MONGIA STEEL LTD THRO ITS AUTHORIZED SIGNATORY NAMELY ARVIND KUMAR YADAV V. UNION OF INDIA THROUGH PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL

WPC/1720/2024

AI Insights

Mongia Steel Limited filed a series of writ petitions against the Union of India and various Income Tax authorities, challenging the orders for a special audit of its books for several assessment years. The audits were ordered following a search and seizure operation that uncovered substantial discrepancies and suspected hawala transactions. The petitioner argued that the orders violated principles of natural justice and were unjustified. However, the court upheld the orders, emphasizing the need for a special audit due to the serious irregularities and the volume of unaccounted transactions. The court also extended the time for the audit and specified the scope of the audit to protect the interests of the petitioner.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 673197 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 24-04-2024
• Assessment Year: misc
• Other Referred Cases: Sahara India (Firm) Lucknow Vs. Commissioner of Income Tax, Central-I and Anr., Malloch v. Aberdeen Corporation, Cinnamond v. British Airports Authority, Escorts Farms Ltd. v. Commr., Kumaon Division
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: KUMAR VAIBHAV; ANURAG VIJAY; OM PRAKASH; SHIVAM SINGH
• Assessee Lawyers: SUMEET GADODIA; DEBASHISH CHATTERJEE; PRAVEEN BARNWAL; SHILPI GADODIA; SHRUT SHEKHAR
• Keywords: Hawala transactions; Income Tax; Natural Justice; Search and seizure; Special Audit
• Section: 148; 143(3); 142(2)(a)

Judgement Text

" IN THE HIGH COURT OF JHARKHAND AT RANCHI (Civil Writ Jurisdiction) W.P. (T) No.1720 of 2024 Mongia Steel Limited, (a company registered under the Companies Act, 1956/2023), having its Unit at Burhidih, Tundi Road, P.O. and P.S. Tundi, District Giridih, PIN 815301 (Jharkhand), through its Authorised Signatory namely, Arvind Kumar Yadav, aged about 39 years, son of Suresh Yadav, resident of Near Women’s College, New Barganda, P.O. & P.S. Giridih, District Giridih, PIN 815301 (Jharkhand) … … Petitioner Versus 1. Union of India, through Principal Commissioner of Income Tax (Central), having its Office at 3rd Floor, Jai Prakash Bhawan, Dak Bunglow Chowk, P.O. – G.P.O., P.S. Dak Bunglow, Town and District Patna (Bihar). 2. Additional Commissioner of Income Tax (Central), Range-II, Ranchi, having its office at Central Revenue Building, 5A, Mahatma Gandhi Road, Ranchi, P.O. – G.P.O., P.S. Chutia, District Ranchi, PIN 834001. 3. Assistant Commissioner of Income Tax, Central Circle, Dhanbad, having its office at ‘Aaykar Bhawan’, Lubi Circular Road, Dhanbad, P.O. and P.S. Dhanbad, District Dhanbad, PIN 826001. … … Respondents With W.P. (T) No.1765 of 2024 Mongia Steel Limited, (a company registered under the Companies Act, 1956/2023), having its Unit at Burhidih, Tundi Road, P.O. and P.S. Tundi, District Giridih, PIN 815301 (Jharkhand), through its Authorised Signatory namely, Arvind Kumar Yadav, aged about 39 years, son of Suresh Yadav, resident of Near Women’s College, New Barganda, P.O. & P.S. Giridih, District Giridih, PIN 815301 (Jharkhand) … … Petitioner Versus 1. Union of India, through Principal Commissioner of Income Tax (Central), having its Office at 3rd Floor, Jai Prakash Bhawan, Dak Bunglow Chowk, P.O. – G.P.O., P.S. Dak Bunglow, Town and District Patna (Bihar). 2. Additional Commissioner of Income Tax (Central), Range-II, Ranchi, having its office at Central Revenue Building, 5A, Mahatma Gandhi Road, Ranchi, P.O. – G.P.O., P.S. Chutia, District Ranchi, PIN 834001. 3. Assistant Commissioner of Income Tax, Central Circle, Dhanbad, having its office at ‘Aaykar Bhawan’, Lubi Circular Road, Dhanbad, P.O. and P.S. Dhanbad, District Dhanbad, PIN 826001. … … Respondents 2 W.P.(T) No. 1720 of 2024 & Ors. With W.P. (T) No.1799 of 2024 Mongia Steel Limited, (a company registered under the Companies Act, 1956/2023), having its Unit at Burhidih, Tundi Road, P.O. and P.S. Tundi, District Giridih, PIN 815301 (Jharkhand), through its Authorised Signatory namely, Arvind Kumar Yadav, aged about 39 years, son of Suresh Yadav, resident of Near Women’s College, New Barganda, P.O. & P.S. Giridih, District Giridih, PIN 815301 (Jharkhand) … … Petitioner Versus 1. Union of India, through Principal Commissioner of Income Tax (Central), having its Office at 3rd Floor, Jai Prakash Bhawan, Dak Bunglow Chowk, P.O. – G.P.O., P.S. Dak Bunglow, Town and District Patna (Bihar). 2. Additional Commissioner of Income Tax (Central), Range-II, Ranchi, having its office at Central Revenue Building, 5A, Mahatma Gandhi Road, Ranchi, P.O. – G.P.O., P.S. Chutia, District Ranchi, PIN 834001. 