Neesa Leisure Ltd v. Deputy Commissioner Of Income Tax Central Circle 2(2) & 1

C/SCA/6811/2013 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 6811 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI andHONOURABLE MS JUSTICE SONIA GOKANI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ NEESA LEISURE LTD....Petitioner(s) Versus DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(2) & 1....Respondent(s)================================================================Appearance: Mr JP SHAH with Mr. MANISH J SHAH for Mr RAVISH D BHATT, Advocate for the PetitionerMr M.R SHAH Sr Advocate with Mrs MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1NOTICE SERVED BY DS for the Respondent(s) No. 2 ================================================================ CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI andHONOURABLE Ms. JUSTICE SONIA GOKANI9th May 2013 ORAL JUDGMENT(PER : HONOURABLE MR. JUSTICE AKIL KURESHI) thPetitioner has challenged an order dated 19 February 2013 {as at Annexure-A to the petition} passed by the respondent no.1-Deputy Commissioner of Income Tax, in the following factual background. The petitioner is a company registered under the Companies Act and is engaged in the business of running a chain of Hotels and Hospitality Management Institute. On 8th September 2010, search and seizure operation was conducted at the premises of the petitioner-company. Pursuant to such action, a notice under section 153-A of the Act came to be issued requiring the petitioner to furnish returns for the A.Y 2005-06 to 2010-11. For the A.Y 2005-06, the petitioner filed return in compliance to such notice dated 29/09/2012 and for the A.Y 2006-07 to 2010-11, such returns were filed on 19th March 2013. Notices were issued by the Assessing Officer under section 142 (1) of the Act calling for various details regarding the accounts of the petitioner. Undisputedly for sometime, the petitioner did not comply with such notices. On 26th December 2012, the respondent no.1 issued a notice stating : “having regard to the nature of complexity of your accounts as mentioned above and in the interest of revenue, I hereby propose to refer your case for approval to the CIT, Central-.II, Ahmedabad for special audit u/s.142 (2A) of the Act 4.In view of above, you are required to show cause why your case .” should not be referred for special audit u/s. 142 (2A) of the I.T Act, 1961.. In such notice, the respondent no. 1 gave detailed account why he believed prima facie that special audit in case of the petitioner was necessary. He conveyed to the petitioner, thus - “2.I have gone through the seized material and return of income filed u/s. 153A of I.T Act and other documents filed during the assessment proceedings. Plethora of papers essentially, bills and vouchers related to construction were found and seized from various premises covered under the search in your case. The following cases emerged, which are summarized as under :- i.Comparison has been made between the digital data impounded/seized from various premises during the search and the audited account submitted by you during the course of assessment proceedings. Following discrepancies found and is summarized hereunder : xx xx believed prima facie that special audit in case of the petitioner was necessary. He conveyed to the petitioner, thus - “2.I have gone through the seized material and return of income filed u/s. 153A of I.T Act and other documents filed during the assessment proceedings. Plethora of papers essentially, bills and vouchers related to construction were found and seized from various premises covered under the search in your case. The following cases emerged, which are summarized as under :- i.Comparison has been made between the digital data impounded/seized from various premises during the search and the audited account submitted by you during the course of assessment proceedings. Following discrepancies found and is summarized hereunder : xx xx ii.It is pertinent to note that there are various other differences in the books of accounts which is audited and the books of accounts seized in the digital form from Cambay Square, GIDC Electronic Estate, Sector 25, Gandhinagar. For the sake of brevity, all the descriptions and narrations, where there is discrepancy in the balance sheet and profit and loss account has not been shown in the above table. Further, it is noteworthy to mention that you are not provided this office with books of accounts for A.Y 2007-08 to 2011-12, which you were required to furnish vide notice u/s. 142 (1) dated 07.11.2012. Even in the seized and other impounded digital data during the course of search/survey, the books of accounts for A.Y 2009-10 and 2010-11 are not found. In the light of data seized and impounded from various premises covered during the search/survey operation on your group and the discrepancies found therein with the audited accounts, makes your account highly complex. ii.During the course of search proceedings at the residence of Shri Sanjay Gupta, Director/Share holder of your company, at B-202, Dhananjay Tower, Satellite, Ahmedabad on 08.09.2012, a copy of certain documents (sale deed) were submitted by him. As per the sale deed dated 15.05.2008, 100% shares of Palm Lagoon Back Water Resorts Private Limited was purchased by Gujarat Sysport Services Private Limited for a consideration