TEHMUL BURJOR SETHNA V. ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1)

SCA/6632/2019

AI Insights

Tehmul Burjor Sethna, a practicing chartered accountant, challenged the notices and orders issued by the Assistant Commissioner of Income Tax for a special audit of his accounts under section 142(2A) of the Income Tax Act, 1961. The audit was proposed following a search operation at Sethna's premises, which uncovered numerous documents and digital data suggesting involvement in complex financial transactions and accommodation entries. The court examined the legal provisions, the nature of the documents seized, and the responses provided by Sethna to the notices. Ultimately, the court upheld the special audit direction, emphasizing the need for a thorough examination of the financial transactions involved.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 762366 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 31-07-2019
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Bhaichand N. Gandhi, Baladin Ram v. Commissioner of Income Tax, Alidhara Texpro Engineering (P.) Ltd. v. Deputy Commissioner of Income Tax, Rajesh Kumar v. Deputy Commissioner of Income Tax, DLF Commercial Projects Corporation v. Assistant Commissioner of Income Tax, Sahara India (Firm) v. Commissioner of Income Tax, Takshashila Realties (P.) Ltd. v. Deputy Commissioner of Income Tax, Asharam Thaumal Harplani (Asaram Bapu) v. Deputy Commissioner of Income Tax, Delhi Development Authority v. Union of India, West Bengal State Co-operative Bank Ltd. v. Joint Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M R BHATT; MAUNA BHATT; KARAN SANGHANI
• Assessee Lawyers: R K PATEL; DARSHAN PATEL
• Keywords: Assessment years; Complexity of accounts; Income Tax; Search operation; Seized documents; Special Audit
• Section: 143(3); 142(1); 143(2); 153A; 142(2A)

Judgement Text

"C/SCA/6632/2019 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 6632 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE VIRESHKUMAR B. MAYANI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ================================================================ TEHMUL BURJOR SETHNA Versus ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) ================================================================ Appearance: MR R. K. PATEL, ADVOCATE with MR DARSHAN R PATEL(8486) for the Petitioner(s) No. 1 MR M.R. BHATT, SENIOR ADVOCATE with MRS MAUNA M BHATT with MR KARAN SANGHANI, ADVOCATE for the Respondents ================================================================ CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE VIRESHKUMAR B. MAYANI Date : 31/07/2019 ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) Page 1 of 94 C/SCA/6632/2019 JUDGMENT 1. By this petition under articles 226 and 227 of the Constitution of India, the petitioner has challenged the notice dated 19.11.2018 issued under section 142(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for assessment years 2011-12 to 2016-17 (Annexure “I” to the petition); show cause notice dated 12.12.2018 (Annexure “K” to the petition); notice dated 21.12.2018 issued by the first respondent – Assistant Commissioner of Income Tax, Central Circle – 1(1), Ahmedabad for special audit (Annexure “N” to the petition); and the order dated 26.12.2018 rejecting the objections filed by the petitioner (Annexure “U” to the petition) and all subsequent proceedings in continuation thereof. 2. The facts giving rise to the present petition are that the petitioner herein is a practising chartered accountant since 1983 and is filing regular returns of income since the year 1984-85. The source of income of the petitioner is from house property, remuneration from partnership firm, capital gains and other sources. It is the case of the petitioner that he is not required to prepare personal books of account nor is he obligated to prepare personal books of account under any of the provisions of the Income Tax Act, 1961. A search operation came to be conducted at the residence and office premises of the petitioner herein on 29.11.2016. Pursuant thereto, the notices under section 153A of the Act dated 12.5.2017 came to be issued for assessment years 2011-12 to 2016-17. In response to the said notices, the petitioner filed his returns of income for assessment years 2011-12 to 2016-17 on 10.06.2017. Page 2 of 94 C/SCA/6632/2019 JUDGMENT 2.1 Thereafter, on 19.9.2017, the petitioner received notices under section 143(2) of the Act for assessment years 2011-12 to 2016-17. The petitioner gave his reply to such notices on 29.9.2017. 2.2 For assessment year 2017-18, the petitioner filed return of income on 31.10.2017. Notices under sections 143(2) and 142(1) of the Act came to be issued by the first respondent on 3.4.2018 for assessment year 2017-18 requiring the petitioner to furnish certain information. The petitioner received another notice under section 143(2) of the Act, whereby the petitioner was informed that his case was selected for limited scrutiny for assessment year 2017-18. 2.3 The petitioner received separate notices dated 25.9.2018 under section 142(1) of the Act for assessment years 2011-12 to 2016-17. The petitioner filed his reply to the notice under section 143(2) of the Act for assessment year 2017-18 on 28.9.2018. The petitioner received a common notice under section 142(1) of the Act for assessment years 2011-12 to 2016-17 on 19.11.2018, wherein the petitioner was also called upon to furnish details for assessment year 2017-18. The petitioner filed his response to the notice issued under section 142(1) of the Act for assessment years 2011-12 to 2017-18 on 23.11.2018. The petitioner filed further reply to the notice issued for assessment years 2011-12 to 2017-18 on 12.12.2018. 2.4 It is the case of the petitioner that on 12.12.2018, the first respondent issued further show cause notice raising queries, which were not part of the notices issued under Page 3 of 94 C/SCA/6632/2019 JUDGMENT section 143(2) of the Act for limited scrutiny. On 17.12.2018, the petitioner filed his reply to the notice for assessment years 2011-12 to 2017-18. 2.5 On 20.12.2018, a Mazharnama came to be drawn, whereby the seal on the seized hard disc was shown to the petitioner along with two witnesses and after confirming that the seals on the hard disc were intact, the seal from the original hard disc was removed in the presence of the petitioner and two independent witnesses and was connected to the system for data retrieval. It is further recorded therein that the backup of the hard disc was taken in a 2 TB external hard disc for use as working copy and the original seized hard disc had been sealed again in presence of the petitioner and two witnesses. 2.6 Thereafter, the first respondent issued a notice dated 21.12.2018 under section 142(2A) of the Act to the petitioner, proposing to get the petitioner’s accounts for assessment years 2011-12 to 2017-18 audited by an accountant as defined under the Explanation to section 288(2) of the Act and nominated by the Principal Commissioner of Income Tax, Ahmedabad for the purpose. 