Deohooti Janmejay Vyas v. The Assistant Commissioner Of Income Tax, Central Circle 2(2

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 8544 of 2021 ============================================================== DEOHOOTI JANMEJAY VYAS VersusTHE ASSISTANT COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE 2(2) ================================================================ Appearance: MRS SWATI SOPARKAR(870) for the Petitioner(s) No. 1,2,3M R BHATT & CO.(5953) for the Respondent(s) No. 1========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANIandHONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 23/11/2021 ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) The petitioner by way of this present petition underArticle 226 of the Constitution of India challenges the orderdisposing of the objections, passed by the respondent underSection 142(2A) of the Income Tax Act (hereinafter referredto as the ‘Act’) dated 8.4.2021 as also the directions issueddated 22.4.2021 directing the petitioner to get theaccounts audited by an Accountant under the provisions ofSection 152(2A) for the A.Y 2014-2015 to 2020-2021, beingthe act beyond the scope of provisions of IT Act and forthe same being allegedly illegal and contrary to theprinciples of natural justice. 2. According to the petitioner, she derives income fromsalary, capital gains and from other sources. Search seizureand survey actions were conducted under Sections 132/133A in “DISHMAN Group” on 19.12.2019 and continued onsubsequent dates. Various materials, documents, andvoluminous data have been seized at premises of theCompany as also the residential premises of the petitioner. 3. On 8.2.2021 and 11.2.2021, the respondent issuednotices under Section 142(1), seeking numerous details. Atthat time the assessment was getting time barred on31.3.2021. Thereafter on 27.2.2021 the due date of theassessment was extended to 30.9.2021. As the detailsconcerned a span of 7 years, the petitioner submittedthose details after compiling the same. 4. It is averred that the respondent issued the noticeunder Section 142(2A) on 19.3.2021 and furnished thesatisfaction drawn to refer the case to the independentauditor. 5. The petitioner objected to the same and also sought thestatements as well as the materials to resist this action byfiling reply to the show cause noti. On 31.3.2021, thepetitioner received the communication from respondent tocollect the copies of requisite document on or before1.4.2021 through the authorised representative. On 5.4.2021the petitioner informed the respondent that the copies ofstatement were not provided and on 6.4.2021, the petitionerwas provided with the copies of statement of only Mr.Bharat Padia and Chirag Thakkar and not of Mr. Rajiv Shah.Therefore, on 7.4.2021 the petitioner wrote a letter seekingcopies of seized materials from Rajiv Shah and findings ofinvestigation wing. Instead of providing investigation papers to the petitioner, the respondent passed order on 8.4.2021disposing off the objections. 6. The respondent issued the direction under Section142(2A) on 22.4.2021. Therefore, the present petition ispreferred with following prayers: “7.(a) quash and set aside the impugned order dated8.4.2021 at Annexure A1 to this petition. (b) quash and set aside the impugned directions of22.4.2021 at Annexure A2 to this petition. (c ) pending the admission, hearing and final disposal ofthis petition, to stay implementation and operation ofthe impugned directions of 22.4.2021 at Annexure A2 tothis petition. (d) any other and further relief deemed just and properbe granted in the interest of justice; (e) to provided for the cost of this petition.” 7.This Court on 25.6.2021 while issuing the notice andmaking it returnable on 12.7.2021 passed the following order: “1. Notice, returnable on 12th July 2021. “7.(a) quash and set aside the impugned order dated8.4.2021 at Annexure A1 to this petition. (b) quash and set aside the impugned directions of22.4.2021 at Annexure A2 to this petition. (c ) pending the admission, hearing and final disposal ofthis petition, to stay implementation and operation ofthe impugned directions of 22.4.2021 at Annexure A2 tothis petition. (d) any other and further relief deemed just and properbe granted in the interest of justice; (e) to provided for the cost of this petition.” 7.This Court on 25.6.2021 while issuing the notice andmaking it returnable on 12.7.2021 passed the following order: “1. Notice, returnable on 12th July 2021. 2. It is submitted by learned advocate Mr. BandishSoparkar for Mrs. Swati Soparkar for the petitioner that theimpugned order passed by the respondent authority is exfacie bad and has been passed without any application ofmind inasmuch as, the powers under section 142(2A) of theIncome Tax Act, 1961 could be exercised by the AssessingOfficer having regard to the nature and complexity of theaccounts, volume of the accounts, doubts about thecorrectness of the accounts, multiplicity of transactions inthe accounts or specialised nature of business activity ofthe assessee, however, in the instant case, the petitionerhas income from salary, capital gains and income fromother sources and therefore, she is neither obliged tomaintain any books of account nor has maintained any thebooks of account. Under the circumstances, the respondentcould not have directed the petitioner to get her books ofaccount audited by the nominated auditor. He submittedthat the said objection was also raised by the petitionerbefore the concerned authorities. 