of Rs. 3,20,00,000/=. As per the another sale deed dated 10.03.2009, the above resort was purchased by you from Gujarat Sysport Services Pvt. Limited for Rs. 7,00,00,000/= which included consideration of Rs. 5,65,00,000/= for transfer of share and Rs. 1,35,00,000/= as reimbursement of expenses. You were requested to explain - a.What was the reason to steep hike in the valuation of the shares in such a short period. b.What sorts of expenses were incurred by Gujarat Sysport Services Pvt. Limited after acquisition of the company with complete details and supporting documentary evidences. In addition to above certain ledger accounts related to these transactions were also found. From the perusal of these accounts, it can be seen that the payment of Rs. 7,00,00,000/= has been shown to have been made by you to M/s. Palm Lagoon Backwater Resorts Pvt. Limited and Dr. V. Harikumar. Whereas as per the sale deed the amount was being paid to Ms. Gujarat Sysport Services Pvt. Ltd. against the purchase of the shares of the company M/s. Palm Lagoon Backwater Resorts Pvt. Ltd. Further, it is evident those bills cannot be found. In the case of Shri J.C Patel and Shri S.V Khant bills and vouchers were found and seized from Neesa Leisure Limited at In addition to above certain ledger accounts related to these transactions were also found. From the perusal of these accounts, it can be seen that the payment of Rs. 7,00,00,000/= has been shown to have been made by you to M/s. Palm Lagoon Backwater Resorts Pvt. Limited and Dr. V. Harikumar. Whereas as per the sale deed the amount was being paid to Ms. Gujarat Sysport Services Pvt. Ltd. against the purchase of the shares of the company M/s. Palm Lagoon Backwater Resorts Pvt. Ltd. Further, it is evident those bills cannot be found. In the case of Shri J.C Patel and Shri S.V Khant bills and vouchers were found and seized from Neesa Leisure Limited at Cambay Square, GIDC Electronic Estate, Sector No. 25, Gandhinagar. When the same was verified with the digital accounts seized/impounded from various premises, during the course of survey/search the entry in the books of account in the name of Shri J.C Patel could not be found. Similar is the case with Shri S.V Khant. It is also pertinent to note that Shri Bharat M. Shah, Prop. Of Kala Sales, Manu Enterprise and P.M Traders and Director of Asopalav Trades Private Limited has already accepted during his statement taken on 29.09.2010 and 10.12.2010 u/s. 131 of I.T Act, that he has provided accommodation entries and no material was physically delivered to you. In this case, your account is highly unreliable and inaccurate. No details have been furnished by you despite lapse of Three months. You were given opportunity to furnish the above mentioned details vide various notices dated 25.09.2012, 18.10.2012, 07.11.2012, 27.11.2012 and 14.12.2012. But even after lapse of the stipulated time mentioned in the notice, this office has not received any details for the query.iv.Various credits were received in the bank accounts of the company from the following entities. You were required to explain the nature of such credits and explain the genuineness of the credits. You were given opportunity to furnish the above mentioned details vide various notices dated 25.09.2012, 18.10.2012, 07.11.2012, 27.11.2012 and 14.12.2012. But even after lapse of the stipulated time mentioned in the notice, this office has not received any details for the query. v.As per agreement to sale dated 11.08.2010 impounded vide page no. 156 to 161 of Annexure A-1/15 from the premises of Neesa Technologies Private Limited at Cambay Grand, Near PERD Center, Off. S.G Road, Thaltej, Ahmedabad. You have received cash of Rs. 95,00,000/= from one Shri Rahul Kalsi. During the course of search you have claimed that the cash does not mean hard liquid cash. It also denotes the consideration in the form of wire transfer/demand draft and other banking instruments. In the same letter, it was contended that no consideration of such nature has been received. During the course of assessment proceedings, you were required to furnish documents in support of the claim of wire transferred/demand draft and through banking channel. You have not furnished any details and evidences despite lapse of three months. Further you have not proved that such cash was offered for taxation. You were required to explain the nature of such credits and explain the genuineness of the credits. You were given opportunity to furnish the above mentioned details vide various notices dated 25.09.2012, 18.10.2012, 07.11.2012, 27.11.2012 and 14.12.2012. But even after lapse of the stipulated time mentioned in the notice, this office has not received any details for the query. vi.You have sold commercial space on the first floor of the complex in your Gandhinagar Office for a total consideration of Rs. 2.14 Crores to M/s. Benefit Infomedia Limited. You were required to provide the complete documents for this transaction and evidence in Further you have not proved that such cash was offered for taxation. You were required to explain the nature of such credits and explain the genuineness of the credits. You were given opportunity to furnish the above mentioned details vide various notices dated 25.09.2012, 18.10.2012, 07.11.2012, 27.11.2012 and 14.12.2012. But even after lapse of the stipulated time mentioned