3. Assistant Commissioner of Income Tax, Central Circle, Dhanbad, having its office at ‘Aaykar Bhawan’, Lubi Circular Road, Dhanbad, P.O. and P.S. Dhanbad, District Dhanbad, PIN 826001. … … Respondents CORAM: HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE NAVNEET KUMAR For the Petitioners : Mr. Sumeet Gadodia, Advocate Mr. Debashish Chatterjee, Advocate Mr. Praveen Barnwal, Advocate Mrs. Shilpi Sandil Gadodia, Advocate Ms. Shrut Shekhar, Advocate For the Respondents : Mr. Kumar Vaibhav, Sr. S.C. Mr. Anurag Vijay, Jr. S.C. Mr. Om Prakash, Advocate Mr. Shivam Singh, Advocate . 24th April 2024 Per, Shree Chandrashekhar, J. In this batch of writ petitions, Mongia Steel Limited seeks to challenge the orders passed under section 142 (2-A) of the Income Tax Act, 1961 for a special audit of its Books of Account for the Assessment Years 2016-17, 2018-19 and 2022-23 by a nominated Accountant. In relation thereto, the orders passed by the Principal Commissioner of Income Tax 3 W.P.(T) No. 1720 of 2024 & Ors. (Central) at Patna granting his approval for special audit are also put to challenge. 2. This is admitted at the Bar that similar facts are pleaded in all the writ petitions. This is also an admitted position that in the aforementioned writ petitions the orders passed by the statutory Authorities are challenged only on the ground of violation of natural justice. For the sake of brevity, the prayer clause in W.P(T) No. 1720 of 2024 is reproduced herein below.: (i) For issuance of an appropriate writ/order/direction, including Writ of Certiorari, for quashing/setting aside the order dated 23.03.2024, contained in DIN & Letter No. ITBA/AST/F/17/2023-24/1063244964(1) (Annexure -10) for Assessment Year 2022-23, wherein Respondent No.3-Assistant Commissioner of Income Tax, Central Circle, Dhanbad has issued direction under Section 142(2-A) of the Income Tax Act, 1961 directing the Petitioner to get it books of accounts audited by the nominated Accountant, especially because aid order has been passed in utter violation of the principles of natural justice and without even considering the show cause reply filed by the Petitioner. (ii) For issuance of further appropriate writ/order/direction to call for and set aside the approval accorded by Respondent No.1-Principal Commissioner of Income Tax (Central), Patna vide its Letter bearing No. F. No. PCIT/Central/Pat/T-163/2023- 24/5868-69 dated 20.03.2024, wherein approval has been accorded for audit of the accounts of the Petitioner in terms of Section 142(2-A) of the Income Tax Act, 1961 by an Accountant namely, M/s. Khetan Rajesh Kumar & Co. Patna. (iii) For issuance of any other appropriate writ(s)/order(s)/direction(s) as Your Lordships may deem fit and proper in the facts and circumstances of the case. 3. Briefly stated, Mongia Steel Limited is a Company registered under the Companies Act, 1956 and the Act of 2013. It was issued a notice under section 148 of the Income Tax Act vide communication dated 27th March 2023 for reopening the income tax assessment, after a search and seizure was conducted on 14th December 2022 and subsequent dates at the premises of Mongia Group of Companies. The petitioner-Company pleaded that for the scrutiny under section 143(3) for the Assessment Year 2022-23 a notice under section 142(1) was issued on 28th July 2023 for furnishing specific details mentioned in the said notice. According to the petitioner- Company, a reply thereof was submitted on 14th August 2023 but a second notice under section 142(1) was issued to it on 28th December 2023. The alleged reason for a second notice under section 142(1) was some suspected Hawala transactions by the petitioner-Company and its directors, employees 4 W.P.(T) No. 1720 of 2024 & Ors. etc. In the communication dated 28th December 2023, the Assessing Officer referred to huge transactions of several crores of rupees in cash by the assessee. Such materials were collected during the search and seizure at Saluja house, Mongia Steel Ltd.’s offices and other places and included documents, digital data and WhatsApp chats. The petitioner-Company filed its response on 17th January 2024 and endeavored to clarify that it had already filed its Income Tax Returns for Assessment Year 2022-23 even before a search was conducted. Still, another notice under section 142(1) was issued to it on 15th January 2024 to complete the scrutiny proceedings within the statutory period of limitation and a reply thereto was sent Online by the petitioner-Company on 12th February 2024. Now a notice dated 1st March 2024 was issued under section 142(2-A) for a special audit of its Books of Accounts, and upon seeking approval of the Principal Commissioner of Income Tax (Central), the impugned order dated 23rd March 2024 was passed. Some portions of order dated 23rd March 2024 are extracted herein below: “The transactions recorded in the seized documents suggests that you had income/receipts from manufacturing and trading of steel, TMT bars, Sponge iron, billets, bricks etc and that huge cash transactions on accounts of receipts and cash deposits in