Multi Commodity Exchange Of Indiacts-255 Exchange Square, Suren Road,Andheri (East), Mumbai - 400 093 v. Deputy Commissioner Of Income Tax

(Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. WRIT PETITION NO. 3550 OF 2018 Multi Commodity Exchange of IndiaCTS-255 Exchange Square, Suren Road,Andheri (East), Mumbai - 400 093. .. Petitioner Versus 1. Deputy Commissioner of Income Tax Central Circle - 8(3), 6th Floor, Room No. 659, Aykar Bhavan, M.K. Road, Mumbai - 400 020. 2. Pr. Commissioner of Income Tax - Central 8, Ayakar Bhavan, Mumbai - 20.02.2019 3. Union of India Aaykar Bhavan, M.K. Road, Churchgate, Mumbai - 400 020 .. Respondents ................... Mr. Percy Pardiwala, Senior Advocate, Mr. Riyaz Padevkar & Shri.Tanzil Padvekar i/by Dave & Padvekar Associates for the PetitionerMr. Percy Pardiwala, Senior Advocate, Mr. Riyaz Padevkar & Shri.Tanzil Padvekar i/by Dave & Padvekar Associates for the Petitioner•Mr. N.C. Mohanty for the RespondentsMr. N.C. Mohanty for the Respondents ................... CORAM : AKIL KURESHI & B.P. COLABAWALLA, JJ. DATE : FEBRUARY 20, 2019. ORAL JUDGMENT(Per Akil Kureshi, J.) 1.The petitioner has challenged an order dated12.11.2018 and further order dated 9.11.2018 under whichthe Revenue Authorities have ordered special audit of thepetitioner's accounts for the assessment year 2015-16 in terms of Section 142(2A) of the Income Tax Act, 1961 ("theAct" for short). 2.Brief facts are as under: 2.1 Petitioner is a public limited company registeredunder the Companies Act, 1956. The petitioner is arecognized National Commodity Exchange. The petitionerprovides platform for trading in Commodity futures contractsacross segments including Bullion, Ferrous and Non FerrousMetals, Energy and Agricultural Commodities. 2.2 The Deputy Commission of Income Tax issued ashow cause notice on 5.9.2018 calling upon the petitionerwhy the petitioner's accounts for the assessment year 2015-16 should not be sent for special audit as per the provisionsof Section 142(2A) of the Act. In such show cause notice, thesaid Authority highlighted different issues on the basis ofwhich he was prima facie of the opinion that the special auditof the accounts of the petitioner was called for. In thiscontext, he had recorded the following discrepancies:- "a) The assessee has claimed to have paid professional charges toFinancial Technologies Knowledge Management Company Ltd(FTKMC), a related concern. Information available on recordindicates that the said amounts are merely in the nature ofaccommodation and further are also in any case above thecontracted rates.Financial Technologies Knowledge Management Company Ltd(FTKMC), a related concern. Information available on recordindicates that the said amounts are merely in the nature ofaccommodation and further are also in any case above thecontracted rates. b) The assessee has entered into several agreements with NHBC,a related concern for payment of rent of warehouses. There arealso several non-agreement based monies paid by theassessee. Details available on record also indicate that thewarehouses for which rent has been claimed to have been paidwere used by certain other persons.a related concern for payment of rent of warehouses. There arealso several non-agreement based monies paid by theassessee. Details available on record also indicate that thewarehouses for which rent has been claimed to have been paidwere used by certain other persons. c) The assessee has claimed to have awarded multipletechnological agreement to FTIL, a related concern. Theassessee has also entered into a contract with FTIL for sub-letting premises. The rationale of these charges paid to FTIL isnot established. Further, amounts paid to FTIL also are abovethe market rates.technological agreement to FTIL, a related concern. Theassessee has also entered into a contract with FTIL for sub-letting premises. The rationale of these charges paid to FTIL isnot established. Further, amounts paid to FTIL also are abovethe market rates. c) The assessee has claimed to have awarded multipletechnological agreement to FTIL, a related concern. Theassessee has also entered into a contract with FTIL for sub-letting premises. The rationale of these charges paid to FTIL isnot established. Further, amounts paid to FTIL also are abovethe market rates.technological agreement to FTIL, a related concern. Theassessee has also entered into a contract with FTIL for sub-letting premises. The rationale of these charges paid to FTIL isnot established. Further, amounts paid to FTIL also are abovethe market rates. d) The assessee has entered in multiple related party transactions.The identification of related