The Commissioner Of Income Tax v. Shri Tara Chand Banasia

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 813 / 2008 The Commissioner Of Income Tax ----Appellant Versus Shri Tara Chand Banasia ----Respondent Connected With D.B. Income Tax Appeal No. 152 / 2008 The Commissioner Of Income Tax ----Appellant Versus Shri Tara Chand Banasia ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain For Respondent(s) : Mr. P. K. Kasliwal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 24/05/2017 In both these appeals common question of law and facts ininvolved and they relates to same assessee therefore, they aredecided by this common order. 1.By way of these appeals, the department has assailed thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the department and allowed the appeal ofthe assessee. 2.This Court while admitting the matter framed the following substantial questions of law:- In DBITA No. 813/2008 “i) Whether under the facts and circumstances ofthe case the order of the Tribunal is justified inannulling the assessment order by holding it to beframed beyond the time limit as prescribed underSection 158BE of the I.T. Act whereas the samewas well within the stipulated time frame? ii) Whether on the facts and circumstances of thecase and in law the ITAT was right in holding thatreference u/s 142(2A) for Special Audit was not inaccordance with the provisions of law and thatthere was no provisions of law and that there wasno complexity of accounts and the interest ofrevenue particularly when the other books asdefined in section 2(12a) includes diary whichwere found and seized during the search and CITwas fully satisfied in appointing a CA to get theaccounts audited on the basis of reasons recordedby the AO and consequently assessment framedwas not time barred and should not have beendeclared annulled?” In DBITA No. 152/2008 i) Whether under the facts and circumstances ofthe case the learned Tribunal was justified indeciding the ground of appeal of the assesseewhich was not pressed before the CIT(A) incontravention of dicta of Hon’ble Apex Court in thecase of Central Bank of India vs. Vrajlal KapoorChand Gandhi & Ors., reported in AIR 2003 SC3028? ii) Whether on the facts and circumstances of thecase and in law the ITAT was right in holding thatreference u/s 142(2A) for Special Audit was not inaccordance with the provisions of law and thatthere was no provisions of law and that there wasno complexity of accounts and the interest ofrevenue particularly when the other books asdefined in section 2(12a) includes diary whichwere found and seized during the search and CITwas fully satisfied in appointing a CA to get theaccounts audited on the basis of reasons recordedby the AO and consequently assessment framedwas not time barred and should not have beendeclared annulled?” 3.Counsel for the appellant contended that the CIT(A) whileconsidering the case of the assessee specifically observed asunder:- “5. The first ground is against the direction u/s142(2A), for which it is stated that no books weremaintained, as was evident from the beginning andso, was bad in law. It is seen, that on the contraryvoluminous records/ documents indicating complextransactions has been seized and requireddeciphering. Besides, this ground was not pressedbefore me. As such, this ground of appeal isdismissed.” 3.Counsel for the appellant contended that the CIT(A) whileconsidering the case of the assessee specifically observed asunder:- “5. The first ground is against the direction u/s142(2A), for which it is stated that no books weremaintained, as was evident from the beginning andso, was bad in law. It is seen, that on the contraryvoluminous records/ documents indicating complextransactions has been seized and requireddeciphering. Besides, this ground was not pressedbefore me. As such, this ground of appeal isdismissed.” 4.In spite of the order of the CIT(A) only on the affidavit inabsence of the assessee, the issue has been decided in favour ofthe assessee accepting his affidavit. Therefore, it was contendedthat in view of the decision of the Supreme Court in case of AIR2003 SC 3028, the matter ought to have been remitted back tothe CIT(A). 5.We have heard counsel for both the sides. 6.It is true that the Supreme Court judgment ought to havebeen followed by the Tribunal but judgment is of 2006 and today itwill not serve the object to be achieved. 7.In that view of the matter, we are left with no other option but to accept to the observations made by the Tribunal in para 16, 17 & 18 which reads as under:- “16. From the bare perusal of Section 142(2A), it isclear that an opinion has to be formed only havingregard to the nature and complexity of theaccounts of the assessee and the interest of theRevenue. The word and signifies conjunction andnot disjunction and therefore, both nature andcomplexity of accounts as also interest of the 5.We have heard counsel for both the sides. 6.It is true that the Supreme Court judgment ought to havebeen followed by the Tribunal but judgment is of 2006 and today itwill not serve the object to be achieved. 