2.7 The petitioner filed his reply dated 22.12.2018 in continuation of the reply dated 17.12.2018 in response to the notices issued under section 142(2) of the Act. In response to the show cause notice dated 21.12.2018 for proposal for special audit under section 142(2A) of the Act, the petitioner raised objections dated 26.12.2018 to the proposal for special audit under section 142(2A) of the Act, which was received by Page 4 of 94 C/SCA/6632/2019 JUDGMENT the first respondent on 27.12.2018. The first respondent disposed of the objections raised by the petitioner against the proposal to special audit under section 142(2A) of the act for assessment years 2011-12 to 2016-17 and assessment year 2017-18 by a communication dated 26.12.2018. On the same day, that is, 26.12.2018, the petitioner requested the second respondent – Principal Commissioner of Income Tax – Central, to provide an opportunity of personal hearing before granting any approval for the action under section 142(2A) of the Act. On 27.12.2018, the second respondent informed the petitioner that personal hearing was fixed on 28.12.2018. On 28.12.2018, the petitioner wrote a letter to the second respondent requesting him to drop the show cause notice issued for proposal of special audit under section 142(2A) of the Act. 2.8 On 30.12.2018, the first respondent informed the petitioner that M/s T.R. Chadha & Co., LLP was appointed as a Special Auditor within the meaning of section 142(2A) of the Act and that the petitioner was required to get the accounts audited for financial years corresponding to assessment years 2011-12 to 2017-18. 2.9 On 4.2.2019, M/s T.R. Chadha & Co., LLP (Special Auditor) requested the petitioner to provide certain details. By a letter dated 19.2.2019, addressed to the second respondent, the petitioner informed him that the Special Auditor was not doing the work of audit. On 20.2.2019, the petitioner addressed a communication to the Special Auditor objecting to several issues, for which the Special Auditor had raised queries, as according to him, such issues did not fall within the purview of Page 5 of 94 C/SCA/6632/2019 JUDGMENT the Special Auditor’s work/jurisdiction. 2.10 On 1.3.2019, the petitioner received a letter from M/s T.R. Chadha & Co., LLP in connection with his letter dated 20.2.2019 responding to the allegations made by him of the auditors exceeding their scope and jurisdiction by asking various details for audit. 2.11 By a communication dated 15.3.2019, the Special Auditor raised various queries/clarifications and called upon the petitioner to provide the details/clarifications asked in the letter and also pending details at the earliest. 2.12 At this stage, the petitioner approached this court seeking the reliefs noted hereinabove on the ground of lack of valid jurisdiction as well as on other grounds. 3. Mr. R. K. Patel, learned advocate for the petitioner invited the attention of the court to the provisions of sub-section (2A) of section 142 of the Act, to submit that the same can be invoked 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, which all presupposes that the assessee is required to maintain the accounts. It was submitted that the petitioner, who is a partner of a firm, is not statutorily required to maintain accounts/books of account. It was submitted that this is an undisputed fact since the assessment year 1984-85, which has been accepted by the department even in scrutiny assessment of earlier years. It was submitted that hence, a basic pre-requisite condition for invoking sub-section (2A) of Page 6 of 94 C/SCA/6632/2019 JUDGMENT section 142 of the Act is not satisfied in the case of the petitioner. Hence, the respondents lack the jurisdiction to invoke section 142(2A) of the Act. 3.1 It was further submitted that in the absence of accounts, the question of complexity in account does not arise and that the Assessing Officer has not even called for the books of account at any point of time. In this regard, the attention of the court was invited to the reply dated 26.11.2018 of the petitioner to the show cause notice dated 21.12.2018 for proposal for special audit under section 142(2A) of the Act. It was contended that the bank pass book/bank statement can never be equated with the books of account. In support of such submission, the learned advocate placed reliance upon the decision of the Bombay High Court in the case of Commissioner of Income Tax v. Bhaichand N. Gandhi, [1982] 11 Taxman 59 (Bom.), wherein the court referred to the decision of the Supreme Court in the case of Baladin Ram v. Commissioner of Income Tax, 71 ITR 427 (SC), for the proposition that the only possible way in which income from an undisclosed source can be assessed or reassessed is to make the assessment on the basis that the previous year for such an income would be the ordinary financial year. Even under the provisions embodied in section 68 of the said Act, it is only when any amount is found credited in the books of the assessee for any previous year that the section will apply and the amount so credited may be charged to tax as the income of that previous year, if the assessee offers no explanation or the explanation offered by him is not satisfactory. Applying the principle, the court held that the pass book supplied by the bank to its constituent is only a copy of the constituent’s Page 7 of 94 C/SCA/6632/2019 JUDGMENT account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. The court held that the Tribunal was, therefore, justified in holding that the pass book supplied by the bank to the assessee in that case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. Reliance was also placed upon the decision of this court in the case of Alidhara Texpro Engineering (P.) Ltd. v. Deputy Commissioner of Income Tax, [2011] 332 ITR 115 (Guj.), and more particularly, to the contents of paragraph 7 thereof. 3.2 Next, it was contended that the non-application of mind on the part of the respondent Assessing Officer is evident from the fact that in the objection rejection order dated 26.12.2018, there is a reference to submissions filed by the petitioner on 27.12.2018 in response to the show cause notice under section 142(2A) of the Act, inasmuch as on 26.12.2018, the Assessing Officer had refused to personally accept the same. 3.3 It was submitted that despite the fact that the Assessing Officer was aware of the fact that the petitioner is neither maintaining the books of account, nor required to maintain the books of account, he has sent the notice dated 19.11.2018 to furnish financial year-wise statements of the following: (i) statement of affairs, (ii) statement of income and expenditure, (iii) statement of receipts and payments, and (iv) fund flow statement. It was submitted that the Assessing Officer has not mentioned anywhere as to what is the nature of the complexity of the accounts. It was submitted that the Page 8 of 94 C/SCA/6632/2019 JUDGMENT Assessing Officer should have examined the relevant accounting entries himself before forming an opinion; however, in case of