parties along with determination offair market value also required determination." The identification of related parties along with determination offair market value also required determination." In background of such discussion, the said Authority after referring to the provisions of Section 142(2A) of the Act conveyed to the petitioner as under:- "4 As per the facts and circumstances enumerated in para 2above, it is noted that the assessee company is engaged into aspecialized business of an Exchange and its nature ofaccounting is complex. Further, it is observed that the accountsabove, it is noted that the assessee company is engaged into aspecialized business of an Exchange and its nature ofaccounting is complex. Further, it is observed that the accounts of assessee company are voluminous. The above instancesalso indicate that there exist serious doubts about thecorrectness of the accounts. There are also multiple relatedparty transactions entered, the reasonableness andgenuineness of which is under question. In entirety of the factand reasons stated herein, it is in the interest of the revenuethat an audit u/s. 142(2A) of the Act be directed in your case. 5.In view of above, this is to inform you that the special audit ofyour books of accounts, as per the provisions of Section142(2A) of the Act is being proposed in your case in respect ofAY 2015-16.your books of accounts, as per the provisions of Section142(2A) of the Act is being proposed in your case in respect ofAY 2015-16. 6.You are therefore given an opportunity of being heard. You aretherefore requested to state your views on the above either inperson or by an authorized representative on or before14.9.2018 at 12.30 p.m. Please note that in case of noresponse from you within the specified time limit, it will bepresumed that you have no objection to the proposed actionand accordingly, the matter will be decided as proposed." therefore requested to state your views on the above either inperson or by an authorized representative on or before14.9.2018 at 12.30 p.m. Please note that in case of noresponse from you within the specified time limit, it will bepresumed that you have no objection to the proposed actionand accordingly, the matter will be decided as proposed." 2.4 The petitioner filed a detail reply to the said showcause notice under communication dated 25.9.2018opposing the proposal for special audit. In such reply, thepetitioner contended that the requirements of Section142(2A) of the Act for special audit were not specified in thepresent case. It was contended that there was no honestattempt on the part of the Assessing OfÏcer to understandthe books of accounts of the assessee company or 2.4 The petitioner filed a detail reply to the said showcause notice under communication dated 25.9.2018opposing the proposal for special audit. In such reply, thepetitioner contended that the requirements of Section142(2A) of the Act for special audit were not specified in thepresent case. It was contended that there was no honestattempt on the part of the Assessing OfÏcer to understandthe books of accounts of the assessee company or application of mind on his part. With respect todiscrepancies mentioned in the show cause notice, it wascontended that the Financial Technologies KnowledgeManagement Company Limited (FTKMC) was not a partyrelated to the assessee as per Section 40A(2)(b) of the Act.It was further contended that several transactions hadalready been subjected to transfer pricing mechanism andthe Transfer Prising OfÏcer ("TPO" for short) had alreadyexamined such transactions. On such grounds, the proposalfor special audit of the accounts was opposed. 2.5 The Deputy Commissioner of Income Tax passedthe order on 6.11.2018 disposing of the objections of thepetitioner, dealing with each objections. 2.6 Under communication dated 8.11.2018, theDeputy Commissioner of Income Tax sought approval fromthe Principal Commissioner of Income Tax for special audit ofthe accounts of the petitioner under Section 142(2A) of theAct. In such letter, the Deputy Commissioner had given fulldetails of the complexity in the petitioner's accounts and the reasons why he was of the opinion that special audit wasnecessary. On 9.11.2018, the Principal Commissioner ofIncome Tax granted his approval to the DeputyCommissioner of Income Tax for special audit of thepetitioner's accounts. On 12.11.2018, the DeputyCommissioner passed the impugned order. The reasons for passing the impugned order may be reproduced hereunder:- "1. M/s. Multi Commodity Exchange of India Ltd is a commoditiesexchange and an erstwhile subsidiary of M/s FinancialTechnologies (India) Ltd. (FTIL).exchange and an erstwhile subsidiary of M/s FinancialTechnologies (India) Ltd. (FTIL). 