M/s. P.N. Gadgil & Co., (Silver), Pune V. Assistant Commissioner of Income-tax,

ITA 1627/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6953 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-12-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 10-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Unexplained investment; Opportunity of being heard; Principle of natural justice; Rule of consistency; Period of limitation; Reassessment proceedings
• Section: 40A(3); 153A; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.1196 TO 1202/PUN/2015 / ASSESSMENT YEARS : 2000-01 & 2006-07 M/S. P.N. GADGIL & CO. (GOLD), PNG HOUSE, 693, NARAYAN PETH, LAXMI ROAD, KUNTE CHOWK, PUNE 411 030 PAN : AABFP4764H . /APPELLANT VS. ACIT, CENTRAL CIRCLE-1(2), PUNE . / RESPONDENT . / ITA NOS.1626 TO 1632/PUN/2015 / ASSESSMENT YEARS : 2000-01 & 2006-07 M/S. P.N. GADGIL & CO. (SILVER), PNG HOUSE, 693, NARAYAN PETH, LAXMI ROAD, KUNTE CHOWK, PUNE 411 030 PAN : AAFFP8483R . /APPELLANT VS. ACIT, CENTRAL CIRCLE-1(2), PUNE . / RESPONDENT . / ITA NO.1539/PUN/2015 / ASSESSMENT YEAR : 2006-07 DCIT, CENTRAL CIRCLE-1(2), PUNE . /APPELLANT VS. M/S. P.N. GADGIL & CO. (GOLD), 693, NARAYAN PETH, LAXMI ROAD, KUNTE CHOWK, PUNE 411 030 PAN : AABFP4764H . / RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK & SHRI M.R. BHAGWA T REVENUE BY : SHRI RAJEEV KUMAR, CIT / DATE OF HEARING : 06.12.2017 / DATE OF PRONOUNCEMENT: 13.12.2017 M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 2 / ORDER PER BENCH : THERE ARE TOTAL 15 APPEALS UNDER CONSIDERATION FILE D BY TWO DIFFERENT ASSESSEES INVOLVING ASSESSMENT YEARS 2000 -01 TO 2006-07. SEVEN APPEALS BEARING ITA NOS. 1196 TO 1202/PUN/2015 PERTAINS TO M/S. P.N. GADGIL & CO. (G OLD); WHEREAS ANOTHER SET OF SEVEN APPEALS BEARING ITA NO S. 1626 TO 1632/PUN/2015 PERTAINS TO M/S. P.N. GADGIL & CO. (S ILVER). ALL THESE APPEALS ARE FILED AGAINST THE SEPARATE ORDERS OF CIT(A)-11, PUNE DATED 29-05-2015 & 28-09-2015 RESPECTIVELY. FU RTHER, THE ITA NO.1539/PUN/2015 IS THE ONLY APPEAL FILED BY TH E REVENUE FOR A.Y. 2006-07 AND THE SAME CONSTITUTES CROSS APP EAL AGAINST THE APPEAL OF THE ASSESSEE PERTAINING TO M/S. P.N. GADGIL & CO. (GOLD). 2. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE I DENTICAL, THEREFORE, THESE APPEALS WERE CLUBBED AND ADJUDICAT ED IN THIS COMPOSITE ORDER. 3. WE SHALL TAKE UP THE FIRST SEVEN BUNCH OF APPEAL S (M/S. P.N. GADGIL & CO. (GOLD) AND REFER TO FACTS AND ISS UES IN ITA NO.1196/PUN/2015. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE EXTRACTED AS UNDER : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE TO EACH OTHER - ON FACTS AND IN LAW , 1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE SE A R CH ACTION U/S. 132 WAS CONDUCTED ON THE ASSESSEE FIRM AND HENCE, T HE LEARNED A.O. WAS JUSTIFIED IN ASSUMING JURISDICTION U/S. 153A AN D COMPLETING THE ASST . ACCORDINGLY. 1 . 1] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING TH AT THE PROCEEDINGS U/S 153A ARE WRONGLY INITIATED - IN THE CASE OF THE ASSESSEE AS THERE WAS NO SEARCH CONDUCTED BUT ONLY A SURVEY M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 3 OPERATION WAS CONDUCTED ON THE ASSESSEE AND THE PRO VISION U/S.153A WERE NOT APPLICABLE AND HENCE, THE ASST . COMPLETED U/S. 153A WAS NULL AND VOID. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RE FERENCE MADE BY THE LEARNED A . O. FOR SPECIAL AUDIT WAS VALID AND ACCORDINGLY , THE ASSESSMENT COMPLETED WAS WITHIN THE LIMITATION PERI OD. 2.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE REFERENCE FOR SPEC I AL AUDIT U/S 142(2A) WAS NOT VALID IN VIEW OF THE R AJASTHAN H. C. DECISION IN THE CASE OF BAJARANG TEXTILES [294 I TR 561] HENCE, THE TIME LIMIT FOR COMPLETION OF ASST. COULD NOT BE EXTE NDED BY THE PERIOD OF SPECIAL AUDIT ALLOWED U/S 142(2A) AND THEREFORE, THE ASSESSMENT ORDER WAS BARRED BY LIMITATION. 3] THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDIT ION OF UNEXPLAINED INVESTMENT IN GOLD OF 11365 GMS AMOUNTI NG TO RS. 48 , 07,395/- . 3.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE CLOSING STOCK AS ON 31 . 03.1999 WAS UNDERVALUED BY 11365 GMS AND HENCE , THERE WAS NO REASON TO MAKE ANY ADDITION ON ACCOUNT OF UNE XPLAINED INVESTMENT IN GOLD AS ON 01 . 04.1999. 4] THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDIT ION OF RS . 41,06 , 948/- MADE ON ACCOUNT OF PURITY GAIN COMPUTED BY TH E LEARNED A.O. ON THE BASIS OF THE REPORT SUBMITTED B Y THE SPECIAL AUDITOR. 4.1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE AB OVE ADDITION MADE BY THE LEARNED A.O. OF RS . 41,06 , 948/- WITHOUT APPRECIATING THAT THE NO INCRIMINATING EVIDENCE WAS FOUND IN THE COURSE OF SEARCH IN RESPECT OF THE SAID ISSUE AND HENCE, NO SUCH ADD ITION COULD BE MADE IN THE ASST . COMPLETED U / S. 153A. 4.2] THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADD ITION OF RS . 