the petitioner, as the respondent knew that the petitioner is not required to maintain the books of account, he has never called for the books of account for verification. It was submitted that the petitioner, in the personal discussion had given in writing and brought to the notice of the Principal Commissioner of Income Tax, Central that he is not maintaining the books of account; however, the Principal Commissioner of Income Tax, Central has granted the approval in a mechanical manner to get the books of account audited by special auditors. It was submitted that therefore, the Principal Commissioner of Income Tax (the second respondent herein) has mechanically granted approval to the proposal for appointment of special auditor which is contrary to the settled legal position of law rendering the proceedings a nullity in the eyes of law. 3.4 In support of such submission, the learned advocate placed reliance upon the decision of the Supreme Court in the case of Rajesh Kumar v. Deputy Commissioner of Income Tax, [2006] 157 Taxman 168 (SC), wherein the court has held that an order of approval is not to be mechanically granted, but the same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He, in a situation of this nature, could have corrected the Assessing Officer if he was found to have adopted a wrong approach or posed a wrong question unto himself. He could have been asked to complete the process of the assessment Page 9 of 94 C/SCA/6632/2019 JUDGMENT within the specified time so as to save the revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of account and/or the entries made therein. While exercising its power, the Assessing Officer has to form an opinion, albeit subject to approval of the Chief Commissioner or the Commissioner, as the case may be. 3.5 Reliance was also placed upon the decision of the Delhi High Court in the case of DLF Commercial Projects Corporation v. Assistant Commissioner of Income Tax, [2012] 26 taxmann.com 236 (Delhi), for the proposition that the provision of sub-section (2A) of section 142 of the Act requires the Assessing Officer to form an opinion that having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, it is necessary to get the accounts audited by a special auditor nominated by the CIT or the CCIT. The proviso makes it incumbent upon the Assessing Officer to give the assessee a reasonable opportunity of being heard before special audit is directed. The direction to conduct special audit has to be, under the sub- section, given with the previous approval of the CIT or the CCIT. It is, thus, the Assessing Officer who is to form the opinion and not for anyone else. The approval to be granted by the CIT or the CCIT, as held by the Supreme Court in the case of Sahara India (Firm) is an inbuilt protection against arbitrary or unjust exercise of power by the Assessing Officer and therefore, a heavy duty is cast on the high ranking authority to see that the approval is not granted in a ritualistic manner; he is required to examine the material on the basis of which an opinion for conducting special audit was formed by Page 10 of 94 C/SCA/6632/2019 JUDGMENT the Assessing Officer. The approval must reflect the application of mind to the facts of the case. 3.6 Reference was also made to the decision of the Calcutta High Court in the case of West Bengal State Co-operative Bank Ltd. v. Joint Commissioner of Income Tax, [2004] 138 Taxman 238 (Cal.), for the proposition that the Commissioner of Income Tax should not give any approval mechanically and if he finds that there is no examination of the books of account by the Assessing Officer before sending the proposal, he will not certainly give any approval. Under this section, the Commissioner of Income Tax does not exercise the jurisdiction of the appellate authority rather the approving authority. Approval means and connotes supporting and accepting of an act and conduct done by another person. Therefore, it would be his duty to examine on receipt of his proposal, whether the Assessing Officer has correctly done it or not, if he finds that this requirement has not been fulfilled, then he must not approve of the same. It was submitted that in this case, the Principal Commissioner of Income Tax has mechanically granted the approval and hence, the approval stands vitiated as being contrary to the settled principles enunciated by the different courts, including the Supreme Court. 3.7 Next, it was submitted that a consolidated reference for special audit for seven assessment years involving section 153A of the Act and limited scrutiny under section 143(3) of the Act has been issued in the present case, which is contrary to the C.B.D.T. Circular as no requisite permission has been obtained for full scrutiny. The attention of the court was Page 11 of 94 C/SCA/6632/2019 JUDGMENT invited to the notice under section 143(2) of the Act issued in respect of assessment year 2017-18, to submit that under the Limited Scrutiny (Computer Aided Scrutiny Selection), the petitioner was required to clarify only one issue, viz., “cash deposit during demonetization period”. The attention of the court was invited to the C.B.D.T. letter dated 30.11.2017, issuing instructions for unauthorized expansion of scope of limited scrutiny, wherein it has been stated that the C.B.D.T. has issued detailed guidelines/directions for completion of cases of limited scrutiny selected through CASS module. These guidelines postulate that an Assessing Officer, in limited scrutiny cases, cannot travel beyond the issues for which the case was selected. The idea behind such stipulations was to enforce checks and balances upon powers of an Assessing Officer to do fishing and roving inquiries in cases selected for limited scrutiny. It was submitted that the resultant effect of going beyond the scope of limited scrutiny is that the entire reference to special audit is vitiated on facts and in law. 3.8 It was further submitted that though the search proceedings commenced on 29.11.2016, effective show cause notice for scrutiny was issued only on 19.11.2018, that is, after a gap of almost two years. It was submitted that thereafter, the show cause notice under section 142(2A) of the Act came to be issued on 21.12.2018 in respect of seven assessment years. It was submitted that the proposal for approval to the Principal Commissioner of Income Tax is dated 27.12.2018 and the approval is granted on 29.12.2018 in a mechanical manner. It was emphatically argued that the sequence of events clearly indicates that the entire exercise of reference to special audit by the first respondent is for the purpose of Page 12 of 94 C/SCA/6632/2019 JUDGMENT buying limitation as the proceedings were becoming time- barred on 31.12.2018. Reference was made to paragraph 8 of the notice dated 12.12.2018, wherein the Assessing Officer has categorically stated that this was a time-barring matter and the case was getting barred by limitation on 31.12.2018. In support of such submission, the learned advocate placed reliance upon the decision of the Supreme Court in the case of