3. Having regard to the above submissions, theoperation and implementation of the impugned directionunder section 142(2A) of the IT Act dated 22.04.2021 incase of the petitioner, is stayed till the returnable date.” 8.The Court also protected the petitioner by staying theoperation and implementation of the directions issuedunder Section 142(2A) of the I.T Act. 9.Learned Senior Advocate Mr. M.R Bhatt on 25.10.2021made a request that in four other matters of the groupcompany, the auditor has already tendered the report and he,therefore, made a request to modify the order which was thereason for the auditor not to complete his task in relation tothe present petition. 9.1Two of these matters were concluded before thisCourt reported in (2020): 118 taxmann.com 444 (Gujarat)(2019) 418 ITR 596 and these decisions were challengedbefore the Apex Court and therefore, this Court modifiedorder of stay dated 25.10.2021 in the following manner : 10. Without prejudice to the right of the petitioner, theorder of stay is modified this wise:- “ The Special Auditor shall confine himself to thescope of Section 142(2A) of the Income Tax Act read withRule 14(A) and Form 6(B) of the Income Tax Rules. Thepetitioner shall co-operate in the inquiry proceedingsbeing conducted by the Special Auditor.” 11. We notice that the affidavit-in-reply on behalfof the respondent is filed by one Mr Brijlal Meena, CIT Central Circle II, Ahmedabad where all the averments havebeen denied categorically. According to the respondent, theAssessing Officer noted the existence of various factorswhich included the nature and complexity of accounts,volume of accounts, the correctness of accounts multiplicityof transaction in the accounts so also the specialised natureof business activities of the assessee and therefore, theissue with regard to the non-maintenance of books ofaccounts would have no bearing according to therespondent. It also sought to rely upon the decision ofTehmul Burjor Sethna reported in (2019) 418 ITR 596. 11. We notice that the affidavit-in-reply on behalfof the respondent is filed by one Mr Brijlal Meena, CIT Central Circle II, Ahmedabad where all the averments havebeen denied categorically. According to the respondent, theAssessing Officer noted the existence of various factorswhich included the nature and complexity of accounts,volume of accounts, the correctness of accounts multiplicityof transaction in the accounts so also the specialised natureof business activities of the assessee and therefore, theissue with regard to the non-maintenance of books ofaccounts would have no bearing according to therespondent. It also sought to rely upon the decision ofTehmul Burjor Sethna reported in (2019) 418 ITR 596. 11.1.It is further contended by the respondent that theprinciples of natural justice have been adhered to fully anddue satisfaction has been arrived at with respect to thereference which was to be made to the special audit. 11.2. According to the respondent, the search, seizure andsurvey actions under Section 132A were conducted on the‘Dishman Group’ and during the course of the said actions,the voluminous incriminating material/documents werefound and during the search proceedings the digitalevidence in the form of hard drive, mobile data and othersuch devices were found and seized. The total volume ofdigital data runs into more than 50 plus HD drive of 1 TBeach and there is also SAP software data. The loose materialitself seized during the course of action ran into more than22,000 pages. The petitioner is averred to be a key personin the ‘Dishman Group’ and, therefore, the satisfaction,according to the respondent, has been correctly reachedand the principles of natural justice have been duly complied with and hence, the petition deserves to berejected in summary. 11.3. All the grounds which have been raised including lackof jurisdiction while initiating proceedings under Section142(2A) have been duly dealt with. It is urged that thecontentions raised of lack of jurisdiction are bereft of anymerit. It is further contended by the respondent that thepetitioner was firstly provided the opportunity to explainthe entire transaction from the material which has beenseized. However, she has chosen to remain silent and hasnot complied with the statutory notices issued underSection 142(1) of the Act. In absence of any specificexplanation on behalf of the petitioner and considering thecomplexity of material realised by the authority and allegedbogus accomodative transaction as could be culled out fromthe data base, old case records and documents seized,without the aid and assistance of special Auditor, theAssessing Officer could not have understood fully allnecessary aspects. 11.4 According to the respondent, the transaction enteredinto by the petitioner is highly webbed and cohesive,leading to the difficulties in understanding the same andarriving at true and clear picture without any assistance ofa special auditor. 12.The respondent additionally demonstrated in SCANo. 