41,06,948/- MADE ON ACCOUNT OF PURITY GAIN WHICH CO MPRISED OFF UNDISCLOSED SALES OF RS.36,29 , 744/- AND EXCESS STOCK WORKED OUT BY THE SPECIAL AUDITOR OF RS . 4,77,204/-. 4 . 3] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING TH AT THE SAID ADDITION WAS MADE BY THE LEARNED A.O. ON THE BASIS OF THE SPECIAL AUDITOR ' S REPORT U/S.142(2A) WITHOUT EVEN ' CONSIDERING THE ASSESSEE ' S SUBMISSIONS ON THIS ISSUE. 4 . 4] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT- A. THE SPECIAL AUDITOR HAD NOT CONSIDERED THE CORRECT FACTS OF THE CASE IN DRAWING A FRESH QUANTITATIVE TRADING ACCOUN T . B. THE APPELLANT'S DAILY STOCK REGISTER ON THE COMPUTE R HAD ALREADY INCLUDED THE PURITY GAIN IN THE DAY TO DAY CLOSING STOCK AND ACCORDINGLY, THE PURITY GAIN AS WORKED OUT BY THE S PECIAL AUDITOR WAS EMBEDDED IN THE CLOSING STOCK SHOWN BY THE ASSE SSEE AND MAKING AN ADDITION OF PURITY GAINS AMOUNTED TO DOUB LE ADDITION IN THE HANDS OF THE ASSESSEE. C. THE ENTIRE PURITY GAIN DID NOT CONSTITUTE ACCRETION IN THE GOLD QUANTIT Y IN THE HANDS OF THE APPELLANT AND HENCE, THERE WAS NO JUSTIFICATION IN MAKIN G ADDITION ON ACCOUNT OF THE SAME. M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 4 D. THERE WAS NO JUSTIFICATION FOR HOLDING THAT THE ALL EGED UNACCOUNTED PURITY GAIN WAS INTRODUCED IN THE FORM OF BOGUS URD PURCHASES. E. THE APPELLANT FOR A FEW YEARS FROM A.Y. 2000 - 01 T O A.Y. 2006 - 07 HAD REPORTED HIGHER QUANTUM OF INCOME THAN WHAT WAS WORKED OUT BY THE SPECIAL AUDITOR AND THE OVER ALL EFFECT ALSO FOR ALL THESE SEVEN YEARS TOGETHER WAS THAT THE APPELLANT HAD SHOWN HIGHER AMOUNT OF INCOME THAN WHAT WAS WORKED OUT BY THE SPECIAL AUDITOR. F. THE SPECIAL AUDITOR WHILE WORKING OUT THE ADDITIONS ON ACCOUNT OF PURITY GAIN/STOCK QUANTITY HAD NOT CONSIDERED THE C ORRECT FACTS. G. IF THERE WAS RESULTANT ADDITION TO THE STOCK FURTHE R ON ACCOUNT OF THE ALLEGED PURITY GAIN AS REPORTED BY THE AUDITOR, THE STOCK AT THE TIME OF SURVEY WAS NOT FOUND IN EXCESS OF THE STOCK AS PER BOOKS IMPLYING THEREBY THAT THERE WAS NO SUCH UNACCOUNTED PURITY GAIN AVAILABLE TO THE APPELLANT . H. THE SPECIAL AUDITOR HAD ERRED IN COMPUTING THE ADDI TION ON ACCOUNT OF THE PURITY GAIN 1 EXCESS STOCK BY INCORRECTLY HOLDING THAT THE CLOSING STOCK SHOWN BY THE APPELLANT IN TH E RETURNS FOR ALL THESE YEARS WAS A CORRECT FIGURE. I. THE INCOME AS PER ' THE PRESENT SET OF ACCOUNTS WHICH ARE CHECKED BY THE SPECIAL AUDITOR OUGHT TO HAVE BEEN TAXED BY ADOPTING THE CLOSING STOCK FOR EACH YEAR AS PER THOSE ACCOUNTS I NSTEAD OF PICKING AND CHOOSING CERTAIN FIGURES FROM THE PRESE NT ACCOUNT AND CERTAIN FIGURES FROM THE EARLIER SET OF ACCOUNTS ON THE BASIS OF WHICH THE RETURNS WERE FILED FOR THE RESPECTIVE YEA RS. J. THE ADDITIONS ON ACCOUNT OF EXCESS STOCK/PURCHASES AS WORKED OUT BY HIM OUGHT TO HAVE BEEN SET-OFF AGAINST THE A DDITIONS MADE BY HIM FOR AN EARLIER PERIOD. 4.5] WITHOUT PREJUDICE TO GROUND NOS. 3 & 3.1 RAIS ED BY THE ASSESSEE FIRM, IN CASE, THE SAID ADDITION IS CONFIR MED, IT IS SUBMITTED THAT SET OFF OF 11365 GMS SHOULD HAVE BEEN GRANTED WHILE COMPUTING THE INCOME OF THE ASSESSEE. 5] THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDIT ION OF RS. 6,68,464/- ON ACCOUNT OF MAJURI CHARGES ADDED TO TH E STOCK VALUATION WITHOUT APPRECIATING THAT THE NO INCRIMINATING EVIDE NCE WAS FOUND IN THE COURSE OF SEARCH IN RESPECT OF THE SAID ISSUE A ND HENCE, NO SUCH ADDITION COULD BE MADE IN THE ASST . COMPLETED U/S. 153A. 5.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT- A. THE ASSESSEE'S METHOD OF VALUING THE STOCK AT COST WITHOUT INCLUDING MAJURI CHARGES WAS ACCEPTED BY THE DEPT . OVER THE YEARS AND HENCE, IN VIEW OF THE PRINCIPLE OF CONSISTENCY, THE SAME METHOD OUGHT TO HAVE BEEN FOLLOWED. B. A SUBSTANTIAL PART OF THE STOCK WITH THE ASSESSEE A T ANY POINT OF TIME WAS THAT OF OLD ORNAMENTS PURCHASED FROM TH E VARIOUS PERSONS AND THERE WAS NO QUESTION OF LOADING MAJURI CHARGES TO THE COST OF SUCH ITEMS IN STOCK. M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 5 6] THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDIT ION OF RS. 57,535/- U/S. 40A(3) OF THE ACT VALUATION WITHOUT APPRECIATI NG THAT THE NO INCRIMINATING EVIDENCE WAS FOUND IN THE COURSE OF SEARCH IN RESPECT OF THE SAID ISSUE AND HENCE, NO SUCH ADDITI ON COULD BE MADE IN THE ASST. COMPLETED U/S. 153A. 6.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE MADE U/S. 40A(3) WAS ON PRESUMPTIONS AND SURMISES W ITHOUT ANY CONCRETE EVIDENCE THAT THE ASSESSEE HAD MADE PAYMEN TS IN EXCESS OF RS. 20,000/- AND HENCE, THE DISALLOWANCE MADE SHOULD HAVE BEEN DELETED . 6.2] WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT NO DISALLOWANCE U/S. 40A(3) CAN BE MADE WHEN THE BOOKS OF THE ASSES SEE ARE REJECTED AND ACCORDINGLY , THE DISALLOWANCE MADE U/S. 40A(3) SHOULD HAVE BEEN DELETED. 7] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL . 4. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT ADJUDICATION OF THE REVENUES APPEAL-ITA NO.1539/PU N/2015 BECOMES AN ACADEMIC EXERCISE, IN CASE THE APPEALS O F THE ASSESSEE ARE ALLOWED ON LEGAL ISSUE RELATING TO THE LIMITATION. ASSESSEE RAISED LEGAL GROUNDS IN THIS REGARD. 5. ADDITIONAL GROUND AOS FAILURE TO GRANT REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE PROVIS O TO SECTION 142(2A) OF THE ACT - BRINGING OUR ATTENTION TO THE GROUNDS OF EACH OF TH E APPEALS OF THE ASSESSEE, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THE BACKGROUND FACTS RELATING TO RAISING OF THE LEG AL AND OTHER GROUNDS. IT IS THE LEGAL GROUND OF THE ASSESSEE TH AT THE ASSESSMENTS MADE U/S.153A OF THE ACT ARE TIME-BARRE D. FOR SPECIFYING THE REASONING FOR SUCH AN ARGUMENTS, LD. COUNSEL FILED AN ADDITIONAL GROUND IN CASE OF BOTH THE ASSE SSEES, I.E. M/S. P.N. GADGIL & CO. (GOLD) AS WELL AS M/S. P.N. GADGIL & CO. (SILVER) AND SUBMITTED THAT THE ADJUDICATION OF THE COMMON ADDITIONAL GROUND TO ALL APPEALS NEEDS TO BE CONSID ERED FIRST AS M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 6 THE SAME GOES TO THE ROOT OF THE ISSUES, I.E. VALID ITY OF THE ASSESSMENT MADE BY THE AO U/S.153A R.W.S.143(3) OF THE ACT. 6. ADDITIONAL GROUND - DEVIATING FROM THE GROUNDS RAISED BY THE ASSESSEES IN THE APPEALS, LD. COUNSEL FOR THE A SSESSEE BROUGHT OUR ATTENTION TO THE SAID ADDITIONAL GROUND AND READ OUT THE SAME. THE SAID COMMON ADDITIONAL GROUND IS EXT RACTED AS UNDER : AS THE A.O. HAS NOT GIVEN AN OPPORTUNITY OF HEARIN G TO THE ASSESSEE AS PER THE PROVISO TO SECTION 142(2A), THE ORDER U/ S. 142(2A) IS BAD IN LAW AND ACCORDINGLY, THE TIME LIMIT FOR COMPLETION O F ASST. CANNOT BE EXTENDED BY THE TIME GIVEN FOR SPECIAL AUDIT AND HE NCE, THE ASST. ORDER IS BARRED BY LIMITATION. 7. WE SHALL FIRST DEAL WITH THE BUNCH OF APPEALS PE RTAINING TO M/S. P.N. GADGIL & CO. (GOLD) ITA NOS.1196 TO 1202/PUN/2015. FOR THE SAKE OF REFERENCE, WE PROCE ED TO REFER TO THE FACTS AND ISSUE IN ITA NO.1196/PUN/2015 IN CONNECTION WITH THE ADDITIONAL GROUND RAISED BY THE ASSESSEE . 8. BRIEFLY STATED RELEVANT FACTS OF THIS ASSESSEE I NCLUDE THAT THE ASSESSEE IS A FIRM TRADING IN GOLD, BULLION AND GOLD ORNAMENTS. THE ASSESSEE FIRM BELONGS TO THE GADGIL GROUP OF CASES. A SEARCH AND SURVEY ACTION WAS CARRIED OUT IN THE CASE OF GADGIL GROUP OF JEWELERS, SARAFS, EXPORTERS AT PUNE AND SANGLI AND AT THE BUSINESS PREMISES OF THE ASSESSEE FIRM O N TWO OCCASIONS, I.E. ON 26-10-2005 AND 09-03-2006. DURIN G THE SEARCH ACTION, VARIOUS INCRIMINATING DOCUMENTS AND OTHER DISCREPANCIES WERE FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN RESPONSE TO NOTICES U/S.153A(A) OF TH E ACT, THE ASSESSEE FILED THE RETURNS OF INCOME FOR A.YRS. 200 0-01 TO 2005- M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 7 06 ON 07-04-2006. ASSESSEE ALSO FILED RETURN OF IN COME U/S.139 OF THE ACT FOR A.Y. 2006-07 ON 31-10-2006 DECLARING TOTAL INCOME OF RS.5,27,79,520/-. DURING THE COURSE OF A SSESSMENT PROCEEDINGS ON 01-11-2007, AO SENT A PROPOSAL TO TH E CIT (CENTRAL), PUNE U/S.142(2A) FOR SPECIAL AUDIT OF T HE ASSESSEE ON THE GROUND THAT VOLUMINOUS INCRIMINATING DOCUMENTS WERE SEIZED/IMPOUNDED. ON THE BASIS OF SAID PROPOSAL OF AO, CIT CENTRAL, PUNE ISSUED A SHOW CAUSE NOTICE DATED 01-1 1-2007 AND FINALLY ACCORDED HIS APPROVAL FOR CARRYING OUT SPEC IAL AUDIT OF THE ASSESSEE ON 19-11-2007 FOR THE A.YRS. 2000-01 T O 2006-07. EVENTUALLY, THE REPORT OF THE SPECIAL AUDIT WAS SUB MITTED ON 16-06-2008. THE ASSESSMENTS WERE COMPLETED ON 12-0 8-2008. 9. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSMENT MADE BY THE AO U/S.153A OF THE ACT IS BA RRED BY LIMITATION OF TIME. JUSTIFYING THE SAME, LD. COUNS EL SUBMITTED THAT THE PERIOD RELATING TO SPECIAL AUDIT IS REQUIR ED TO BE EXCLUDED FOR DETERMINING THE DUE DATE FOR COMPLETIO N OF THE ASSESSMENT. IN THIS REGARD, LD. COUNSEL MENTIONED THAT THE ORDER OF THE AO FOR REFERRING THE SPECIAL AUDIT U/S .142(2A) OF THE ACT IS ILLEGAL AND IN UNSUSTAINABLE IN LAW AS THE C ONTENTS OF THE PROVISO TO SUB SECTION (2A) OF SECTION 142 OF THE A CT IS NOT APPLIED BY THE AO QUA THE GRANTING OF REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE. AO FAILED TO GRANT R EASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE T HE ORDER FOR SPECIAL AUDIT IS ISSUED. IN THIS REGARD, LD. COUNS EL BROUGHT OUR ATTENTION TO THE EVENT CHART OF THE DATES AND READ OUT THE SAME WHICH IS AS UNDER : M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 8 ACCORDING TO THE DEPARTMENT SEARCH WAS CONDUCTED ON 26/10/2005 NOTICE U/S 153A ISSUED ON 06/03/2006 RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 15 3A ON 07/04/2006 NORMAL TIME BARRING DATE FOR ALL ASSESSMENTS 31/12 /2007 SHOW-CAUSE NOTICE FOR SPECIAL AUDIT U/S 142(2A) ISS UED BY CIT CENTRAL, PUNE 01/11/2007 ORDER OF THE CIT CENTRAL GRANTING APPROVAL FOR SPE CIAL AUDIT 19/11/2007 LETTER FROM ASSESSING OFFICER INTIMATING APPOINTMEN T OF M/S. IRANI & CO AS SPECIAL AUDITORS 17/12/2007 ORDER GRANTING EXTENSION OF TIME FOR SPECIAL