Jabalpur Development Authority vs. Principal Commissioner Of Income Tax2

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE SHEEL NAGU & HON'BLE SHRI JUSTICE HIRDESH ON THE 5th OF OCTOBER, 2023 WRIT PETITION No. 1195 of 2019 BETWEEN:- JABALPUR DEVELOPMENT AUTHORITY, THROUGH ITS ACCOUNT OFFICER, SHRI RAKESH AWASTHI S/O LATE SHRI S.C. AWASTHI, AGED ABOUT 60 YEARS, J.D.A OFFICE, 7-A, CIVIC CENTER, JABALPUR (M.P.) - 482 001 .....PETITIONER (BY SHRI ABHISHEK OSWAL - ADVOCATE ) AND 1. PRINCIPAL COMMISSIONER OF INCOME TAX-2, CENTRAL REVENUE BUILDING, NAPIER TOWN, JABALPUR (M.P.) 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2 (1) JABALPUR, CENTRAL REVENUE BUILDING, NAPIER TOWN, JABALPUR (M.P.) .....RESPONDENTS (BY SHRI HARSHVARDHAN TOPRE - ADVOCATE ) This petition coming on for orders this day, Justice Sheel Nagu passed the following: ORDER The instant petition filed under Article 226 of the Constitution of India assails orders dated 20.12.2018 issued by respondent No.1/Principal Commissioner of Income Tax-2, Jabalpur and 27.12.2018 issued by respondent No.2/Deputy Commissioner of Income Tax, Circle-2(1), Jabalpur cumulatively contained in Annexure P/8, by which approval for special audit u/S.142(2A) of 1 Income Tax Act, 1961 (for short 'IT Act') is accorded for auditing the account of petitioner -Jabalpur Development Authority. 2. Learned counsel for petitioner and Revenue are heard on the question of admission so also final disposal. 3. It is pertinent to point out at the very outset that this Court while taking cognizance of this matter on 23.01.2019 restrained the Revenue from proceeding with the special audit granted by the impugned order herein. The said interim order continues to subsist till date. 4. Learned counsel for petitioner in support of challenge to the impugned order submits that the same is based on subjective satisfaction, is non-speaking and has been mechanically passed. It is also submitted that interest of Revenue does not suffer and thus the impugned order is unwarranted. It is further urged that the petitioner is a Government owned body and not a private assessee and, therefore, manipulation of account is ruled out. 5. Learned counsel for petitioner has relied upon decisions of Apex Court i n Sahara India (Firm), Lucknow Vs. Commissioner of Income Tax, report in (2016) 2 ITJ Online 460 (SC); Delhi High Court in Delhi Development Authority & another Vs. Union of India and another, reported in (2013) 259 CTR (Del) 518; and High Court of Himachal Pradesh in H.P. State Forest Corporation Vs. Joint Commissioner of Income Tax , (2001) 252 ITR 833 (HP). 6 . Learned counsel for the Revenue per contra referring to para-wise comments submits that due and sufficient opportunity contemplated by proviso to sub-Section (2A) of Section 142 of IT Act was duly afforded to petitioner by issuing show cause notices on 13.11.2018 (Annexure P/5) and 2 19.11.2018 (Annexure RJ/1). The petitioner was asked to submit his response by 22.11.2018. No response was submitted by petitioner, whereafter further opportunity was afforded to petitioner by fixing the case on 19.11.2018 and 22.11.2018. Another show-cause notice dated 04.12.2018 (Annexure P/6) was again issued affording opportunity of personal hearing to petitioner. Availing this opportunity, the authorized representative of petitioner (Shri Anil Kumar Gupta, CA) appeared on 18.12.2018 and submitted his statement on behalf of assessee. Learned counsel for the Revenue has replied upon the decision of Gujarat High Court in Dhanpati Marketiers Private Limited Vs. Deputy Commissioner of Income - Tax, Central Circle 1(4) (Special Civil Application No.5483 of 2017 decided on 26.04.2017). 6 . 1 The need to issue another show cause notice dated 04.12.2018 (Annexure P/6) arose due to noting of the competent authority that due and sufficient opportunity was not afforded to petitioner and the proposal of the assessing officer was not preceded by production and inspection of books of accounts of the assessee. 7. The aforesaid authorized representative of petitioner submitted a detailed written submission, after perusal of which the competent authority vide note- sheet dated 18.12.2018 came to following tentative conclusions : "(i) The net profit, in this year is at 40% which in the first previous year was estimated by the AO 18% (the same was restricted to 3% by the CIT, Appeal) and therefore the special audit will not yield any benefit to the revenue. (ii) The assessee maintains "cash system" of accounting and hence the balance sheet can not be prepared. The figure of Rs.1 (on both the side of balance sheet) has been shown because the system does not accept the audit report without there being a balance sheet. 