JUDGMENT M. Katju, J.
1. This writ petition has been filed for quashing the impugned directions and notice dated March 23, 1994 (annexures 5 and 6 to the petition), under Section 142(2A) of the Income-tax Act, 1961. The petitioner has also prayed for a mandamus restraining respondent No. 1, the Assistant Commissioner of Income-tax, Central Circle I, Varanasi, from proceeding in pursuance of the aforesaid directions and notice.
2. Heard learned counsel for the parties.
3. The petitioner is a company registered under the Indian Companies Act. The petitioner established a vanaspati manufacturing unit at Varanasi. It maintains its account on mercantile basis. For the assessment year 1990-91, the petitioner filed a return under the Income-tax Act on December 31, 1990, declaring a loss of Rs. 24,61,860. Notice under Section 143(2) of the Act dated June 18, 1991, was served on the petitioner on June 21, 1991. Thereafter also several notices dated July 15, 1991, July 30, 1991, November 7, 1991, November 9, 1992, etc., were issued to the petitioner asking for various details and making various queries. However, it is alleged in para. 9 of the petition, that at no stage of the assessment proceedings, did respondent No. 1 tell or indicate to the petitioner that the account books of the petitioner were of complex nature and he was finding it difficult to understand, appreciate or apprehend the entries in the account books.
4. It is alleged in para. 10 of the petition that during the assessment in question respondent No. 1 examined the account books of the petitioner in detail and formed a full and final opinion in regard to the assessment of the petitioner. Respondent No. 1 assessed the income of the petitioner at Rs. 62,47,993 vide assessment order dated March 24, 1993 (annexure 1 to the petition). The petitioner filed an appeal to the Commissioner of Income-tax (Appeals), Varanasi on April 20, 1993.
5. It is alleged in para. 14 of the petition that the appeal was heard on 5 or 6 dates, and on each of the dates the assessing authority of the petitioner, namely, respondent No. 1 appeared on behalf of the Department. However, at no point of time and at no stage he stated that the account books of the petitioner were of complex nature and there was difficulty in understanding, appreciating and comprehending the entries in the account books.
6. The Commissioner of Income-tax (Appeals) by his order dated March 15, 1994, allowed the appeal, set aside the assessment order and remanded the matter to the Assessing Officer for fresh assessment. True copy of the appellate order is annexure 3 to the petition.
7. It is alleged in para. 17 of the petition that there is no mention anywhere in the assessment order or appellate order that the account books of the petitioner were of complex nature and there is any difficulty in understanding, appreciating or comprehending the entries in the account books. It is alleged in para. 18 that there is no complexity in the petitioner's account nor are they of such nature that there could be any difficulty on the part of respondent No. 1 to understand, appreciate or comprehend the same. However, on March 24, 1994, the petitioner received directions under Section 142(2A) of the Act, purporting to be dated March 23, 1994, from respondent No. 1. By the aforesaid notice, the petitioner has been directed to get its accounts audited by a chartered accountant and to furnish a report of such audit in the prescribed form, duly signed and verified by the chartered accountant. In the aforesaid directions, one Shri N. C. Agrawal has been appointed by respondent No. 1 as the chartered accountant for this purpose. True copy of the directions is annexure 4. Photostat copy of the relevant provisions of Section 142(2A), (2B), (2C) and (2D) are annexure 4A to the petition.
8. It is alleged in para. 21 of the petition that a perusal of the impugned directions show that they are all in the nature of seeking information which is already on record and which if required can easily be given either by the petitioner or on a bare perusal of the account books. It is alleged that none of the information sought is such that it cannot be obtained either from the petitioner or from looking into the account books.
9. It is alleged in para. 22 of the petition that the directions only say that respondent No. 1 had examined the petitioner's return, profit and loss account, balance-sheet and other documents and also the account books/documents furnished by the petitioner in the course of the assessment proceedings. The direction further states that they have been issued having regard to the nature and complexity of the petitioner's accounts and also on the basis of material on which the assessment has been reopened. Similar direction under Section 142(2A) of the Act has been given by respondent No. 1 in respect of the assessment year 1991-92 (vide annexure 5 to the petition). It is alleged that this direction does not mention the basis on which this direction is given nor is it accompanied by any annexure. The narrative of this direction does not mention that it is founded on information on the basis of which the assessment has been reopened.
10. It is alleged in paras. 25 and 26 of the petition that for the assessment years 1990-91 and 1991-92 the account books of the petitioner were audited by the authorised chartered accountant.
11. It is alleged in para. 27 of the petition that the impugned directions under Section 142(2A) have been issued to the petitioner without issuing any show cause notice as to why such directions be not issued. It is implicit that opportunity of hearing should be given to a party before issuing the directions under Section 142(2A) of the Act. It is alleged that the impugned directions are violative of the rights of the petitioner and prejudicial to its interest.
