Income Tax Appellate Tribunal - Jaipur
Assistant Commissioner Of Income Tax vs Heera Lal on 20 October, 2006
Equivalent citations: (2007)106TTJ(JP)114
ORDER
1. In all these appeals preferred by the Revenue, first appellate orders have been questioned on the following common grounds that the learned CIT(A) has erred in:
1. holding that the issue of notice under Section 148 was barred by limitation as prescribed under Section 149(1)(b) ignoring the fact that the income escaped assessment in the assessment year as per reasons to believe recorded by AO at more than Rs. 1 lac (Rs. 50 lacs) and due approval of the Addl. CIT was taken by the AO before issuing notice under Section 148.
2. holding that there was no material evidence before the AO which could suggest that there was escapement of income chargeable to tax leading to the formation of reasons to believe, ignoring that the deposits found in the undisclosed bank account and the payment slips are irrefutable evidence of income having escaped assessment.
3. acting beyond his jurisdiction in illegally quashing the assessment order while ignoring the ratio of decisions in the cases of Phool Chand Bajrang Lal and Anr. v. ITO and Anr. where it has been held that sufficient reasons and belief of the AO is not for the appellate authority to judge and also of the apex Court in the case of ITO v. Selected Dalurband Coal Co. (P) Ltd. (1996) 132 CTR (SC) 162 : (1996) 217 ITR 597 (SC) holding that the formation of the belief by the ITO is essentially, within his subjective satisfaction.
4. holding that the proceedings under Section 142(2A) of the IT Act, 1961 was also not as per law laid down and the assessment order was barred by limitation, ignoring the fact that the assessee was asked to get his books of account audited from M/s Kalani & Co., Jaipur, after obtaining necessary approval from the CIT, Jaipur-IE, Jaipur and the directions for getting books of account audited was served upon the assessee on 28th Feb., 2003 (as evident from the service placed on record) and accordingly the AO completed assessment on 28th Aug., 2003, i.e., within 180 days from service of directions.
5. holding that the assessment was barred by limitation and proceedings under Section 142(2A) was not as per law despite the fact that letter requiring the assessee for audit was served upon him after approval of CIT, Jaipur-III, Jaipur, on 28th Feb., 2003, i.e., before 31st March, 2003.
2. Heard and considered the arguments advanced by the parties in view of orders of lower authorities, material available on record as well as the decisions relied upon by them.
3. Ground Nos. 1,2 & 3:
3.1 In these grounds, invalidity of issuance of notice under Section 148 and the assessment made in consequence thereto held by the learned CIT(A) has been questioned by the Revenue.
3.2 Facts, as per the assessment orders, are that there was a survey under Section 133A on 6th Nov., 2001 at the business premises of the assessee, wherein it was found that the assessee was not filing his return of income, though his income was taxable. A notice under Section 148 was issued on 18th March, 2002, which was served upon the assessee on 26th March, 2002, requiring him to furnish his return of income. In response to further notice under Section 142(1) on 16th May, 2002, the assessee filed his returns of income on 17th June, 2002 declaring a loss of Rs. 6,50,883 in asst. yr. 1995-96, Rs. 6,66,815 in asst. yr. 1996-97 and Rs. 8,15,170 in asst. yr. 1997-98. However, the assessee has not filed his returns of income for the asst. yrs. 1998-99, 1999-2000 and 2000-01. The assessee, vide letter dt. 27th Feb., 2003, was required to get his books of account audited under Section 142(2A) of the Act from M/s Kalani & Co., chartered accountant, Jaipur. Notice under Section 143(2) was issued to the assessee on 30th April, 2003 fixing the case on 6th May, 2003 along with query letter requiring him to furnish certain information. As per the AO, on 30th June, 2003, the assessee filed the audit report under Section 142(2A) of M/s Kalani & Co., chartered accountant, Jaipur. On 2nd July, 2003, the assessee was requested to clarify the discrepancies/defects pointed out by the auditor. The assessee was also required to furnish confirmations of cash creditors as per Annex. 'B' of the audit report. On 30th July, 2003, confirmations of 30 creditors were filed. Again on 18th Aug., 2003, some more confirmations were filed showing inability to produce them for verification.