in the notice, this office has not received any details for the query. vi.You have sold commercial space on the first floor of the complex in your Gandhinagar Office for a total consideration of Rs. 2.14 Crores to M/s. Benefit Infomedia Limited. You were required to provide the complete documents for this transaction and evidence in support of the income arising out of this transaction being offered to tax. Neither you have furnished any information or documentary evidences, nor you have shown whether it has been offered to taxation. Despite of lapse of Three months from the issuance of first notice, no information has reached this office. You were required to explain the nature of such credits and explain the genuineness of the credits. You were given opportunity to furnish the above mentioned details vide various notices dated 25.09.2012, 18.10.2012, 07.11.2012, 27.11.2012 and 14.12.2012. But even after lapse of the stipulated time mentioned in the notice, this office has not received any details for the query. vii.You were required to furnish details of expenditure in the case of “Neemrana Project” undertaken by you. Your group has obtained secured loan of Rs. 45 Crores against the expenditure of only Rs. 7.66 Crores as certified by Chartered Engineers Report till 30th June 2010. Further, an email annexed as page no. 124 of Annexure B-1 seized from the residence of Shri Sanjay Gupta at B-202, Dhananjay Tower, Satellite, Ahmedabad shows the total expenditure incurred in “Neemrana Project” till 31.07.2010 as Rs. 78.50 Crores. There is huge difference of expenditure shown in email vis-a-vis the expenditure certified by the Chartered Engineer. You have not furnished any details of construction/expenditure on “Neemrana Project” during the course of post search proceedings as well as during the course of assessment proceedings despite several opportunities. You have not explained the two different amounts of expenditure, evidence of which was found during the course of search, despite of lapse of Three months from the issuance of first notice. You were required to explain the nature of such credits and explain the genuineness of the credits. You were given opportunity to furnish the above mentioned details vide various notices dated 25.09.2012, 18.10.2012, 07.11.2012, 27.11.2012 and 14.12.2012. But even after lapse of the stipulated time mentioned in the notice, this office has not received any details for the query. viii.You were required to furnish the purchases made from M/s. OTS Marketing and Estate Pvt. Limited from A.Y 2005-06 to 2011-12. You were further required to explain the expenditure booked under various heads in different years. Further, you were asked to provide the details of transportation of goods so purchased and details of payments made by you with the supporting evidences. No such information has been received by this office till date even after several opportunities. Further, treatment of such purchases in your books of accounts also remains unexplained. You were required to explain the nature of such credits and explain the genuineness of the credits. You were given opportunity to furnish the above mentioned details vide various notices dated 25.09.2012, 18.10.2012, 07.11.2012, 27.11.2012 and 14.12.2012. But even after lapse of the stipulated time mentioned in the notice, this office has not received any details for the query. ix.You were required to furnish the ledger accounts in the case of Shri S.V Khant and Shri J.C Patel as appearing in the books of accounts. No such details were submitted. The purchases were neither properly explained, nor their genuineness were confirmed by you. Further, even the identity of Shri J.C Patel has not been provided which was sought by this office vide letter dated 18.10.2012. You were required to explain the nature of such credits and explain the genuineness of the credits. You were given opportunity to furnish the above mentioned details vide various notices dated 25.09.2012, 18.10.2012, 07.11.2012, 27.11.2012 and 14.12.2012. But even after lapse of the stipulated time mentioned in the notice, this office has not received any details for the query.” In response to such notice, the petitioner replied under communication dated 5th January 2013. The proposal for special audit was opposed on the ground that there were no complexities in the accounts nor such an action was necessary to protect the interest of the Revenue. It was contended that the resort to the special audit is being taken only to buy time since the assessments are getting time barred on 31st March 2013. In such reply, the petitioner prayed for an opportunity of personal hearing in the following terms :- “The opportunity of personal hearing to the assessee’s authorized representative before your honour and CIT Central-II, Ahmedabad to represent the matter has been requested for. A letter of authority attached herewith.” The respondent no. 1, however, was not convinced by the petitioner’s opposition. He, therefore, sought the approval of the Commissioner, as required under the statute. The Commissioner granted a personal hearing to the petitioner. He took into account the grounds raised. He, however, approved the proposal for special audit. Under such circumstances, the respondent no. 1 passed the impugned order dated 19th February 2013 and referred the accounts of the assessee