2. During the course of proceedings, it was observed that theassessee had incurred various expenses to related and non-related parties, which need to audited. Some of these expensesare as follows: assessee had incurred various expenses to related and non-related parties, which need to audited. Some of these expensesare as follows: a) The assessee has entered into several agreements withNBHC, a relate concern, for payment of rent of warehouses.There are also several non-agreement based monies paid bythe assessee. Details available on record also indicate thatsome of the warehouses for which rent has beet claimed tohave been paid were used by certain other persons.NBHC, a relate concern, for payment of rent of warehouses.There are also several non-agreement based monies paid bythe assessee. Details available on record also indicate thatsome of the warehouses for which rent has beet claimed tohave been paid were used by certain other persons. b) The assessee has claimed to have awarded multipletechnological agreements to M/s Financial Technologies IndiaLtd (FTIL), a related concern. The rationale of charges paid toFTIL is not established. Further, amounts paid to FTIL alsoare above the market rates. technological agreements to M/s Financial Technologies IndiaLtd (FTIL), a related concern. The rationale of charges paid toFTIL is not established. Further, amounts paid to FTIL alsoare above the market rates. c) The assessee has entered into multiple related partytransactions. The identification of related parties along withgenuineness of transactions and the factor of arms lengthpricing or reasonableness of expenditure also requiresdetermination. transactions. The identification of related parties along withgenuineness of transactions and the factor of arms lengthpricing or reasonableness of expenditure also requiresdetermination. c) The assessee has entered into multiple related partytransactions. The identification of related parties along withgenuineness of transactions and the factor of arms lengthpricing or reasonableness of expenditure also requiresdetermination. transactions. The identification of related parties along withgenuineness of transactions and the factor of arms lengthpricing or reasonableness of expenditure also requiresdetermination. Besides the above transactions, assessee has entered intovarious transactions in other years, which may have a bearing inAY 2015-16 too. Some of these transactions are as follows: a) The assessee has claimed to have paid divestment fees toMPPL Enterprises Pvt. Ltd. and Ovira Logistics Pvt. Ltd.Documents available on record indicate that these amountspaid are mere book entries MPPL Enterprises Pvt. Ltd. and Ovira Logistics Pvt. Ltd.Documents available on record indicate that these amountspaid are mere book entries b) The assessee has also claimed to have paid expenses toFinancial Technologies Knowledge Management CompanyLtd. (FTKMC), a related concern. Information available onrecord indicates that the said amounts are merely in the natureof accommodation and further are also in any case above thecontracted rates.Financial Technologies Knowledge Management CompanyLtd. (FTKMC), a related concern. Information available onrecord indicates that the said amounts are merely in the natureof accommodation and further are also in any case above thecontracted rates. c) The assessee has claimed to have engaged VardhamanInternational for creating a traders database. The aspect ofactual work being performed is not established. International for creating a traders database. The aspect ofactual work being performed is not established. d) The assessee has claimed deduction u/s. 80G of donation paidto Arunodaya Charitable Trust. The existence and activities ofArunodaya Charitable Trust have been doubted. to Arunodaya Charitable Trust. The existence and activities ofArunodaya Charitable Trust have been doubted. e) The assessee has claimed to have engaged Splash Media andInfra Ltd to display hoardings at Mahim Causeway and Haji Alilocations in Mumbai. There are no documents on record toInfra Ltd to display hoardings at Mahim Causeway and Haji Alilocations in Mumbai. There are no documents on record to establish the genuineness of the activities carried out bySplash Media and Infra Ltd. f) The assessee has claimed to have engaged MediacomCommunications as its media agency for outdoor, print and TVcampaigns. These payments are not established beyonddoubts. Communications as its media agency for outdoor, print and TVcampaigns. These payments are not established beyonddoubts. 