3.3 The assessee derived income from kirana and moneylending business. The AO alleged that assessee was not maintaining regular books of account, hence return did not show the real picture, then the assessee, vide letter dt. 27th Feb., 2003, was directed to get his books of account audited by M/s Kalani & Co., who had submitted their report on 30th June, 2003 pointing out some discrepancies in balances of creditors and debtors. The assessee, vide letter dt. 8th July, 2003, was asked to explain the reasons for such discrepancies/defects pointed out by the auditor. The assessee questioned the validity of the auditor's report and also the validity of initiation of proceedings under Sections 147 and 148 of the Act. The AO was not agreeable to the same and invoking the provisions of Section 145 of the Act, rejected the books of account and proceeded to estimate the income on the basis of material available on record. He doubted the creditworthiness of the creditors whose confirmations were filed by the assessee and some of them were also produced before him. The AO, accordingly, assessed the income of the assessee at Rs. 48,63,450. The assessee went in first appeal, wherein he succeeded on the issues of validity of notice issued under Section 148 of the Act and reference for special audit under Section 142(2A) of the Act.
3.4 In support of the grounds, the learned Departmental Representative placed reliance on the assessment order with this submission that the learned CIT(A) was not justified in holding that notice issued under Section 148 of the Act was barred by limitation. He submitted that the provisions under Section 149(1)(b) prescribe time-limit of 6 years in a case of escapement of assessment of income of more than Rs. 1,00,000. He referred to page Nos. 28 to 36 of the paper book filed on behalf of the Department i.e. copy of the reasons recorded while issuing notice under Section 148 of the Act for the asst. yrs. 1995-96 to 2000-01 and submitted that specific reason was given for issuance of notice under Section 148 of the Act. Hence, the learned CIT(A) was not correct in alleging that reasons were vague and not fit for issuance of notice under Section 148 of the Act. The learned Departmental Representative submitted that 31st March, 2002 was the last date for issuance of notice under Section 148 and the notice has been served upon the assessee on 26th March, 2002. Thus, the learned CIT(A) was not correct in arriving at the conclusion that the notice under Section 148 was beyond prescribed time-limit. The learned Departmental Representative submitted further that since certain bank deposits to the extent of Rs. 5,00,000 (approx.) were found during the course of survey, hence there was sufficient reason to believe on the part of the AO for issuance of notice under Section 148 of the Act. He placed reliance on the decisions in the cases of Phool Chand Bajrang Lal and Anr. v. ITO and Anr. and ITO v. Selected Dalurband Coal Co. (P) Ltd. (1996) 132 CTR (SC) 162 : (1996) 217 ITR 597 (SC).
3.5 The learned Authorised Representative, on the other hand, justified the first appellate order and submitted that a bare perusal of the reasons recorded makes it clear that the AO had nowhere made a mention of even a single penny in terms of figure or any amount so as to allege the same to be an escaped income. He simply stated that there may be a substantial income from selling of Pashu Ahar (Animal Feed). Further, the amount of Rs. 50,00,000, referred in the Ground of Appeal, in fact, is not the amount of income but it was the probable amount of deposits in each case exceeding Rs. 20,000, in the context of Section 269SS, which the AO suspected, may be more than Rs. 50,00,000. For taking an action under Section 147/148, r/w Section 149, it is the amount of income, which is relevant and not the amount of deposits, inasmuch as, Section 147 uses the words 'escapement of income' and not 'escapement of deposits'. The learned CIT(A), therefore, rightly recorded a finding that no amount at all was mentioned or, in other words, the alleged escapement was not at all quantified. In this regard, he placed reliance on the decision of Jaipur Bench of the Tribunal in the case of ITO v. Satya Narayan Parwal (2005) 98 TTJ (Jp) 432 : 33 Tax World 89 (Jp), wherein the decision in the case of Uttam Chand Nahar v. ITO (2002) 77 TTJ (Jd) 69 : 28 Tax World 435 (Jd), which is squarely applicable on the facts of the present case. He also placed reliance on the following decisions:
1. Manik Chand Nahata v. ITO ;
2. ITO v. Smt. Chakka Bai Bald (1985) 23 TTJ (Jp) 334 : (1986) 15 TTD 328 (Jp).
The learned Authorised Representative submitted that under Section 149(1)(b), the prescribed limitation is 4 years and in the case of income exceeding Rs. 1,00.000, the limitation is 6 years. A notice under Section 148 was served on 26th March, 2002. Accordingly, the expiry of one year from the end of the relevant financial year was 31st March, 2003. The assessment, as per plain and simple reading of Section 153(2) should have been framed on or before 31st March, 2003, whereas the assessment is dt. 28th Aug., 2003. Even if the very action under Section 142(2A) is treated as valid, the necessary implication thereof shall be that the impugned assessment stands time-barred as in that case the assessment was to be completed latest by 29th June, 2003 after exclusion under Expln. 1(iii). He also placed reliance on the decision of Hon'ble Calcutta High Court in the case of Manik Chand Nahata v. ITO (supra).
3.6 Opposing Ground No. 2 of the appeal, the learned Authorised Representative submitted that there was no query, nor is there any whisper in the entire assessment order with regard to any undisclosed bank account/deposits or some payment slips. Even not a single penny has been added by the AO in the subject assessment order. There are only 4 bank accounts with minor balances, as is apparent from page No. 93 of the paper book. This totally appears to be a typing mistake and wrong facts included by the Revenue in its ground. In asst. yrs. 1997-98, 1998-99, 1999-2000 and 2000-01, one cannot totally fail to understand as to how a deposit can be converted into an income, more particularly when the AO considered them in the context in the contravention of Section 269SS and not as income. The mere fact that there was some deposit either in the bank account or in the books of account, cannot be automatically converted into income unless something more is there. He referred the decision of Hon'ble Supreme Court in the case of Union of India v. Ajit Jain and Anr. it was held that mere intimation simplicitor by the CBI that money was found in possession of the respondent, which according to the CBI, was undisclosed, without something more, did not constitute "information" within the meaning of Section 132 of the Act to have reasons to believe. In the present case as well, the simple fact as found by the AO was that there were various deposits in cash in the books of account. A deposit simply simplicitor cannot be an income much less an escaped income in the hands of an assessee, as alleged by the AO. Unless a further material or information is received by the AO and makes out a case that all these deposits or some of them, in fact, represented income that too undisclosed income, then only the AO could have a reason to believe of escapement of alleged income. The AO has not referred any material in the reasons recorded, except the books of account, so as to remotely support his case that there was some income, which escaped assessment. Interestingly for the asst. yrs. 1997-98 to 2000-01, the books of account were impounded on 7th Nov., 2001, whereas notice under Section 148 was also issued on the same very date i.e. 7th Nov., 2001. One can, thus, imagine as to how an AO could have gone through the books of account so as to reach even a prima facie belief that there was some escapement of income so as to necessitate such a drastic action. A perusal of the survey report included in the paper book filed by the Revenue at page No. 25 makes it clear that there was no material at all before the AO on 7th Nov., 2001, when he recorded the reason for asst. yrs. 1995-96 and 1996-97. Perusal of survey report shall reveal that at the bottom of it, it has been alleged that the assessee claimed huge losses due to interest with reference to the return of income filed for asst. yr. 1995-96. Interestingly, the return of income was filed only on 17th June, 2002, as mentioned at page No. 1, para No. 1 of the assessment order. Hence, the survey report could not be prepared on 6th Nov., 2001 with reference to the return of income filed on 17th June, 2002. Thus, admittedly, the survey report was not available on 7th Nov., 2001, when reasons were recorded.