the bank accounts, which were not recorded in your regular books of accounts. The voluminous transactions recorded in pages running in more than thousands in number, in the form of ledgers, loose sheets, cash book, registers and diaries, cash vouchers, challan book etc will require special audit to prepare receipt and payment account, party wise ledgers cash book etc to compare with your regular books of accounts and determine the transactions relating to receipts and payments of cash/cheque etc. which have not been recorded in your regular books of accounts for FYs 2012-13 to 2022-23 to determine the nature and source of receipts and incomes which are chargeable to tax as evident from the seized documents, but not disclosed by you. 5. Accordingly, you are hereby directed to get your book of accounts audited by the above nominated accountant. The nominated accountant will be required to submit the report as per rule 14A of Income Tax Rules, 1962 and in prescribed form no 6B. In addition to the same, the nominated accountant auditing your books is directed as follows:- (i) To prepare date wise receipt and payment account with regard to money in cash or through bank transaction. (ii) To verify whether such transactions of receipts and payments are recorded in assessee’s regular books of accounts. (iii) To report and comment on the nature of transactions and purpose of payments and their allowability under the Income Tax Act, 1961 as expenditure. (iv) To determine and comment as to whether amounts received in cash or through bank are in the nature of the assessee’s income considering the nature of 5 W.P.(T) No. 1720 of 2024 & Ors. the business of the assessee company. (v) The report should incorporates all the above points and also any other point that may need to be further referred to the accountant by this office and (vi) During the search operation at business/factory/office premises at Giridih, certain books of accounts consisting of ledgers, registers, loose documents and diaries were seized as mentioned above. It is observed from the seized materials that substantial amounts of the cash transactions were undertaken by the assessee company and those cash amounts were deposited in disclosed/undisclosed bank accounts of the company. Perusal of the contents of the seized documents shows that the issue has direct and cumulative effect on the taxable income of the assessee company for FYs 2012-13 to 2022-23 relevant to the AYs 2013-14 to 2023-24. (vii) On perusal of the submission filed till date in this case, Appraisal Report, seized materials, statements recorded during the search operation, digital data and the financial information available on record, it is found that there are huge numbers of voluminous transactions either in cash or cheque. The entries/transactions in seized/impounded documents/digital documents/bank accounts are not matching with the financials shown by the assessee company in its return of income for the different A.Ys. It is observed that tax implication of the transactions in such complex incriminating documents is substantial. (viii) During the course of search, evidences of undisclosed sale during FY 2014- 15 to 2021-22 have been found. When the sale mentioned in the above seized documents was verified with Tally Data found & seized from the office of Mongia Steel Ltd. Burhiadih, Tundi Road, Giridih, huge discrepancies were found. It has been found that sale mentioned in column of Sale Achieved in FY 2021-22 have not been fully accounted for in books of accounts maintained in Tally. When the data relating to FY 2020-21 were perused, it is again seen that sale has been suppressed to 40% approx. in respect of turnover shown in ITRs. On the basis of above, undisclosed sale has been extrapolated for FY 2014-15 to 2021-22. (ix) Evidences of cash transaction including hawala have been found from the mobile of Sri Gopal Agarwal, Ajay Kumar Jha, Om Kinkar Thakur, Nityanand Jha & Rishi Saluja. During the course of search, the mobile phone of Sri Gopal Agarwal, staff of Mogina Steel Ltd was examined and found evidence of hawala transactions in his whatsapp chat with other persons/employee of company. Print out of his wahtsapp chat was taken and seized with identification mark MSO-01. After due analysis of seized documents MSO-01, evidence of huge cash transactions especially through hawala has been found. (x) Evidence of undisclosed production was found during the search. It is seen that daily production data was sent on the whatsapp of Harinder Singh Mongia, one of the directiors of M/s Mongia Steel Limited, which has not been fully accounted for in the books. (xi) Apart from the above, proposal for valuation of M/s Mongia School at Giridih, owned by M/s Mongia Steel Limited has also been referred to the District Valuation Officer, Kanpur vide letter having DIN ITBA/AST/S/77/2023- 24/1059276777(1) dated 02.01.2024, the report of which is awaited. The assessee has not submitted the evidences regarding the investments made in the construction of the school. The seized documents do not have any documentary evidences of investments made in the construction/furnishing of the said school. (xii) The accountant is requested to ensure that the report should incorporate all the above mentioned points. 