TaxTMI 
TaxTMI 
2021 (11) TMI 637
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.... the return of Income Tax was filed for the Assessment Year 2007-08 on 14.11.2007, declaring 'Nil' income after conduct of Statutory Audit and tax Audit of books of accounts. 3. The petitioner company, for the Assessment Year 2008-09 filed their return of income disclosing taxable total income at Rs. 65,99,372/- after subjecting their accounts to the statutorily prescribed audit as well as tax audit. The return of Income was taken for scrutinising the assessment under Section 143(3) of the Act dated 02.12.2010 at a taxable total income of Rs. 1,43,61,890/-, after making certain disallowances including the disallowances on the application of Section 40 (a) (ia) of the Act. 4. The fact regarding the filing of return of income, scrutinising the assessment and certain disallowances made, are not in dispute between the parties. The issue raised importantly on behalf of the petitioner is that the order impugned dated 16.12.2011, was issued in violation of the principles of natural justice, in view of the fact that the 1st proceedings dated 09.12.2011, passed by the 2nd respondent cannot be construed as a show cause notice in compliance with the provisions of Section 142 (2A) of....
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....rtunity of being heard is only in respect of the material gathered on the basis of the audit report submitted under sub-section (2A) and not on the validity of the original order directing the special audit. It is well-settled that the principle audi alteram partem can be excluded only when a statute contemplates a post-decisional hearing amounting to a full review of the original order on merits, which was not the position in the instant case. 9. Admittedly, the order appointing an auditor is not a final order under the Income Tax Act. The Hon'ble Apex Court made a distinction in respect of the review of final order passed wherein appeals are provided which is post-decisional hearing. As far as orders where an appointment of an auditor is passed, then pre-decisional hearing is to be provided and such an opportunity is considered as a valuable opportunity for the assessee to defend their case by availing the opportunity. The assessing officer being a quasi judicial authority is not expected to determine the issues in advance. If at all some grounds are traceable for appointment of an auditor for certain aspects, the assessing officer shall provisionally form an opinion for app....
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....jections and on receipt of such objections, such an authority may take a final decision, whether his opinion initially formed, is right or wrong. 13. This being the purpose for such show cause notices are issued, mere forming an opinion for initiation of certain action by the competent authority cannot be construed, as the issues were already pre-determined by the authority. Even in such case, it is to be understood that one cannot assess the mind of the competent authority at that juncture. However, when an order or show cause notice is issued containing certain reasons, even if the assessee forms an opinion that the authority has predetermined the issue then also, he gets an opportunity to rebut the same by submitting his objections. However, there is a difference between a final decision arrived and forming the opinion for the purpose of issuing a show cause notice. 14. The learned Senior standing counsel appearing on behalf of the respondents contended that the proceedings dated 09.12.2011 is a show cause notice, though it has not been specifically stated as 'show cause notice'. In order to substantiate the said contention, the learned Senior standing counsel relied o....
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.....2011, the assessing officer had not formed an opinion however, he had some reasons to appoint an auditor in the case of the petitioner. Therefore, this Court is of an opinion that the very contention that the respondent has pre-determined the issue while issuing the order dated 09.12.2011, is doubtful. The assessing officer at the time of issuance of proceedings dated 09.12.2011 had not obtained the prior approval as at that point of time, he has not received the objections of the petitioner/assessee. Only after receiving the objections from the petitioner, on 15.12.2011, the assessing officer formed an opinion that the case of the petitioner is a fit case for appointment of an auditor by invoking Section 142(2A) of the Income Tax Act and accordingly, obtained the prior permission from the Commissioner of Income Tax and disposed of the objection in proceedings dated 16.12.2011. 20. In the order dated 16.12.2011, the assessing officer categorically considered the nature of accounts and the complexities involved in the accounts and few such complexities involved in the accounts are narrated, which reads as under: "(a) The company is not in a position to explain properly the whole....
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....f Income Tax, Chennai - 1 has nominated M/s.Sundaram & Srinivasan, CAs, No.23, C.P.Ramaswamy Street, Alwarpet, Chennai - 18 Tel.No.24988762, 24988463 as Special Auditors, for this purpose. 23. Not satisfied with the above order disposing of the objections filed by the writ petitioner, once again the petitioner submitted further objections on 23.12.2011 and the said objections were also disposed of by the 2nd respondent in proceeding dated 26.12.2011, which is impugned in the present writ petition. 24. The impugned order reveals that the assessment was given in paragraph Nos.2 and 3, and the same reads as under: "2. Taking into complexities of the accounts as detailed in by a show cause notice u/s.142(2A) dated 09/12/2011 and served on you on 10/12/2011, the company was directed to get accounts audited u/s.142(2A) of the Act as approved by the Hon'ble CIT-1, Chennai vide approval in C.No.278/50/CIT-I/2011-12 dated 15/12/2011. 3. The assessee was given an opportunity to explain its case. Assessee's objections are considered before issuing a direction for special audit u/s.142(2A). Information furnished by the assessee was carefully gone through, defects noticed in the a....
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....oceedings. That exactly is the reason why the petitioner has contended that it is not a show cause notice. 27. Though the petitioner argued before this Court that it is not a show cause notice, it was construed as a show cause notice by the petitioner themselves. The reason would be that pursuant to the proceedings dated 09.12.2011 neither an Auditor was appointed immediately nor an Auditor went to the premises of the petitioner and even the approval at that point of time from the Commissioner of Income Tax, was not obtained. But the petitioner submitted their objections on 15.12.2011 in detail and thereafter, on receipt of the objections the assessing officer obtained approval from the Commissioner of Income Tax and disposed of the objections on 16.12.2011. The assessee has once again submitted an objection on 23.12.2011 and the said objections were also disposed of on 26.12.2011. Thus, the opportunity to defend the case by way of pre-decisional hearing was provided as no final order was passed based on the proceedings dated 09.12.2011 directly. Further, the petitioner has not challenged the said order dated 09.12.2011, as if the said proceedings is a final order. 28. As conside....