M/S.habitat Shelters Private Limited v. The Pr. Commissioner Of Income Tax & Ors

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 12 DAY OF FEBRUARY 2018 BEFORE THE HON'BLE Dr.JUSTICE VINEET KOTHARI #WRIT PETITION No.2009 OF 2018 (TRES) Between:| M/s.Habitat Shelters Private LimitedA Company incorporated under theCompanies Act, 1996, and having itsCorporate Office at Unit No.8, WestGate Point, R.V.Road, No.77,Basavanagudi 560004.Represented by its DirectorMr.Sunil R. Bajaj. _.. Petitioner (By:Mr.Anirudha R.J. Nayak, Advocate) And: 1.)The Pr. Commissioner of Income Tax Bangalore-3, Bangalore 560003. iaThe Additional CIT Range — 3(1), Bangalore 560 OO1. 3.The Income Tax Offficer Ward-3(1)(3), 2[nd]Floor, BMTC Building, 80 feet road,Koramangala,Bangalore 560095.Koramangala,Bangalore 560095. ...Respondents This Writ Petition is filed under Articles 226 & 227 ot!the Constitution of India praying to quash the order dated19.12.2017 and 28.12.2017 in Annexure-H and H1 as beingcontrary to the provisions of Sec.142(2A) of the Income Tax Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 2/10 Act, 1961 and being violative of the principles of naturaljustice and untenable in law and etc. This W.P. coming on for Orders this day, the Court!made the following:- ORDER Mr.Anirudha R.J. Nayak,Advocate for Petitioner.| Thepetitioner—M/s.HabitatSheltersPrivateLimitedhas filed this Writ Petition aggrieved by thedirections of holding a Special Audit by the respondent-_Income Tax Department underSection 142(2A)ot the IncomeTaxAct,1961(Act)videimpugnedCommunicationAnnexure-#dated|28.12.2017for theAssessment Year.2015-2016while undertaking theassessment proceedings of the petitioner assessee forthe said assessment year. | 2 |The writ petitioner has contended before this CourtthroughMr.Anirudha_R.J.Nayak,that|therespondent Authority did not comply with the principlesof natural justice in the present case and withoutconsidering the objections raised by the petitioner Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 3/10 against such Special Audit underSection 142(2A)ot.the Act, videAnnexure-Gdated19.12.2017,which was.submittedthroughan)e-mailaT|6295p.I71OT]19.12.2017,theimpugned orderAnnexure-#dated 28.12.2017,without mentioning any time thereon was|sent to the petitioner communicating the reasons fordirecting the Special Audit of Books of Accounts of thepetitioner assessee for the Assessment Year)2015 =2016. | 3.The learned counsel for the petitioner has|also contended before the Court that the assessment inquestion for the Assessment Year)2015-2016WaSgetting time barred onO91L.132.2and therefore, justto buy more time, the respondent Authority has takenrecourse to directing the Special Audit under|Section|142(2A)of the Act, which will unnecessarily further|prolong the assessment proceedings. He has alsosubmitted before the Court that the petitioner was Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 4/10 paying the Presumptive Tax under the _ relevanprovisions of the Act and therefore could not besubjected to this Special Audit. 4Having heard the learned counsel for thepetitioner, this Court is of the opinion that the reasons.assigned by the respondent Authority inAnnexure-H dated19.12.2017, which are quoted below cannot be|held to be irrelevant for the purpose of directing SpecialAudit underSection 142(2A)ot the Act. The said|FEeasOf#sprima facie,indicate that the petitionerassessee had adopted different accounting practices fordifferent projects of real estate undertaken by it, viz.,Indiranagar Project and Safari Quest Project. Thereasons contained in paras-2 to 5 are quoted below forready reference:-_ M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 4/10 paying the Presumptive Tax under the _ relevanprovisions of the Act and therefore could not besubjected to this Special Audit. 4Having heard the learned counsel for thepetitioner, this Court is of the opinion that the reasons.assigned by the respondent Authority inAnnexure-H dated19.12.2017, which are quoted below cannot be|held to be irrelevant for the purpose of directing SpecialAudit underSection 142(2A)ot the Act. The said|FEeasOf#sprima facie,indicate that the petitionerassessee had adopted different accounting practices fordifferent projects of real estate undertaken by it, viz.,Indiranagar Project and Safari Quest Project. Thereasons contained in paras-2 to 5 are quoted below forready reference:-_ 6)You have stated your objections tothe proposed reference of your case for SpecialAudit stating that you have placed on recorddetails/information/ documents in support of thenumbers in the financials. Further, it is also Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 5/10 Stated that revenue recognised for the FY 2014-15 has been made percentage completion method. 3.|Your attention is invited to thehearing session on 7/12/2017 wherein, theManagingDirectorMr.DeepakLullaattended.In response to revenue recognised ofRs.2,15,60,000/- under percentage completionmethod, he stated it was actually closing stockand that the same was wrongly considered asrevenue. Regarding theIndiranagar Project,it|was seen that/ no agreements were entered(stc.) tnto,but only a sale deed was available|and an amount of Rs.2,91,000 was shown|adsTEVENUEunder|percentagecompletionmethod with no basis. 4.