7620 of 2021, the case of Dishman Carbogen AmcisLimited, where terms of reference has been formulated. Achart depicting relevancy thereof to the provisions of Section 142 (2A) read with Form 6B also have been filed. Itis reiteratively emphasised that the nomenclature of thebooks of accounts would include the seized documents, inthe form of soft copies, pen drive,seized papers etc. 13.Affidavit-in-rejoinder is filed for on behalf of thepetitioner, according to whom there are no books ofaccounts for A.Y 2014-2015 to 2020-2021 and hence, there isno question of complexity and volume of accounts andtherefore, the reference under Section 142(2A) has no basisand the terms of reference issued under Section 142(2A) ofthe Act as well as all the proceedings pursuant thereto arevoid and bad in law. Section 142 (2A) read with Form 6B also have been filed. Itis reiteratively emphasised that the nomenclature of thebooks of accounts would include the seized documents, inthe form of soft copies, pen drive,seized papers etc. 13.Affidavit-in-rejoinder is filed for on behalf of thepetitioner, according to whom there are no books ofaccounts for A.Y 2014-2015 to 2020-2021 and hence, there isno question of complexity and volume of accounts andtherefore, the reference under Section 142(2A) has no basisand the terms of reference issued under Section 142(2A) ofthe Act as well as all the proceedings pursuant thereto arevoid and bad in law. 14.It is further the say of the petitioner in hisrejoinder that if the Assessing Officer has no assistance tounderstand the seized documents after a search action, anappraisal report is made by the ADIT/DDIT(Inv) after asearch which sends the same to the Assessing Officer forthe very same assessment purpose. The report wouldencompass complete and thorough analysis of the seizeddocuments by the ADIT/DDIT. Therefore, the delegation ofwork of both the Investigating Officer as well as AssessingOfficer upon the Special Auditor is bad. The DDIT (Inv.),Unit 1(3), Ahmedabad has quantified undisclosed income ofRs 3,949 crores which the respondent himself has reliedupon in his satisfaction note. Rest of all the contentionsraised have been denied emphatically. 15. We have heard extensively the learned Advocate MrBandish Soparkar for the petitioner who has emphatically argued before us questioning the very jurisdiction of theofficer in resorting to the provisions under Section 142(2A).According to him, the petitioner is not required to maintainthe books of accounts. 16. Except a thin connection in one of the papers seizedat the time of search and seizure and survey actions at thecompany premises, there is nothing to involve thepetitioner who is not even expected under the law tomaintain the books of accounts. Therefore, if at all theAssessing officer needed any assistance, a separatemachinery is created by the department where the analysisof the seized material by way of a appraisal report can belooked into. It is contended that the definition of the booksof accounts under Section 2(12A) of the Act would notinclude the documents, loose papers, materials etc. It isfurther the say of the learned Advocate for the petitionerthat the two of the matters which have been decided by thisCourt were relating to the search and seizure carried out atthe premises of the company and the concerned companyitself, while in the instant case it is the person in whoserelation even some material is noticed, the reference to thespecial auditor is completely undesirable and is without anyjurisdiction. Here it is not a case of initiating the actionsunder Section 153(c) nor would the petitioner question theproceedings as may be initiated against the petitioner.However this reference under Section 142(2A) iscompletely without jurisdiction and misplaced. He therefore,emphasised that non-entertainment of the other petitionswould have no bearing so far as the present petition isconcerned. It is also pointed out to this Court as to how in case of the company as well as the two other petitionersbeing Special Civil Application No. 9331 of 2021 andSpecial Civil Application 11249 of 2021, the Special Auditorhas come out with the report. The complete protectiongiven by this Court in relation to the present petitioner hadnot made it feasible for the Special Auditor to work in herconnection and there is a complete co-operation offeredinasmuchas a software SAP used as page software which isbeing made available to the team. All facilities andamenities have been offered and the officer has carried outscrutiny, sitting in the premises of the company. It isfurther urged that so far as the name of the presentpetitioner is concerned is only restricted to B6 and nowhere it is shown by the respondents that there is anycomplexity or multiplications so far as the accounts of thepetitioner are concerned. He has questioned the jurisdictionto assess the petition but for special audit serious objectionis raised. It is further his say that the objections which havebeen disposed of are also done mechanically withoutindividually examining the case of the petitioner . 17. Learned Senior Advocate Mr. Bhatt has taken usthrough the entire material and urged that the person wisesegregation is difficult from the voluminous material foundfrom the premises of the company and also from theresidential premises. The petitioner, her son and husbandas well as three more persons are key persons. Thematerial unearthed would surely require the special audit asthey are complicated details. The provision of law wouldpermit such reference. According to him, the name of thepetitioner is quite apparently being found from the seized material. The loose papers when scrutinised unaccountedincome is also revealed. The specialised nature of theaccounts which also would entitle the exercise of powersunder Section 142(2A) of the I.T Act. He has also pointedout from the averments raised in the petition to urge thatthe petitioner has taken a vault face while taking a standthat Section 142 (2A) would not have any applicability in thecase. It is further urged that matter which has been decidedby the co-ordinate Bench, reported in (2020)118Taxmann.com 444 would have a direct bearing on the caseas the terms of reference in all the matters are identical.According to him the challenge was made by the Companyin the case of Dishman Carbogen Amcis Ltd., by way ofSpecial Leave to Appeal (C) 15782 of 2021 and the samehas been dismissed. 