12. It is alleged in para. 32 of the petition that under the impugned directions there is no mention worth the name of any entry or aspect of the account books on the basis of which it could be said that the account books of the petitioner are of such nature and of such complexity that they require a special audit under Section 142(2A) of the Act. There is no finding that the account books are of complex nature, and that the accounts cannot be appreciated without a special order. Hence, it is alleged that the impugned directions are wholly illegal and without jurisdiction.
13. The petitioner has also alleged that the proceedings under Section 148 are in violation for the assessment year 1990-91.
14. A counter affidavit has also been filed and we have perused the same.
15. In para. 3(a) of the counter affidavit it is mentioned that for the assessment year 1990-91, the petitioner filed the return claiming a loss of Rs. 24,61,860. The assessment was, however, finalised on an income of Rs. 62,47,990. Addition of Rs. 62,47,993 was made under Section 68 in respect of certain credits appearing in the account books of the petitioner whose genuineness could not be established by the petitioner. Besides, the claim of depreciation and investment allowance were also denied as the petitioner could not give satisfactory evidence about acquisition and installation of the plant and machinery and its claim that the plant and machinery were fabricated locally was found to be false since M/s. Sudha Industries through whom most of the machinery was claimed to be fabricated, was found to be non-existent.
16. In para. 3(b) of the counter affidavit it is mentioned that the petitioner avoided furnishing information in the course of assessment proceedings about the manufacturers/dealers through whom the plant and machinery were purchased. The petitioner's claim that the plant and machinery were locally fabricated after procuring steel and other parts did not appear to be convincing considering the fact that the plant for manufacture of vanaspati required sophisticated machinery and there were not many manufacturers of vanaspati plants. Enquiries were pursued in this regard in the course of assessment for the assessment year 1991-92. It was, then found that the other fabricator, M/s. Bharat Fabricator, was also not traceable at the address furnished by the petitioner-company.
17. The petitioner showed investment as on March 31, 1990, of Rs. 35,78,717 claiming that the aforesaid plant and machinery have been fabricated through certain parties. However, these parties were not found at the addresses given by the petitioner and it could not be believed that the sophisticated plant and machinery for manufacture of vanaspati could have been fabricated on payment of Rs. 1,02,122.
18. The Chief Director, Ministry of Food and Civil Supplies, Directorate of Vanaspati, Government of India, sent a report to the Director of Income-tax, New Delhi, stating that such a plant costs three crores.
19. Thus it is evident that the information furnished by the petitioner was incorrect. In para. 3(b) of the counter affidavit it is stated that from the facts it is evident that investment in plant and machinery for the assessment year 1990-91 has been understated by Rs. 1,12,98,883. Thus there was reason to believe that understated investment assessable to tax escaped assessment in the relevant assessment year. Hence, notice under Section 148 was issued on March 18, 1994.
20. In para. 4 of the counter affidavit it is stated that for the assessment year 1991-92 the return of income was filed by the petitioner along with the profit and loss account and balance-sheet audited by M/s. Garg and Company, Calcutta, chartered accountant. The report of the statutory auditor clearly shows that the petitioner did not maintain proper records snowing full particulars of the fixed assets. The relevant part of the said report of the auditors of the petitioner-company clearly mentions that the company has not maintained proper records showing full particulars including details and situation of fixed assets.
21. In para. 5 of the counter affidavit it is stated that apart from the aforesaid remarks of the auditors, schedule 16 to the notes on accounts submitted by the petitioner's auditor show that various items are subject to confirmation and reconciliation with the seized books and records.
22. In para of the counter affidavit it is stated that when the deponent made scrutiny of the stock register, the production in the various months as compared to the actual consumption of oil was almost an impossibility. The production in the month of January, 1991, is about 134 per cent, of the actual consumption. Moreover, as per auditor's report, the total consumption is 1166.883 m.t., whereas the same is only 1147.513 m. t. as per stock register. All these facts show the complexity and intricacy of the account books specially those relating to arrival of raw materials, consumption, yield, shortage and wastage. These are most complicated and require special audit by a qualified chartered accountant.
23. Apart from that there are several units belonging to the Jhunjhunwala group and between these concerns there are a large number of transactions of money but adjustments have been made by books entries, which require proper verification. These adjustment entries have been passed in a very complex manner. Details are given in para. 11 of the counter affidavit.
24. In para. 12 of the counter affidavit it is stated that in the book entries out of 809 book entries for the assessment year 1991-92, 397 entries were made only on the last date on March 31, 1991, and these adjustments have been made in a very complex manner.
