there is an attempt at tax evasion. The petitioner has relied on the judgment of the Allahabad High Court in the case of Swadeshi Cotton Mills Co. Ltd. [1988] 171 ITR 634, wherein it has been observed thus: "The exercise of power to direct special audit depends upon the satisfaction of the Income-tax Officer with the added approval of the Commissioner. But he must be satisfied that the accounts of the assessee are of a complex nature, and, in the interests of the Revenue, the accounts should be audited by a special auditor. The special auditor is also an auditor like the company's auditor, but he has to be nominated by the Commissioner and not by the company. The accounts are again to be audited at the cost of the company. . . . As regards companies, only those cases are to be referred for special audit where: (i) there are reports of misfeasance, gross neglect or breach of duty on the part of the principal officer or director in relation to the affairs of the company, or (ii) the company's affairs have been the subject of a search or seizure under the Income-tax Act or been the subject of....
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....est Corporation Ltd. [2001] 252 ITR 833 (HP). The Division Bench of the Himachal Pradesh High Court has proceeded in that case on the basis of the facts obtaining in that case wherein it has been observed thus: "We have considered the rival contentions of the parties and, in our view, the petition deserves to be allowed. It is true that the power has been exercised under sub-section (2A) of section 142 of the Act. But, it is equally true that so far as the order passed vide annexure PI, impugned in the present petition is concerned, it does not state that the Assessing Officer had considered the relevant factors which were required to be borne in mind under sub-section (2A) of section 142 of the Act. It is, no doubt, true in the affidavit and further affidavit, several factors have been pointed out before this court as to why the action was required to be taken. In our opinion, however, when those factors have not been reflected in the impugned order, annexure PI, the same cannot be pressed in aid at the time of hearing of the petition." The law laid down by the Himachal Pradesh High Court in the aforesaid case was in the background that there was no reason assigned and the r....