18.After hearing the learned counsels on both the sides,the Court chose not to interfere with the judgment andorder of this Court. 19. Thus, having heard both sides and also on extensivelyconsidering the material which has been placed before thisCourt and so also noticing the decision of this Court incase of Dishmangroup Vs Assistant Commissioner (supra),at the outset challenge which has been made by thepetitioner would deserve attention. The petitioner is notquestioning the jurisdiction of the Assessing Officer toassess the petitioner in relation to the material which hasbeen seized on the search of the premise of the company aswell as the residence, however, for reference to the specialaudit the serious issue has been raised. The satisfaction arrived at while disposing of the objections is underchallenge and thus essentially is on the ground that Section142 (2A) does not permit any reference and search inrelation to the company. 20.It would be apt to reproduce Section 142 (2A) whichread as under : arrived at while disposing of the objections is underchallenge and thus essentially is on the ground that Section142 (2A) does not permit any reference and search inrelation to the company. 20.It would be apt to reproduce Section 142 (2A) whichread as under : 142 (2A)If, at any stage of the proceedings before him,the7Assessing] Officer, having regard to the nature andcomplexity of the accounts of the accounts , volume of theaccounts, doubts about the correctness of the accounts,multiplicity of transaction in accounts, or specializednature of business activities of the assessee and theinterests of the revenue, is of the opinion that it isnecessary so to do, he may, with the previous approval ofthe9Chief Commissioner or Commissioner], direct theassessee to get the accounts audited by an accountant asdefined in the Explanation below sub- section (2) of section288, nominated by the9Chief Commissioner orCommissioner] in this behalf and to furnish a report ofsuch audit in the prescribed form duly signed and verifiedby such accountant and setting forth such particulars asmay be prescribed and such other particulars asthe10Assessing] Officer may require. 21.At this stage, under the heading of the inquirybefore assessment provides that at any stage of proceedingbefore the A.O having regard to the nature and complexityof the accounts, volume of accounts, doubts about thecorrectness of the accounts, multiplicity of the transactionsin the account or specialised nature of business activity ofassessee and in the interest of the revenue, is of the opinionthat it is necessary to get the accounts audited by anAccountant, as defined in the explanation below sub section 2 of section 288 with a previous approval of thePrincipal Chief Commissioner or Chief Commissioner orPrincipal Commissioner or Commissioner, can direct theassessee to get the accounts audited by an Accountant andinfer and direct to furnish the report of such audit in theprescribed form duly signed and verified by suchAccountant by setting forth such particulars as may beprescribed. It is quite clear from the very provisions that it isa discretion to be used by the A.O at any stage ofproceedings before them. He needs to arrive at a satisfactionthat the nature and complexity of the accounts its volume,its correctness the multiplicity of transactions or thespecialised nature of activity of the assessee are such in theinterest of the revenue, he may have to get the accountsaudited by an Accountant as defined under Subsection 2 ofSection 288. Explanation to sub Section 2 of Section 288says that Accountant would mean chartered accountant asdefined in clause (b) of sub section 1 of Section 2 of theChartered Accountant’s Act, 1949, who holds a validcertificate of practice under Sub Section (1) of Section 6. 22. The very issue came up for consideration before thisCourt in case Tehmul Burjor Sethna Vs AssistantCommissioner of Income Tax Cirle 1(1) reported in(2020) 118 taxmann.com 444 (Gujarat) ;(2019) 418 ITR596, reference of the same would be necessary at thisjuncture. 23. It was the case where the petitioner was a practisingChartered Accountant and was filing regular return ofincome. The source of income of the petitioner was from 22. The very issue came up for consideration before thisCourt in case Tehmul Burjor Sethna Vs AssistantCommissioner of Income Tax Cirle 1(1) reported in(2020) 118 taxmann.com 444 (Gujarat) ;(2019) 418 ITR596, reference of the same would be necessary at thisjuncture. 