Rajesh Kumar v. Deputy Commissioner of Income Tax (supra), wherein the court has observed thus: “49.Assuming that two sets of accounts were being maintained the same would not mean that the nature of accounts is difficult to understand. It could have furthermore not been shown that the power is sought to be exercised only for an unauthorised purpose, viz., for the purpose of extension of the period of limitation as provided for under Explanation 2 to section 158BE of the Act.” 3.9 Reference was also made to the decision of this court in the case of Alidhara Texpro Engineering (P.) Ltd. v. Deputy Commissioner of Income Tax (supra), to submit that the entire exercise of invoking powers under section 142(2A) of the Act was a mala fide exercise only to buy time as the assessments were otherwise getting barred by limitation. Reference was made to the decision of the Delhi High Court in the case of DLF Commercial Projects Corporation v. Assistant Commissioner of Income Tax (supra), wherein the assessment proceedings were getting barred by time on 31.12.2011. The Assessing Officer had fixed the hearing on 28.12.2011. It was on that day, that is, 28.12.2011 that the approval of the CCIT to the special audit proposal was communicated to him. The court observed that Page 13 of 94 C/SCA/6632/2019 JUDGMENT this extended the period of limitation for completing the assessment, which was also an aspect that was required to be kept in view. The court found it difficult to believe that the CCIT could have applied his mind in such a short period of time and ultimately quashed the direction for special audit and the order containing the terms of reference to special auditors and all further proceedings consequent thereto. 3.10 It was next contended that the entire exercise of reference to the Special Auditor is delegation of the jurisdiction of the assessment proceedings to the auditor, which is impermissible in law. In this regard reference was made to the reply dated 20.2.2019 of the petitioner to the notice dated 4.2.2019 of the Chartered Accountants appointed for special audit. Reliance was placed upon the decision of the Delhi High Court in the case of Delhi Development Authority v. Union of India, [2012] 25 taxmann.com 234 (Delhi), wherein the court has held thus: “24. We have referred to the aforesaid note in detail for two reasons. Firstly, the note reveals that the Assessing Officer felt that the case required detailed scrutiny or monitoring, verification of entries, which were substantial in number. Detailed scrutiny of large number of entries by itself, on standalone basis, will not amount to complexity of accounts. The accounts do not become complex because merely there are large number of entries, e.g., a petrol pump may have substantial sales, to thousands of customers daily at prices fixed under law/Rules, but this by itself will not be the accounts complex. Similarly, an Assessing Officer is required to scrutinize the entries and verify them, but this does not require services of a special auditor or a Chartered Accountant to undertake the said exercise. Section 142(2A) is not a provision by which the Assessing Officer delegates his powers and functions, Page 14 of 94 C/SCA/6632/2019 JUDGMENT which he can perform to the special auditor. The said provision has been enacted to enable the Assessing Officer to take help of a specialist, who understands accounts and accounting practices to examine the accounts when they are complex and the Assessing Officer feels that he cannot understand them and comprehend them fully, till he has help and assistance of a special auditor. Interest of the Revenue being the other consideration. In the present case, the Revenue has not submitted that test check of entries was undertaken, but anomalies or mistakes were detected. For proceeding further, and to compute the taxable income, help and assistance of an accounting expert was required. Secondly, we notice that the Assessing Officer felt that special auditor is required for determining and deciding certain legal issues, i.e., nature and character of Nazul I and Nazul II land, payments received and the treatment of the said payments, receipts or expenditure in the books for the purposes of taxation. The special auditor cannot go into and examine the said legal issue or question regarding taxability. This has to be determined and decided by the Assessing Officer. This determination/decision requires passing of the assessment order. However, at this stage, the Assessing Officer should indicate his prima facie or tentative view on why the legal issue requires examination of accounts by the specialist. A Chartered Accountant, a specialist in accounts does not have a role to play and cannot be delegated and asked to decipher, decide or express his opinion on nature and character of Nazul I or Nazul II land receipts and payments. In a given case, the complexities of account and the legal issue may be intertwined or connected and, therefore, examination of accounts may indirectly or directly require his opinion on a legal matter/issue, but this is not true or so stated in the present case. The case and the stand of the assessee is that as per the statute, including the Rules, Nazul I and Nazul II land, payments received, expenditure incurred etc., belong to the Central Government and nothing whatsoever can be attributed to them. There is no examination, consideration of the legal aspect and formation of a tentative view. The decision on this legal issue cannot be transposed and passed to the Chartered Accountant as a special auditor as he is not a specialist and mandated by the Act to undertake the said exercise. Page 15 of 94 C/SCA/6632/2019 JUDGMENT The case of the assessee is that it is maintaining separate accounts for Nazul I and Nazul II lands and the General Development Account. The said accounts are audited by the Comptroller and Auditor General and have been accepted by the Central Government. 25. We also find merit in the contention raised by the petitioner that the Assessing Officers have repeatedly in all orders, for the purpose of recording reasons, taken the \"notes of accounts\" and verbatim incorporated the same. This is apparently correct and, therefore, discloses non-consideration and non-application of mind, which constitutes an error in the decision making process. It is an easy and convenient manner to transfer the obligation of scrutiny and examination to the special auditor. It may be true and correct that certain aspects mentioned in the Notes of Accounts may, if required and necessary and after in depth examination, justify appointment of a special auditor but the Assessing Officer has to be cautious and careful to segregate them from others while recording the reasons. If such an exercise is undertaken, it will show due and proper application of mind and not exercise of power under Section 142(2A) on the pretend or on the pretext that such power exists and, therefore, should be exercised. Existence of the power is not in dispute; it is the exercise of power, which is in dispute and question. The exercise of power must withstand and meet the requirements prescribed. Failure to exclude irrelevant and extraneous matters negates the \"opinion\" as the said matters should not cloud or dent formation of opinion. Reasons recorded must be genuine and have a nexus with the twin statutory requirements i.e. complexity of accounts and interest of the Revenue.” 