TaxTMI 
TaxTMI 
2018 (6) TMI 963
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.... 3. That the Ld. CIT(A) has erred in law and on facts in upholding the directions by the Ld. Assessing Officer to the appellant for getting the accounts audited by a special auditor u/s 142(2A) and the assessment framed thereafter. The assessment made deserves to be quashed in as much as the Special Auditor has travelled beyond the provisions of section 142(2A) for the purpose of conducting the audit. 4 That he further not justified to uphold the disallowance of Rs. 35,539/- made by the Ld. Assessing Officer on account of non-payment of TDS. Grounds of Appeal in ITA No. 155/Chd/2013 for the A.Y. 2006-07: 1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in upholding the assessment framed u/s 153C read with section 143(3) by the Ld. Deputy Commissioner of Income Tax, Central Circle-Ill, Ludhiana is against law and facts on the file in as much as the very initiation of proceedings u/s 153C is bad in law. 2. That the assessment framed is bad in law in as much as the assessment has been framed by total disregard of principles of natural justice. 3. That the Ld. CIT(A) has erred in law and on facts in u....
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.... and repaid in cash. (c) a sum of Rs. 15,000/- on account of non deduction of TDS. Grounds of Appeal in ITA No. 157/Chd/2013 for the A.Y. 2008-09: 1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in upholding the assessment framed u/s 153C read with section 143(3) by the Ld. Deputy Commissioner of Income Tax, Central Circle-Ill, Ludhiana is against law and facts on the file in as much as the very initiation of proceedings u/s 153C is bad in law. 2. That the assessment framed is bad in law in as much as the assessment has been framed by total disregard of principles of natural justice. 3. That the Ld. CIT(A) has erred in law and on facts in upholding the directions by the Ld. Assessing Officer to the appellant for getting the accounts audited by a special auditor u/s 142(2A) and the assessment framed thereafter. The assessment made deserves to be quashed in as much as the Special Auditor has travelled beyond the provisions of section 142(2A) for the purpose of conducting the audit. 4 That he was further not justified to arbitrarily uphold:- (a) disallowance of Rs. 5,000/- on account of a....
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....accounted ones and to work out the interest income earned on these advances and also to check the source of investment made in these advances, on yearly basis from Asstt. Year 2002-03 to Asstt. Year 2008-09. e) To redraw the balance sheet, P&L account from A.Y. 2002-03 to 2008-09, so as to arrive at a true and correct income. f) To check the loose papers found and reconcile them with your regular books of account. 6. In reply to the show cause the assessee submitted before the Assessing Officer that the assessee has fully cooperated with the department and attended all the proceedings in complied with all requirements. It was submitted that so far as Kacchi books in Mahajani language are concerned, the translated version has already been submitted and also the regular books of accounts have been translated into computerized accounts and they are available for verification. 7. The Assessing Officer considered the report and held that the perusal of appraisal report clearly states that the assessee did not attend the post search proceedings to explain the nature of the seized material, the assessee has not complied to the notice issued from January 2009 to Nov....
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....cannot be worked out within a short span of a week at this juncture belays all the statutory provisions enshrined for referring the matter to the special audit. Further on core issues of references, it was argued that translation from Mahajani language to English language cannot be a function of the Special Audit as translated versions have already been given to the Assessing Officer. It was argued that the person who writes or translates the books of accounts cannot be authority to conduct the Special Audit in any case. Taking objection to the point no. b) of the show cause "To bifurcate the transactions recorded in the kacha cash book. So as to clarify whether they pertain to M/S Chet Ram Ravi Kumar or Sunder Mai Sat Pal " cannot be a purpose of Special Audit as bifurcation of transactions in one cash book no way, involves auditing of accounts. 12. Similarly taking objection to the point nos. c, d & f) of the show cause "c) To bifurcate the accounted transactions from unaccounted transactions to arrive at a definite conclusion and also reconcile the regular books of account with these seized books". "d) Reconciliation of the pronotes with the regular books....
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....nts and unearth tax evasion or furnishing of inaccurate particulars etc. The provision balances the right of the Revenue with the inconvenience which the assessee may face. Assessing Officers are not Chartered Accountants and when required and permissible, therefore, can take help and assistance from the qualified specialists to complete the assessment and determine the taxable income of an assessee. 16. Ld. DR taking cue from the order of the Hon'ble Delhi High Court in the case of Sahara India Financial ... vs CIT And Ors. Dt. 23 August, 2017 wherein the earlier judgment was quoted argued that the powers under Section 142(2A) were exercised in terms of the legislative provisions only. The object and purpose behind the legislation is to facilitate investigation and proper determination of the tax liability. The importance and relevancy of the legislation cannot be underestimated and it is a power available with the Assessing Officer to aid and assist him. Accounts should be accurate and provide real time record of the financial transactions of the assessee. In order to ensure reliability and accuracy, enterprises resort to internal audit and an external audit which can be a sta....
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....sessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard] 18.1 The above provisions were applicable w.e.f 01/06/2013 and prior to that definition was only for the nature and complexity of the accounts of the assessee and all other conditions have been inserted by Finance Act, 2013 w.e.f 01/06/2013. 18.2 The provisions provides for certain conditional requirements for Special Audit which are as under: * Nature and complexity of accounts * Volume of the accounts * Doubts about correctness * Multiplicity of transactions * Specialized nature of business * Interest of Revenue 19. And the pre amendment it was only the nature and complexity of the accounts. The reasons given by the Assessing Officer while ordering the special audit are being examined in the context of the requirements laid down by the statute. No doubt the services of the expert in the field of accounts cannot be denied to the Assessing Officer at the same time the Assessing Officer should have reasonable satisfaction to be brought out on record about the nature and ....
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....are conspicuous by their absence in the impugned order. The impugned order under section 142(2A) of the Act thus does not meet the requirement of law and based on the judgment of Hon'ble High Court of Delhi in the case of Delhi Development Authority and Another Vs. Union of India and Another (350 ITR 432) wherein it was held that an Assessing Officer is required to scrutinize the entries and verify them, but this does not require services of a special auditor or a Chartered Accountant to undertake the said exercise. Section 142(2A) is not a provision by which the Assessing Officer delegates his powers and functions, which he can perform to the special auditor, it can be said that the Assessing Officer is not right in getting the accounts audited. We also hereby place reliance in the case of Sahara India (Firm) Vs. Commissioner of Income Tax, Central-1 300 ITR 403 (SC) wherein it was observed that "Before dubbing the accounts to be complex or difficult to understand, there has to be a genuine and honest attempt on the part of the Assessing Officer to understand accounts maintained by the assessee; to appreciate the entries made herein and in the even of any doubt, to seek explanatio....