6. The assessee is hereby directed to submit the report of the accountant by 15.05.2024 on the above mentioned points/issues. You are also directed to extend all cooperation to the nominated accountant and make available all necessary documents, evidences, books of accounts as may be required by him so as to 6 W.P.(T) No. 1720 of 2024 & Ors. conduct audit and prepare and submit the report within the given time period. 7. You are, hereby directed to provide the auditors with the books of accounts, password of all soft data, bills and vouchers, bank accounts, cash book, narration of each entry, trail balance etc and other materials. You are also hereby directed to extend full cooperation and furnish all requisite details and information sought by aforesaid auditor for completion of special audit u/s 142(2A) of the Act. 8. In case of non-co-operation to the authorized accountant, you will be liable for penalty u/s 271(1)(b)/272A(1) and prosecution u/s 276D of the Income Tax Act, 1961. 9. The progress of the audit should be intimated to the undersigned every month/fortnight and as and when required. Any other particulars which the undersigned may find necessary, the same will be communicated to you during the course of the audit.” 4. As mentioned above, the order dated 23rd March 2024 in DIN & Letter No. ITBA/AST/F/17/2023-24/1063244964(1) for Assessment Year 2022-23 for the audit of the Books of Accounts of Mongia Steel Limited by a nominated Accountant has been challenged on the ground of violation of natural justice. On a similar ground, the petitioner-Company has questioned the order dated 20th March 2024 granting approval for the special audit under section 142(2-A) of the Income Tax Act, 1961. 5. Mr. Sumeet Gadodia, the learned counsel for the petitioner- Company submits that the exercise of powers under sub-section (2-A) to section 142 of the Income Tax Act follows serious civil consequences to the assessee. It is submitted that the exercise of powers under sub-section (2-A) is hedged with the statutory requirements contained thereunder to avoid unnecessary harassment and safeguard the interest of the assessee but without recording his satisfaction as to “six conditions” provided thereunder, the entire burden is now sought to be shifted upon the petitioner-Company. The learned counsel further submitted that by affording five days’ time to respond to the notice dated 1st March 2024 the petitioner-Company was deprived of the opportunity of putting forth its objection against the proposed exercise of power under sub-section (2-A) to section 142. 6. This is a plea set up by the petitioner-Company that the order dated 20th March 2024 by the Principal Commissioner, Income Tax (Central) approving special audit does not take note of its objections, and the Assessing Officer wrongly recorded that the petitioner-Company did not 7 W.P.(T) No. 1720 of 2024 & Ors. submit its reply to the show-cause notice dated 1st March 2024. 7. Per contra, Mr. Kumar Vaibhav, the learned Sr. Standing Counsel while supporting the exercise of powers under sub-section (2-A) to section 142 of the Income Tax Act submits that the Assessing Officer is vested with wide powers to safeguard the interest of the Revenue and avoid evasion of taxes. 8. Sub-section (2-A) to section 142 of the Income Tax Act provides as under: “(2-A) if, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, 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 Principal Chief Commissioner or Chief Commissioner or Principal 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 Principal Chief Commissioner or Chief Commissioner or Principal 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: 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.” 9. On a plain reading of the provisions under sub-section (2-A), it becomes clear that the Assessing Officer can exercise the powers thereunder at any stage of the proceedings before him. Sub-section (2-A) provides that if the Assessing Officer thinks that it is necessary to cause a special audit he may with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner direct the assessee to get the accounts audited by a nominated Accountant. The opinion so formed by the Assessing Officer shall be based on (i) the nature and complexity of accounts, (ii) the volume of the accounts, (iii) doubts about the correctness of the accounts, (iv) multiplicity of transactions in the accounts or (v) specialized nature of business activity of the assessee. While forming an opinion for the special audit by a nominated Accountant, the Assessing Officer is also required to have regard to the interests of the 8 W.P.