for special audit with specific issues on which he desired that the auditor should focus. In such order, he recorded the reasons as under :- “4.You had submitted your contention against the proposal for special audit u/s. 142 (2A) vide letter dated 05.01.2013, it has been observed that you have only dealt with the legal provisions and substantive provision of section 142 (2A) of I.T Act, but you grossly fail to comment on the factual aspect of your case which was specifically pointed out in the show cause u/s. 142 (2A) dated 26.12.2012. Further more, the reconciliation provided by you in A.Y 2006-07 does not explain the discrepancies pertaining to tally accounts seized during the search operations. Moreover, you did not provide any reconciliation for discrepancies mentioned in point no.1 of the show cause notice u/s. 142 (2A) for A.Y 2007-08 and 2008-09. However, your reply was perused and a factual report was submitted to CIT (Central)-II, Ahmedabad on 09.01.2013. 4.1Further more, you had requested for personal hearing from CIT Central II, Ahmedabad vide letter dated 05.01.2013. Although no personal hearing was required to be given once specific show cause notice narrating the complexity of accounts have been issued by this office, but however, in the interest of natural justice personal hearing was provided to you on 05.02.2013 by CIT [Central] II, Ahmedabad. 4.2Considering the totality of facts and the circumstances brought on the record by this office and during your personal hearing, CIT {Central} II, Ahmedabad has granted an approval for special audit u/s. 142 (2A) of the Act for A.Y 2005-06 to 2011-12 in your case vide letter no. CIT (C) -II/ Neesa/Special Audit/2012/13 dated 11.02.2013. Relevant extract of the approval granted by CIT Central-II, Ahmedabad is reproduced hereunder : 4.2Considering the totality of facts and the circumstances brought on the record by this office and during your personal hearing, CIT {Central} II, Ahmedabad has granted an approval for special audit u/s. 142 (2A) of the Act for A.Y 2005-06 to 2011-12 in your case vide letter no. CIT (C) -II/ Neesa/Special Audit/2012/13 dated 11.02.2013. Relevant extract of the approval granted by CIT Central-II, Ahmedabad is reproduced hereunder : “Please refer to your letter dated 09/01/2013 in the above case requesting the undersigned to give approval to refer the case to Special Audit u/s. 142 (2A) of the Act. In the above referred letter, you have also enclosed the show cause notice issued by you to the assessee on 26/12/2012 and reply of the assessee on the show cause notice vide letter dated 05/01/2013. 2.The undersigned has gone through your letter dated 26/12/2012 addressed to the assessee asking it as to why its case should not be referred to special audit for A.Y 2005-06 to A.Y 2011-12. The discrepancy in date pointed by you in para 2 (i) of your show cause notice and other specific issues referred to in your show cause notice have also been noted. The undersigned has also noted your queries raised during the course of the assessment proceedings and non compliance of the assessee of these queries, which have been mentioned by you in almost each para of your show cause notice. The replies of the assessee during the course of the assessment proceedings have also been perused. It is observed that the assessee has not given complete details and explanations of the queries raised by you vide notice dated 25.09.2012, 18.10.2012; 7.11.2012; 27.11.2012 and 14.12.2012. It has also been observed that the said queries have not been replied despite more than sufficient opportunities and time. You have levied penalty u/s. 271 (1)(b) against the assessee for non compliance of your notices, however, the compliance of the assessee has not improved inspite of levy of penalty. 3. The undersigned has also gone through the reply of the assessee to your show cause notice vide its letter dated 05/01/2013. The assessee has referred to various judgments in which it is held that before referring the case for special Audit, there should be an honest attempt by the A.O to understand the accounts of the assessee. The assessee has also observed in its reply dated 05/01/2013 that reference to Special Audit is being opted for buying extra time to complete assessments. 4.The assessee demanded the opportunity of personal hearing before the undersigned. Although, no personal hearing is required to be given once the specific show cause notice narrating the complexity of accounts has been issued by the A.O., however, in the interest of natural justice the personal hearing was fixed on 28/01/2013. Shri Dhiren Shah, C.A and A.R of the assessee appeared on that date and requested for adjournment. The personal hearing was adjourned to 05/02/2013. 5.Shri Dhiren Shah, C.A Shri Ravish Bhatt, Advocate, Shri Khanjam Chhaya, C.A Shri Kapil Oza, C.A and Miss Khyati Vora, C.A attended on 05/02/2013. In the said hearing, it was requested by Shri Dhiren Shah, C.A that the guidelines mentioned in the judgment of the Hon’ble Supreme Court in the case of Rajesh Kumar v. DCIT, 287 ITR 91 should be followed while taking any decision on referring the case for Special Audit. 