TaxTMI 
TaxTMI 
2009 (3) TMI 79
X X X X Extracts X X X X
X X X X Extracts X X X X
....ust has also challenged the order dated 30.12.2008 (P-6) being totally arbitrary and contrary to Article 14 of the Constitution. 2. The petitioner-Trust filed its return in respect of assessment year 2006-07 on 29.10.2006 and the case was selected for scrutiny on 27.10.2007. A notice under Section 143(3) of the Act was issued. The assessment was required to be completed on or before 31.12.2008 as per the provisions of Section 143(3) of the Act. On 5.12.2008 (P-1), a show cause notice was issued proposing to hold special audit under Section 142(2A) of the Act. The petitioner-Trust has alleged that the aforesaid course was adopted in order to extend the period of limitation provided by Section 143(3) of the Act, which was to expire o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uri, learned counsel for the petitioner-Trust has argued that once books of account were produced for the first time on 18.12.2008 and there could not be any application of mind for recording the conclusion about the complex nature of the accounts and so many other discrepancies. In support of her submission learned counsel has placed reliance on a judgment of Hon'ble the Supreme Court rendered in the case of Sahara India (Firm) v. Commissioner of Income-Tax, [2008] 300 ITR 403. According to the learned counsel the real import of the judgment of Hon'ble the Supreme Court is that special audit under Section 142 (2A) of the Act should be resorted to in rarest cases where there was a genuine and honest attempt on the part of the Assessing O....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4. It was pointed out that the discrepancies which existed in the earlier year were also found to be existing in the return for the assessment year 2006-07. The reply to the queries was not furnished. The respondents clarified that it was not possible to examine the books of account with reference to the vouchers for purchases/expenditure of different nature to find out the exact nature of such expenses. Some expenses were found to be capital in nature and needed to be capitalised as part of the closing stock. It quoted an example of the expenses on account of development and other works amounting to Rs. 7,66,92,810/-, which were debited in the Trading Account instead of capitalising the same part of closing stock. Likewise, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e furnished, vide letter dated 5.12.2008, yet books of account were not produced. The books of account, which have been produced on 18.12.2008 are quite voluminous, which were impounded and upon test checking of the impounded books, the following discrepancies were found:- A/c.Code Account Head Bal. as per Ledger Bal. as per B.Sheet/Income & Expenditure A/c. Difference C4-1 Capital Fund (Cr.) 230,413,964/- 2,230,413,964/- 2,000,000,000/- 0301 Opening Stock (Dr.) 400,097,766/- 1,400,097,766/- 1,000,000,000/- E402 Earnest Money Payable (Cr.) 80,641,111/- 77,684,590/- 29,56,521/- 6. The entries in the ledger did not match with the entries made in the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 11.00 A.M. in my office at Ludhiana. Furnishing reply to this office letter you may conduct inspection of impounded books of account on 23.12.2008 at 1.00 A.M. Formal notices u/s. 142(1) & 143(2) are enclosed." 7. It is further pertinent to notice that vide order dated 30.12.2008, special audit has been ordered after obtaining prior approval of the Commissioner of Income Tax-III, Ludhiana, vide order dated 30.12.2008 and have requisitioned the audit report within a period of 90 days from the receipt of the letter. 8. In the backdrop of the aforesaid factual position we are of the considered view that the instant petition lacks merit and is, thus, liable to be dismissed. The decision to undertake special audit for the assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....08 (P-3) and hearing was granted on 23.12.2008 to which the petitioner-Trust had filed detailed reply on 26.12.2008 (P-4). It was thereafter that on 30.12.2008, respondent No. 2 has passed the order. There is neither any procedural lapse because the prior approval of the Commissioner of Income Tax-III, Ludhiana, was obtained before issuance of show cause notice on 19.12.2008. The principles of natural justice as laid down by their Lordships' of Hon'ble the Supreme Court in the case of Sahara India (supra) and the principles requiring proper application of mind have been followed and applied. Moreover, even in respect of the last assessment year 2005-06, such a course was adopted and, therefore, there is no room to interfere in exercise of j....