3. In entirety of the fact and reasons stated herein, you arerequired to conduct the special audit u/s. 142(2A) of the Act onthe following terms of reference:-"required to conduct the special audit u/s. 142(2A) of the Act onthe following terms of reference:-" The terms of reference for special audit were as under:- 3.1 The auditors need to audit books of accounts of M/s. MultiCommodity Exchange of India Ltd for the A.Y. 2015-16. They have toexamine and report on the following aspects in general. 1. Whether proper books of accounts are maintained andverifiable? verifiable? 2. Whether all bills / Vouchers and other relevant originaldocuments are maintained and verifiable? documents are maintained and verifiable? 3. Whether all statutory requirements have been met? 3.2 In addition to the above, the auditors need to critically examinethe following issues in the light of the facts as discussed above. i. Genuineness of the business activity undertaken by theassessee company.assessee company. The terms of reference for special audit were as under:- 3.1 The auditors need to audit books of accounts of M/s. MultiCommodity Exchange of India Ltd for the A.Y. 2015-16. They have toexamine and report on the following aspects in general. 1. Whether proper books of accounts are maintained andverifiable? verifiable? 2. Whether all bills / Vouchers and other relevant originaldocuments are maintained and verifiable? documents are maintained and verifiable? 3. Whether all statutory requirements have been met? 3.2 In addition to the above, the auditors need to critically examinethe following issues in the light of the facts as discussed above. i. Genuineness of the business activity undertaken by theassessee company.assessee company. ii.Detailed examination of parties covered u/s 40A(2)(b) of theIncome Tax Act, 1961 and the nature, genuineness andreasonableness of payments made to these parties.Income Tax Act, 1961 and the nature, genuineness andreasonableness of payments made to these parties. iii. Detailed examination as regard to major expenses exceedingRs. 10 lakhs and the tax deduction/collection thereon apart fromRs. 10 lakhs and the tax deduction/collection thereon apart from those referred in subsequent points and allowability thereof asper the provisions of the Act. iv. Detailed examination as regard the Trade payables, theirexistence, genuineness and subsequent payments thereof.existence, genuineness and subsequent payments thereof. v.In respect of the expenditure incurred by the assessee towardsadvertisement, business promotion, marking, sponsorship, etcwhether expenditure incurred is genuine? Whether it iscommensurate with the services rendered by other party?advertisement, business promotion, marking, sponsorship, etcwhether expenditure incurred is genuine? Whether it iscommensurate with the services rendered by other party? vi.Details of donation paid along with genuineness and allowabilityof the same under the provisions of the Act.of the same under the provisions of the Act. vii. Allowability of Warehousing Charges having regard to theprovisions of the Act.provisions of the Act. viii. Allowablity of Technological Service charges having regard to theAct. Act. ix. Any other issues arising in the course of audit, which ought tohave been offered as income in the return of income but notofferred by the assesseehave been offered as income in the return of income but notofferred by the assessee x. Any other issue which in the opinion of the auditor is relevant forthis office for completion of the assessment this office for completion of the assessment 3.3 It is noted that similar issues have been involved in precedingyears also i.e A.Y. 2010-11 to AY 2014-15 and accordingly the auditshall be conducted in accordance with the terms of reference referredabove even in those years. Certain discrepancies were noted in thereport of the Pricewaterhouse Coopers ("PWC Report") which is alsosignificant to be considered while deciding the above terms ofreferences for the A.Y. 2010-11 to 2015-16. Copy of the said reportalong with all its annexure (3 volumes) are also enclosed with thisletter" This is the order, the petitioner has challenged in thepresent petition. 3.Learned counsel Shri. Pardiwala for the petitioner tookus painstakingly through the documents and materials onrecord and raised following contentions:- i. The impugned order contains a direction to theauditor to audit the accounts whereas underSection 142(2A) of the Act, the powers of theDeputy Commissioner are to ask the assessee tohave the audit of the accounts carried out;auditor to audit the accounts whereas underSection 142(2A) of the Act, the powers of theDeputy Commissioner are to ask the assessee tohave the audit of the accounts carried out; This is the order, the petitioner has challenged in thepresent petition. 