(T) No. 1720 of 2024 & Ors. Revenue. In the milieu of such varied requirements as provided under sub- section (2-A), this cannot be a requirement in law that the Assessing Officer must refer to each of the aforementioned factors separately and narrate the supporting facts thereof while exercising the power under sub-section (2-A). 10. In the notice under section 142(1) to the petitioner-Company, the Assessing Officer referred to huge discrepancies in sale descriptions in the seized documents that were verified with Tally data. During the searches, several documents and digital devices were seized and the information, retrieved from the mobile phone of the directors and employees of the petitioner-Company revealed suspected Hawala transactions. The unexplained transactions and the details of suspicious transactions are spread over eleven pages in the notice dated 28th December 2023. 11. A portion of the notice dated 28th December 2023 is reproduced below: “The following accounts or documents or information is/are sought under section 142(1) of the Income-tax Act, 1961: 1. During the course of the search operation in the case of Sri Gunwant Singh Mongia, Smt Trilochan Kaur, Sri Harinder Singh Mongia, Smt Avneet Kaur at Saluja House, Netaji Chowk, Bhandaridih, Giridih, various documents and digital devices were found and seized with identification marks RGMS-01 to RGMS-10 and RGPH-01 to RGPH-02. On verification of page no. 01 to 03 of the seized document RGSM-06, it is found that it represents the statements of incentives paid to several dealers and sub dealers. When the sale mentioned in the above seized documents was verified with tally data found and seized from the office of the Mongia Steel Ltd, Burhisidh, Tundi Road, Giridih, huge discrepancies were found. It has been found that, sale mentioned in column of sale achieved in 2021-22 has not been fully accounted for in the books of accounts maintained in the tally software. The snippets of the discrepancies found are as under.- Sl No. Party Name Target 2021-22 Achieved Target as per PDF Sheet for F.Y 2021-22 Sales recorded as per Tally Date for the F.Y 2021-22 Defference between Achieved Target as per FPDF Sheet Sales recorded as per Tally Date for F.Y- 2021-22 1. Aman Trading Jamui 825 1280.39 511.59 768.8 2. Anchal Traders, Jamui 200 212.66 111.23 101.43 3. Anil Trader, Chakai 495 450.88 224.77 226.11 4. Ansari Traders, Chakai 165 220.79 170.73 50.06 5. Bandi Singh, Ratanpur 220 212/5 - 212.5 9 W.P.(T) No. 1720 of 2024 & Ors. 6. Banka Steel, Bhagalpur 6600 7007.85 168.41 6839.44 7. Bhagat Tub, Jamui - 133.28 113.49 19.79 8. Chourasia Trds, Khaira 275 186.56 196.69 0 9. GIT Pirpati 400 509.28 208.61 300.67 10. JS Traders Sono 385 286.48 187.33 99.15 11. Jaiguru Traders, Madhepura 695 657.35 458.07 199.28 12. JRM Bhandar 385 1265.76 8.33 1257.43 On going through the complete verification, difference of 46338.69 MT has been found between the achieved sale and actual sale for the FY 2021-22. On taking average price of Rs. 50,000/- per MT, value of the difference comes to Rs. 2,31,69,34,500/-. In the light of the above facts, you are requested to please furnish the reason behind this huge difference of sale disclosed at two platforms. In case of no proper submission, it will be treated as unexplained sale and in that case please show cause why not the unexplained/ unaccounted/ undisclosed sale to the tune of Rs. 2,31,69,34,500/- should be added back to the total income of the concerned assessee for the FY 2021-22 relevant to the AY 2022-23. 1. During the course of search in the case of Mongia Steel Ltd at Burdiadih, Tundi Road, Giridih, various documents and digital devices were found and seized with identification marks AKJ-01 to AKJ-11 and AKJ/HD/12 and AKJPO/01, In the meantime, mobile of Sri Ajay Kumar Jha, director of Mongla Steel Ltd., was examined and found evidence of hawala transaction in his whatsapp chat with other persons. Printout of those whatsapp chat were taken and seized. On verification of this, it is found that, Sri Ajay Kumar Jha has been indulged in the hawala transaction and these transactions have not been recorded in the books. The financial year wise details of the transaction are as follows:- FY Amount involved (in Rs.) 2019-20 6,50,950/- 2020-21 -- 2021-22 45,00,000/- 2022-23 1,85,02,000/- Total 2,36,53,150/- In this regard, the assessee is requested to please state the reason behind such transaction. Please state whether these transaction have been recorded in the books of accounts. Please furnish the relevant portion of the books of accounts with supporting documentary evidences. In case of no proper submission, it will be treated as unexplained transaction and in that case please show cause why not the unexplained/unaccounted/undisclosed transaction to the tune of Rs. 6,50,950/-, Rs. 45,00,000/- and Rs. 1,85,02,200/- should be added back to the total income of the concerned assessee for the FY 2019-20, 2021-22 and 2022-23 relevant to the AY 2020-21, 2022-23 and 2023-24 respectively. 