AUDIT 01/05/2008 SUBMISSION OF SPECIAL AUDIT REPORT TO THE ASSESSING OFFICER 16/06/2008 ASSESSMENTS U/S. 153A FOR ASSESSMENT YEARS 2000-200 1 TO 2005-2006 COMPLETED ON 12/08/2008 ASSESSMENT U/S. 143 (3) FOR ASSESSMENT YEAR 2006-2 007 COMPLETED ON 12/08/2008 10. FROM THE ABOVE, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE DUE DATE FOR COMPLETION OF THE ASSESSMENTS IS 31-12- 2007 BUT FOR THE SPECIAL AUDIT. THE PROVISO MANDATES THE AO TO ISS UE THE OPPORTUNITY OF HEARING TO THE ASSESSEE. HOWEVER, THE AO NEVER GRANTED OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFO RE SUCH ORDER WAS ISSUED. REFERRING TO THE SHOW CAUSE NOTICE/OR DER OF CIT GRANTING APPROVAL FOR SPECIAL AUDIT, LD. COUNSEL SUBMITTED TH AT THE SHOW CAUSE NOTICE ISSUED BY CIT CENTRAL, PUNE IS INVALID AS THE SAME IS REQUIRED TO BE ISSUED UNDER STATUTE BY THE AO ONLY AND NOT THE CIT CENTRAL, PUNE. WE PROCEED TO EXTRACT THE SAME AS UNDER : TO, M/S. PNG JEWELLERY AND GEMS, 693, NARAYAN PETH, KUNTE CHOWK, LAXMI ROAD, PUNE-30. SIR, SUB : COMPULSORY AUDIT FOR A.Y. 2000-01 TO 2006-0 7- REG. I HAVE RECEIVED A PROPOSAL FROM THE A.O. RECOMMENDI NG COMPULSORY AUDIT IN YOUR CASE. YOU ARE HEREBY GIVEN AN OPPORTU NITY IN VIEW OF PROVISO TO SECTION 142(2A) TO SHOW-CAUSE WHY COMPULSORY AUDIT SHOULD NOT BE ORDERED IN YOUR CASE. M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 9 2. IN THIS REGARD YOUR KIND ATTENTION IS ALSO INV ITED TO PROVISO TO SECTION 142(2D) OF THE I.T. ACT, 1961, AS PER WHICH THE EXP ENSES FOR COMPULSORY AUDIT ARE TO BE PAID BY THE CENTRAL GOVERNMENT. THE COMPULSORY AUDIT THEREFORE SHALL NOT CAUSE ANY FINANCIAL BURDEN ON Y OU. 3. THE GIST OF THE PROPOSAL RECEIVED FROM THE A.O . IS ENCLOSED. 4. THE HEARING IS FIXED FOR 12.11.2007 AT 11.00 A.M . YOURS FAITHFULLY, SD/- ( ARUN KUMAR ) COMMISSIONER OF INCOME TAX (CENTRAL) PUNE. 11. THE ABOVE LETTER IS SELF-EVIDENT THAT IT WAS THE CIT (CENTRAL), PUNE WHO GRANTED THE OPPORTUNITY TO THE ASSESSEE IN V IEW OF THE PROVISO TO SECTION 142(2A) OF THE ACT. THERE IS NO DISPUTE ON THIS FACT OF THE MATTER AND IT IS NOT THE CASE BOTH THE AO A S WELL AS THE CIT GRANTED SUCH AN OPPORTUNITY TO THE ASSESSEE. 12. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT COMPLETION OF ASSESSMENT ON 12-08-2008 AGAINST THE DUE DATE OF 31- 12-2007 CONSTITUTES TIME BARRED ONES. THE PERIOD OF SPE CIAL AUDIT IS REQUIRED TO BE EXCLUDED DUE TO THE ILLEGALITY OF IT AND E XPLAINING THE SAME, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATT ENTION TO THE PROVISIONS OF SECTION 142(2A) OF THE ACT AND READ OUT THE SAME TO DEMONSTRATE THE LEGAL REQUIREMENT OF GRANTING REASONABLE OPPORTUNITY TO THE ASSESSEE BY THE AO AS PER THE PRO VISO TO SAID SECTION 142(2A) OF THE ACT. LD. COUNSEL SUBMITTED THAT THE CIT (CENTRAL) ERRED IN ISSUING SUCH SHOW CAUSE NOTICE INSTEAD OF THE AO. 13. LEGAL PRECEDENTS ON THE ISSUE OF GRANTING OF OPPORT UNITY BY THE AO - FURTHER, LD. COUNSEL FOR THE ASSESSEE ALSO BROUGHT OU R ATTENTION TO THE JUDGMENTAL PRECEDENTS ON THIS ISSUE A ND SUBMITTED THAT IDENTICAL ISSUE CAME UP FOR ADJUDICATION BY THE PUNE BENCH OF M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 10 THE TRIBUNAL IN THE CASE OF ITO (CENTRAL), KOLHAPUR VS. VILSONS PARTICLE BOARD INDUSTRIES LTD. IN ITA NO.447/PN/2013, ITA NOS. 309 & 310/PN/2015 & ITA NOS. 448 & 449/PN/2013 RELATING T O ASSESSMENT YEARS 2004-05 TO 2006-07, ORDER DATED 21- 12-2016 AND ALSO IN THE CASE OF MAHARASHTRA ACADEMY OF ENGINEERING AND EDUCATIONAL RESEARCH VS. DCIT CENTRAL CIRCLE-1(1), PUNE IN ITA NOS. 915 TO 920/PUN/2012 RELATING TO ASSESSMENT YEARS 1999 -2000 TO 2004-05, ORDER DATED 10-02-2017. THE FACT OF TRIBUNAL GR ANTING RELIEF TO THE ASSESSEES ON THIS ISSUE OF REQUIREMENT OF AO GRANTING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE ORDER OF REFERRAL U/S.142(2A) OF THE ACT IS ISSUED. ACCORDING TO THE LD. COUNSEL, THE TRIBUNAL HAS CATEGORICALLY STATED THAT THE C IT CANNOT GRANT OPPORTUNITY IN THE SAID PROVISO TO SECTION 142(2A) OF THE ACT. 14. PER CONTRA, ON THIS ADDITIONAL GROUND, LD. CIT-DR SHRI R AJEEV KUMAR, RELIED HEAVILY ON THE ORDER OF THE AO AND THE FINDIN G OF THE CIT(A). AS PER THE LD. DR, THE REQUIREMENT OF GRANTING OPP ORTUNITY BY THE AO IS A CURABLE DEFECT UNDER THE PROVISIONS OF SEC TION 292B OF THE ACT. RELYING THE JUDGMENT OF HONBLE CALCUTTA HIGH C OURT IN THE CASE OF CIT VS. SHYAMAL SARKAR REPORTED IN 84 TAXMANN.COM 146, LD. DR MENTIONED WHERE AUDIT HAS TAKEN PLACE, THE PERIOD OF LIMITATION FOR PASSING THE ASSESSMENT ORDER WOULD BE EXTEN DED BY TIME TAKEN FOR SPECIAL AUDIT, MERE IRREGULARITIES IN THE ORDE R OF AUDIT COULD NOT INVALIDATE THE PROCEEDINGS. HOWEVER, HE FAIRLY SU BMITTED THAT THE IRREGULARITIES, IF ANY, NOTED IN THE SAID CASE DOES NOT RELATE TO THE GRANTING OF OPPORTUNITY BY THE AO TO THE ASSES SEE AT THE TIME OF ORDER REFERRING TO THE SPECIAL AUDIT. HE ALSO SUBMITTED THAT THE ASSESSEE COOPERATED WITH THE SPECIAL AUDIT AS WELL