3.Learned counsel Shri. Pardiwala for the petitioner tookus painstakingly through the documents and materials onrecord and raised following contentions:- i. The impugned order contains a direction to theauditor to audit the accounts whereas underSection 142(2A) of the Act, the powers of theDeputy Commissioner are to ask the assessee tohave the audit of the accounts carried out;auditor to audit the accounts whereas underSection 142(2A) of the Act, the powers of theDeputy Commissioner are to ask the assessee tohave the audit of the accounts carried out; ii.He contended that the requirements of Section142(2A) of the Act were not satisfied. The DeputyCommissioner, therefore, committed an error inexercising the powers without satisfaction of thenecessary requirements;142(2A) of the Act were not satisfied. The DeputyCommissioner, therefore, committed an error inexercising the powers without satisfaction of thenecessary requirements; iii.Learned counsel contended that the order suffersfrom non-application of mind. The DeputyCommissioner had proceeded on the basis ofseveral inaccurate or erroneous grounds. Evenwhen pointed out in the objections, the DeputyCommissioner refused to accept such errors;from non-application of mind. The DeputyCommissioner had proceeded on the basis ofseveral inaccurate or erroneous grounds. Evenwhen pointed out in the objections, the DeputyCommissioner refused to accept such errors; iv.It was contended that several of the transactionsreferred to in the impugned order were alreadysubjected to transfer pricing mechanism. The TPOhad already examined the transactions minutely.referred to in the impugned order were alreadysubjected to transfer pricing mechanism. The TPOhad already examined the transactions minutely. No useful purpose would be served by sendingsuch transactions for special audit; v. The learned counsel also drew our attention to thejudgment of this Court in Writ Petition No. 143 of2018 and connected petitions dated 1.10.2018 filedby this petitioner in which the Court had quashedthe order for special audit with respect to severalearlier assessment years. 4.On the other hand, Mr. Mohanty, the learned Counselfor the Revenue opposed the petition contending that theDeputy Commissioner had issued a show cause notice callingupon the objections from the petitioner to the proposal ofspecial audit of the accounts. The objections were disposedof by speaking order. The impugned order was passed aftertaking necessary approval from the Principal Commissioner.The Deputy Commissioner has recorded proper reasons forexercise of the powers. He pointed out that the provisions ofSection 142(2A) of the Act has been amended w.e.f 1.6.2013substantially widening the scope for special audit. Hecontended that in facts of the present case, the necessaryingredients of Section 142(2A) were fully satisfied and theorder was, therefore, correctly passed by the Deputy Commissioner. 5.Both sides have referred to the judgments, reference towhich would be made at the appropriate stage. Commissioner. 5.Both sides have referred to the judgments, reference towhich would be made at the appropriate stage. 6.From the material on record, it may be seen that theDeputy Commissioner after issuing the show cause noticerecording his grounds why he proposed to call for specialaudit, considered the objections of the petitioner to suchproposal. He passed a detail order disposing of theobjections citing reasons. Subsequently, he also obtainedthe approval from the Principal Commissioner before passingthe impugned order. In such order, he recorded that theassessee had entered into several agreements with a relatedconcern for payment of rent of warehouses. Some of thewarehouses for which the rent was claimed to have beenpaid were used by other persons. He also recorded that theassessee had claimed to have awarded multipletechnological agreements to FTIL as a related concern andthe rational of charges paid to FTIL was not established. Theamounts paid to FTIL were also above the market rates. He also recorded that the assessee had entered into multiplerelated party transactions and identification of related partiesalong with genuineness of the transactions and the factor ofarms length pricing or reasonableness of expenditure wasrequired to be determined. He also recorded that divestmentfees claimed to have been paid by the assessee appeared tobe mere book entires. He also recorded that some of thepayments were in the nature of accommodation entires andthe claims of the donation etc. were doubtful. On suchgrounds, he formed the belief that special audit would benecessary. He, therefore, laid down the terms of referencefor special audit. 