25. In para. 14 it is stated that big factories are run by the Jhunjhunwala group. The family members are assessees but the details of returned income of the money are so meagre which clearly show that the investment appears to have been made from unaccounted source.
26. In paras. 15 to 22 of the counter affidavit it is stated that approval was sought for from the Commissioner of Income-tax (Central), Kanpur, by submitting a detailed proposal. The proposal mentioned in annexure CA4 gives full details about the complexity of the account and the interest of the Revenue. The Commissioner of Income-tax (Central), Kanpur, granted approval, vide para 22.
27. From the facts of the case, we find no merit in this petition. It is evident from these facts that the petitioner's accounts are complex in nature and hence they require special audit.
28. Section 142(2A) of the Income-tax Act states :
"If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts of the asses-see 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."
29. A bare perusal of Sub-section (2A) of Section 142 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 accounts.
30. In our opinion, it is not necessary for the Assessing Officer to give a show cause notice or give a hearing to the assessee before issuing the directions under Section 142(2A). In our opinion, the direction under Sub-section (2A) of Section 142 is purely administrative in nature and not quasi judicial. Moreover, in our opinion, such a direction does not have civil consequences. It does not affect the assessee's rights or liability. Hence, the decision of the Supreme Court in State of Orissa v. Dr. Binapani Dei, AIR 1967 SC 1269 does not apply. No doubt an administrative order if it has civil consequences can only be passed after giving opportunity of hearing, but in our opinion a direction under Sub-section (2A) of Section 142 does not have civil consequences because it does not affect his rights and does not create any liability against the assessee. It is only the assessment order which will create a 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. Hence, we do not agree with learned counsel for the petitioner that an opportunity of hearing or show cause notice has to be given to the assessee before passing the direction under Section 142(2A).
31. Detailed reasons have been given in annexure CA 4 to the counter affidavit about the complexity of the accounts of the petitioner, the suppression of investment, etc.
32. In Gurunanak Enterprises v. CIT [2003] 259 ITR 637, the Delhi High Court observed (page 646) :
"It is not within the province of judicial review to minutely analyse the materials on which the opinion of the Assessing Officer is rested to find out whether the same is sufficient for the authority concerned to come to the conclusion that the accounts of the assessee need to be subjected to special audit. As noticed above, what is complex to one may be simple to another and, therefore, the issue has to be examined from the view point of the Assessing Officer concerned. The court is not expected to substitute its own understanding and comprehension of the accounts of an assessee.
We also do not find any substance in the submission of learned counsel for the petitioners that merely because no special audit under the said provision had been directed in the past several years or that their accounts had already been subjected to statutory audit under Section 44AB of the Act and the petitioners' assessments were completed without noticing any complexity in the accounts, the Assessing Officer is denuded of his power to order special audit subsequently, even though the nature of business and the method of accounting adopted by the assessee had remained the same as in the past. If the facts and circumstances so warrant, a special audit under Section 142(2A) may be ordered in respect of any year."
33. In Kumar Films Pvt. Ltd. v. CIT [2002] 258 ITR 257, the Patna High Court held that the High Court in writ jurisdiction cannot judge the satisfaction of the authority when it has ordered for appointment of an auditor after taking note of the nature of the controversy and accounts. We agree with the view of the Patna High Court also.
34. In Living Media Ltd. v. CIT [2002] 255 ITR 268, the Supreme Court affirmed the judgment of the Delhi High Court in this connection.
35. In U.P. State Handloom Corporation Ltd. v. CIT [1988] 171 ITR 640, the Allahabad High Court upheld the directions under Section 142(2A).
36. In Swadeshi Cotton Mills Co. Ltd. v. CIT [1988] 171 ITR 634, a Division Bench decision of this court held that the satisfaction of the Income-tax Officer while issuing direction under Section 142(2A) has to be on an objective assessment, regard being had to the nature of accounts. The Division Bench on the facts of the case upheld the direction under Section 142(2A).
37. In our opinion, this court cannot sit in appeal over the decision of the Income-tax Officer in directing special audit under Section 142(2A). As held by the Supreme Court in Tata Cellular v. Union of India, AIR 1996 SC 11, this court has a very limited scope for interference with administrative directions.
38. In the very recent decision of the Division Bench of this court in Pushpak Jyoti v. State of U.P., decided on December 11, 2003, this court explained in detail the theory of judicial restraint while examining the power of judicial review of administrative decisions. In Pushpak Jyoti's case (supra) this court considered the entire case law including the decision of the U. S. Supreme Court in this connection, and was of the view that the court should exercise judicial restraint in such matters.
39. For the reasons given above, there is no merit in this petition and it is accordingly dismissed.