1. During the course of search in the case of Mongia Steel Ltd at Burdiadih, Tundi Road, Giridih, various documents and digital devices were found and seized with identification marks MSO-01 to 08. MSO/HD/01 to MSO/HD/08, MSO/Desktop- 01 and MSO/Mobile-01. In the meantime, mobile of Sri Gopal Agrawal, one of the employee of Mongia Steel Ltd, was examined and found evidence of hawala transaction in his whatsapp chat with other persons. Printout of those whatsapp chat were taken and seized having identification marks as MSO-01. On verification of this, it is found that, Sri Gopal Agrawal has been indulged in the hawala transaction and these transactions have not been recorded in the books. 10 W.P.(T) No. 1720 of 2024 & Ors. The financial year wise details of the transaction are as follows:- FY Amount involved (in Rs.) 2019-20 79,000/- 2020-21 1,21,30,690/- 2021-22 39,74,77,641/- 2022-23 56,74,87,525/- Total 97,71,74,856/- In this regard, the assessee is requested to please state the reason behind such transaction. Please state whether these transaction have been recorded in the books of accounts. Please furnish the relevant portion of the books of accounts with supporting documentary evidences. In case of no proper submission, it will be treated as unexplained transaction and in that case please show cause why not the unexplained/unaccounted/undisclosed transaction to the tune of Rs. 79,000/-, Rs. 1,21,30,690/-, Rs. 39,74,77,641/- and Rs. 56,74,87,525/- should be added back to the total income of the concerned assessee for the FY 2019-20, 2020-21, 2021-22 and 2022-23 relevant to the AY 2020-21, 2021-22, 2022-23 and 2023-24. 1. During the course of search in the case of Om Kinker Thakur at Giridih, various documents and digital devices were found and seized with identification marks OKT-01 to OKT-03, OKT/HDD/01 and OKT/HDD/02. In the meantime, mobile of Sri Om Kinker Thakur and his wife Smt Mita Thakur, one of the directors of Mongia Steel Ltd, were examined and found evidence of hawala transaction in his whatsapp chat with other persons. Printout of those whatsapp chat were taken and seized having identification marks as OKT-01. On verification of this, it is found that, Sri Om Kinker Thakur and his wife Smt Mita Thakur has been indulged in the hawala transaction and these transactions have not been recorded in the books. The financial year wise details of the transaction are as follows:- FY Amount involved (in Rs.) 2019-20 2,15,52,362/- 2020-21 6,17,65,341/- 2021-22 1,09,07,861/- 2022-23 15,92,018/- Total 9,58,17,582/- In this regard, the assessee is requested to please state the reason behind such transaction. Please state whether these transaction have been recorded in the books of accounts. Please furnish the relevant portion of the books of accounts with supporting documentary evidences. In case of no proper submission, it will be treated as unexplained transaction and in that case please show cause why not the unexplained/unaccounted/undisclosed transaction to the tune of Rs. 2,15,52,362/-, Rs. 6,17,65,341/-, Rs. 1,09,07,861/- and Rs. 15,92,018/- should be added back to the total income of the concerned assessee for the FY 2019-20, 2020-21, 2021-22 and 2022-23 relevant to the AY 2020-21, 2021-22, 2022-23 and 2023-24. 1. During the course of search in the case of Nityanand Jha at Kolkata, various documents including whatsapp chat and digital devices were found and seized with identification marks NNJ-01. The seized documents were examined and evidence of hawala transaction in his whatsapp chat with other persons was found. On verification of this, it is found that, Sri Nityanand Jha has been indulged in the hawala transaction and these transactions have not been recorded in the books. The financial year wise details of the transaction are as follows:- 11 W.P.(T) No. 1720 of 2024 & Ors. FY Amount involved (in Rs.) 2021-22 2,30,10,500/- 2022-23 1,18,75,000/- Total 3,48,85,500/- In this regard, the assessee is requested to please state the reason behind such transaction. Please state whether these transaction have been recorded in the books of accounts. Please furnish the relevant portion of the books of accounts with supporting documentary evidences. In case of no proper submission, it will be treated as unexplained transaction and in that case please show cause why not the unexplained/ unaccounted/ undisclosed transaction to the tune of Rs. 2,30,10,500/- and Rs.1,18,75,00/- should be added back to the total income of the co0ncerned assessee for the FY 2021-22 and 2022-23 relevant to the AY 2022-23 and 2023-24. 