7.Section 142 of the Act pertains to inquiry before theassessment. Sub-section (2A) of Section 142 reads as under: " If, at any stage of the proceedings before him, the [Assessing]Officer, having regard to [the nature and complexity of the accounts,volume of the accounts, doubts about the correctness of theaccounts, multiplicity of transactions in the accounts or specializednature of business activity of the assessee, and] the interests of therevenue, is of the opinion that it is necessary so to do, he may, withthe previous approval of the [Principal Chief Commissioner or] ChiefCommissioner or [Principal Commissioner or] Commissioner], directthe assessee to get the accounts audited by an accountant, asdefined in the Explanation below sub-section (2) of Section 288, nominated by the [Principal Chief Commissioner or] [ChiefCommissioner or [Principal Commissioner or] Commissioner] in thisbehalf and to furnish a report of such audit in the prescribed formduly signed and verified by such accountant and setting forth suchparticulars as may be prescribed and such other particulars as theAssessing Officer may require : [Provided that the Assessing Officer shall not direct the assessee toget the accounts so audited unless the assessee has been given areasonable opportunity of being heard.] We may notice that the group of words, "the nature andcomplexity of the accounts, volume of the accounts, doubtsabout correctness of the accounts, multiplicity of thetransactions in the accounts or specialized nature of businessactivity of the assessee and" was substituted by thelegislature by Finance Act, 2013 w.e.f. 1.6.2013 for thefollowing group of words : "the nature and complexity of theaccounts of the assessee and". It can thus be straight awayseen that prior to this amendment, the power of theAssessing OfÏcer to call for special audit would have to beexercised having regard to the nature and complexity of theaccounts of the assessee and the interest of the revenue.The legislature has now considerably widened the scope ofexercise of such powers by including several other situationsbesides the nature and complexity of the accounts of the assessee. Thus, additional expressions which now finds wayinto Section 142(2A) of the Act are volume of the accounts,doubts about correctness of the accounts, multiplicity of thetransactions in the accounts or specialized nature of businessactivities of the assessee. The correctness of the decision ofthe Deputy Commissioner, therefore, shall have to beconsidered from such widened scope of his powers. We areconscious that the requirement of the formation of theopinion as the special audit being in the interest of theRevenue continues to apply before and after theamendment. Nevertheless, the basic essential requirementsof exercising the powers have been substantially widened bythe legislature by way of such amendment. We are alsoconscious that the proposition that special audit would resultinto serious legal consequences to the assessee andtherefore, even if there was no statutory requirement, theprinciple of natural justice must be followed before theAssessing OfÏcer could exercise the powers, would continueto govern the situation. In case of Sahara India (Firm) Vs.CIT[1], the Supreme Court has held and observed that theexercise of power under Section 142(2A) leads to serious civil1[2008] 300 ITR 403 (SC) consequences, and, therefore even in the absence of anyexpress provision for affording an opportunity of per-decisional hearing to the assessee, requirement ofobservance of the principle of natural justice is to be readinto the said provision. 8.In the present case, we have already noted that thedetail grounds on which the Assessing OfÏcer formed anopinion that special audit was necessary and the final orderthat he passed calling for such special audit. As noted, finalaudit proceeds on various grounds of genuineness of thetransactions and payments by the assessee. We may recall,doubts about correctness of the accounts, multiplicity oftransactions and specialized nature of business activities aresome of the additional grounds, now recognized by thelegislative for special audit. We do not find that the orderrequires any interference. 