JUDGMENT
1. By means of the present writ petition filed under Article 226 of the Constitution of India, the petitioner, Ghaziabad Urban Co-operative Bank Ltd., seeks the following relief:
(i) To issue a writ, order or direction in the nature of certiorari, quashing the notice dated March 28, 2006 issued by respondent No. 3 (annexure 8 to the writ petition) appointing special auditor illegally and arbitrarily.
(ii) To issue a writ, order or direction in the nature of mandamus directing respondents Nos. 2 and 3 to stop the proceedings of special audit for the assessment year 2003-04.
(iii) To issue any other writ or order which this hon'ble court may deem fit and proper in the circumstances of the case. (iv) To award the cost of the petition to the petitioner.
2. Briefly stated the facts giving rise to the present writ petition are as follows.
3. According to the petitioner, it is a co-operative society registered under the provisions of the U.P. Co-operative Societies Act, 1965, with its registered office at Ghaziabad. It has also been authorised by the Reserve Bank of India to carry on banking activities in the State of Uttar Pradesh. It has also been permitted to open branches. For the assessment year 2003-04, the petitioner had filed the return of income on October 21, 2003 showing a total income at Rs. 47,74,043.99 and claimed exemptions under Section 80P of the Income-tax Act, 1961 (hereinafter referred to as "the Act") on the entire amount. Its accounts have been audited by the auditors appointed by the Registrar of Co-operative Societies as also under the provisions of Section 44AB of the Act. The Additional Commissioner of Income-tax, Range-II, Ghaziabad, respondent No. 3, who is the Assessing Officer of the petitioner issued a show cause notice on October 25, 2005, purporting to be under Section 142(1) of the Act calling upon the petitioner to furnish certain explanations and also produce the books of account and other relevant documents mentioned therein. The petitioner submitted its reply on December 9, 2005. Another notice was issued on January 4, 2006 and February 14, 2006 calling upon the petitioner to furnish certain more informations, to which the petitioner submitted its reply on February 28, 2006, March 6, 2006 and March 20, 2006. However, vide order dated March 28, 2006, the petitioner has been informed by respondent No. 3 that M/s. Ban-shal Gupta and Associates, Ghaziabad have been appointed as special auditor under Section 142 of the Act for the audit of the accounts of the petitioner for the assessment year in question. The petitioner submitted its objection to the appointment of the statutory auditor and also wanted to know the reasons and the circumstances under which the said auditor has been appointed. The reasons have not been supplied. The petitioner has approached this Court challenging the order by which the special auditor has been appointed on the ground that respondent No. 3 did not have any material before him for forming an opinion regarding the nature and complexity of the accounts of the petitioner and further the interests of the Revenue was not to be affected inasmuch as the accounts of the petitioner-bank had been statutorily audited both under the provisions of the U.P. Co-operative Societies Act, 1965, as also under Section 44AB of the Act.
4. In the counter affidavit filed by Shri Lala Ram, inspector working in the office of the Additional Commissioner of Income-tax, Range-II, Ghaziabad, on behalf of the respondents, it has been stated that in spite of several opportunities having been issued to the petitioner, it did not comply with the directions contained in the notices and repeated adjournments were being sought. The details as required were not being submitted by the petitioner and the limitation was going to expire on March 31, 2006. The petitioner's representative has noted the next date as February 8, 2006, for compliance, but nobody attended on that date, whereupon the Assessing Officer, respondent No. 3 visited the office of the petitioner at 109, Navyug Market, Ghaziabad on March 7, 2006 where he found that not only the records of the petitioner were voluminous, but they also needed thorough examinations in the light of adverse findings in the preceding years. Based on the materials gathered by the Assessing Officer on his visit to the petitioner's office on March 7, 2006, respondent No. 3 vide letter dated March 24, 2006, sought approval for appointment of the special auditor under Section 142 of the Act by recording the following reasons:
In fact overall books of account and subsidiary documents on the basis of which such books are maintained are voluminous, complex and not properly maintained which in the opinion of the undersigned should be subjected to special audit as per the provisions of Section 142 of the Income-tax Act, 1961 in the interests of the Revenue.
5. The Commissioner of Income-tax had examined the proposal of respondent No. 3 and communicated the approval for appointment of M/s. Banshal Gupta and Associates as special auditor under Section 142 of the Act vide letter dated March 27, 2006, which was communicated to the petitioner.
6. In the rejoinder affidavit, it has been stated that recourse to Section 142 of the Act was not legally permissible as the petitioner was cooperating in the assessment proceedings and further in the immediately preceding assessment year, i.e., 2002-03, no order for appointment of special auditor was passed under Section 142 of the Act and the assessment was made in a routine manner.
7. We have heard Shri Rishi Raj Kapoor, learned Counsel for the petitioner and Shri R.K. Upadhyay, learned standing counsel appearing for the respondents.
8. As the counter affidavit and rejoinder affidavit have been exchanged between the parties, with the consent of learned Counsel for the parties, the writ petition is being heard and finally disposed of at the admission stage itself in accordance with the rules of the court.
9. Learned Counsel for the petitioner submitted that it is incorrect to state that in the previous years, the special auditor under Section 142 of the Act was appointed. In fact, in the immediately preceding year, i.e., 2002-03, no such special auditor has been appointed and the assessment was done in a routine manner. He, however, submitted that prior to the previous year, the special auditor under Section 142 of the Act had been appointed. He further submitted that merely because the books of account and other documents are voluminous in nature, that itself does not give the power to respondent No. 3 to order for a special audit under Section 142 of the Act. According to him, special audit can only be ordered when the preconditions of Sub-section (2A) of Section 142 are complied with. He submitted that the requirement of Sub-section (2A) of Section 142 of the Act is that the Assessing Officer should form an opinion that the accounts of the assessee are complex and the interests of the Revenue requires the special audit failing which, it would not be permissible to invoke the provisions of Sub-section (2A) of Section 142 of the Act.