3.11 Reliance was also placed upon the decision of the Calcutta High Court in the case of West Bengal State Co- operative Bank Ltd. v. Joint Commissioner of Income Tax (supra), wherein the court has held that primarily the Assessing Officer should examine either by himself or to get the accounts examined by some other official subordinate to him and then apply his mind to form opinion about the nature Page 16 of 94 C/SCA/6632/2019 JUDGMENT and complexity of the accounts. The said section leaves ample scope for the Assessing Officer to abuse or misuse power conferred thereunder by appointing a special auditor, to be more precise the task of the Assessing Officer of examining accounts can be shifted to the third party at the cost of the assessee. In the facts of the said case, the court found that undoubtedly, the Assessing Officer never tried to examine the books of account before forming his opinion. The court was of the view that voluminous and the numbers of books of account or the plea of impossibility are no ground to abdicate his duty. If it is possible for an auditor or his team to examine the books of account, then why is it impossible for an Assessing Officer, is not comprehensible, after all he is presumed to have workable skill and idea of accounting because the nature of the duty entrusted to him under the statute reasonably demands such skill and knowledge of examining accounts. The court further held that the Commissioner of Income Tax should not give any approval mechanically and if he finds that there is no examination of the books of account by the Assessing Officer before sending the proposal, he will not certainly give any approval. Under this section, the Commissioner of Income Tax does not exercise the jurisdiction of the appellate authority rather the approving authority. Approval means and connotes supporting and accepting of an act and conduct done by another person. Therefore, it would be his duty to examine on receipt of his proposal, whether the Assessing Officer has correctly done it or not, if he finds that this requirement has not been fulfilled, then he must not approve of the same. 3.12 The attention of the court was invited to the terms of reference issued by the Assessing Officer under section Page 17 of 94 C/SCA/6632/2019 JUDGMENT 142(2A) of the Act and more particularly, to clause (x/vi) of paragraph 12 thereof, which reads thus: “Any other issue that the Principal Commissioner of Income Tax, Central (Ahmedabad) may deem fit”, to submit that thus, in the directions issued by the Assessing Officer to the Special Auditor, the Principal Commissioner of Income Tax is involved on merits despite the fact that the Principal Commissioner of Income Tax has only jurisdiction of approval and not appellate jurisdiction for these proceedings. 3.13 It was further submitted that in this case, a search was conducted on 29.11.2016, which is post the amendment of 2003 for search proceedings, and hence, no block assessment is to be framed. Despite this fact, no separate assessment year-wise details have been asked for by issuing specific show cause notices for different assessment years, which itself renders the proceedings invalid. 3.14 It was further submitted that the petitioner has alleged mala fides right from the response to the show cause notice for reference to special audit and has further informed the Principal Chief Commissioner of Income Tax, as well as the Director General of Income Tax (Investigation), to check the laptops of the auditors since they are not conducting audit work of the petitioner, but are carrying out professional work of their firm. In this regard, the attention of the court was invited to the communication dated 19.2.2019 of the petitioner addressed to the Principal Commissioner of Income Tax as well as the Director General of Income Tax (Investigation), Ahmedabad. Page 18 of 94 C/SCA/6632/2019 JUDGMENT 3.15 Alternatively and without prejudice to the above contentions, the learned advocate submitted that even when section 142(2A) of the Act talks of audit for “specialized nature of business activities of assessee”, the pre-requisite condition of maintenance of books of account as per statutory requirement, is a must. To bolster his submission, the learned advocate placed reliance upon the decision of this court in the case of Takshashila Realties (P.) Ltd. v. Deputy Commissioner of Income Tax, Circle-4(1)(2), [2017] 80 taxmann.com 176 (Gujarat), wherein the court has held thus: “17. Now so far as submission made on behalf of the petitioner that the Assessing Officer cannot direct special audit under Section 142 (2A) of the Act before calling for the accounts from the petitioner in the assessment proceedings and without doubting the accounts and/or considering the complexity in the accounts is concerned, it is required to be noted that as per amended Section 142 (2A) of the Act, apart from the nature and complexity of the accounts, etc., even in case of multiplicity of transactions in the accounts or specialized nature of business activity of the assessee and the interests of the Revenue, the Assessing Officer can pass an order for special audit in exercise of powers conferred under Section 142 (2A) of the Act. Therefore, while forming an opinion to get the accounts audited by special auditor; considering the specialized nature of business activities of the assessee, there need not be any books of account before the Assessing Officer. In the present case, having found that there are complex issues relating to introduction of land by the partners into the firms; revaluation of land; credit of partners in capital account equal to revalued amount of land; conversion of capital account to loan account of shareholders and issues relating to issuance of equity shares against the balances of revaluation credits at an unreasonable premium, and after having been satisfied that considering the specialized nature of business activities of the assessee, the Assessing Officer has passed an order of special audit in exercise of powers Page 19 of 94 C/SCA/6632/2019 JUDGMENT under Section 142 (2A) of the Act. 18. We see that the decision for audit of the assessees' account is backed by proper material on record and reasons recorded by the Assessing Officer. His formation of belief that looking to the multiplicity of the transactions in the accounts and specialized natureof business activities of the assessee, a special audit is called for, and therefore, it cannot be faulted. 