MONTECARLO LIMITED V. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(3), AHMEDABAD

SCA/15357/2021

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Montecarlo Limited, a public limited company engaged in infrastructure development and real estate, filed a special civil application against the Assistant Commissioner of Income Tax, Central Circle 1(3), Ahmedabad. The dispute arose from the Income Tax Department's scrutiny of the company's return of income, where it declared a total income and claimed deductions under various sections of the Income Tax Act. The department issued a show cause notice questioning the deductions claimed and referred the matter to a Valuation Officer for assessing the value of land sold. The company contested the valuation and the proposed special audit of its accounts, arguing that the audit was unnecessary and violated principles of natural justice. The court, after hearing the arguments, was disinclined to entertain the petition, leading to its withdrawal by the petitioner.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 749595 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 12-10-2021
• Assessment Year: misc
• Other Referred Cases: Swadeshi Cotton Mills Company Ltd. Vs Commissioner of Income Tax and Ors, Sahara India (Firm), Lucknow Vs Commissioner of Income Tax, Central I and Ors, Alidhara Texpro Engineering Pvt. Ltd. Vs Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: HARDIK VORA
• Keywords: Deductions; Income Tax; Natural Justice; Special Audit; Valuation Officer
• Section: 142(2A); 80IA; 35AD; 288(2)