7.In that view of the matter, we are left with no other option but to accept to the observations made by the Tribunal in para 16, 17 & 18 which reads as under:- “16. From the bare perusal of Section 142(2A), it isclear that an opinion has to be formed only havingregard to the nature and complexity of theaccounts of the assessee and the interest of theRevenue. The word and signifies conjunction andnot disjunction and therefore, both nature andcomplexity of accounts as also interest of the Revenue are necessary ingredients for exercise ofthe powers u/s 142(2A) of the Act. Therefore, theopinion require to be formed by the AO must bebased on objective consideration and not on thebasis of this subjective satisfaction. A priorapproval as envisages u/s 142(2A) is not an emptyritual. Such an approval is a condition precedent forexercising power u/s 142(2A) of the Act fordirecting the assessee to get his accounts auditedby an Accountant nominated by the ChiefCommissioner or the Commissioner in this behalf.Before granting approval, the approving authoritymust have before him the materials on the basiswhereof an opinion in that regard has been formedby the AO. The AO, therefore, is required to placeall materials before the approving authority toshow that he intends to take recourse to the poweru/s 142(2A) having regard to the nature andcomplexity of the accounts of the assessee andinterests of the Revenue. Therefore, where no suchmaterial have been placed before the approvingauthority or even no precious approval has beensought for but merely a proposal has been placedfor perusal of the approving authority and forappointment of a Special Auditor, the approvingauthority cannot be said to have applied his mindat all as regards the prerequisite for grant ofprevious approval by mechanically appointing anaccountant as Special Auditor. These views findsupport from the decision in the case of PeerlessGeneral Finance & Investment company Ltd. Vs.DCIT (1999) 236 ITR 671.677.679 (Cal.) In thepresent case, we have already given our findingsthat the assessee is not maintaining accounts/books of account and therefore, AO has not appliedhis mind while forming an opinion as regards thenature and complexity of the accounts of theassessee and the interest of the Revenue. Therewas no material before the AO for the purposes ofdirecting Special Audit u/s 142(2A). There isnothing on record either from order of the AO orfrom the paper book of the Department or even thearguments of ld. DR from which it could be madeout that some material was placed before the ChiefCommissioner or Commissioner for taking theapproval from the said approving authority. In suchcircumstances, we are of the view that the AO hasinvoked the Provisions of Section 142(2A) verylightly not based on objective consideration andtherefore, the order passed u/s 142(2A) was notpassed in consonance with the provisions ofSection 142(2A) of the Act. 17. Therefore, we have to peruse whether the AOhas completed the assessment under Chapter XIV-B within the framework of the said Chapter. Section158BE is the Section which lays down the time limitfor completion of block assessment under the saidChapter. The relevant provisions of the said Sectionare reproduced as under:- 158BE(1)(b) within two years from the end of themonth in which the last of the authorizations forsearch u/s 132 or for requisition u/s 132A, as thecase may be, was executed in cases where asearch is initiated or books of account or otherdocuments or any assets are requisitioned on orafter the 1[st] day of Jan. 1997. [Explanation 1] – In computing the period oflimitation for the purposes of this section, theperiod- 17. Therefore, we have to peruse whether the AOhas completed the assessment under Chapter XIV-B within the framework of the said Chapter. Section158BE is the Section which lays down the time limitfor completion of block assessment under the saidChapter. The relevant provisions of the said Sectionare reproduced as under:- 158BE(1)(b) within two years from the end of themonth in which the last of the authorizations forsearch u/s 132 or for requisition u/s 132A, as thecase may be, was executed in cases where asearch is initiated or books of account or otherdocuments or any assets are requisitioned on orafter the 1[st] day of Jan. 1997. [Explanation 1] – In computing the period oflimitation for the purposes of this section, theperiod- (i) during which the assessment proceeding isstayed by an order or injunction of any court, orstayed by an order or injunction of any court, or (ii) commencing from the day on which the AOdirects the assessee to get his accounts auditedunder sub-section (2A) of Section 142 and endingon the day on which the assessee is required tofurnish a report of such audit under that sub-section. 18. As already held by us here in before that thedirections given by AO to the assessee to get hisaccounts audited u/s 142(2A) were not inaccordance with the provisions of section 142(2A)of the Act, therefore, the AO will not get the benefitof completing the assessment as per explanation 1to section 158BE of the Act. The search and seizureoperation were carried on 20.1.98 and as per timelimit laid down for completion of block assessmentu/s 158BE expires on 31.1.2000 i.e. within 2 yearsfrom the end of the month in which the last ofauthorization for search u/s 132 was made.Whereas the AO had completed the assessment on14.7.2000 which is beyond the time limitprescribed u/s 158BE of the Act. In suchcircumstances, the assessment framed by the AOu/s 158BC/143(3) dated 14.7.2000 is annulled.Therefore, the merit of the case is not discussed inview of our decision herein before as regards theassessment, which has been held to be a nullity.Thus the appeal and the C.O. of the assessee areallowed in favour of the assess and the AO isdirected to accept the returned income filed by theassessee on 30.7.99 in response to notice u/s158BC of the Act.” 8.However, this will not be treated as precedent. 9.Both the issues are decided in favour of the assessee against the department. The appeals stand disposed off. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. A.Sharma/20-21