19. At this stage, it is required to be noted that the following material weighed with the Assessing Officer, while forming an opinion that there is necessity for accounts of the assessee audited by special auditor. “That, the 5 Companies, which have amalgamated with Takshashila Gruh Nirman Pvt. Ltd., have their beginning as partnership firms, which were already doing the real estate and construction business and were executing various projects like Takshashila Residency at Naroda Dehgam Road, Takshshila Colonials at Maninagar and Takshshila Habitat at Vastral, apart from hotel and commercial projects. Hotel projects with shops were earlier executed by Chanakya Buildcon, later by Chanakya Buildcon Pvt. Ltd. and now after amalgamation the present Takshshila Gruh Nirman Pvt. Ltd. has completed project and entered into sale agreement. Chanakya Infrastructure commenced construction of Takshshila Habitat and in the middle of the construction, the firm was converted into Company viz., Chanakya Infracon Pvt. Ltd. under chapter IX of Company Act. Now, the Chanakya Infracon Pvt. Ltd. has been amalgamated with Takshshila Gruh Nirman Pvt. Ltd. Similar is the case with Takshshila Gruh Nirman, a firm converted into company Takshshila Properties Pvt. Ltd. and amalgamated with Takshshila Gruh Nirman Pvt. Ltd. The 80IB project Takshshila Colonials, for which approval was granted by Local Authority to erstwhile firm and stock-in-trade/CWIP has changed hands and the 80IB deduction is being claimed in the present Takshshila Gruh Nirman Pvt. Ltd. (Takshshila Realities Ltd.) That, at the time of formation or at the later date Page 20 of 94 C/SCA/6632/2019 JUDGMENT some of the partners brought land into the firms as their capital contribution. Before conversation to companies, the firms got the lands available in the books revalued and the amounts were credited in the current capital accounts of the partners. Consequent to amalgamation, the Company has issued and allotted 6,00,000 equity shares at a fair price of Rs. 10/- and a premium Rs. 390/- per share against the unsecured balances of Rs. 24 Crores, treating the same as share application money and share premium. The fair market value of shares has been arrived by the company on 'Discounted Cash Flow (DCF) method. The basis for free cash flow to equity is randomly taken by the company. Conversion of 5 firms into companies, after revaluation of lands, merger of 5 companies with Takshshila Gruh Nirman Pvt. Ltd. Later with issue of equity shares against the balances of revaluation credits at a premium. Valuation of shares as Discounted Cash Flow method by estimating cash flows and adopting a random discounted rate for valuation. There is complex web of transactions in the group of firms namely introduction of land by some of the partners, revaluation of lands and crediting of amounts in the current accounts of all partners, conversion of firms in to companies which merged with the existing company, valuation of share by discounted cash flow method and allotment of shares against the amounts outstanding as unsecured loans at unreasonable premium, clubbed with multiple revaluation or properties over the years starting from 2008 to 2013 in various entities involves application of provisions of the Companies Act, application of Accounting Standards and examination of provisions of capital gains in the hands of various partners, firms and directions is involved. 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 specialized nature of transaction in the cases which finally of the assessee, and the interests of the revenue, am of the opinion that it is necessary to get the accounts Page 21 of 94 C/SCA/6632/2019 JUDGMENT audited by a Special Auditor from the point of view of taxation of capital gains and accounting of stock- in-trade at each stage of transfer so that there is no loss to the revenue out of the complex web of transactions involved.” 20. Considering the aforestated facts and circumstances of the case and having regard to the multiplicity and specialized nature of transactions and in the interests of the Revenue, when the Assessing Officer has passed the impugned orders of special audit under Section 142 [2A] of the Act, the same cannot be faulted with.” 3.16 It was submitted that even if the Special Auditor is to be appointed in connection with the business of the petitioner in relation to multiplicity of transactions and various materials, still it can be done only if the books of account are to be statutorily maintained, in the absence of which invocation of section 142(2A) of the Act is not justified. Reliance was placed upon the decision of this court in the case of Asharam Thaumal Harplani (Asaram Bapu) v. Deputy Commissioner of Income Tax, [2017] 82 taxmann.com 265 (Gujarat), wherein the court has held that the Special Auditor can be appointed if at any stage of the proceedings before him, the Assessing Officer having regard to the nature and complexity of the account of the assessee and the interest of the revenue, is of the opinion that it is necessary so to do, he may direct the accounts to be verified by the Special Auditor. Therefore, having regard to the nature and complexity of the accounts, if the Assessing Officer is satisfied and/or is of the opinion that accounts are required to be verified by the Special Auditor, he may pass such order. It was submitted that therefore, a basic pre-requisite for the purpose of invoking sub-section (2A) of section 142 of the Act is that the assessee should be required to statutorily maintain the accounts and in Page 22 of 94 C/SCA/6632/2019 JUDGMENT the absence of such condition being satisfied, the provisions of section 142(2A) of the Act cannot be invoked. 3.17 It was further submitted that the entire basis for referring the matter to Special Auditor under section 142(2A) of the Act is that the petitioner is engaged in the business of accommodation entries through the Trust. According to the learned advocate, this is a lame excuse which is proved beyond doubt from the assessment orders of the Trust framed by the same Assessing Officer on 28.12.2018 without making any reference under section 142(2A) of the Act in spite of the fact that the show cause notice for reference to special audit was already issued in the case of the petitioner on 21.12.2018. It was submitted that in the orders of the Trust, there is not even a whisper of any accommodation entry in the case of the Trust or involvement of the petitioner in any manner whatsoever. It was submitted that despite the fact that the Trust is required to maintain the accounts, there is no reference under section 142(2A) of the Act in the case of the Trust. It was, accordingly, urged that the reference to the Special Auditor under section 142(2A) of the Act is without any authority of law and hence, the same as well as any proceedings pursuant thereto, deserve to be quashed and set aside. 4. Vehemently opposing the petition, Mr. M. R. Bhatt, Senior Advocate, learned counsel with Mrs. Mauna Bhatt, learned senior standing counsel for the respondents, invited the attention of the court to sub-section (2A) of section 142 of the Act, to submit that the same is in two parts. The first part talks of accounts, whereas the second part does not refer to Page 23 of 94 C/SCA/6632/2019 JUDGMENT accounts and refers to specialized nature of business activities of the assessee. It was submitted that therefore, the contention that in the absence of any duty cast upon the assessee to maintain the accounts statutorily, sub-section (2A) of section 142 of the Act cannot be invoked, is misconceived and does not merit acceptance. 