3.7 In opposing the ground No. 3, the learned Authorised Representative submitted that the Department has placed reliance on the decision of Hon'ble Supreme Court in the case of Phool Chand Bajrang Lal and Anr. v. ITO (surpa) in support of this ground holding that sufficiency of reasons and belief of the AO are not to be seen by the appellate authority. The learned Authorised Representative submitted that there cannot be any dispute on this settled proposition, however, a bare perusal of the operative part of the first appellate order p. 19 will make it clear that the learned CIT(A) has not at all uttered on the sufficiency of the reasons as wrongly alleged in this ground. The learned CIT(A) has nowhere said that the reasons so recorded were insufficient. What he said is that there was no specific mention of the likely amount of escaped income, which is a fact evident from the reasons and repeatedly submitted by the assessee. He held further that reasons show that notice under Section 148 has been issued for making enquiries for verification of the deposits exceeding Rs. 20,000 received by the assessee, which is not permissible in law. The learned CIT(A) further observed that there was a difference between the reasons recorded by the AO and those furnished before the higher authority which, unduly influenced the decision and approval making process as required under law. The ratio laid down in the case of Phool Chand Bajrang Lal (supra) has not been fully gone through by the Revenue as therein it was further held that it is open to an assessee to establish that there, in fact, existed no belief or that the belief was not at all a bona fide one, was based on vague, irrelevant and nonspecific information. To that limited extent, the Court may look into the conclusion arrived at by the ITO and examine whether there was any material available on the record from which the requisite belief could be formed by the ITO and further whether that material had any rational connection or a link for the formation of the requisite belief.
3.8 The learned Authorised Representative on the reliance of the Revenue on the decision in the case of ITO v. Selected Daluiband Coal Co. (P) Ltd. (supra), submitted that in that case, there was a letter from the Chief Mining Officer, who on a joint inspection alleged that there was a case of underreporting of the coal raised. It was on this basis the AO issued a notice making out a case under Section 147 of the Act. It was on that basis the Hon'ble Court held that such a letter could constitute the basis for the formation of requisite belief under Section 147 of the Act and the reassessment notices were held to be valid. The facts of the present case are, thus, distinguishable.
3.9 Considering the arguments advanced by the parties as mentioned above, we agree with the findings of the learned CIT(A) that provisions under Section 147, r/w Section 148 of the Act cannot be invoked to make further enquiry in a case but the foremost requirement for invoking these provisions is to record reasons to believe on the part of the AO that some income has escaped assessment. Thus, at least a prima facie belief must be reflected in the reasons that some taxable income of assessee has escaped assessment. It is not other way around that the AO first issued notice under Section 148 of the Act and then after conducting some enquiry he would arrive at a conclusion that there was escapement of assessment of income. In the present case, admittedly, the books were impounded and were in the custody of the Department on the face of which AO certainly was in a position to arrive at a conclusion even on prima facie basis that a particular income has escaped assessment. But the reasons recorded by the AO in this regard, as evident from page Nos. 28 to 36 of the paper book filed by the Department does not indicate as to what amount of income has escaped assessment to justify the issuance of notice under Section 148 of the Act. Now, it is a well established position of law that a notice under Section 148 of the Act cannot be issued on the basis of mere suspicion and whatever has been recorded in the reasons in the present case, as rightly concluded by the learned CIT(A), was nothing but to enable the Department to make further investigation under the garb of notice issued under Section 148 of the Act. The learned CIT(A) has placed reliance on several decisions at page No. 4 of the first appellate order on the ratio that the notice under Section 148 cannot be issued on the basis of reason to suspect. Admittedly, the belief must be of an honest and reasonable person based upon reasonable grounds. The officer may act on direct or circumstantial evidence, but his belief must not be based on mere suspicion. The AO would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court, as per the decisions in the cases of Sheo Nath Singh v. AAC , Ganga Saran and Sons (P) Ltd. v. ITO and Ors. , Indian Oil Corporation v. ITO , etc. The reopening should not be for mere investigating/finding out probability of escaped income as held in several decisions of the Hon'ble Courts. Some of those are Chhugamal Rajpal v. S.P. Chaliha and Ors. and ITO v. Lakhmani Mewal Das , etc. A mere allegation or suspicion is not at all sufficient and permissible even for a small addition/disallowance during the course of a regular assessment and more particularly in case of proceedings under Section 147, as rightly observed by the learned CIT(A). He also discussed about the possibility of generation of undisclosed income in the present case in para No. 2.6 of the first appellate order with this observation that the AO has hot at all estimated the turnover to such an extent so as to result in income to the extent of Rs. 50 lakhs. In this regard, reference has been made to page No. 4, para No. 1 of the assessment order where the AO has not disturbed the declared turnover of Rs. 8,48,466, yet he suspected that there was an escapement of income to the extent of a huge amount of Rs. 50 lakhs. It has been further observed that the assessee being a person of 90 years, running, a small Kirana Shop in a remote village of Shekhawati of Rajasthan and whose turnover admittedly ranging between Rs. 8 to 15 lakhs are some of the vital facts, in the light of which no honest person of a reasonable prudence would have thought of escapement of income of Rs. 50 lakhs.
