TaxTMI 
TaxTMI 
2020 (2) TMI 131
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..... 4. This appeal under Section 260A of the Income Tax Act, 1961 ("the Act" for short) is directed against the order dated 21.12.2016 passed by the Income Tax Appellate Tribunal, Pune Bench "A", Pune ("Tribunal" for short) in Income Tax Appeal Nos. 448/PN/2013 and 309/PN/2013 for the assessment year 2005-06. 5. Though a number of questions have been proposed by the revenue, we feel that the following two questions cover the controversy in question:- (A) Whether on the facts and in the circumstances of the case and in law, Tribunal was justified in treating the assessment order as bad in law by holding that reasonable opportunity of being heard should have been allowed by the Assessing Officer at pre-decisional stage, considering the mandate of Section 142(2A) of the Income Tax Act, 1961? (B) Whether on the facts and in the circumstances of the case and in law, Tribunal was right in holding that opportunity of being heard has to be given by the Assessing Officer and opportunity of being heard given by the superior authority i.e Commissioner of Income Tax (Central) does not constitute sufficient compliance with the rules of audit alterm parterm? 6. Question for consideration is....
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....ded over on 17.04.2009. Thereafter, the assessment proceedings were taken. 39. The first communication of Assessing Officer to the assessee is vide letter dated 21.11.2008, under which reference is made to the CIT (Central), Pune's order granting approval under section 142(2A) of the Act dated 01.11.2008, wherein the assessee was asked to get the accounts audited through nominated auditor within period of sixty days and submit the audited accounts along with audit report. He was also asked to get additional particulars as verified by the nominated auditor and submit the same; copy of the said letter is placed at pages 251 to 252 of the Paper Book. The assessee has also placed on record the order granting permission under section 142(2A) of the Act by the CIT (Central), Pune which is dated 04.11.2008, under which it is mentioned that proposal dated 11.09.2008 for conducting special audit in the group cases of Patel group was received. The detailed reasons for special audit as given in the proposal are mentioned which were forwarded to the Addl. CIT, Pune. Further, show cause notice was issued to the assessee on 12.09.2008 by the CIT and he was asked to explain as to why special au....
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....o referred to the earlier decision of Apex Court in Rajesh Kumar and Others Vs. DCIT (supra). The principles laid down by the Hon'ble Supreme Court are that the principle of audi alteram partem cannot be ignored even at the stage of pre-decisional hearing. In other words, in case the Assessing Officer is of the view that having regard to the nature and complexity of the accounts and interests of revenue, it is necessary to get the accounts audited by an accountant, with previous approval of Principal Chief Commissioner, then he can do so. However, the proviso inserted by the Finance Act, 2007 w.e.f. 01.06.2007 has very categorically provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given an opportunity of being heard. In other words, the principles of natural justice that a person could not be condemned unheard, have been incorporated in section itself w.e.f. 01.06.2007. The Apex Court in Rajesh Kumar and Others Vs. DCIT (supra) had deliberated on the provisions of the Act before insertion of said proviso but had laid down the proposition that nobody could be unheard even at the stage of forming an opinio....
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....o give any opportunity to the assessee before making proposal for special audit and the opportunity allowed by the approving authority, who in any case is enshrined with the duties of checking whether there is no arbitrariness in functioning of adjudicating authority, has to be satisfied before giving approval. Hence, the opportunity allowed by the CIT(C), Pune after proposal was made by the adjudicating authority does not absolve the non-allowance of reasonable opportunity of hearing by the Assessing Officer. 41. Applying the principles laid down by the Apex Court in Sahara India (Firm) Vs. CIT and Another (supra), we hold that where no show cause notice was given to the assessee before making the order proposing conduct of special audit under section 142(2A) of the Act, in the present case and the CIT having approved the said proposal though after giving opportunity of hearing to the assessee is vitiated because of non-compliance with the principles of natural justice. Accordingly, the assessment order passed in the facts of present case is beyond the period of limitation and hence, the same is invalid and bad in law." 8.1. Thus, Tribunal held that show cause notice was requir....
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...., subject to previous approval of the higher authority as mentioned. 10. In Rajesh Kumar Vs. Deputy CIT [2006] 287 ITR 91 (SC), Supreme Court was confronted with the question as to whether before a proposal for special audit under Section 142(2A) of the Act was made, was there a requirement of providing pre-decisional hearing to the assessee. Supreme Court took the view that an order of directing special audit entails civil consequences and therefore, principles of natural justice was held to be implicit under Section 142(2A) of the Act. Thus, there is requirement of providing pre-decisional hearing by the Assessing Officer to the assessee before forming opinion to submit proposal for special audit. In the said case, Supreme Court also held that an order of approval by the higher authority is also not to be mechanically granted. The same should be done having regard to the materials on record and considering the explanation given by the assessee. 11. Thus, in Rajesh Kumar (supra), Supreme Court read into Section 142(2A) of the Act principles of natural justice and held that before forming an opinion as to the need for a special audit, having regard to the requirement of Section 1....