3 (iii) Since the assessee maintains its accounts on cash system basis, only income & expenditure accounts has been prepared and the same is submitted. (iv) The assessee's A.R. had attended the hearing before the AO as and when he was asked to do so. Submissions were made on line." 7.1 On the basis of aforesaid tentative findings, the comments of the Assessing Officer were sought, which were received online that the requisite audit would be in the interest of the Revenue. Thereafter, the approval by the competent authority was granted on 20.12.2018 for special audit u/S.142 (2A) of IT Act. 7.2 Consequent thereupon the impugned order (Annexure P/8) was issued granting approval for special audit u/S.142(2A) of I.T. Act and nominating MSG & Associate CA, Bhopal for carrying out the said audit vide order dated 27.12.2018. 8. From a bare perusal of aforesaid material placed on record not only by the Revenue but also by the assessee in their rejoinder and as well as application for taking documents on record (I.A. No.4777/2019), it is vivid that due and sufficient opportunity was afforded to petitioner before the sanction was granted for special audit. So far as the application of mind is concerned, it is obvious from the material on record, especially the note-sheet that the competent authority has duly applied its mind by taking into account not only the response of the petitioner-assessee but also comments of the Revenue. The object behind special audit contained in sub-section (2A) of Section 142 of IT Act has also been kept in mind by the competent authority. 8.1 The objection of petitioner that there is no material to show that interest 4 of Revenue was adversely affected hence the special audit was not helpful, has no legs to stand in view of element of public interest being pre-dominant in the object behind special audit. The power vested in the Assessing Officer and the approving authority are wide enough to include within its ambit all such matters where complexity of accounts, volume of accounts, doubts about correctness of accounts, multiplicity of transactions and specialized nature of business are involved, besides the pre-dominant element of interest of the Revenue. From the very language of sub-section (2A) of Section 142, it is obvious that the same is worded in language which is very wide and inclusive. The paramount interest seems to be to avoid evasion of tax and to prevent the defaulter from slipping out of income tax nets. Thus, the provision u/S.142(2A) is to be read liberally in favour of the Revenue with the only safeguard of prior opportunity of being heard to the assessee which in the present case has been complied with. 9 . After having due consideration of submission of learned counsel for petitioner and the material placed on record, this Court does not find any illegality or impropriety in the impugned order. 10. As regards the first case relied upon by the petitioner of Sahara India (Firm), Lucknow (supra), the Supreme Court in the said case which dealt with unamended section 142 during the period when sub-section (2A) was not incorporated held that even in the absence of any express provision affording opportunity of being heard to the assessee, such benefits should be impliedly read into the same. Later, reasonable opportunity clause was included by way of amendment of sub-section (2A) w.e.f. 01.04.2023. The judgment in Sahara India (Firm), Lucknow (supra) is of no avail to petitioner since in the present case it is clear from the attending facts that due and sufficient opportunity of being heard was afforded to petitioner. 5 (SHEEL NAGU) JUDGE (HIRDESH) JUDGE 10.1 The other decision relied upon by petitioner is of Division Bench of Delhi High Court in Delhi Development Authority (supra) where interference was made in an order passed u/S.142 (2A) by recording a finding that books of accounts or relevant accounts were not even perused by the Revenue whereas in the instant case, though the petitioner failed to file any balance sheet of profit and loss account but the income and expenditure accounts were produced and perused. However, later in this case balance sheet was manually produced during assessment proceeding for AY 2015-16. The Revenue also noticed from the record produced that the assessee has shown assets and liability of Rs.1/- which was beyond imagination and impractical. The cash book and receipt and payment register were also seen. Thus, the books of accounts may not be in entirety but to some extent were perused by the Revenue giving an impression that a case for special audit was made out. Thus, the judgment of the Delhi High Court in Delhi Development Authority (supra) does not benefit the petitioner. 11. In view of aforesaid, this Court does not deem it appropriate to interfere with the order impugned and, therefore, the petition stands dismissed. DV

6 DINESH VERMA 2023.10.10 17:16:49 +05'30'