Judgement Text

"C/SCA/15357/2021 ORDER DATED: 12/10/2021 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 15357 of 2021 ========================================================== MONTECARLO LIMITED Versus ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(3), AHMEDABAD ========================================================== Appearance: MR. HARDIK V VORA(7123) for the Petitioner(s) No. 1 for the Respondent(s) No. 1,2 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MR. JUSTICE RAJENDRA M. SAREEN Date : 12/10/2021 ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) The petitioner Company is a Public Limited Company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of Infrastructure Development, Mining and Infrastructure for power transmission and distribution as well as in the Real Estate business. As part of the infrastructure construction and development operations, the company undertakes highway projects on BOT, EPC and HAM on the basis of Mining Project on MDO basis. 2. It is the case of the petitioner that it had filed the Return of Income declaring total income of Rs 171,31,23,145/- and claimed deduction under Chapter VI-A of Rs 87,50,11,896/- offering the said amount as Page 1 of 7 C/SCA/15357/2021 ORDER DATED: 12/10/2021 taxable amount. 3. His case was selected for scrutiny and petitioner submitted various details along with the audit report from the Chartered Account in Form 10CCB duly certifying the claim of deduction made under section 80IA of the Income Tax Act (for “the Act” for short) of each project, profit and loss account of project and other relevant documents. 4. It is the case of the petitioner that a show cause notice was issued on 19.6.2021 . He was asked to explain as to why the deduction claimed under 80IA of the Act to the tune of Rs 123,25,69,872/- and deduction claimed under Section 35 AD of the Act of Rs 5,21,35,505/- should not be disallowed and added to the total income. 5. It is further the case of the petitioner 19.6.2021 vide notice no. DCIT/CC.1(3)/Ahd/MCL/DVO/2021-22 the respondents referred the matter to the Valuation Officer, Bhopal, for estimating the value of the land sold during the year under consideration situated at village Noornagar, Tehsil Udaypura, Madhya Pradesh. 6. It is the grievance of the petitioner that the assessee had already accepted the circle rates as declared by the State Government authority and yet, such reference of valuation have been made. 7. On 25.6.2021 in response to the show cause notice seeking to explain the direction claimed under Section Page 2 of 7 C/SCA/15357/2021 ORDER DATED: 12/10/2021 801-IA, the reply have been submitted along with the relevant documents. It is the case of the petitioner that it had raised various contentions including the objection of the audit report in form 10CCB having been uploaded electronically along with Profit and Loss accounts and his contract from Government of each undertaking being eligible for deduction under Section 80-IA (4). It was also submitted to the concerned officer that the petitioner company maintained separate books of accounts for 80- IA and 35AD projects in SAP based ERP system which according to the petitioner,is an elaborate, comprehensive and containing the robust accounting system. The books of accounts were duly audited by the qualified Chartered Accountant and while filing the return of income, audit report in Form 10CCB along with the profit and loss accounts had been furnished on the Income Tax Portal. It is also his claim that his deduction under Section 80-IA (4) in preceding years had been allowed, where in some of those years the, Assessing Officer had disallowed, the Appellate Authority had allowed the same and, therefore, the Assessing Officer had no reason to take a different view treating the earlier views as erroneous. There are other elaborate objections which have been raised on the part of the petitioner. It is further his say that the notice under Section 50C had been issued by the Valuation Officer, Bhopal on 1.7.2021 after the notice had gone on 19.6.2021 by the respondent referring the matter to the Valuation officer. 7.1 In response to the said notice also, the petitioner Page 3 of 7 C/SCA/15357/2021 ORDER DATED: 12/10/2021 had submitted detailed submissions along with the relevant documents. 8. His grievance is that at the fag end of the time barring assessment dated 30.9.2021 and after two years from initiation of assessment proceedings and after more than three months from the date of detailed show cause notice, the assessing Officer had proposed the Special Audit of books under Section 142(2A), and he left just one working day to represent the matter by stating that having regard to the nature and complexities in the books of accounts, the voluminous details and data involved, the doubts about the correctness of the accounts and reports filed as form 10CCB, the multiplicity of the transactions and specialised nature of business, and their impact on the income and in the interest of revenue, would lead him to get the account of the petitioner audited by an accountant, as defined under Section 288(2) for the AY 2018-2019 and nominated by Pr. CIT (Central), Ahmedabad. The hearing for the said purpose have been fixed on 27.9.2021. 9. The notice had been replied to by the petitioner. His grievance is that he was granted only one working day i.e on 24.9.2021 as 25th and 26th fell on a weekend. He received the notice and when he represented his case , instead of considering his version to proposed the reference for in the Special audit of account under Section 142(2-A) of the I.T Act. It appears to be an attempt on the part of the Assessing officer to fetch more time and to pass an assessment order. His Page 4 of 7 C/SCA/15357/2021 ORDER DATED: 12/10/2021 grievance is also multiplied when the Assessing Officer had proposed the entire disallowance under Section 80- IA (4), on 19.6.2021 which according to him is a sign of verification on the part of the respondents and who understood the documents on record and yet thereafter, he chose to issue the show cause notice. However, at the end of the limitation period before passing the assessment order and without availing an opportunity he proposed the special audit which is nothing but an excuse to get more time, therefore, the petitioner is before this Court with the following prayers. 5. The petitioner accordingly prays that this Hon’ble Court may kindly be pleased to issue ; a. A writ of certiorari or writ, order, or direction in the nature of Certiorari quashing/ setting aside the order disposing objections for proposed referral for special audit under section 142(2A) on 29.9.2021 and consequent order dated 30.9.2021 giving directions under section 142(2A) of the Income Tax Act, 1961. b. Pending hearing and final decision of the writ petition, to stay the order dated 30.9.2021 giving directions under section 142(2A) of the Income Tax Act, 1961 and consequent proceedings of special audit; c. Pass any other orders as this Hon’ble Court may deem fit and more appropriate in order to grant interim relief to the petitioner; d. Any other and further relied deemed just and proper be granted in the interest of justice; e. To provide for the cost of this petition. Page 5 of 7 C/SCA/15357/2021 ORDER DATED: 12/10/2021 10. We have heard extensively learned Advocate Mr. Vora who has taken us through the entire material. According to him, the twin conditions necessary for invoking the powers under Section 142(2A) of the I.T Act are missing. He has also urged that there has been a violation of principles of natural justice as giving of opportunity only for a day before reference to the Special Audit would amount to non-availment of an opportunity. He has also further urged that what the Assessing Officer himself ought to have done he has chosen to get it done through the Special Auditor which not only would put the present petitioner to the jeopardy but the basic requirement of the provisions are not being satisfied and that would be the reason for the Court to intervene and indulge at this juncture. In support of his submissions he had taken us through the responses given by him to the issuance of the show cause notice and the details which have been furnished which according to the petitioner if would have been taken into consideration, there would not be any necessity for him to make a reference as has been done presently. 10.1 He has relied on the following authorities in support of his submissions. (a) Swadeshi Cotton Mills Company Ltd. Vs Commissioner of Income Tax and Ors. Vs Commissioner Of Income Tax and Ors passed in Civil Misc. Writ No. 41 of 1978 decided on 3.3.1987. (b) Sahara India (Firm), Lucknow Vs Commissioner of Income Tax, Central I and Ors passed in Civil Appeal No. 2783 of 2008 and allied matters decided on 11.4.2008. Page 6 of 7 C/SCA/15357/2021 ORDER DATED: 12/10/2021 (C) Alidhara Texpro Engineering Pvt. Ltd. Vs Deputy Commissioner of Income Tax in Special Civil Application No 7240 of 2008 decided on 17.3.2009. 11. As the Court was disinclined to entertain this petition, learned Advocate Mr. Vora, for the petitioner has sought permission to withdraw this petition, permission is granted. 12. Petition is dismissed as withdrawn. Notice is discharged. (SONIA GOKANI, J) (RAJENDRA M. SAREEN,J) MARY VADAKKAN Page 7 of 7 "