5.Shri Dhiren Shah, C.A Shri Ravish Bhatt, Advocate, Shri Khanjam Chhaya, C.A Shri Kapil Oza, C.A and Miss Khyati Vora, C.A attended on 05/02/2013. In the said hearing, it was requested by Shri Dhiren Shah, C.A that the guidelines mentioned in the judgment of the Hon’ble Supreme Court in the case of Rajesh Kumar v. DCIT, 287 ITR 91 should be followed while taking any decision on referring the case for Special Audit. 6.The undersigned has gone through the judgment of the Hon’ble Supreme in the case of Shri Rajesh Kumar. The said judgment basically deals with the issue of natural justice. It has been held by the Hon’ble Supreme Court that order u/s. 142 (2A) of the Act without giving an opportunity of hearing to the assessee cannot be sustained. The Hon’ble Supreme Court has held that the Assessing Officer and the approving authority should observe principles of natural justice. It seems that the Assessing Officer had not provided any opportunity of hearing to the assessee before referring the case to the CIT in that case. The complexities in the accounts of the assessee were never disclosed to the assessee before order u/s. 142 (2A) of the Act. 7.The reply of the assessee dated 05/02/2012 has been considered. The perusal of the reply reveals that the assessee has not given reply on many issues of your show cause notice dated 26/12/2012. After going through the assessment records, the reply of the assessee during the assessment proceedings and your show cause notice for Special Audit, it cannot be said that you have not attempted to understand the accounts of the assessee in a fair and honest manner. Further, the complexities of accounts referred to you in your show cause notice for Special Audit are genuine and the assessee has not been able to given any satisfactory reply of your notice on many issues. 8.In the present case, you have not only issued an elaborate show cause notice to the assessee specifying the complexities and non compliance of various queries during the assessment proceedings by the assessee. You have referred the case for Special Audit through Joint Commissioner of Income Tax, Central Range-2, Ahmedabad after taking into account the reply of the assessee. The undersigned has also given personal hearing to the assessee. The assessee has also submitted one written submission in ‘dak’ on 05/02/2013 after conduct of personal hearing. There is no reply on specific issues raised by you in the said submission and it has reiterated reply given to you vide letter dated 05/01/2013. 9.The assessee has alleged that the reference to the Special Audit is being made to buy time to complete the assessments. In this regard, it is to be noted that notice u/s. 153A of the Act was issued in this case on 07/11/2011 and the assessee was required to file its return of income within 45 days. The assessee did not file return till 09/02/2012 for A.Y 2005-06 and till 19/3/2012 for rest of the assessment years. It is clear that there is considerable delay on the part of the assessee to avoid the proceedings. Even after filing return of income, the assessee has not complied with your notices as it clear from your show cause notice. Therefore, at one hand the assessee is itself using dilatory tactics on the other hand it is alleging the Department for buying time, which is contrary to the facts. The assessee has contended that non compliance of the notices cannot be the basis of referring the case for Special Audit. In this regard, it is observed that you have not only mentioned non compliance but also pointed out complexity of accounts of the assessee in your show cause notice, it is to be further observed that when the assessee itself is not supplying information, then this fact itself refers to the complexity of the accounts. on the part of the assessee to avoid the proceedings. Even after filing return of income, the assessee has not complied with your notices as it clear from your show cause notice. Therefore, at one hand the assessee is itself using dilatory tactics on the other hand it is alleging the Department for buying time, which is contrary to the facts. The assessee has contended that non compliance of the notices cannot be the basis of referring the case for Special Audit. In this regard, it is observed that you have not only mentioned non compliance but also pointed out complexity of accounts of the assessee in your show cause notice, it is to be further observed that when the assessee itself is not supplying information, then this fact itself refers to the complexity of the accounts. 10.In view of the facts lying on the assessment records. I am satisfied that it is a fit case for reference to Special Audit u/s. 142 (2A) of the Act having regard to the nature and complexity of the accounts of the assessee and the interest of the revenue. Therefore, approval is hereby accorded to you u/s. 142 (2A) of the Act.” The respondent no. 1, in the said order, raised following issues for the consideration of special auditor. “4.3You are directed to furnish the report of the Special Auditor in Form No. 6B as mentioned in the Rule 14A of Income Tax Rules, 1962. The Special Auditor is also specifically required to go through the following issues:- (i)To take into account seized/impounded documents, seized/impounded documents, seized/impounded papers, seized/impounded books of accounts, material seized/ impounded in soft copies, document submitted during the course of search and survey proceedings and report. (a)Whether there is any discrepancy in entries in regular books of account vis-a-vis the seized / impounded material. (b)Whether transactions reflected in seized/impounded materials are shown in regular books of account. (c)Whether books of account of the assessee show true and correct picture of the affairs. If not, then the nature and quantum of discrepancies. (d)Whether some transaction shown in regular books of account need more investigation by the A.O. (ii)To verify whether proper records of income and expenditure are maintained, if not then details thereof. (iii)To verify the depreciation claim of the assessee. (iv)To examine the banking transactions of the assessee and ascertain whether the same have been duly reflected in books of accounts and income tax return. (v)To list all the transactions of loan given by the assessee above Rs. 1,00,000/= giving such particulars as name and address of the borrower, mode of payment, date of loan, period of loan, interest rate, amount of interest, amount received back and mode of repayment. (vi)To ascertain the quantum of secured loan used for the business purpose of the concern. (vii)To list all immovable properties acquired and/or constructed or sold by the assessee giving, particulars of identity of buyers/sellers, address and location of the property, date of acquisition / consideration. Mode of payment and whether such property is reflected in regular books of account. (viii)To ascertain the capital employed by the assessee including opening capital, capital introduced and closing capital. (ix)To ascertain the actual purchase of assets/stock in trade vis-a-vis the purchase bills/vouchers/other loose papers seized/impounded during the course of search and ascertain whether evidences of transportation of such goods assets are available. The details of payment against the purchases are also to be obtained. (x)To ascertain the actual purchases of assets/stock in trade vis-a-vis the entries in regular books of account. (viii)To ascertain the capital employed by the assessee including opening capital, capital introduced and closing capital. (ix)To ascertain the actual purchase of assets/stock in trade vis-a-vis the purchase bills/vouchers/other loose papers seized/impounded during the course of search and ascertain whether evidences of transportation of such goods assets are available. The details of payment against the purchases are also to be obtained. (x)To ascertain the actual purchases of assets/stock in trade vis-a-vis the entries in regular books of account. (xi)To ascertain whether plant and machinery appearing in seized impounded records are reflected in regular books of accounts and are also physically available at site and whether evidences of transportation and installation of plant and machinery are available with the assessee. The details of payment against purchases of plant and machineries are also to be obtained. (xii)To ascertain actual sale of assets/stock in trade vis-a-vis the seized/impounded records/books of account. To ascertain whether such sales have been reflected in Sales Tax / VAT returns. The details of receipts against sales are also to be obtained. (xiii)To comment on valuation of physical stock on the date of survey / search vis-a-vis the stock shown in the books of account. (xiv)To ascertain whether assessee had enough stock, when sale was effected. (xv)To ascertain whether entries in seized books of account/regular books of account have been made as per accepted accounting norms and practices.(xvi)Any other issue that may come to knowledge during the course of Special Audit, which has bearing on computation of total income/loss of the assessee.” It is this order that the petitioner has challenged in the present petition. Learned counsel for the petitioner raised following contentions : [a]No personal hearing was granted to the petitioner by the respondent no. 1 before passing the impugned order. Counsel contended that hearing envisaged under Section 142 {2A} of the Act necessarily includes a personal hearing. In the present case, though a specific request was made for such personal hearing, the respondent no. 1 did not grant such hearing. [b]The order passed by the respondent no. 1 is not a reasoned order. Various grounds and objections raised by the petitioner in the reply to the show cause notice have not been dealt with. [c]Counsel lastly contended that the requirement of exercise of the powers under Section 142 (2A) of the Act are not fulfilled. This is neither a case of complexities of accounts nor a case where interest of revenue required any such reference to the special auditor. In support of his contentions, counsel relied on the following decisions :- [a]In case of Rajesh Kumar & Ors. v. Deputy Commissioner of Income-Tax & Ors., reported in (2006) 287 ITR 91 (SC), wherein, the Supreme Court in the context of the provisions of Section 142 (2A) of the Act held that an order passed under the said provision results in civil consequences against the assessee, and therefore, the principles of natural justice were implicit. [b]In case of Sahara India [Firm] vs. Commissioner of Income Tax & Anr., reported in 300 ITR 403 in which the Supreme Court approved the ratio in the decision in case of Rajesh Kumar & Ors. {Supra}. [c]In case of Sahara Hospitality Limited & Anr. v. Commissioner of Income Tax & Ors., reported in (2013) 352 ITR 38 (Bombay) in which, the Bombay High Court in the context of transfer of