23. It was the case where the petitioner was a practisingChartered Accountant and was filing regular return ofincome. The source of income of the petitioner was from house property, remuneration from partnership firm,capital gain and other resources. It was his case that hewas not required to prepare the personal books ofaccounts nor was he oblidged to maintain books ofaccounts under any of the provisions of the Income TaxAct. A search operation came to be conducted at theresidence and the office premises of the petitionerpursuant to which the notice under Section 153 (A) ofthe Act had been issued for assessment years 2011-2012to 2016-2017. The case of the petitioner was that therespondent had issued the show cause notices raisingvarious queries to which he had replied. However, therespondent issued a notice under Section 142 (2A )to thepetitioner proposing to get the petitioner’s accountaudited for the assessment year 2011-2012 to 2017-2018by an Accountant as defined under the explanation toSection 288(2) and nominated by PrincipalCommissioner, Income Tax, Ahmedabad for the purpose.The petitioner had raised objections to the said proposalof Special audit under Section 142(2A) and objectionswere disposed of by the respondent wherein he waspermitted a personal hearing also in relation to the sameand he communicated the request for dropping theshow cause notice issued for proposal of special audit.The very ground which is raised by the petitioner in thepresent petition, he had raised stating that he being apartner of a firm is not statutorily required to maintainthe books of accounts and after scrutiny assessment forthe earlier years, his assessment has been accepted bythe department and thus, the basic condition forinvocation of powers under Section 142 (2A) is not satisfied. The respondent lacks jurisdiction to exercisethis power of Section 142 (2A). It was also contendedthat in absence of accounts the question of examiningcomplexity in accounts simply would not arise and theA.O has not even called for the books of accounts at anypoint of time. It is further submitted that the A.O wasaware of the fact that the petitioner was neithermaintaining the books of accounts nor required tomaintain the books of accounts and he has furnished theyear wise statement of affairs, income and expenditurereceipt and payments and there was nowhere anyrevelation in what manner the nature of complexitywould drive the officer to refer the matter to the specialaudit. All these have been dealt with by this Courtextensively in the following manner negating thesecontentions: All these have been dealt with by this Courtextensively in the following manner negating thesecontentions: 1. At this stage, it may be germane to refer to theprovisions of section 142 of the Act, which read thus: 142.Enquiry before assessment.— (1) For the purpose ofmaking an assessment under this Act, the Assessing Officermay serve on any person who has made a return underSection 115-WD or Section 139 or in whose case the timeallowed under sub-section (1) of Section 139 for furnishingthe return has expired a notice requiring him, on a date tobe therein specified,— (i) where such person has not madea return within the time allowed under sub-section (1) ofSection 139 or before the end of the relevant assessmentyear, to furnish a return of his income or the income of anyother person in respect of which he is assessable under thisAct, in the prescribed form and verified in the prescribedmanner and setting forth such other particulars as may beprescribed, or: Provided that where any notice has beenserved under this sub-section for the purposes of thisclause after the end of the relevant assessment yearcommencing on or after the 1st day of April, 1990 to aperson who has not made a return within the time allowedunder sub-section (1) of Section 139 or before the end ofthe relevant assessment year, any such notice issued to himshall be deemed to have been served in accordance withthe provisions of this subsection. (ii) to produce, or cause tobe produced, such accounts or documents as the AssessingOfficer may require, or (iii) to furnish in writing and verified in the prescribed manner information in such formand on such points or matters (including a statement of allassets and liabilities of the assessee, whether included inthe accounts or not) as the Assessing Officer may require:Provided that— (a) the previous approval of the JointCommissioner shall be obtained before requiring theassessee to furnish a statement of all assets and liabilitiesnot included in the accounts; (b) the Assessing Officer shallnot require the production of any accounts relating to aperiod more than three years prior to the previous year. (2)For the purpose of obtaining full information in respect ofthe income or loss of any person, the Assessing Officer maymake such enquiry as he considers necessary. (2-A) If, atany stage of the proceedings before him, the AssessingOfficer, having regard to the nature and complexity of theaccounts, volume of the accounts, doubts about thecorrectness of the accounts, multiplicity of transactions inthe accounts or specialised nature of business activity ofthe assessee, and the interests of the revenue, is of theopinion that it is necessary so to do, he may, with theprevious approval of the Principal Chief Commissioner orChief Commissioner or Principal Commissioner orCommissioner, direct the assessee to get the accountsaudited by an accountant, as defined in the Explanationbelow sub-section (2) of Section 288, nominated by thePrincipal Chief Commissioner or Chief Commissioner orPrincipal Commissioner or Commissioner in this behalf andto furnish a report of such audit in the prescribed