3.10 Regarding the time-limit for issuance of notice under Section 148 of the Act, to which we also agree with, the learned CIT(A) has noted that the notice under Section 148 in the present case was issued on 18th March, 2002 after the expiry of 4 years from the end of the relevant assessment year, which falls on 31st March, 2000. Thus, the case was clearly out of the limitation provided under Section 149(1)(a) of the Act and in such a situation, in fact, it was Section 149(1)(b), which provides for the extended time-limit of 4 years to 6 years from the end of the relevant assessment year, provided however the escaped income exceeded Rs. 1 lakh or more. Since the AO has not mentioned any amount of escaped income, therefore, the very issuance of notice under Section 148, r/w Section 149(1)(a) can be said to have been barred by limitation. The learned CIT(A) has also observed that provisions contained under Section 153(2) provides a limitation of one year from the end of financial year in which a notice under Section 148 was served. In the present case, notice under Section 148 was served upon the assessee on 26th March, 2002. Accordingly, the expiry of one year from the end of the relevant financial year was 31st March, 2003. The assessment order has been passed on 28th Aug., 2003. We are, thus, of the view that the learned CIT(A) has rightly arrived at a conclusion that assessment was time-barred under Section 153(2) of the Act. The order of the learned CIT(A) is, thus, upheld. Ground Nos. 1 to 3 are rejected.
4. Ground Nos. 4 & 5:
4.1 In support of these grounds, the learned Departmental Representative placed reliance on the assessment order with this submission that the objections regarding the validity of reference of audit under Section 142(2A) and the assessment based on this audit report raised before the learned CIT(A) were remanded to the AO for his comment and the AO, as referred at page Nos. 17 and 18 of the first appellate order, has met the objections of the assessee. The books of account found during the course of survey carried out at the business premises were not complete. The opening and closing balance of stock, totals of purchases/sales accounts were not made. Day-today cash balance was not reflected in the cash books. Other discrepancies were also noted and, accordingly, the AO was of the view that special audit was required keeping in mind complexity of the account. The assessee was also afforded opportunity to raise objection, if any, against the audit report. The learned CIT(A) was, thus, not justified in holding the reference for special audit report under Section 142(2A) as invalid.
4.2 On the other hand, the learned Authorised Representative justified the first appellate order while reiterating the contentions raised before the lower authorities.
4.3 After considering the arguments advanced by the parties in view of the orders of the lower authorities, material available on record as well as the decisions relied upon by them, we do not find reason to interfere with the first appellate order. The contentions of the assessee remained that under Section 142(2C) at the first instance the assessee is required to file audit report within the stipulated period, if there is any. Assuming there was a period i.e. upto 30th April, 2003, the further period could have been extended by the AO under the proviso below Section 142(2C) on the condition that the assessee approached the AO by way of an application seeking extension and that too for a good and sufficient reaspn. The assessee, in the present case since very beginning, treated the audit as nullity and hence there was no question of seeking any extension on behalf of the assessee. The correct position of facts is that the last date being 30th April, 2003 could not have been extended by the AO suo motu and, therefore, for the purposes of Expln. 1(iii), this must be treated as the last date. The another contention remained that even assuming letter No. 602, dt. 27th Feb., 2003 is a letter by which the assessee was directed to get the accounts audited, suffers from various serious infirmities as there is no specific date by which the assessee was required to get the accounts audited, which is otherwise a mandatory requirement contained under Section 142(2C). This provision provides that the assessee shall be furnishing the report to the AO within such period as may be specified by the AO. That being the position, the assessee could not have furnished any report to comply with such a direction. Consequently, the entire provision under Section 142(2A) could and should not have been applied. It was submitted that the AO had taken shelter under the alleged special audit under Section 142(2A) which, on the face of the record, was purported mainly for getting the advantage of an extended lease of life under Section 153(2),which otherwise stood expired on 31st March, 2003, inasmuch as, notice under Section 148 was issued and served on 26th March, 2002 i.e. within