AS THE M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 11 ASSESSMENT PROCEEDINGS AND RAISING OF SUCH A GROUND AT THIS POINT OF TIME NEED NOT BE ENTERTAINED. DECISION OF THE TRIBUNAL - LEGAL ISSUE 15. WE SHALL NOW TAKE UP THE LEGAL ISSUE FOR ADJUDICATION CONSIDERING THE ABOVE ARGUMENTS AND CITATIONS BY BOTH THE PARTIES. TO START WITH WE EXTRACT THE RELEVANT PROVISIONS OF SECT ION 142(2A) OF THE ACT. [(2A) IF, AT ANY STAGE OF THE PROCEEDINGS BEFORE H IM, THE [ASSESSING] OFFICER, HAVING REGARD TO [THE NATURE AND COMPLEXIT Y OF THE ACCOUNTS, VOLUME OF THE ACCOUNTS, DOUBTS ABOUT THE CORRECTNES S OF THE ACCOUNTS, MULTIPLICITY OF TRANSACTIONS IN THE ACCOUNTS OR SPE CIALIZED NATURE OF BUSINESS ACTIVITY OF THE ASSESSEE, AND ] THE INTERE STS OF THE REVENUE, IS OF THE OPINION THAT IT IS NECESSARY SO TO DO, HE MAY, WITH THE PREVIOUS APPROVAL OF THE [PRINCIPAL CHIEF COMMISSIO NER OR ] CHIEF COMMISSIONER OR [PRINCIPAL COMMISSIONER OR] COMMISSIO NER], DIRECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED BY AN ACCO UNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288, NOMINATED BY THE [PRINCIPAL CHIEF COMMISSIONER OR] C HIEF COMMISSIONER OR [PRINCIPAL COMMISSIONER OR] COMMISSIO NER] IN THIS BEHALF AND TO FURNISH A REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SET TING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED AND SUCH OTHER PAR TICULARS 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 .] THE ABOVE PROVISO IS CATEGORICAL IN EXPRESSLY PROVIDING FOR THE LEGAL REQUIREMENT OF GRANTING OPPORTUNITY BY THE AO BEFORE DIRECTING THE ASSESSEE TO GET THE ACCOUNTS AUDITED. 16. WE SHALL NOW PROCEED TO EXAMINE THE FACTS RELATING TO GRANTING OF SUCH OPPORTUNITY BY THE AO. IN THIS REGARD, WE PERUS ED THE CONTENTS OF PARA NO.5.5, 5.5.1, 5.5.4 ETC., OF THE CIT(A)S ORDER FOR WANT OF FACTS RELATING TO GRANTING OF OPPORTUNITY AND THE STAND OF THE CIT(A) ON THIS ISSUE. IN PARA NO.5.5, THE CIT(A) NARRATED TH E SEQUENCE OF EVENTS AS WELL AS LD. ARS CONTENTION BEFORE HIM ABOUT THE REQUIREMENT OF GRANTING OPPORTUNITY AND FAILURE OF THE AO IN M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 12 GRANTING SUCH OPPORTUNITY TO THE ASSESSEE. RELEVANT LIN ES ARE EXTRACTED HERE AS UNDER : 5.5THE PROVISO TO SECTION 142(2A) STATES THA T THE A.O. SHALL NOT DIRECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED UNLESS ASSESSEE HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. NARRATING THE SEQUENCE OF EVENTS IN THE CASE, THE L D. A.R. CLAIMED THAT NO SUCH OPPORTUNITY OF HEARING WAS GRANTED TO THE A PPELLANT BY THE ASSESSING OFFICER AS REQUIRED U/S. 142(2A), THEREBY VITIATING ONE OF THE PRIMARY CONDITIONS PRECEDENT BEFORE EXERCISING THE POWER UNDER THE SAID PROVISION. THE LD. A.R. FURTHER CONTENDED THAT AS THE PROVISO REQUIRES THAT THE OPPORTUNITY SHOULD BE GIVEN BY TH E A.O., THE SAME HAS TO BE GIVEN BY THE ASSESSING OFFICER ALONE AND JUST BECAUSE THE LEARNED CIT HAD GIVEN AN OPPORTUNITY OF HEARING TO THE ASSESSEE DOES NOT MEAN THAT THE STATUTORY CONDITION HAS BEEN COMPLIED WITH. HE, THUS, ARGUED THAT THE ASSESSING OFFICER HAVING CONTRAVENED THIS STATUTORY CONDITION, THE REFERENCE MADE BY THE ASSE SSING OFFICER U/S.142(2A) FOR SPECIAL AUDIT IS TOTALLY ILLEGAL. T HE LD. A.R. STRESSED THAT WHEN LAW GIVES AUTHORITY TO THE A.O. TO DECIDE WHETHER TO REFER THE MATTER TO THE AUDITOR OR NOT, THERE IS NO REASO N FOR SOME OTHER OFFICER, EVEN IF SENIOR TO THE A.O. TO GIVE AN OPPO RTUNITY TO THE ASSESSEE, WHILE POINTING OUT THAT SECTION 2(7A) DEF INES THE TERM A.O. WHICH DOES NOT INCLUDE CIT AND THEREFORE, EVEN IF O PPORTUNITY IS GRANTED BY THE CIT, THE SAME DOES NOT AMOUNT TO COM PLIANCE OF THE REQUIREMENT LAID DOWN IN THE PROVISIONS.. THE ABOVE EXTRACTS PROVE THAT THERE WAS ARGUMENTS AND DETAILED DISCUSSION ON THE ISSUE RAISED IN THE ADDITIONAL GRO UND (SUPRA). 17. WE ALSO EXAMINED THE FINDING OF THE CIT(A) DISMISSING THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST GRANTING SUCH OPPORTUNITY BY THE AO ALONE. CONTENTS OF PARA NO.5.5.4 ARE RELEVANT A ND RELEVANT LINES ARE EXTRACTED AS UNDER : 5.5.4 IN THE PRESENT CASE, THE APPELLANT HAS NOT ESSENTIALLY QUESTIONED THE SUFFICIENCY OF EXISTENCE OF THE CIRC UMSTANCES UNDER WHICH THE ASSESSING OFFICER MADE THE REFERENCE FOR SPECIAL AUDIT U/S.142(2A), BUT THE GRIEVANCE OF THE APPELLANT IS THAT IT WAS NOT AFFORDED AN OPPORTUNITY OF BEING HEARD BY THE ASSES SING OFFICER. ACCORDING TO THE LD. A.R., SUCH AN OPPORTUNITY OF B EING HEARD HAS TO BE GIVEN BY THE ASSESSING OFFICER ALONE WHICH HAS N OT BEEN DONE AND THEREFORE, THE DIRECTIONS BY THE ASSESSING OFFICER UNDER THE SAID PROVISIONS ARE ILLEGAL. THIS ARGUMENT OF THE APPELL ANT IS DEVOID OF MERIT AND CONTRARY TO THE PROVISIONS OF SEC.142(2A) . WHAT THE PROVISO TO SEC.142(2A) SAYS IS 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. NOWHERE HAS IT SAID THAT SUCH AN OPPORTUNITY HAS TO BE GIVEN BY THE ASSESSING OFFICER