9.Merely because the impugned order contains anarration that the special auditor should conduct the audit,would not destroy the very essence of the order nor would the same be fatal to the order itself. It is true that Section142(2A) of the Act envisages the direction to the assessee toget the accounts audited by an accountant as defined in theexplanation below sub-section (2) of Section 288 of the Actas may be appointed by the Principal Commissioner.However, inconsequential inaccuracy in the language usedin the impugned order, would not be fatal to the order itself. 10. The decisions cited by Shir. Pardiwala in respect of thecontention that the requirements of Section 142(2A) werenot satisfied, are all rendered before the amendment inSection 142(2A) w.e.f. 1.6.2013. In case of DelhiDevelopment Authority & Anr. Vs. Union of India &Anr.[2], the Division Bench of Delhi High Court in backgroundof the per-amended provisions had quashed the order ofspecial audit. It was in this background observed that inorder to direct special audit under Section 142(2A) of the Act,the Assessing OfÏcer must form an opinion with regard totwin conditions namely nature and complexity of theaccounts and interest of the revenue. As noted, thisexpresses "nature and complexity of the accounts" has now2(2013) 350 ITR 432 (Delhi) been substantially widened by the legislature. The amendedprovision of Section 142(2A) came up for considerationbefore this Court in case of Sharad Kantilal Shah Vs.Deputy Commissioner of Income Tax, Central Circle8(3)[3] wherein it was observed as under:- been substantially widened by the legislature. The amendedprovision of Section 142(2A) came up for considerationbefore this Court in case of Sharad Kantilal Shah Vs.Deputy Commissioner of Income Tax, Central Circle8(3)[3] wherein it was observed as under:- "7. As far as the third grievance of the petitioner is that theAssessing Officer did not examine the books of account beforeordering/directing the special audit is concerned, on facts we find thatthe show-cause notice as well as the impugned direction proceed onthe basis that on verification of the books of account and vouchersthat the issue of special audit arose. Thus, this grievance of non-examination of the books of account is without any substance.Moreover after the amendment to section 142(2A) of the Act witheffect from 2013, a special audit is not restricted only to complexity ofthe accounts. The special audit can now be directed not only if theaccounts are complicated but also if there is doubt to the correctnessof the account or multiplicity of transactions or volume of transactionor specialized nature of the accounts. Moreover the other grievancethat the notice did not indicate the reasons which led him to a primafacie view directing a special audit stands belied by the fact that theshow-cause notice dated July 25, 2016, issued to the petitioner, infact, indicated the basis for directing special audit on the basis of thevolume of the total trades executed by the petitioner, multiplicity oftransactions in the accounts, including the nature and complexity ofthe accounts and doubts about the correctness of the accounts.Therefore, this grievance is also without substance. 10. We find that the impugned order dated 10 March 2016directing a special audit is not without jurisdiction. The procedural3[2017] 393 ITR 594 (Bombay) safeguards of notice, approval of the Chief Commissioner andhearing have undisputedly been complied with. Besides, thesatisfaction recorded by the Assessing Officer before directing aspecial audit is his opinion on the basis of the facts before him andsuch opinion is not shown to be perverse. We are not a court ofappeal to substitute the opinion of the Assessing Officer to exercisepower under section 142(2A) of the Act by our opinion to thecontrary. We find that the opinion reached by the Assessing Officerto direct special audit on the present facts is a reasonable andpossible view." 11. In case of Takshashila Realities (P) Ltd Vs. Deputy Commissioner of Income Tax, Circle 4(1)(2)[4], the Gujarat High Court also referred to the amended provisionsof Section 142(2A) and observed as under:- "17.1 Now so far as submission made on behalf of the petitioner thatthe Assessing Officer cannot direct special audit under Section 142[2A] of the Act before calling for the accounts from the petitioner inthe assessment proceedings and without doubting the accountsand/or considering the complexity in the accounts is concerned, it isrequired to be noted that as per amended Section 142 [2A] of the Act,apart from the nature and complexity of the accounts, etc., even incase of multiplicity of transactions in the accounts or specializednature of business activity of the assessee and the interests of theRevenue, the Assessing Officer can pass an order for special audit inexercise of powers conferred under Section 142 [2A] of the Act.Therefore, while forming