assessment proceedings under Section 127 (1) & (2) of the Act quashed the order on the ground that the petitioner had not been heard. [d]In case of Dr. N Rajkumar vs. Deputy Commissioner of Income Tax, reported in (2010) 33 DRT 273 in which, the proceedings which were decided in absence of the assessee were restored back to the Tribunal for fresh hearing to enable the assessee to appear for fresh hearing. [e]In case of Commissioner of Wealth Tax, Bihar-I, Patna v. Jagdish [c]In case of Sahara Hospitality Limited & Anr. v. Commissioner of Income Tax & Ors., reported in (2013) 352 ITR 38 (Bombay) in which, the Bombay High Court in the context of transfer of assessment proceedings under Section 127 (1) & (2) of the Act quashed the order on the ground that the petitioner had not been heard. [d]In case of Dr. N Rajkumar vs. Deputy Commissioner of Income Tax, reported in (2010) 33 DRT 273 in which, the proceedings which were decided in absence of the assessee were restored back to the Tribunal for fresh hearing to enable the assessee to appear for fresh hearing. [e]In case of Commissioner of Wealth Tax, Bihar-I, Patna v. Jagdish Prasad Choudhary, Sahebganj., reported in AIR 1996 Patna 58, in which, the Full Bench of Patna High Court in the context of the provisions of Sections 18 (2) and 39 of the Wealth Tax Act held that the requirement of hearing in such provisions would include personal hearing. [f]In case of Shikshana Prasaraka Mandali v. Commissioner of Income- tax {Central}, reported in (2013) 32 taxmann.com 129 (Bombay) in which an order under section 127 (2) of the Act was quashed for want of personal hearing. [g]In case of Simple Viniyog P. Limited v. Commissioner of Income-Tax, reported in (2009) 313 ITR 336 (Cal.) in which the Calcutta High Court in the context of the provision of Section 127 of the Act quashed the order passed by the authority on the ground that no opportunity of hearing was granted. [h]In case of Oriental Bank of Commerce & Anr. v. R.K Uppal, reported in (2011) 8 SCC 695 wherein, the Supreme Court in the context of requirement of hearing in appeal, revision and review arising in disciplinary proceedings made certain observations, with respect to requirement of personal hearing, to which we would advert to at a later stage. On the other hand, learned counsel Shri Manish R. Bhatt for the Department opposed the petition, raising following contentions :- [a]requirement of personal hearing cannot be read into Section 142 (2A) of the Act. Whenever the Legislature desired that a personal hearing should be given, it has been specifically so provided. He drew our attention to Section 250 of the Act, in which, the procedure in appeal before the appellate Commissioner is provided. Sub-section (2) of Section 250 provides that the appellant, either in person or by an authorized representative; and the Assessing Officer, either in person or by a representative, shall have a right to be heard at the hearing of the appeal. Likewise, Rule 23 of the Income Tax Appellate Tribunal Rules, 1963 provides that on the date fixed by the Tribunal or any other date to which, the hearing may be adjourned, the appellant shall be heard in support of the appeal. The Tribunal shall then, if necessary hear the respondent against the appeal and in such case, the appellant shall be entitled to reply. On the basis of such statutory provisions, counsel contended that when no personal hearing is envisaged under Section 142 (2A) of the Act, the same cannot be read into the said provision. [b]Counsel further submitted that the petitioner was granted personal hearing by the Commissioner before the approval was accorded to the action proposed by the Deputy Commissioner. The contentions raised by the representative of the petitioner were taken into account. This should be seen as substantial compliance of the requirement of personal hearing; even if it was otherwise necessary. [c]With respect to validity of the order, counsel contended that there was sufficient material before the Deputy Commissioner to come to a conclusion that looking to the complexity of the accounts and in the interest of revenue, special audit was required. Counsel pointed out that the petitioner did not respond to notices issued under Section 141(1) of the Act for which penal proceedings under section 271 [1](b) of the Act had to be initiated. [d]In support of his contentions, counsel relied on the following decisions :- [c]With respect to validity of the order, counsel contended that there was sufficient material before the Deputy Commissioner to come to a conclusion that looking to the complexity of the accounts and in the interest of revenue, special audit was required. Counsel pointed out that the petitioner did not respond to notices issued under Section 141(1) of the Act for which penal proceedings under section 271 [1](b) of the Act had to be initiated. [d]In support of his contentions, counsel relied on the following decisions :- [i]In case of A.K Gopalan v. State of Madras & Anr., reported in AIR 1950 SC 27;1950 SC 27; [ii]In case of Ganesh Santa Ram Sirur v. State Bank of India & Anr., reported in (2005) 1 SCC 13 in which the Apex Court observed as under :- “31.Mr. Salve invited our attention to para 17 of the judgment in State of Patiala v. S.K Sharma which deals with the opinion of the House of Lords in the United Kingdom. He also drew