ALONE.. M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 13 18. FROM THE ABOVE EXTRACTS, IT IS EVIDENT THAT THE AO N EVER GRANTED OPPORTUNITY AS REQUIRED UNDER THE PROVISIONS O F SECTION 142(2A) OF THE ACT. IT IS THE CIT WHO HAS ACTUALLY GRAN TED THE OPPORTUNITY. CIT(A) (CENTRAL) JUSTIFIED THE ABOVE STAND OF T HE AO. IN THE LIGHT OF THE ABOVE FACTUAL MATRIX, WE NEED TO DECIDE IF THE ABOVE UNDERSTANDING OF THE OFFICERS ON THE PROVISIONS OF LAW IS IN P ROPER PERSPECTIVE OR NOT. 19. WE ALSO EXAMINED THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHYAMAL SARKAR (SUPRA) RELIED ON BY T HE LD. CIT-DR FOR THE REVENUE. WE FIND THE SAID JUDGMENT WAS D ELIVERED ON THE FACTUAL MATRIX OF ISSUING A PROPER ORDER OF REFERRA L FOR SPECIAL AUDIT. IT WAS NOT ON THE ISSUE RELATING TO GRANTING OF OP PORTUNITY OF BEING HEARD TO THE ASSESSEE BY THE AO BEFORE ORDER FOR SPECIAL AUDIT IS ISSUED. THUS, THIS CASE IS DISTINGUISHABLE ON FACTS AND UNCONNECTED TO THE ISSUE RAISED IN THE ADDITIONAL GROUND EXTRACTED ABOVE. 20. NEXT WE SHALL TAKE UP THE PRECEDENTS CITED BY THE L D. COUNSEL FOR THE ASSESSEE. TO START WITH, THE DECISION OF PUNE BENC H OF THE TRIBUNAL IN THE CASE OF VILSONS PARTICLE BOARD INDUSTRIES LT D. (SUPRA) IS ANALYSED. AS SUGGESTED, WE PERUSED THE CONTENTS OF PARA NO.40 AND 41 OF THE SAID ORDER OF THE TRIBUNAL. THIS IS ALSO A C ASE WHERE THE AO NEVER GRANTED REASONABLE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE BEFORE DIRECTING THE ASSESSEE TO GET THE ACCO UNTS AUDITED. IT IS THE CIT WHO ACTUALLY ISSUED A SHOW CAUSE NOTICE O N THIS ASPECT. THE TRIBUNAL EXPLAINED THE SAID PROVISIONS OF SECTION 142(2 A) OF THE ACT AND RELIED HEAVILY ON THE HONBLE APEX COURT JUDGM ENT IN THE CASE OF SAHARA INDIA (FIRM) VS. CIT AND ANOTHER (2008) 300 ITR 403 M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 14 (SC) AND HELD THAT THE ASSESSMENT ORDER PASSED IN THE S AID CASE IS BEYOND THE PERIOD OF LIMITATION. WE EXTRACT THE RELEVANT P ARAGRAPHS OF THE SAID ORDER OF THE TRIBUNAL HEREUNDER : 40. THE QUESTION WHICH ARISES FOR ADJUDICATION BEF ORE US IS THAT IN THE PRESENT SET OF FACTS, WHERE THE ASSESSING OFFIC ER BEFORE SENDING A PROPOSAL FOR CONDUCTING SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT HAS NOT GIVEN AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND IN VIEW OF THE PROVISO TO SECTION 142(2A) OF THE ACT, IS THE SAID PROPOSAL MADE WITHOUT AFFORDING PRE-DECISIONAL HEARING TO TH E ASSESSEE VALID AND CAN THE PROCEEDINGS CONDUCTED THEREAFTER BE HEL D TO BE VITIATED IN LAW. THE HON'BLE SUPREME COURT IN THREE JUDGE DECIS ION IN SAHARA INDIA (FIRM) VS. CIT AND ANOTHER (SUPRA) HAD DECIDE D THE ISSUE OF SHOW CAUSE NOTICE TO BE GIVEN ON PRE-DECISIONAL STA GE AND POST- DECISIONAL STAGE OF STARTING THE PROCEEDINGS UNDER SECTION 142(2A) OF THE ACT AND HAD ALSO REFERRED TO THE EARLIER DECISI ON OF APEX COURT IN RAJESH KUMAR AND OTHERS VS. DCIT (SUPRA). THE PRINC IPLES LAID DOWN BY THE HON'BLE SUPREME COURT ARE THAT THE PRINCIPLE OF AUDI ALTERAM PARTEM CANNOT BE IGNORED EVEN AT THE STAGE OF PRE-D ECISIONAL HEARING. IN OTHER WORDS, IN CASE THE ASSESSING OFFICER IS OF THE VIEW THAT HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE A CCOUNTS AND INTERESTS OF REVENUE, IT IS NECESSARY TO GET THE AC COUNTS AUDITED BY AN ACCOUNTANT, WITH PREVIOUS APPROVAL OF PRINCIPAL CHI EF COMMISSIONER, THEN HE CAN DO SO. HOWEVER, THE PROVISO INSERTED BY THE FINANCE ACT, 2007 W.E.F. 01.06.2007 HAS VERY CATEGORICALLY PROVI DED THAT THE ASSESSING OFFICER SHALL NOT DIRECT THE ASSESSEE TO GET THE ACCOUNTS SO AUDITED UNLESS THE ASSESSEE HAS BEEN GIVEN AN OPPOR TUNITY OF BEING HEARD. IN OTHER WORDS, THE PRINCIPLES OF NATURAL JU STICE THAT A PERSON COULD NOT BE CONDEMNED UNHEARD, HAVE BEEN INCORPORA TED IN SECTION ITSELF W.E.F. 01.06.2007. THE APEX COURT IN RAJESH KUMAR AND OTHERS VS. DCIT (SUPRA) HAD DELIBERATED ON THE PROVISIONS OF THE ACT BEFORE INSERTION OF SAID PROVISO BUT HAD LAID DOWN THE PRO POSITION THAT NOBODY COULD BE UNHEARD EVEN AT THE STAGE OF FORMIN G AN OPINION THAT IN VIEW OF THE NATURE AND COMPLEXITY OF ACCOUNTS AN D INTEREST OF REVENUE, SPECIAL AUDIT IS TO BE CONDUCTED UNDER SEC TION 142(2A) OF THE ACT. THE APEX COURT IN SAHARA INDIA (FIRM) VS. CIT AND ANOTHER (SUPRA) HAVE UPHELD THE SAID PROPOSITION LAID DOWN BY THE HON'BLE SUPREME COURT AND HAS ALSO TAKEN NOTE OF THE AMENDM ENT W.E.F. 01.06.2007 AND HAVE HELD THAT THE PRINCIPLES OF NAT URAL JUSTICE HAVE TO BE FULFILLED EVEN AT THE PRE-DECISIONAL STAGE. I N CONCLUSION, THE APEX COURT DIRECTED THAT THE SAID PROPOSITION WOULD BE A PPLICABLE PROSPECTIVELY. THE CASE OF THE ASSESSEE BEFORE US R ELATES TO THE PERIOD WHICH IS PROSPECTIVE TO THE DECISION OF THE APEX CO URT AND IS ALSO AFTER INSERTION BY THE FINANCE ACT, 2007 W.E.F. 01. 