TaxTMI 
TaxTMI 
TaxTMI 
2024 (5) TMI 645
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.... Patna granting his approval for special audit are also put to challenge. 2. This is admitted at the Bar that similar facts are pleaded in both the writ petitions. This is also an admitted position that in the orders passed by the statutory Authorities are challenged only on the ground of violation of natural justice. For the sake of brevity, the prayer clause in W.P(T) No. 1721 of 2024 is reproduced herein below.: (i) For issuance of an appropriate writ/order/direction, including Writ of Certiorari, for quashing/setting aside the order dated 23.03.2024, contained in DIN & Letter No. ITBA/AST/F/17/2023-24/1063248864(1) (Annexure-8) for Assessment Year 2022-23, wherein Respondent No. 3-Assistant Commissioner of Income Tax, Central Circle, Dhanbad has issued direction under Section 142 (2-A) of the Income Tax Act, 1961 directing the Petitioner to get it books of accounts audited by the nominated Accountant, especially because said order has been passed in utter violation of the principles of natural justice and without even considering the show cause reply filed by the Petitioner. (ii) For issuance of further appropriate writ/order/direction to call for and set aside the approva....
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....T bars, Sponge iron, billets, bricks etc and that huge cash transactions on accounts of receipts and cash deposits in the bank accounts, which were not recorded in your regular books of accounts. The voluminous transactions recorded in pages running in more than thousands in number, in the form of ledgers, loose sheets, cash book, registers and diaries, cash vouchers, challan book etc will require special audit to prepare receipt and payment account, party wise ledgers cash book etc to compare with your regular books of accounts and determine the transactions relating to receipts and payments of cash/cheque etc. which have not been recorded in your regular books of accounts for FYs 2012-13, 2016-17 to 2022-23 to determine the nature and source of receipts and incomes which are chargeable to tax as evident from the seized documents, but not disclosed by you. 5. Accordingly, you are hereby directed to get your book of accounts audited by the above nominated accountant. The nominated accountant will be required to submit the report as per rule 14A of Income Tax Rules, 1962 and in prescribed form no 6B. In addition to the same, the nominated accountant auditing your books is directed....
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....s from 01.04.2021 to 19.11.2022. On verification of purchase entered in the excel sheet with books of accounts in Tally, it has been found that various purchase has not been accounted for in the regular books of accounts maintained in Tally. Further, on verification of purchase from Amalgam, it has been found that quantity of 853.110 MT out of total purchase of 3784.920 MT has not been entered in books of accounts in Tally. Similarly, quantity of 3826.030 MT out of total purchase of 4822.630 MT from Atibir has not been entered in books of account. Thus, most of the purchases have not been accounted for in regular books of accounts maintained in Tally. (ix) During the course of search, a ledger of Rishi Saluja was found. From perusal of ledger, it is evident that raw materials have been purchased in kaccha and payment has been made in cash. (x) The accountant is requested to ensure that the report should incorporate all the above-mentioned points. 6. The assessee is hereby directed to submit the report of the accountant by 15.05.2024 on the above-mentioned point/issues. You are also directed to extend all cooperation to the nominated accountant and make available all necessary....
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....ated 1st March 2024 is extracted below:- "The case of the assessee for the A.Y. 2022-23 was also opened under compulsory scrutiny on 31.05.2023 through CASS. Notice u/s 142 (1) of the Act was issued on 30.10.2023. The detailed submission has not been filed by the assessee till date. 1. On perusal of the submission filed till date in this case, Appraisal Report, seized materials, statements recorded during the search operations, digital data and the financial information available on record, it is found that there are huge number of transactions either in cash or cheque. The entries/transactions in seized/impounded documents/digital documents/bank accounts are not matching with the financials shown by the assessee in its return of income for the different A.Ys. It is observed that tax implication of the transactions in such complex incriminating documents is substantial. Some of the major financial transactions are discussed below:- 1. Undisclosed sale-During the search operations, one Dell Laptop was found and seized from the Director's office with identification Marked as SSPPL/F/Laptop/18. In this laptop, an excel file was found. Further, on verification of excel file, one she....