our attention to S.L Kapoor v. Jagmohan and Managing Director, ECIL v. B. Karunakar in SCC paras 25, 26 and 28. The decisions relied on and cited above make one thing clear, namely, principles of natural justice cannot be reduced to any hard and fast formulae and as said in Russel v. Duke of Norfolk, these principles cannot be put in a straitjacket. Their applicability depends upon the context and the facts and circumstances of each case. The objective is to ensure a fair hearing, a fair deal to a person whose rights are going to be judgment in State of Patiala v. S.K Sharma which deals with the opinion of the House of Lords in the United Kingdom. He also drew our attention to S.L Kapoor v. Jagmohan and Managing Director, ECIL v. B. Karunakar in SCC paras 25, 26 and 28. The decisions relied on and cited above make one thing clear, namely, principles of natural justice cannot be reduced to any hard and fast formulae and as said in Russel v. Duke of Norfolk, these principles cannot be put in a straitjacket. Their applicability depends upon the context and the facts and circumstances of each case. The objective is to ensure a fair hearing, a fair deal to a person whose rights are going to be affected. In our opinion, the approach and test adopted in Karunakar case should govern all cases where the complaint is not that there was no hearing, no notice, no opportunity and no hearing but one of not affording a proper hearing that is adequate or a full hearing or violation of a procedural rule or requirement governing the enquiry.” On the decision of the Supreme Court in case of Sahara India [Firm] v. Commissioner of Income Tax & Anr. [Supra] in which it was observed that the object behind enacting the provision of Section 142 (2A) is to assist the Assessing Officer in framing the correct and proper assessment based on the accounts maintained by the assessee and when he finds the accounts of the assessee to be complex, with a view to protect the interest of the revenue, recourse to said provision can be had. In case of Purvanchal Vidyut Vitran Nigam Limited v. Union of India & Ors., reported in (2010) 329 ITR 508 (All.) , the Allahabad High Court upheld such order passed by the concerned authority with the approval of the Commissioner observing that on facts and circumstances of the case, approval granted by the Commissioner could not be said to be mechanical or without application of mind. Having thus heard learned counsel for the parties, we may first examine whether requirement of hearing envisaged under Section 142 (2A) of the Act includes personal hearing. Section 142 of the Act pertains to inquiry before assessment. Sub-section (2A) thereof provides that if, at any stage of proceedings the Assessing Officer, In case of Purvanchal Vidyut Vitran Nigam Limited v. Union of India & Ors., reported in (2010) 329 ITR 508 (All.) , the Allahabad High Court upheld such order passed by the concerned authority with the approval of the Commissioner observing that on facts and circumstances of the case, approval granted by the Commissioner could not be said to be mechanical or without application of mind. Having thus heard learned counsel for the parties, we may first examine whether requirement of hearing envisaged under Section 142 (2A) of the Act includes personal hearing. Section 142 of the Act pertains to inquiry before assessment. Sub-section (2A) thereof provides that if, at any stage of proceedings the Assessing Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, may with the previous approval of the Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in Explanation below to sub-section (2) of Section 288, and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require. Said section reads as under :- “142.Inquiry before assessment. [1] xx xx xx xx [2]xx xx xx xx [2A]If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the Chief Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require : Provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard. Proviso to Section 142 [2A] in clear terms requires that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard. Such proviso was inserted by the Finance Act, 2007 w.e.f 1st June 2007. The question is whether such requirement of giving reasonable opportunity of being heard should include personal hearing. Even before insertion of said proviso, the Supreme Court in case of Rajesh Kumar & Ors. [Supra] had read such requirement as implicit in exercise of power under section 142 (2A) of the Act. It was observed as under :- “Justice, as is well known, is not only to be done but manifestly seem to be done. If the assessee is put to notice,he could show that the nature of accounts is not such which would require appointment of special auditors. He could further show that what the Assessing Officer considers to be complex is in fact not so. It was also open to him to show that the same would not be in the interest of the Revenue.” Such decision was approved by the Supreme Court in a later decision in case of Sahara India [Firm] v. CIT & Anr. {Supra}, observing as under :- Even before insertion of said proviso, the Supreme Court in case of Rajesh Kumar & Ors. [Supra] had read such requirement as implicit in exercise of power under section 142 (2A) of the Act. It was observed as under :- “Justice, as is well known, is not only to be done but manifestly seem to be d