4.1 Reference was made to sub-section (12A) of section 2 of the Act, which defines “books or books of account” to include ledgers, day-books, cash books, account books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro- magnetic data storage device. It was submitted that in sub- section (2A) of section 142 of the Act, the legislature has consciously used the words “accounts” and not “books of account” and that the expression “accounts” has a wider meaning than the expression “books of account”. Reference was made to the decision of the Supreme Court in the case of Central Bureau of Investigation v. V. C. Shukla and others, (1998) 3 SCC 410, wherein it has been held thus: “20. Mr Sibal, the learned counsel for the Jains, did not dispute that the spiral notebooks and the small pads are “books” within the meaning of Section 34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor were they regularly kept in the course of business. He submitted that at best it could be said that those books were memoranda kept by a person for his own benefit. According to Mr Sibal, in business parlance “account” means a formal statement of money transactions between parties arising out of contractual or fiduciary relationship. Since the books in question did not reflect any such relationship and, on the contrary, only Page 24 of 94 C/SCA/6632/2019 JUDGMENT contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr Sibal. He next contended that even if it was assumed for argument’s sake that the above books were books of account relating to a business still they would not be admissible under Section 34 as they were not regularly kept. It was urged by him that the words “regularly kept” mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions he also relied upon the dictionary meanings of the words “account” and “regularly kept”. 21. The word “account” has been defined in Words and Phrases, Permanent Edn., Vol. I-A at pp. 336 to 338 to mean (i) a claim or demand by one person against another creating a debtor-creditor relation; (ii) a formal statement in detail of transactions between two parties arising out of contracts or some fiduciary relation. At p. 343 of the same book the word has also been defined to mean the preparation of record or statement of transactions or the like; a statement and explanation of one’s administration or conduct in money affairs; a statement or record of financial transactions, a reckoning or computation; a registry of pecuniary transactions or a reckoning of money transactions; a written or printed statement of business dealing or debits and credits; or a certain class of them. It is thus seen that while the former definitions give the word “account” a restrictive meaning the latter give it a comprehensive meaning. Similarly is the above word defined, both restrictively and expansively, in Black’s Law Dictionary (Sixth Edn.) to mean: “A detailed statement of the mutual demands in the nature of debit and credit between parties, arising out of contracts or some fiduciary relation. A statement in writing, of debits and credits, or of receipts and payments; a list of items of debits and credits, with their respective dates. A statement of pecuniary transactions; a record or course of business dealings between parties; a list of statement of monetary transactions, such as payments, losses, sales, debits, credits, accounts Page 25 of 94 C/SCA/6632/2019 JUDGMENT payable, accounts receivable, etc., in most cases showing a balance or result of comparison between items of an opposite nature.” 22. Mr Altaf Ahmed relied upon the wider definition of the word “account” as mentioned above to contend that MR 71/91 fulfils the requirements of “account” as it records a statement of monetary transactions — such as receipts and payments — duly reckoned. Mr Sibal on the other hand urged that business accounts must necessarily mean only those accounts which record transactions between two parties, arising out of a contract or some fiduciary relations (a meaning accepted by the High Court). He submitted, relying upon the definition of “memorandum” as appearing in Words and Phrases, that MR 71/91 could at best be described as a memorandum of some transactions kept by a person for his own benefit to look into the same if and when the occasion would arise. 23. From the above definitions of “account” it is evident that if it has to be narrowly construed to mean a formal statement of transactions between two parties including debtor-creditor relation and arising out of contract, or some fiduciary relations, undoubtedly the book MR 71/91, would not come within the purview of Section 34. Conversely, if the word “account” is to be given wider meaning to include a record of financial transactions properly reckoned the above book would attract the definition of “book of account”. 24. It cannot be gainsaid that the words “account”, “books of account”, “business” and “regularly kept” appearing in Section 34 are of general import. Necessarily, therefore, such words must receive a general construction unless there is something in the Act itself, such as the subject-matter with which the Act is dealing, or the context in which the words are used, to show the intention of the legislature that they must be given a restrictive meaning.” 4.2 It was submitted that sub-section (2A) of section 142 of the Act refers to various aspects of accounts, viz., nature and complexity of accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in Page 26 of 94 C/SCA/6632/2019 JUDGMENT the accounts and that accounts are a formal statement of many transactions. 4.3 Dealing with the contention raised on behalf of the petitioner that the Assessing Officer had issued a notice only on 25.9.2018 after a period of two years from the date of the search and that the powers under section 142(2A) of the Act were invoked only for the purpose of buying limitation, it was pointed out that in this case, the search came to be conducted on 29.11.2016; notice under section 153A of the Act came to be issued on 12.5.2017, in response to which the returns of income came to be filed by the petitioner on 10.6.2017, whereafter the notice under section 143(2) of the Act came to be issued on 19.9.2017. It was submitted that therefore, it is not as if no notice was issued prior to the notice dated 25.9.2018. It was pointed out that during the course of search, voluminous documents and materials came to be seized and the returns filed by the petitioner were not in consonance with the seized material. It was submitted that considering the voluminous documents as well as the nature of such documents, the Assessing Officer. after clearly recording detailed reasons, was of the view that 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, specialized nature of business activity and the interest of revenue, it was necessary to get the accounts of the petitioner for assessment years 2011-12 to 2017-18 audited by an accountant as defined under sub-section (2) of section 288 of the Act. It was submitted that prior to issuing directions under section 142(2A) of the Act, the Assessing Officer had issued notice to Page 27 of 94 C/SCA/6632/2019 JUDGMENT the petitioner and had duly considered the objections submitted by the petitioner and passed a reasoned order dated 26.12.2018. It was submitted that the Principal Commissioner of Income Tax had also afforded an opportunity of personal hearing to the petitioner and had thereafter approved the proposal under section 142(2A) of the Act. The learned counsel for the revenue had produced the original file for the perusal of this court and submitted that the proposal was considered with thorough application of mind and after recording reasons, the Principal Commissioner of Income Tax has given his approval on 29.12.2018. 