TaxTMI 
TaxTMI 
2019 (4) TMI 714
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....upon the AS-22 receipts. The return was selected for scrutiny and the notice was issued on 07.09.2018 by the Revenue. The NPCC was asked to produce the documents it relied upon in respect of its returns. It submitted - on 20.09.2018 computation of income and audit financials in respect of return of income. Another notice calling for information was issued by the Revenue on 29.09.2018. The NPCC uploaded the information and documents, in the Revenue's web-portal - in response to this notice (of 29.09.2018) on 21.11.2018. A week later, i.e. on 28.11.2018, the Revenue called for particulars with respect to the following four items: "a. Furnish in the prescribed manner details of Party wise work done along with PAN details and ledger of the parties. b. Provide details of other expenses along with bills and vouchers of the expenses and its applicability towards the business to the tune of Rs. 100.75 crore. c. Provide partywise details of the long term advances shown at note no. 10 and 11 of the balance sheet. d. And, provide justification and details of huge increase in cash and cash equivalent along with evidences." 3. The NPCC contends that when it was in the process of co....
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....t. Therefore, in view of the discrepancies pointed out by the statutory auditor of the assessee company itself in his audit report viz-a-viz noticed from the part details submitted by your AR during the assessment proceedings during the year under consideration, and in view of complexities involved in your books of accounts, nature of transactions and complexities involved in the business affairs, you are required to show cause as why your accounts should not be get audited by an accountant nominated by the Department as per provisions of section 142(2A) of the Income Tax Act, 1961 and why such accountant not be asked to furnish the report such audit in the prescribed for duly signed and verified by him, in the interest of revenue. Your reply in the matter must be reached to the undersigned on or before 21.02.2018 failing which, it shall be construed that you have no objection to the proposed audit of your books of accounts by an accountant so nominated by the Department as per the provisions of the section 142(2A) of the Income Tax Act, 1961." 6. A reply to the SCN was given by the NPCC on 21.12.2018. The reply stated that adverse comments of the auditor were general and it d....
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....ght forwarded losses have been lapsed as there were on profit in the company for a long time. * If you go through the „Computation of Income‟ of the assessee, you‟ll find each and every small disallowance has been added back to calculate the Taxable Income of the assessee." 7. Further replies were issued by the NPCC in the form of submissions on 26.12.2018 and 27.12.2018. On 28.12.2018, the AO passed an order directing special audit under Section 142(2A) of the Act. 8. The NPCC questions that order. Mr. Tarun Gulati, learned counsel argued that the AO without considering the NPCC's submissions passed the impugned order. He urges that the impugned order of special audit is based on inaccurate assumptions. Furthermore, serious exception is taken with respect to the procedure adopted and the denial of principles of natural justice. 9. Learned counsel urged that the impugned order was passed as a mere pretence with an intent to extend the limitation period for completing assessment proceedings since the issue was getting time-barred. The NPCC urges that special audit of accounts of NPCC can be ordered having regard to the nature and complexity of accounts, volu....
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.... of the Impugned Order was attached. However, it is also pointed out that the Annexure A referred to in the order was not a part of the attachment received. A Copy of the email dated 31.12.2018 along with the attachment is annexed hereto and marked as Annexure-2. Further, the screenshot on the Department‟s e-filing portal reflecting the dates in the matter is annexed hereto and marked as Annexure-3." 12. The Revenue's position is that the impugned order is justified. It refutes allegations relating to unfair procedure, and points out that the order directing special audit was admittedly received by the assessee on 31.12.2018. It is submitted that apart from the procedural fairness, on the merits the order cannot be questioned, because it was made in bona fide exercise of power. The replies to queries such as detailed party wise particulars, travel particulars details (and not mere particulars, unit wise) were not furnished. Mr. Ruchir Bhatia, learned counsel for the Revenue also urged that the mere circumstance that NPCC's returns for a number of years were framed after scrutiny, or that it was a public sector unit of the Central Government, did not in any manner deflect fr....
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....ved by its representative subsequently. The letters on record addressed by the petitioner's representative CA firm - the earliest of which is dated 04.01.2019 nowhere reflect a complaint that the annexure to the order containing the terms of reference was withheld. On the other hand, requests for inspection were made of the assessment file and certain other documents. Those letters significantly do not contain any grievance in that regard. Even otherwise, having received a copy on 31.12.2018, the petitioner could easily have sought to obtain a copy of the terms of reference. 15. As far as the merits of the order is concerned, this Court notices that to say that a special audit was needed, the AO has given several reasons. The first one is that several anomalies were noted in the books of accounts which led to questionnaires eliciting information. According to the AO, on examination of details, it was felt that the accounts were complex, for several reasons, It was stated that the company repeatedly reported losses for a long time in its core activity, i.e. construction business and stated that it was a sick company and had regained its net worth in 2012-13; and NPCC also stated th....
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....th some sub-contractors are attached herewith for your kind reference. In reference to the selection of sub-contractor is concerned it is submitted that the assessee is following the guidelines issued by CPWD for selection of the sub-contractors as well as the instructions issued by the vigilance in respect of award of the work to sub-contractors. Please find attached herewith as (annexure-5) the sample for notice Inviting Tender (NIT) for your kind reference. In reference to the Long Term Liabilities, current Liabilities and other current liabilities are concerned in this regard it is submitted that the liabilities as shown in the Balance Sheet are the cumulative figures of current as well as past many years, some of them are disputed and arbitration cases are going on. Similarly there are some amount recoverable from them but adjustment cannot be carried out because of the court cases are going on. The balances shown in liabilities are identified and unit/party wise detail is attached herewith as (Annexure-6) for your kind reference please. It is further submitted that the assessee company is regularly writing back the liabilities when it is established that it is no mor....
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....ts of auditor. 9.4 Other issues as submitted by the assessee in its submission dated 21.12.2018. * The assessee company is a Govt. Company with 98.89% with Central Govt. and rest with State Govt. * Directors of the company are appointed by Govt. of India and there is no motive to escape the income as all ultimately belongs to Govt. of India. * The statutory audit is being done by the auditor appointed by CAG as per the provisions of the section 139 of the Companies Act, 2013. * Once the statutory audit is done, the Financial Statement along with Audit report of the Statutory Auditors have to be submitted before C&AG for Audit of the Financial Statements u/s 143(6) (a) of the Companies Act, 2013 and comments of C&AG has to be placed before AGM * The assessee company was assessed u/s 143(3) continuously for last 15 years and disclosing the true income in their return. * The assessee company was a Sick Public Sector Undertaking within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA.) since 1980 till 2013. Even huge brought forwarded losses have been lapsed as there were on profit in the company for a long time. * If you go through ....
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....or difficult to understand there should be a genuine attempt on part of the AO to understand the accounts maintained by the assessee appreciating the entries made and in the event of doubt seek explanation. In the present case, the nature of proceedings which culminated in the passing of the order under Section 142(2A), to this Court's mind, do not show any unfairness; they in fact highlight that the AO started the enquiry to understand the claims of the assessee as far back as in September. In fact, the notice seeking detailed facts issued in late September 2018 could be replied with the relevant details only after two months, i.e. 21.11.2018 by the NPCC. Thereafter too, on not less than three occasions, the AO called for further details. The process of receiving these details continued - even after the issuance of the SCN on 18.12.2018. The last of these documents was in fact given on 21.11.2018. In these circumstances, it cannot be said that there was no genuine attempt on part of the AO to understand the nature of the assessee's business; its method of accounting or to understand the nuances of its books or documents. So far as the reasons given by the AO are concerned, this Co....