06.2007. REASONABLE OPPORTUNITY OF BEING HEARD ON PRE-DECISI ONAL STAGE TO BE ALLOWED BY THE ASSESSING OFFICER TO THE ASSESSEE WA S ON STATUTE WHEN THE PROCEEDINGS WERE TAKEN UP AGAINST THE ASSE SSEE. HOWEVER, AS THE FACTS REVEAL BEFORE SUBMITTING THE PROPOSAL DATED 11.09.2008 FOR CONDUCTING SPECIAL AUDIT UNDER SECTION 142(2A)O F THE ACT TO THE CIT(C), NO OPPORTUNITY OF HEARING WAS GIVEN TO THE ASSESSEE. THE REQUIREMENT OF THE ACT IS THAT THE ASSESSING OFFICE R HAS TO GIVE FINDING THAT THERE IS COMPLEXITY OF ACCOUNTS AND THE INTERE STS OF REVENUE WOULD BE AFFECTED, AND IN SUCH CIRCUMSTANCES, SHOW CAUSE NOTICE NEEDS TO BE GIVEN TO THE ASSESSEE TO EXPLAIN ITS CA SE. WHERE THE ASSESSEE WAS ABLE TO EXPLAIN THE NATURE OF ENTRIES AND ALSO JUSTIFY THAT THE SAME ARE NOT COMPLEX, THEN THERE IS NO NEE D TO PUT THE ASSESSEE TO SUCH HARDSHIP OF CONDUCTING SPECIAL AUD IT. THE ASSESSING OFFICER HAVING FAILED TO GIVE ANY OPPORTUNITY OF HE ARING TO THE ASSESSEE BEFORE MAKING THE PROPOSAL FOR CONDUCTING SPECIAL AUDIT M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 15 UNDER SECTION 142(2A) OF THE ACT AT THE PRE-DECISIO NAL STAGE, THEN SUCH PROPOSAL MADE BY THE ASSESSING OFFICER TO THE CIT(C), PUNE IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND SUFFE RS FROM INFIRMITY. THE CASE OF REVENUE BEFORE US IS THAT THE CIT(C), P UNE BEFORE PASSING HIS ORDER OF GIVING PERMISSION TO THE ASSESSING OFF ICER TO ASK THE ASSESSEE TO GET THE SPECIAL AUDIT CONDUCTED HAD GIV EN FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ROLE OF CIT(C) IS THE ROLE OF APPROVING AUTHORITY. THE ROLE IS NOT THAT OF ADJUDI CATING AUTHORITY WHICH HAD TO BE CARRIED OUT BY THE ASSESSING OFFICE R. THE ADJUDICATING AUTHORITY IN THE PRESENT SET OF FACTS HAS FAILED TO GIVE ANY OPPORTUNITY TO THE ASSESSEE BEFORE MAKING PROPO SAL FOR SPECIAL AUDIT AND THE OPPORTUNITY ALLOWED BY THE APPROVING AUTHORITY, WHO IN ANY CASE IS ENSHRINED WITH THE DUTIES OF CHECKING W HETHER THERE IS NO ARBITRARINESS IN FUNCTIONING OF ADJUDICATING AUTHOR ITY, HAS TO BE SATISFIED BEFORE GIVING APPROVAL. HENCE, THE OPPORT UNITY ALLOWED BY THE CIT(C), PUNE AFTER PROPOSAL WAS MADE BY THE ADJ UDICATING AUTHORITY DOES NOT ABSOLVE THE NON-ALLOWANCE OF REA SONABLE OPPORTUNITY OF HEARING BY THE ASSESSING OFFICER. 41. APPLYING THE PRINCIPLES LAID DOWN BY THE APEX C OURT IN SAHARA INDIA (FIRM) VS. CIT AND ANOTHER (SUPRA), WE HOLD T HAT WHERE NO SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE BEFORE MAKIN G THE ORDER PROPOSING CONDUCT OF SPECIAL AUDIT UNDER SECTION 14 2(2A) OF THE ACT, IN THE PRESENT CASE AND THE CIT HAVING APPROVED THE SA ID PROPOSAL THOUGH AFTER GIVING OPPORTUNITY OF HEARING TO THE A SSESSEE IS VITIATED BECAUSE OF NON-COMPLIANCE WITH THE PRINCIPLES OF NA TURAL JUSTICE. ACCORDINGLY, THE ASSESSMENT ORDER PASSED IN THE FAC TS OF PRESENT CASE IS BEYOND THE PERIOD OF LIMITATION AND HENCE, THE SA ME IS INVALID AND BAD IN LAW. 21. FURTHER, THE ABOVE ORDER OF THE TRIBUNAL WAS FOLLOWED B Y SUBSEQUENT ORDER OF THIS BENCH IN THE CASE OF MAHARASHT RA ACADEMY OF ENGINEERING AND EDUCATIONAL RESEARCH (SUPRA). WE PROCEE D TO EXTRACT THE RELEVANT PARAGRAPHS OF THE ORDER OF THE TR IBUNAL ON THIS LEGAL ISSUE. CONTENTS OF PARA NOS. 115 TO 119, WHICH ARE R ELEVANT ARE REPRODUCED AS UNDER : 115. GROUND OF APPEAL NO.2 WHICH IS COMMON FOR ALL THE YEARS RELATES TO VALIDITY OF THE REASSESSMENT PROCEEDINGS ON THE ISSUE OF LIMITATION IN VIEW OF THE ILLEGAL ORDER FOR SPECIAL AUDIT U/S.142(2A). HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE RESTRICTE D HIS ARGUMENTS FOR A.Y. 1999-2000 AND 2000-2001 ONLY AND DID NOT P RESS THIS GROUND FOR OTHER YEARS. ACCORDINGLY, THIS GROUND F OR OTHER YEARS ARE DISMISSED. SINCE WE HAVE ALREADY HELD IN THE PRECE DING PARAGRAPHS THAT THE ORDER FOR A.Y. 1999-2000 IS VOID, THEREFOR E, WE CONFINE OUR DISCUSSION ON THIS ISSUE ONLY FOR A.Y. 2000-2001. 116. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR TH E ASSESSEE THAT WHILE DIRECTING FOR SPECIAL AUDIT U/S.142(2A) OF TH E I.T. ACT FOR A.YRS. 1999-2000, 2000-01 AND 2005-06 THE ASSESSING OFFICE R HAD NOT GIVEN OPPORTUNITY OF BEING HEARD AS PER THE PROVISO TO SECTION 142(2A) AND ONLY THE LD.CIT HAS GIVEN THE OPPORTUNI TY. THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF RAJESH M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 16 KUMAR (SUPRA) AND THE DECISION OF HONBLE BOMBAY HI GH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES PVT. LTD. (SUPRA) THE ORDER U/S.142(2A) IS ILLEGAL AND INVALID AND THEREFORE, T HE LIMITATION FOR ASSESSMENT COULD NOT BE EXTENDED IN VIEW OF THE ILL EGAL ORDER U/S.142(2A). IT IS ALSO HIS SUBMISSION THAT THE AS SESSMENTS FOR A.YRS. 1999-2000, 2000-01 AND 2005-06 WERE GETTING TIME BARRED IN VIEW OF SECOND PROVISO TO SECTION 153(2) ON 31-12-2 007 WHEREAS THE ASSESSMENT ORDER IS DATED 08-08-2008. THEREFORE, S UCH ASSESSMENT ORDERS ARE TIME BARRED AND THEREFORE ARE VOID. 117. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE ASSESSME NT ORDER FOR A.Y. 2000-01 IS DATED 08-08-2008. IT IS ALSO AN ADMITTE D FACT THAT THE ASSESSING OFFICER WHILE DIRECTING FOR SPECIAL AUDIT U/S.142(2A) HAS NOT GIVEN ANY OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE AND THE OPPORTUNITY OF BEING HEARD WAS GRANTED ONLY BY THE LD. CIT CENTRAL WHO HAS PASSED A DETAILED ORDER DATED 05-12-2007 GR ANTING APPROVAL ON THE REFERENCE BY THE ASSESSING OFFICER FOR SPECIAL AUDIT U/S.142(2A). UNDER THESE CIRCUMSTANCES WE HAVE TO SEE WHERE THE ASSESSING OFFICER BEFORE SENDING A PROPOSAL FOR CON DUCTING SPECIAL AUDIT U/S.142(2A) OF THE ACT HAS NOT GIVEN AN OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE AND IN VIEW OF THE PROVISO TO SECTION 142(2A) OF THE ACT, WHETHER THE SAID PROPOSAL MADE WITHOUT AFFORDING PREDECISIONAL HEARING TO THE ASSESSEE WAS VALID AND CAN THE PROCEEDINGS CONDUCTED THEREAFTER BE HELD TO BE VITI ATED. 118. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. VILSONS PAR TICLE BOARD INDUSTRIES LTD. AND VICE VERSA. WE FIND THE TRIBUN AL IN ITA NO.447/PN/2013, ITA NOS. 309 & 310/PN/2013 AND ITA NOS. 448 & 449/PN/2013 VIDE ORDER DATED 21-12-2016 AFTER CON SIDERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RA JESH KUMAR AND OTHERS (SUPRA) AND VARIOUS OTHER DECISIONS HAS HELD THAT WHERE NO SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE BEFORE MAKING THE ORDER PROPOSING CONDUCT OF SPECIAL AUDIT U/S.142(2A ) OF THE ACT AND SUCH OPPORTUNITY WAS GIVEN ONLY BY THE CIT BEFORE A PPROVAL FOR SUCH SPECIAL AUDIT, SUCH ASSESSMENT IS VITIATED BECAUSE OF NON-COMPLIANCE OF PRINCIPLE OF NATURAL JUSTICE. HENCE THE LIMITAT ION FOR CONCLUSION OF ASSESSMENT CANNOT BE EXTENDED FOR SUCH ILLEGAL ORDE R U/S.142(2A). THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 40 ONWARDS OF THE ORDER READ AS UNDER : . . . . . . . . . . . . . . 119. SINCE IN THE INSTANT CASE THE ASSESSING OFFICE R HAS NOT GIVEN ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFO RE DIRECTING HIM TO GET ITS ACCOUNTS AUDITED U/S.142(2A) AND SUCH OP PORTUNITY WAS GRANTED ONLY BY THE CIT, THEREFORE, THE LIMITATION F OR COMPLETION OF ASSESSMENT CANNOT BE EXTENDED IN VIEW OF SAID ILLEG AL ORDER PASSED U/S.142(2A). SINCE THE ASSESSMENT IN THE INSTANT C ASE WAS GETTING TIME BARRED UNDER SECOND PROVISO TO SECTION 153(2) ON 31-12-2007 AND SINCE THE ASSESSING OFFICER HAS PASSED THE ORDE R ON 08-08- 2008, THEREFORE, THE ASSESSMENT ORDER PASSED U/S.14 3(3)/147 FOR THE IMPUGNED A.Y. 2000-2001 IS BARRED BY LIMITATION AND ACCORDINGLY THE SAME IS VOID AND ILLEGAL. GROUND O F APPEAL NO.2 FOR A.Y. 2000-2001 BY THE ASSESSEE IS ACCORDINGLY ALLOW ED. M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 17 22. FROM THE ABOVE EXTRACTS, IT IS OBVIOUS THAT THE PROV ISO TO SECTION 142(2A) OF THE ACT IS EXPLAINED AND IT IS THE STATUT ORY REQUIREMENT OF LAW THAT AO SHALL NOT DIRECT THE ASSESSEE TO GET THE ACCOUNTED AUDITED UNLESS THE ASSESSEE HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. NOBODY CAN REPLACE THE AO IN SUCH MATTERS, LEAVE ALONE THE CIT, AS IS THE CASE IN THE INSTAN T CASE. ACCORDINGLY, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED AND ALLOWED AS A COVERED ISSUE. 23. SINCE THE ASSESSEE SUCCEEDS ON THIS TECHNICAL GROUND , THE OTHER GROUNDS FOR A.Y. 2000-01 HAVE BECOME ACADEMIC IN N ATURE AND THEREFORE, THEY ARE DISMISSED AS ACADEMIC. THE APPE AL FILED BY THE ASSESSEE FOR A.Y. 2000-01 IS ACCORDINGLY PARTLY ALLOWED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A.Y. 2000 -01 IS PARTLY ALLOWED. 25. THE ADDITIONAL GROUND RAISED BY THE PRESENT ASSESSEE (I.E. M/S. P.N. GADGIL & CO. (GOLD)) IS IDENTICAL FOR THE REMAINING A.YRS. 2001-02 TO 2006-07 AND AS WELL AS THE ASSESSEE M/S. P.N. GADGIL & CO. (SILVER) FOR THE A.YRS. 2000-01 TO 2006-07. SINCE WE HAVE ALREADY DECIDED THE SAID ADDITIONAL GROUND IN FAVOU R OF THE ASSESSEE, WE FOLLOW THE SAME PARITY OF REASONING AN D ALLOW THE ADDITIONAL GROUND RAISED BY BOTH THE ASSESSEES IN F AVOUR OF THE ASSESSEES. REST OF THE GROUNDS RAISED IN ALL THE R EMAINING APPEALS BY THE ASSESSEE STAND DISMISSED AS ACADEMIC . THEREFORE, ALL THESE APPEALS OF THE ASSESSEE ARE PA RTLY ALLOWED. ITA NO.1539/PUN/2015 (BY REVENUE A.Y. 2006-07) : 26. AS MENTIONED BY THE LD. COUNSEL FOR THE ASSESSE E, SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE ON THE I SSUE OF M/S. P.N. GADGIL & CO. (GOLD) & M/S. P.N. GADGIL & CO. (SILVER) 18 VALIDITY OF THE ASSESSMENT FOR A.Y. 2006-07 TOO, AD JUDICATION OF THE APPEAL FILED BY REVENUE FOR A.Y. 2006-07 BECOME S AN ACADEMIC EXERCISE. THE APPEAL IS THEREFORE DISMISS ED. 27. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 28. TO SUM UP, ALL THE APPEALS FILED BY M/S. P.N.GA DGIL & CO. (GOLD) AND M/S. P.N. GADGIL (SILVER) ARE PARTLY ALL OWED AND THE ONLY APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF DECEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 13 TH DECEMBER, 2017. COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT THE CIT(A) - 1 1, PUNE CIT - 11, PUNE % , , A BENCH PUNE; GUARD FILE.