|In the Safari Quest project,prima)facie, the JDA was entered into only on14/5/2015 (FY 2015-16) relevant to AY 2016-17,however an amount of Rs.60,00,000 has beenShownaS|revenue.Advanceshave|been|received but no agreements to this effectwere made. 5.|There is a_ profit from sale ofcompleted flats of Rs.21,00,000. A sale deed Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 6/10 dated 4/2/2015 is submitted, but no purchasedeed is furnished to compute the actual gains.” In view of the above, it is seen that theCompany has entered intomultiple agreementssome of which were oral agreements and|some interpreted as agreements anda sale|deed registered subsequently.Though thedetallspertainedto|threeventures,the|accounting of the same is complex- as alsoinvolvingmultiplicity of agreements andunderstanding.Hence, your objections are notacceptable. 5Therefore, the aforesaid portions of the said|communication,primafacte2Dindicatesthat|TO understand the complex treatment of multiplicity ofagreements entered into by the petitioner for differentprojects, the Income Tax Authority directed a SpecialAudit for better clarity of the picture of Books ofAccounts maintained by the petitioner during the saidperiod, which are supposed to be consistent and onuniform method, so that a consistent view about the)taxability of income arising or accruing to the petitioner Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 7/10 assessee for the said year could be taken and income subjected to taxation. The relevant provisions ofSection 142(2A)of the Act are quoted below for readyreference:-. ¢142. Inquiry before assessment. /!0XXXX (2)XXXX Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 7/10 assessee for the said year could be taken and income subjected to taxation. The relevant provisions ofSection 142(2A)of the Act are quoted below for readyreference:-. ¢142. Inquiry before assessment. /!0XXXX (2)XXXX (2A)| If, at any stage of the proceedings beforehim, the Assessing Officer, having regard to thenature and complexity of the accounts,volume of the accounts, doubts about thecorrectness of the accounts, multiplicity oftransactions- in the accounts or specializednature of business activity of the assesssee,and the interests of the revenue, is of theopinion that it is necessary so to do, hemay,with the previous approval of the PrincipalChief Commissioner or Chief Commissioner orPrincipal Commissioner or Commuissioner, directthe assessee to get the accounts audited by anaccountant, as defined in the Explanation below|sub-section (2) of section 288, nominated by the|PrincipalChiefCommissioner|OTChiefCommissioner or Principal Commissioner orCommissioner in this behalf and to furnish a Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 8/10 report of such audit in the prescribed form dulysigned and verified by such accountant and|setting forth such particulars as may beprescribed and such other particulars as theAssessing Officer may require: Provided|that the Assessing officer shall not)direct the assessee to get the accounts soaudited unless the assessee has been given areasonable opportunity of being heard. 6. This Court does not find any force in thecontentions raised at the bar that there was a breach otprinciples of natural justice in the present case. Even.though the objections to the Proposition Notice forSpecial Audit were submitted by the assessee on19.12.2017and on the same day, the Communicationaforesaid,Annexure-H dated19.12.2017came to beissued, it cannot be said that the objections raised bythe assessee were not considered by the respondentAuthority. The petitioner assessee was heard before thesaid Authority during the course of assessmentproceedings and a hearing on)7.12.2017also took place Date of Order 12-02-2018 W.P.No.2009/2018 M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 9/10 in this regard before the said Assessing Authority,where the Managing Director of the petitioner CompanyMr.Deepak Lulla attended the proceedings, whichappears from the aforesaid quoted portion of theCommunicationAnnexure-H dated|19.12.2017.Thefinal directions for the said purposeAnnexure-#dated28.12.2017also refers to the e-mail of the petitioner —assessee stated in its objections dated 19.12.2017. TS|Obviously, this Court cannot go into thesufficiency of reasons assigned by the AssessingAuthority for directing such Special Audit. Only if therewere no reasons assigned and objections of thepetitioner assessee were not considered, perhaps, thebreach of principles of natural justice, as requiredunderSection 142(2A)ot the Act and Proviso thereto.could be so contended by the assessee, but from therecord, it does not appear to be either absence of an M/s.Habitat Shelters Private Limited Vs. The Pr. Commissioner of Income Tax & Ors., 10/10 opportunity of hearing altogether or the absence of anyreasons at all. 8.|Thus, this Court cannot draw any inferenceof breach of principles of natural justice or arbitrariness in the impugned order passed by the respondentAuthority. Accordingly, the requirement of Section142(2A)ot the said Act cannot be said to have been not|complied by the respondent Authority. The samerequires no interference underArticle 226ot the|Constitution of India. Therefore, the Writ Petition is.liable to be dismissed and is accordingly dismissed. Nocosts. A copy of this order be sent to the respondents. | VGR Sd/-.JUDGE