financial year 2001-02. Section 142(2A) is the provision, which enables the Department to direct an assessee to undergo the rigour of special audit. The provision is that if at any stage of the proceedings before him, the AO having regard to the nature and complexity of the accounts of the assessee and the interest of the Revenue, is of the opinion that it is necessary so to do, he may with the previous approval of the Chief CIT or CIT direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below Sub-section (2) of Section 288, nominated by the Chief CIT or CIT in this behalf and to furnish an audit report in the prescribed form. Although the AO got the entire exercise done i.e. appointment of M/s Kalani & Co. chartered accountants, Jaipur, as special auditor, requesting them to come to Sikar, providing them the impounded accounts for this purpose and the preparation of the draft report by the special auditor, all had already happened absolutely without the knowledge of the assessee, nor any direction was given to the assessee under Section 142(2A) prior to this entire exercise. The AO, at a very later stage when he came to know of this serious lapse on his part, had proceeded to make efforts to regularize the accounts and to make good the lapses, went even to the extent of manipulating/fabricating the record at their end as the AO, at page No. 1 of the assessment order has stated having issued a letter No. 602, dt. 27th Feb., 2003, a copy whereof has been placed at page No. 11 of the paper book, to the assessee directing him to get the accounts audited, which is not correct and this mentioning of incorrect finding of fact raises a serious doubt. It was submitted that the perusal of record shows that the AO, vide letter dt. 27th Feb., 2003, No. 602, addressed to the assessee, has mentioned that M/s Kalani & Go. has been assigned the task of audit and the assessee has been requested to make the vouchers, etc. available for audit. A copy of this letter has been endorsed to M/s Kalani & Co., chartered accountant and to Shri Sunil More, also whereas this letter has been actually served upon the Authorised Representative on 8th April, 2003 only, however, this letter has been actually served upon the assessee on 9th April, 2003 only. There appears no reason as to why AO sent copy to the Authorised Representative on 8th April, 2003, if the original letter was really sent to the assessee on 28th Feb., 2003. It was also alleged that from record, it appears that some manipulation has been done by converting the date from 9th Feb., 2003 to 28th Feb., 2003. The AO has also ignored to mention the exact and actual date of service of the letter to the assessee in the assessment order. Thus, this letter did not comply with the requirement of Section 142(2A). The language of the letter clearly shows that the CIT had already "assigned" or in other words had already appointed the auditor. The letter also did not stipulate any particular date by which the assessee was required to get the accounts audited. This letter is accompanied with a further letter of even date on 27th Feb., 2003 also again No. 602, as apparent from page No. 12 of the paper book, wherein the assessee has been required to complete the books of account by carry over the balances in some years and also the assessee has been asked to contact M/s Kalani & Co. This letter nowhere speaks of any audit under Section 142(2A) or other related things. Again vide letter No. 7, dt. 8th April, 2003, a copy whereof has been placed at page No. 15 of the paper book, the assessee has been asked to complete the P&L a/c and the books of account. The assessee has also been asked to attend on 16th April, 2003. Again this letter does not speak of any audit or other related things. It was contended that all these facts suggest that this letter is only purported to support the claim that the original letter was served on 1st Feb., 2003. The auditor M/s Kalani & Co. vide their letter of 10th April, 2003, a copy whereof has been placed at page No. 62 of the paper book addressed to the assessee under copy to the Authorised Representative of the assessee, sent a draft audit report under Section 142(2A). The assessee was asked to put up his case within 7 days of the receipt in case so required. The auditor again vide letter dt. 19th April, 2003, a copy whereof has been placed at page Nos. 16 and 17 of the paper book, reminded the assessee to put their objections, if any, which they were required to do earlier. The assessee was asked to send the same by 30th April, 2003 otherwise the report sent by them shall be treated as final. Interestingly and notably, once the assessee and its Authorised Representative both got the letters directing audit only on 8/9th April, 2003, it appears, even prior to this the auditor had already completed his job. It was submitted further that the AO alleged that the assessee co-operated in the audit and also supplied the requisite information to bring home the point that there was