form dulysigned and verified by such accountant and setting forthsuch particulars as may be prescribed and such otherparticulars as the Assessing Officer may require: Providedthat the Assessing Officer shall not direct the assessee toget the accounts so audited unless the assessee has beengiven a reasonable opportunity of being heard. (2-B) Theprovisions of sub-section (2-A) shall have effectnotwithstanding that the accounts of the assessee havebeen audited under any other law for the time being inforce or otherwise. (2-C) Every report under sub-section (2-A) shall be furnished by the assessee to the AssessingOfficer within such period as may be specified by theAssessing Officer: Provided that the Assessing Officer may,suo motu, or on an application made in this behalf by theassessee and for any good and sufficient reason, extend thesaid period by such further period or periods as he thinksfit;so, however, that the aggregate of the period originallyfixed and the period or periods so extended shall not, inany case, exceed one hundred and eighty days from thedate on which the direction under sub-section (2-A) isreceived by the assessee. (2-D) The expenses of, andincidental to, any audit under sub-section (2-A) (includingthe remuneration of the accountant) shall be determined bythe Principal Chief Commissioner or Chief Commissioner orPrincipal Commissioner or Commissioner (whichdetermination shall be final) and paid by the assessee andin default of such payment, shall be recoverable from theassessee in the manner provided in Chapter XVII-D for therecovery of arrears of tax: Provided that where anydirection for audit under subsection (2-A) is issued by theAssessing Officer on or after the 1st day of June, 2007, the expenses of, and incidental to, such audit (including theremuneration of the Accountant) shall be determined bythe Principal Chief Commissioner or Chief Commissioner orPrincipal Commissioner or Commissioner] in accordancewith such guidelines as may be prescribed and theexpenses so determined shall be paid by the CentralGovernment. (3) The assessee shall, except where theassessment is made under Section 144, be given anopportunity of being heard in respect of any materialgathered on the basis of any enquiry under sub-section (2)or any audit under sub-section (2-A) and proposed to beutilised for the purposes of the assessment. (4) Theprovisions of this section as they stood immediately beforetheir amendment by the Direct Tax Laws (Amendment) Act,1987 (4 of 1988), shall apply to and in relation to anyassessment for the assessment year commencing on the 1stday of April, 1988, or any earlier assessment year andreferences in this section to the other provisions of this Actshall be construed as references to those provisions as forthe time being in force and applicable to the relevantassessment year. 11.1 Sub-section (2A) of section 142 ofthe Act came to be amended by the Finance Act, 2013,prior thereto, it reads thus: “(2A) If, at any stage of theproceedings before him, the Assessing Officer, havingregard to the nature and complexity of the accounts of theassessee and the interests of the revenue, is of the opinionthat it is necessary so to do, he may, with the previousapproval of the Chief Commissioner or Commissioner,direct the assessee to get the accounts audited by anaccountant, as defined in the Explanation below sub-section(2) of section 288, nominated by the Chief Commissioner orCommissioner in this behalf and to furnish a report of suchaudit in the prescribed form duly signed and verified bysuch accountant and setting forth such particulars as maybe prescribed and such other particulars as the AssessingOfficer may require.” 12. In the context of the unamendedprovisions of section 142(2A) of the Act, the Supreme Courtin Sahara India (Firm) (1) v. Commissioner of Income Tax,(2008) 14 SCC 151, held thus: “6. A bare perusal of theprovisions of sub-section (2- A) of the Act would show thatthe opinion of the assessing officer that it is necessary toget the accounts of the assessee audited by an accountanthas to be formed only by having regard to: (i) the natureand complexity of the accounts of the assessee; and (ii) theinterests of the Revenue. The word “and” signifiesconjunction and not disjunction. In other words, the twinconditions of “nature and complexity of the accounts” and“the interests of the Revenue” are the prerequisites forexercise of power under Section 142(2-A) of the Act.Undoubtedly, the object behind enacting the said provisionis to assist the assessing officer in framing a correct andproper assessment based on the accounts maintained bythe assessee and when he finds the accounts of theassessee to be complex, in order to protect the interests ofthe Revenue, recourse to the said provision can be had. 7.The word “complexity” used in Section 142(2-A) is notdefined or explained in the Act. As observed in SwadeshiCotton Mills Co. Ltd. v. CIT, (1998) 171 ITR 634, it is anebulous word. Its dictionary meaning is: “ ‘The state or quality of being intricate or complex “or” that is difficult tounderstand.’ However, all that is difficult to understandshould not be regarded as complex. What is complex to onemay be simple to another. It depends upon one’s level ofunderstanding or comprehension. Sometimes, whatappears to be complex on the face of it, may not be reallyso if one tries to understand it carefully.” (emphasissupplied) Thus, before dubbing the accounts to be complexor difficult to understand, there has to be a genuine andhonest attempt on the part of the assessing officer tounderstand accounts maintained by the assessee;appreciate the entries made therein and in the event of anydoubt, seek explanation from the assessee. But opinionrequired to be formed by the assessing officer for exerciseof power under the said provision must be based onobjective criteria and not on the basis of subjectivesatisfaction. 8. There is no gainsaying that recourse to thesaid provision cannot be had by the assessing officermerely to shift his responsibility of scrutinising theaccounts of an assessee and pass on the buck to the specialauditor. Similarly, the requirement of previous approval ofthe Chief Commissioner or the Commissioner in terms ofthe said provision being an inbuilt protection against anyarbitrary or unjust exercise of power by the assessingofficer, casts a very heavy duty on the said high-rankingauthority to see to it that the requirement of the previousapproval, envisaged in the section is not turned into anempty ritual. Needless to emphasise that before grantingapproval, the Chief Commissioner or the Commissioner, asthe case may be, must have before him the material on thebasis whereof an opinion in this behalf has been formed bythe assessing officer. The approval must reflect theapplication of mind to the facts of the case.” 13. In RajeshKumar v. Commissioner of Income Tax, (2007) 2 SCC 181,the Supreme Court held thus: “11. We may at the outsetnotice that the following are the relevant factors forinvoking Section 142(2-A) the Act: (i) the nature ofaccounts, (ii) complexity of accounts, and (iii) interest ofthe Revenue. 12. The formation of opinion of the assessingofficer must be on the premise that while exercising hispower regard must be had to the factors enumeratedtherein. The use of the word “and” shows that it isconjunctive and not disjunctive. All the aforementionedfactors are conjunctively required to be read. Theformation of opinion indisputably must be based onobjective consideration. 13. The expression “complexity”would mean the state or quality of being intricate orcomplex or that it is difficult to understand. Difficulty inunderstanding would, however, not lead to the conclusionthat the accounts are complex in nature. No order can bepassed on whims or caprice.” 14. However, with effect from1st June, 2013, the words “the nature and complexity of theaccounts of the assessee and” came to be substituted bythe words “the nature and complexity of the accounts,volume of the accounts, doubts about the correctness of theaccounts, multiplicity of transactions in the accounts orspecialised nature of business activity of the assessee,and”. 15. While prior to its amendment, sub-section (2A) ofsection 142 of the Act could be invoked only upon considering two factors, viz., the nature and complexity ofthe accounts of the assessee and the interests of therevenue, now the Assessing Officer can invoke the said sub-section if he is of the opinion that having regard to: (i) thenature and complexity of the accounts, (ii) volume of theaccounts, (iii) doubts about the correctness of the accounts,(iv) multiplicity of transactions in the accounts or (v)specialised nature of business activity of the assessee, andthe interests of the revenue, it is necessary so to do. 16.Thus, apart from the nature and complexity of theaccounts, there are four other contingencies under whichthe Assessing Officer can invoke the provision. Out of thesefive contingencies, while four refer to accounts, the fifth isindependent and refers only to specialised nature ofbusiness activity of the assessee. 17. At this juncture, itmay be germane to refer to the explanatory notes to theprovisions of the Finance Act, 2013 issued by the CentralBoard of Direct Taxes vide Circular No.03/2014 dated 24thJanuary, 2013, which to the extent the same are relevantfor the present purpose, read thus: “35. Direction forspecial audit under sub-section (2A) of section 142 35.1Sub-section (2A) of section 142 of the Income-tax Act,before its amendment by the Act, inter-alia, provided that ifat any stage of the proceedings, the Assessing Officerhaving regard to the nature and complexity of the accountsof the assessee and the interests of the revenue, is of theopinion that it is necessary so to do, he may, with theapproval of the Chief Commissioner or Commissioner,direct the assessee to get his accounts audited by anaccountant and to furnish a report of such audit in theprescribed form. The expression “nature and complexity ofthe accounts” has been interpreted in a very restrictivemanner by various courts. 35.2 Sub-section (2A) of section142 has been amended to provide that if at any stage of theproceedings before him, the Assessing Officer, havingregard to the nature and complexity of the accounts,volume of the accounts, doubts about the correctness of theaccounts, multiplicity of transactions in the accounts orspecialized nature of business activity of the assessee, andthe interests of the revenue, is of the opinion that it isnecessary so to do, he may, with the previous approval ofthe Chief Commissioner or the Commissioner, direct theassessee to get his accounts audited by an accountant andto furnish a report of such audit in the prescribed form.35.3 Applicability: – This amendment takes effect from 1stJune, 2013.” 