JUDGMENT
1. By means of the present writ petition filed under Article, 226 of the Constitution of India, the petitioner, Ghaziabad Urban Cooperative Bank Ltd. seeks the following relief:
(i) To issue a writ, order or direction in the nature of certiorari, quashing the notice dated 28.3.2006 issued by the 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 the respondent 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 cooperative society registered under the provisions of U.P. Cooperative 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 return of income on 21st October, 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 the Cooperative 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 25.10.2005, 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 9th December, 2005. Another notice was issued on 4th January, 2006 and 14th February, 2006 calling upon the petitioner to furnish certain more informations, to which the petitioner submitted its reply on 28th February, 2006, 6* March, 2006 and 20th March, 2006. However, vide order dated 28th March, 2006, the petitioner has been informed by the respondent No. 3 that M/s. Banshal Gupta and Associates, Ghaziabad have been appointed as Special Auditor under Section 142(2A) 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 Special Auditor has been appointed on the ground that the respondent No. 3 did not have any material before him for forming an opinion regarding the nature of complexity of the accounts of the petitioner and further the interest 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 U.P. Cooperative 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 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 was not being submitted by the petitioner and the limitation was going to expire on 31st March, 2006. The petitioner's representative has noted the next date as 8th February, 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 7th March, 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 7th March, 2006, the respondent No. 3 vide letter dated 24th March, 2006 sought approval for appointment of the Special Auditor under Section 142(2A) 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(2A) of the IT. Act, 1961 in the interest of the revenue.
5. The Commissioner of Income Tax had examined the proposal of the respondent No. 3 and communicated the approval for appointment of M/s. Banshal Gupta & Associates as Special Auditor under Section 142(2A) of the Act vide letter dated 27th March, 2006, which was communicated to the petitioner.
6. In the rejoinder affidavit, it has been stated that recourse to Section 142(2A) 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(2A) 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 the 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(2A) 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, Special Auditor under Section 142(2A) of the Act had been appointed. He further submitted that merely because the books of accounts and other documents are voluminous in nature, that itself does not give the power to the respondent No. 3 to order for a special audit under Section 142(2A) of the Act. According to him, special audit can only be ordered when the preconditions of Sub-section (2A) of Section 142 is 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 interest 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 Commissioner of Income Tax and Ors., .
11. Shri R.K. Upadhyay, 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 cooperating and not furnishing the required details and was not producing its books of accounts 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 accounts, the complexity of accounts maintained by the petitioner as also taking into consideration the interest 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 accounts maintained by the petitioner.
12. In support of his various plea, he has relied upon the following decisions:
1. Jhunjhunwala Vanaspati Ltd. v. Assistant Commissioner of Income Tax and Anr. .
2. Atlas Copco (India) Ltd. v. V.S. Samuel, Assistant Commissioner of Income Tax and Ors. .
13. He further submitted that the decision of the Calcutta High Court in the case of West Bengal State Cooperative Bank Ltd. (supra) relied upon by the learned Counsel for the petitioner, has been dissented by the Bombay High Court in the aforesaid case of Atlas Copco (India) Ltd. (supra) and it has followed the decision of this Court in the case of Jhunjhunwala Vanaspati Ltd. (supra).
14. We have given our anxious consideration to the various plea raised by the 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 25th October, 2005. The petitioner was required to furnish details and other explanations and produce the books of accounts 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 informations 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 accounts and other documents maintained by the petitioner, as also the complexity of its accounts and in the interest 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 the 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 Cooperative Bank Ltd. (supra) is concerned, it has held that merely because the accounts 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, the respondent No. 3, the assessing authority was satisfied that the petitioner's accounts are complex in nature, voluminous and in the interest of 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 has been fulfilled in the present case. This Court in the case of Jhunjhunwala Vanaspati Ltd. (supra) has held that:
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 rights 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 Ltd. v. C.I.T. CMWP No. 505 of 1999 decided on. The Bombay High Court in the case of Atlas Copco (India) Ltd. (supra) 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. (supra), 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. 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.