1. During the course of search in the case of Baljit Singh Saluja alias Rishi Saluja at Saluja House, Giridih, various documents and digital devices were found and seized with identification marks BS-01 to BS-04. In the meantime, mobile of Sri Baljit Singh Saluja alias Rishi Saluja, was examined and thus evidence of hawala transaction in his whatsapp chat with other persons was found. Printout of those whatsapp chat were taken and seized having identification marks as BS-02. On verification of this, it is found that, the assessee has been indulged in the hawala transaction and these transactions have not been recorded in the books. The financial year wise details of the transaction are as follows:- FY Amount involved (in Rs.) 2021-22 32,11,633/- 2022-23 8,69,74,618/- Total 9, 01,86, 251/- In this regard, the assessee is requested to please state the reason behind such transaction. Please state whether these transaction have been recorded in the books of accounts. Please furnish the relevant portion of the books of accounts with supporting documentary evidences. In case of no proper submission, it will be treated as unexplained transaction and in that case please show cause why not the unexplained/unaccounted/undisclosed transaction to the tune of Rs. 32,11,633/- and Rs. 8,69,74,618/- should be added back to the total income of the concerned assessee for the FY 2021-22 and 2022-23 relevant to the AY 2022-23 and 2023-24. During the course of the search operation in the case of M/s Mongia Steel Ltd. at Buriadih, Tundi Road, Giridih, various documents and digital devices were found and seized with identification marks MSO-01 to 58, MSO/HD/01 to MSO/HD/08, MSO/Desktop-01 and MSO/Mobile-01. Page No. 48-56 of MSO/39 represents the report of daily production of Mongia Steel Ltd., prepared by the search team during the course of search on the basis of data found in Tally maintained in office of Mongia Steel Ltd. and daily production report given by Shri Mithilesh (Employee of Mongia Steel Ltd.) to Harinder Singh Mongia on daily basis on WhatsApp, the chat of which, i.e.. Harinder Singh Mongia, was seized as MSO/Desktop-01, and the printout of the chat was taken by the search team and had been seized as MSO/41 to MSO /58. On verification of the data, it is seen that, the production of TMT has been mentioned as SMS production to the tune of 303.9002 MT and Hot charging 114.492 MT on a particular day but, in the tally software, total production was mentioned of 345.81 MT only. Thus, suppression of production has been recorded 12 W.P.(T) No. 1720 of 2024 & Ors. in the books of accounts. ……………………………………………………………………………………… ……………………………………………………………………………………..” 12. The satisfaction indicated under sub-section (2-A) for forming an opinion by the Assessing Officer shall not be open to judicial scrutiny and wherever it is shown to the Court that there are materials for arriving at satisfaction for the special audit of the accounts of an assessee by an Accountant as defined in explanation to sub-section (2) of section 288, the writ Court shall be denuded of its power of judicial review under Article 226 of the Constitution of India. The submission that by passing an order under sub-section (2-A) the period of limitation which shall be expiring on 31st day of March 2024 would be extended by six months and thereby cause prejudice to the assessee cannot be countenanced in law. Unless it is demonstrated by producing materials to the satisfaction of the Court that the exercise of powers under sub-section (2-A) by the Assessing Officer is with mala fide intention, the writ Court shall not exercise its powers under Article 226 of the Constitution. In the opinion of this Court, the Assessing Officer for valid and justifiable reasons may exercise the powers under sub-section (2-A) till the last date of the financial year. 13. Having regard to the initial stage of inquiry, we shall be careful to see that no prejudice is caused to the assessee and would therefore simply indicate that (i) there are certainly doubts about the correctness of the accounts (ii) multiplicity of transactions is apparent (iii) Hawala transactions are like specialized transactions and (iv) the accounts are complex and certainly voluminous. The order granting approval dated 20th March 2024 for special audit under section 142(2-A) of the Income Tax Act takes note of every detail of the case. This would evince no doubt that at this stage, the statutory Authority is required to form a prima facie opinion and not to render a conclusive finding. The Latin word “prima facie” which means at first glance shall refer to materials based on which the statutory Authority shall form an opinion. In the concluding paragraph, the Principal Commissioner of Income Tax (Central) recorded thus: 13 W.P.