a valid audit carried out under Section 142(2A). It was submitted that the assessee vide letter dt. 30th June, 2003, a copy whereof has been placed at page No. 36 of the paper book and 18th Aug., 2003, a copy whereof has been placed at page No. 50 of the paper book, had agitated that the audit has been got completed by the Department itself and they never supplied any information to M/s Kalani & Co. for this purpose. The learned Authorised Representative alleged that the matter was going between the Department ? and the auditor only and there was nothing made known to the assessee neither any communication nor any direction was given to it. As an alternative plea, it was submitted that even assuming that letter dt. 27th Feb., 2003 was served upon the assessee directing for an audit, there were other serious lapses bringing the case out of Section 142(2A). Firstly, no satisfaction on the nature and complexity of the books of account was recorded by the AO for the reference of special audit. One must not forget that once an audit is ordered, the assessee is put to a substantial financial cost of audit, other incidental expenses as also the expenses on some assistance, accountants, etc. It was submitted that admittedly in the present case, complete books of account were maintained in the regular course of business activities i.e. on day-to-day basis and what was incomplete was only to draw a trial balance and, therefore, cannot be said that the nature and complexities in the accounts were such necessitating audit under Section 142(2A). The provisions of Section 142(2A) have to be strictly construed, the power under the said provision should not be lightly exercised and must be based on objective criterion. A cursory look at the books of account would not serve the purpose. The learned Authorised Representative has placed reliance on the following decisions' in support:
(a) Swadeshi Cotton Mills Co. Ltd. v. CIT ;
(b) Peerless General Finance and Investment Co. Ltd. and Anr. v. Dy. CIT (1999) 156 CTR (Cal) 512 : (1999) 236 ITR 671 (Cal);
(c) Muthoottu Mini Kuries v. Dy. CIT (2001) 166 CTR (Ker) 180 : (2001) 250 ITR 455 (Ker);
(d) Jt. CIT v. ITC Ltd. .
Considering these submissions the learned CIT(A) has come to the following conclusion:
There is also substantial force in the argument that the audit under Section 142(2A) is void ab initio because no direction for getting books of account audited as required under Section 142(2A) was given by the learned AO to the appellant within the limitation period. The letter No. 602, dt. 27th Feb., 2003 containing the direction for the audit issued by the learned AO to the appellant was actually served on the appellant on 9th April, 2003. The date of receipt on the letter with the signature of the appellant appears to be tampered with as it has been changed to 28th Feb., 2003 by erasing the date 9th April, 2003. There appears to be the fabrication of the false evidence by tampering with the record, hence proper inquiry in the matter by the competent authority is suggested as the allegations of the appellant in the matter are of serious nature for the manipulation of the limitation period.
Besides above, the directions issued vide above letter does not specify the year of assessment involved for audit and the date by which the audit report must have been submitted by the appellant as it shows that the letter issued under Section 142(2A) was vague and of general nature for all the years involved. It was not as per the law laid down in Section 142(2A).
The perusal of the assessment records also reveals that there was non-compliance of provisions of Section 142 as there is no evidence in the assessment record that the AO considered nature and complexity of the accounts required for the formation of the opinion for the making of the direction to the appellant for audit and such an application of mind not possible when as the learned AO himself mentioned in opening part of the assessment order that assessee was not maintaining regular books of account. There is also substance in the argument that there is no evidence in the note sheet mentioned by the AO in respect of issue of direction vide letter dt. 27th Feb., 2003.
Hence after considering the totality of the facts, circumstances and the case law cited by the learned Authorised Representative in his various submissions made during the course of appeal proceedings, I am of the considered view that the notice under Section 148 r/w Section 147 was not as per law. The proceedings under Section 142(2A) was also not as per the law laid down and lastly the assessment order was barred by limitation. The order is not as per law hence it is ab initio void.
4.4 The first appellate order on the issue is comprehensive and reasoned one, thus, we are not inclined to interfere therewith. We subscribe our view with first appellate authority. The first appellate orders are upheld. The ground Nos. 4 and 5 are, thus, rejected.
5. In result, the appeals are dismissed.