18. Thus, it is the restrictive interpretation ofthe expression “nature and complexity of the accounts” byvarious courts that has occasioned the amendment,evidently, therefore, the intention of the legislature was towiden the scope and ambit of sub-section (2A) of section142 of the Act. The scope and ambit of sub-section (2A) ofsection 142 of the Act has, therefore, become wider uponits amendment with effect from 1 st June, 2013 and cannotbe construed in the same restrictive manner as it was priorto its amendment. 19. As noted hereinabove, sub-section(2A) of section 142 of the Act can be invoked having regardto the nature and complexity of the accounts, volume of theaccounts, doubts about the correctness of the accounts,multiplicity of transactions in the accounts or specialised nature of business activity of the assessee. Thus, fourcontingencies in which section 142(2A) of the Act can beinvoked, relate to accounts. 20. The question that thenarises for consideration is what meaning has to be assignedto the expression “accounts”. The expression “account” hasbeen defined in the Black’s Law Dictionary to mean thus:“A detailed statement of the mutual nature of business activity of the assessee. Thus, fourcontingencies in which section 142(2A) of the Act can beinvoked, relate to accounts. 20. The question that thenarises for consideration is what meaning has to be assignedto the expression “accounts”. The expression “account” hasbeen defined in the Black’s Law Dictionary to mean thus:“A detailed statement of the mutual demands in the nature of debit and credit between parties,arising out of contracts or some fiduciary relation. Astatement in writing, of debits and credits, or of receiptsand payments, a list of items of debits and credits, withtheir respective dates. A statement of pecuniarytransactions; a record or course of business dealings withparties; a list or statement of monetary transactions,payable, accounts receivable, etc. in most cases showing abalance or result of comparision between items of anopposite nature”. In P. Ramanatha Aiyar’s Law Lexicon,“account” has inter alia been defined to mean: (i) astatement of moneys received and paid with calculationand balance, (ii) a formal record of debts and creditsrelating to the person named or caption placed at the headof the ledger account, (iii) computation, and (iv) astatement of fact or occurrence. Thus, the expression“account” also takes within its ambit a statement ofpecuniary transactions, a record or course of dealings withparties as well as computation. The expression“accounts”cannot be read to mean ‘books of account’ whichare statutorily required to be maintained by certain classesof assessees, but has to be given a wider meaning. 21. It isthe case of the petitioner that he does not maintain anypersonal books of account as he is statutorily not requiredto maintain the same. In effect and substance, therefore,the petitioner seeks to equate the expression “accounts”with “books or books of account” as contemplated undersection 2(12A) of the Act. However, as rightly submitted bythe learned counsel for the respondents, the expressionused in the sub-section is “accounts” and not “books ofaccount”, and had the legislature so intended, it wouldhave employed the expression “books of account” insteadof “accounts”. In CBI v. V.C. Shukla (supra), the SupremeCourt though dealing with a case relating to section 34 ofthe Indian Evidence Act, had occasion to construe thescope and ambit of the expression “account”. The Courtheld thus: “20. Mr Sibal, the learned counsel for the Jains,did not dispute that the spiral notebooks and the smallpads are “books” within the meaning of Section 34. He,however, strongly disputed the admissibility of those booksin evidence under the aforesaid section on the ground thatthey were neither books of account nor were they regularlykept in the course of business. He submitted that at best itcould be said that those books were memoranda kept by aperson for his own benefit. According to Mr Sibal, inbusiness parlance “account” means a formal statement ofmoney transactions between parties arising out ofcontractual or fiduciary relationship. Since the books inquestion did not reflect any such relationship and, on thecontrary, only contained entries of monies received fromone set of persons and payment thereof to another set ofpersons it could not be said, by any stretch of imagination that they were books of account, argued Mr Sibal. He nextcontended that even if it was assumed for argument’s sakethat the above books were books of account relating to abusiness still they would not be admissible under Section34 as they were not regularly kept. It was urged by himthat the words “regularly kept” mean that the entries in thebooks were contemporaneously made at the time thetransactions took place but a cursory glance of the bookswould show that the entries were made therein long afterthe purported transactions took place. In support of hiscontentions he also relied upon the dictionary meanings ofthe words “account” and “regularly kept”. 21. The word“account” has been defined in Words and Phrases,Permanent Edn., Vol. I-A at pp. 336 to 338 to mean (i) aclaim or demand by one person against another creating adebtor-creditor relation; (ii) a formal statement in detail oftransactions between two parties arising out of contracts orsome fiduciary relation. At p. 343 of the same book theword has also been defined to mean the preparation