an opinion to get the accounts audited byspecial auditor; considering the specialized nature of businessactivities of the assessee, there need not be any books of accountbefore the Assessing Officer. In the present case, having found thatthere are complex issues relating to introduction of land by the partners into the firms; revaluation of land; credit of partners incapital account equal to revalued amount of land; conversion ofcapital account to loan account of shareholders and issues relating toissuance of equity shares against the balances of revaluation creditsat an unreasonable premium, and after having been satisfied thatconsidering the specialized nature of business activities of theassessee, the Assessing Officer has passed an order of special auditin exercise of powers under Section 142 [2A] of the Act." 12. Karnataka High Court in case of Habitat Shelters P Ltd Vs. Pr. CIT, Banglore[5]after referring to the amended Section 142(2A) of the Act observed as under: "7. Obviously, this Court cannot go into the sufficiency of reasonsassigned by the Assessing Authority for directing such Special Audit.Only if there were no reasons assigned and objections of thepetitioner assessee were not considered, perhaps, the breach ofprinciples of natural justice, as required under Section 142(2A) of theAct and Proviso thereto could be so contended by the assessee, butfrom the record, it does not appear to be either absence of anopportunity of hearing altogether or the absence of any reasons atall. 8. Thus, this Court cannot draw any inference of breach ofprinciples of natural justice or arbitrariness in the impugned orderpassed by the respondent Authority. Accordingly, the requirement ofSection 142(2A) of the said Act cannot be said to have been notcomplied by the respondent Authority. The same requires nointerference under Article 226 of the Constitution of India. Therefore,the Writ Petition is liable to be dismissed and is accordinglydismissed. No costs." 5[2018] 254 Taxman 160 13. Merely because some of the transactions weresubjected to transfer pricing mechanism, would not debarthe Assessing OfÏcer from exercising powers under Section142(2A) of the Act, if the conditions for exercising suchpowers were otherwise satisfied. The Transfer Pricing OfÏcerwould be essentially concerned with the assessment of thearm's length price of the specified transactions with anassociated enterprise. 14. Reference to the judgment of this Court in case of thisvery assessee would also be of no avail. It was a case inwhich the assessee had challenged the orders passed by theAssessing OfÏcer calling upon for special audit of thepetitioner's accounts for several assessment years.However, the decision of the Court was not on merits. Thejudgment records that the Court had put it to both thecounsel for the petitioner and the respondent why the wholegamut of the special audit be followed. Instead, during thecourse of assessment, that will be undertaken pursuant tothe notice under Section 148 of the Act and when thepetitioner was possessed a copy of the report of PWC, all contentions in relation to such proceedings can be raised andthereafter, orders can be passed after hearing the petitioner.This suggestion was accepted by both sides. It was, in thisbackground, the Court disposed of the petition with followingdirections:- " The Petitions can be disposed off with a direction that thespecial audit in terms of the impugned notice and the approval neednot be undertaken for all the materials in relation to the petitioner'stransactions, their share holdings, are already referred to in the PWCreport as also the pending proceedings under Section 148 of the I.T.Act. There is a return of income filed under protest by the petitionerson 26th April, 2017 and that is under assessment. If during thecourse of assessment and pursuant to this return, the petitionerdesires to raise objections with regard to the contents of the PWCreport and to be relied upon by the Assessing Officer, then, theAssessing Officer shall allow the petitioner to raise the necessarycontentions and after dealing with them, he shall pass an order inaccordance with law." 15. Firstly, as noted, the Court did not decide thepetitioner's objection to the special audit on merits, insteadproceeded on consensus. Secondly, the assessment yearsinvolved in the said orders besides others were 2010-11,2011-12 and 2014-15. For the assessment years 2010-11and 2011-12 unamended provisions of Section 142(2A)would apply. In the result, we do not find merit in thispetition. The same is dismissed. Ad-interim relief, if any, stands vacated. [ B.P. COLABAWALLA, J. ] [ AKIL KURESHI, J ]