(T) No. 1720 of 2024 & Ors. “10. In view of the above discussions and after careful consideration of the facts and circumstances of the case and the provisions of law, and having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts and in the interests of the revenue, I am of the opinion that it is necessary to get the accounts of the assessee audited by an accountant under the provisions of section 142[2A] of the Income-tax Act, 1961. Accordingly, approval is hereby granted for audit in terms of section 142[2A] of the Income-tax Act, 1961 for the financial years 2012-13, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18, 2018-19, 2019-20, 2020- 21, 2021-2022, and 2022-23 by M/s Khetan Rajesh Kumar & Co., Adharshila Complex, 306, 5th, South Gandhi Maidan, Patna, Bihar 800 001 duly empanelled for this purpose by the Pr. Chief Commissioner of Income-tax (B&J), Patna vide order dated 15.02.2024. The above accountant shall complete the audit within a reasonable time and furnish a report in the prescribed form to the concerned Assessing Officer. The terms of reference as well as specific issues to be examined during the course of such special Audit shall be determined and communicated by the Assessing Officer.” 14. An order passed in violation of natural justice becomes susceptible in law. “Sahara India (Firm) Lucknow Vs. Commissioner of Income Tax, Central-I and Anr.” (2008) 14 SCC 151 is an authority to the proposition that reasonable opportunity must be given to the assessee before the power under section 142(2-A) is exercised by the Assessing Officer. After the amendment, this requirement to follow natural justice is incorporated in sub-section (2-A) by providing that reasonable opportunity of being heard shall be provided to the assessee. To a limited extent, we may agree with the learned counsel for the petitioner-Company that five days to respond to the notice under section 142(2-A) was not sufficient and the Assessing Officer passed the order without looking at the objections raised by the petitioner-Company. 15. Even so, there is no law of universal application that every order passed in breach of natural justice must be interfered by the Court. The requirement in law that every order that ensues civil consequence must be passed following the rules of natural justice shall vary from case to case and no strait-jacket formula can be prescribed. We are not in agreement with the learned counsel for the petitioner-Company that serious prejudice has been caused to the petitioner-Company on account of violation of the rules of natural justice. Lord Wilberforce observed that: “a breach of procedure cannot give (rise to) a remedy in the courts, unless behind it there is 14 W.P.(T) No. 1720 of 2024 & Ors. something of substance which has been lost by the failure. The court does not act in vain” [see, “Malloch v. Aberdeen Corporation” (1971) 2 ALL ER 1278 (HL)]. In the same vein were the observations in “Cinnamond v. British Airports Authority” (1980) 2 All ER 368 (CA). Brandon L.J. rendered the opinion; “no one can complain of not being given an opportunity to make representations if such an opportunity would have availed him nothing”. The Hon’ble Supreme Court rendered a decision in “Escorts Farms Ltd. v. Commr., Kumaon Division” (2004) 4 SCC 281 on the same lines and held that the rules of natural justice shall not apply in cases where it would be of no use if an opportunity of hearing shall be a mere ritual and without the possibility of any change in the decision on merits. A notice under section 142(2-A) of the Income Tax Act is only a step towards the assessment of income tax and the nominated Auditor’s report is not the final decision. Moreover, the objections so laid by the petitioner-Company prima facie do not reflect any merit. In a proceeding under Article 226 of the Constitution, the writ Court shall not exercise its discretionary jurisdiction where the records reveal that the petitioner-Company has, in fact, no defence to object to a special audit under sub-section (2-A) to section 142. 16. For the foregoing reasons, we are not inclined to interfere with the order dated 23rd March 2024 contained in DIN & Letter No. ITBA/AST/F/17/2023-24/1063244964(1). We however indicate that we have referred to some facts and made observations thereon for examining the plea of natural justice and such observations shall not be treated as an expression of opinion on the merits of the case; observations are only for the present case. To protect the interest of the petitioner-Company, we issue the following directions: (i) The time indicated in the order dated 23rd March 2024 for submission of report by the nominated Auditor is extended by a further three months; (ii) The nominated Auditor shall confine the inquiry to the matters indicated in para no.5 of the order dated 23rd March 2024; and 15 W.P.(T) No. 1720 of 2024 & Ors. (iii) He shall not refer to any internal document/appraisal report prepared by the Income Tax Department concerning the petitioner- Company. 17. These writ petitions are disposed of. I.A., if any, stands disposed of. (Shree Chandrashekhar, A.C.J.) (Navneet Kumar, J.) Basant B/S.Das "