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....per sheet IN, it has been found that various items like sponge, iron ore, coal, etc has been purchased from various parties from 01.04.2021 to 19.11.2022. On verification of purchase entered in the excel sheet with books of accounts in Tally, it has been found that various purchase has not been accounted for in the regular books of accounts maintained in Tally. On verification of purchase from Amalgam, it has not been found that quantity of 853.110 MT out of total purchase of 3784.920 MT has not been entered in books of accounts in Tally. Similarly, quantity of 3826.030 MT out of total purchase of 4822.630 MT from Atibir has not been entered in books of accounts. Thus, most of the purchases have not been accounted for in regular books of accounts maintained in Tally. The summary of the unaccounted purchase made during the FY 2021-22 is as under:- Party Name Period Wt Fy Amount ATIBIR 13/01/2021 to 05/02/2022 3853.200 4,50,53,980.00 ARORAR IRON 14/04/2021 to 24/07/2021 19937.770 4,03,50,655.50 ABHAY SINHA 01/04/2021 to 31/03/2022 7778.050 31,27,32,990.00 AMALGAM 01/04/2021 to 05/02/2022 854.410 2,65,83,689.00 AMIT JAIN 26/04/2021 to 01/06/2021 13....
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....ation below sub-section (2) of section 288, nominated by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require: Provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard." 10. On a plain reading of the provisions under sub-section (2-A), it becomes clear that the Assessing Officer can exercise the powers thereunder at any stage of the proceedings before him. Sub-section (2-A) provides that if the Assessing Officer thinks that it is necessary to cause a special audit he may with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner direct the assessee to get the accounts audited by a nominated Accountant. The opinion so formed by the Assessing Officer shall be based on (i) the nature and complexity of accounts, (ii) the vol....
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....initial stage of inquiry, we shall be careful to see that no prejudice is caused to the assessee and would therefore simply indicate that (i) there are certainly doubts about the correctness of the accounts (ii) multiplicity of transactions is apparent (iii) unexplained/unaccounted transactions are like specialized transactions and (iv) the accounts are complex and certainly voluminous. The order granting approval dated 20th March 2024 for special audit under section 142 (2-A) of the Income Tax Act takes note of every detail of the case. This would evince no doubt that at this stage, the statutory Authority is required to form a prima facie opinion and not to render a conclusive finding. The Latin word "prima facie" which means at first glance shall refer to materials based on which the statutory Authority shall form an opinion. In the concluding paragraph, the Principal Commissioner of Income Tax (Central) recorded thus: "10. In view of the above discussions and after careful consideration of the facts and circumstances of the case and the provisions of law, and having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of th....
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....rforce observed that: "a breach of procedure cannot give (rise to) a remedy in the courts, unless behind it there is something of substance which has been lost by the failure. The court does not act in vain" [see, "Malloch v. Aberdeen Corporation" (1971) 2 ALL ER 1278 (HL)]. In the same vein were the observations in "Cinnamond v. British Airports Authority" (1980) 2 All ER 368 (CA). Brandon L.J. rendered the opinion; "no one can complain of not being given an opportunity to make representations if such an opportunity would have availed him nothing". The Hon'ble Supreme Court rendered a decision in "Escorts Farms Ltd. v. Commr., Kumaon Division" (2004) 4 SCC 281 on the same lines and held that the rules of natural justice shall not apply in cases where it would be of no use if an opportunity of hearing shall be a mere ritual and without the possibility of any change in the decision on merits. A notice under section 142 (2-A) of the Income Tax Act is only a step towards the assessment of income tax and the nominated Auditor's report is not the final decision. Moreover, the objections so laid by the petitioner-Company prima facie do not reflect any merit. In a proceeding under Article....