10. In support of his plea, he has relied upon a decision of a learned single judge of the Calcutta High Court in the case of West Bengal State Cooperative Bank Ltd. v. Joint CIT .
11. Shri R.K. Upadhayay, learned standing counsel, on the other hand, submitted that it is not in dispute that in the previous assessment year, the accounts of the petitioner-bank have been subjected to special audit under Section 142(2A) of the Act and merely because in the immediately preceding assessment year, i.e., 2002-03, no such order was passed, it would not make any difference. He submitted that as the assessee was not co-operating and not furnishing the required details and was not producing its books of account and other documents as required by the various notices, the Assessing Officer was left with no other option but to visit the petitioner's office at Navyug Market, Ghaziabad, and having found the voluminous nature of the books of account, the complexity of accounts maintained by the petitioner as also taking into consideration the interests of Revenue, he had rightly sent a proposal for a special audit under Section 142(2A) of the Act, which proposal was rightly approved by the Commissioner of Income-tax. He further submitted that it is incorrect to state that the special audit has been ordered only on account of the voluminous nature of the books of account maintained by the petitioner.
12. In support of his various pleas, he has relied upon the following decisions:
(1) Jhunjhunwala Vanaspati Ltd. v. Asst. CIT (No. 1) ; and (2) Atlas Copco (India) Ltd. v. V.S. Samuel, Asst. CIT >
13. He further submitted that the decision of the Calcutta High Court in the case of West Bengal State Co-operative Bank Ltd. relied upon by learned Counsel for the petitioner, has been dissented from by the Bombay High Court in the aforesaid case of Atlas Copco (India) Ltd. and it has followed the decision of this Court in the case of Jhunjhnnwala Vanaspati Ltd. .
14. We have given our anxious consideration to the various pleas raised by learned Counsel for the parties.
15. It is not in dispute that assessment proceedings in the assessment year 2003-04 had commenced with the issuance of the notice under Section 142(1) of the Act on October 25, 2005. The petitioner was required to furnish details and other explanations and produce the books of account and other documents. Several dates were fixed and the proceedings had been adjourned at the instance of the petitioner. Full compliance had not been given to the various notices seeking information from the petitioner. It is also not in dispute that in the earlier assessment years excluding the immediate preceding year 2002-03, the accounts of the petitioner had been subjected to special audit under Section 142(2A) of the Act. Respondent No. 3, who is the assessing authority of the petitioner took pains to visit the petitioner's office at Navyug Market, Ghaziabad, and after seeing the voluminous nature of the books of account and other documents maintained by the petitioner, as also the complexity of its accounts and in the interests of Revenue had rightly come to the conclusion that the special audit is required to be made in the present case. The opinion, thus, formed by respondent No. 3 cannot be said to be based on no material on record. So far as the decision of the Calcutta High Court in the case of West Bengal State Co-operative Bank Ltd. [2004] 267 ITR 345 is concerned, it has held that merely because the account books are voluminous in nature, it does not give a right to the Assessing Officer to invoke the provisions of Section 142(2A) of the Act where the preconditions of the said Section are not fulfilled. The aforesaid decision is clearly distinguishable on the facts of the present case inasmuch as in the present case, respondent No. 3, the assessing authority was satisfied that the petitioner's accounts are complex in nature, voluminous and in the interests of the Revenue and only after forming such opinion had proposed for statutory audit. Voluminous nature was only one of the factors recorded by him. In fact, the requirement of Section 142(2A) of the Act had been fulfilled in the present case. This Court in the case of Jhunjhunwala Vanaspati Ltd. [2004] 266 ITR 657 has held that (headnote):
A bare perusal of Sub-section (2A) of Section 142 of the Income-tax Act, 1961, shows that all that is required therein is that the Assessing Officer should be of the opinion that in view of the nature and complexity of the accounts of the assessee and the interest of the Revenue it is necessary to direct special audit of the assessee's account. It is not necessary for the Assessing Officer to give a show cause notice or a hearing to the assessee before issuing the direction under Section 142(2A). The direction under Sub-section (2A) of Section 142 is purely administrative in nature and not quasi-judicial. Moreover, such a direction does not have civil consequences. It does not affect the assessee's right or liability. The purpose of the direction under Sub-section (2A) of Section 142 is to ensure that a correct assessment order is passed so that the Revenue is not deprived of its dues. The High Court in writ jurisdiction cannot judge the satisfaction of the authority when it ordered the appointment of an auditor after taking note of the nature of the controversy and accounts. The court cannot sit in appeal over the decision of the Income-tax Officer in directing special audit under Section 142(2A).
16. The aforesaid decision has been subsequently followed by this Court in the case of U.P. Financial Corporation v. Joint CIT, C.M.W.P. No. 505 of 1999 decided on October 12, 2004--since . The Bombay High Court in the case of Atlas Copco (India) Ltd. has also followed the aforesaid decision.
17. We are in respectful agreement with the view taken by this Court in the case of Jhunjhunwala Vanaspati Ltd. , and therefore, we do not find any illegality in the order passed under Section 142(2A) of the Act.
18. In view of the foregoing discussions, we do not find any merit in the writ petition. The writ petition is, accordingly, dismissed in limine.
19. However, in the facts and circumstances of the case, the parties are left to bear their own costs.