4.4 Next, it was submitted that in this case, the directions under section 142(2A) of the Act came to be issued on 30.12.2018, informing the petitioner that approved auditors M/s T. R. Chadha & Co., LLP have been nominated by the Principal Commissioner of Income Tax, Central, Ahmedabad, within the meaning of section 142(2A) of the Act and stating therein the aspects on which the nominated accountant is required to submit the report as per rule 14A of Income Tax Rules, 1962 and in prescribed Form No.6B. It was submitted that thereafter, the petitioner has not approached this court and that the Special Auditors had commenced the audit pursuant to the directions issued by the Assessing Officer. It was submitted that it is only after a considerable period of time that the petitioner has approached this court challenging the reference to the Special Auditor under section 142(2A) of the Act. It was submitted that once the petitioner has acquiesced with the appointment of the Special Auditor, it is not permissible for him approach this court invoking its extraordinary jurisdiction under article 226 of the Constitution Page 28 of 94 C/SCA/6632/2019 JUDGMENT of India. It was emphatically argued that looking to the sequence of events, approaching this court is nothing but an afterthought on the part of the petitioner after having acquiesced with the reference to the Special Auditor. It was submitted that in this case, the principles of natural justice have been duly complied with, both, by the Assessing Officer as well as by the Principal Commissioner of Income Tax prior to granting the approval to the proposal submitted by the Assessing Officer under section 142(2A) of the Act. The attention of the court was invited to the averments made in the affidavit-in-reply filed on behalf of the respondents, to submit that based on the record referred to, there is enough material to form a satisfaction as mandated under section 142(2A) of the Act. 4.5 It was urged that it is not at the fag end of the period of limitation that the Assessing Officer has woken up. It was submitted that the first notice was issued on 19.9.2017 and that in response thereto, on 29.9.2017 and 4.12.2017, the petitioner had stated that he is not required to maintain the books of account and therefore, such books are not maintained. It was submitted that therefore, prior to issuance of the notice under section 142(2A) of the Act, there was an earnest effort on part of the Assessing Officer to understand the seized documents. It was pointed out that in the show cause notice, it has been specifically mentioned that the assessee is engaged in a specialized business of providing accommodation entries through the conduit of various trusts etc. and hence, the requirement of sub-section (2A) of section 142 of the Act is duly satisfied. Page 29 of 94 C/SCA/6632/2019 JUDGMENT 4.6 It was submitted that expression, ‘accounts’ employed in section 142(2A) of the Act does not mean the regular books of account which would be maintained by an assessee, else the legislature would have used the words “books of account”. According to the learned counsel, the legislature has purposely used the word “accounts” and hence, any material found during the course of the search relating to any financial transactions would fall within the ambit of the expression “accounts”. It was submitted that in this case, the court is not concerned with the books of account regularly maintained by an assessee. It was urged that the benami transactions would not be reflected in the books of account and, therefore, the question as to whether the petitioner is liable to maintain books of accounts would pale into insignificance. 4.7 Dealing with the contention raised on behalf of the petitioner that insofar as the assessment year 2017-18 is concerned, since a notice dated 25.9.2018 has been issued under section 142(2A) of the Act for a limited scrutiny (Computer Aided Scrutiny Selection), it is not permissible for the Assessing Officer to go beyond the issue identified for examination, it was submitted that this being a search case, limited scrutiny would not apply. 4.8 In support of his submissions, the learned counsel placed reliance upon the decision of the Delhi High Court in the case of DLF Ltd. v. Additional Commissioner of Income Tax, [2014] 47 taxmann.com 159 (Delhi), wherein the court, after considering various rulings of different High Courts, has observed that every scrutiny assessment entails investigation and verification of the books of accounts, genuineness of the Page 30 of 94 C/SCA/6632/2019 JUDGMENT transactions or entries reflected in the books, computation of income etc. It is an exercise which demands expertise and a degree of skill to understand the accounts and decipher whether true and full income has been disclosed; whether there has been jugglery in the accounts or camouflage has been adopted. No undesirable assumptions should be made and a return filed is presumed to be correct, but a deep and in depth scrutiny depending upon the facts may be warranted. Section 142(2A) is an enabling provision to help and assist the Assessing Officer to complete scrutiny assessment with the assistance of an accountant. The court further held that as opposed to an ordinary accountant, a Chartered Accountant with his experience and academic background is in a better position to investigate, examine and scrutinize entries and records of financial transactions. The court further held that it is also a fact that business transactions have become more complicated and accounting entries more complex than ever before. This may be one of the causes why possibly frauds could not be detected in some cases. Indeed such cases have made the audit work more comprehensive, intrusive and investigative. The court further observed that the Assessing Officers are not Chartered Accountants and when required and permissible, therefore, can take help and assistance from the qualified specialists to complete the assessment and determine the taxable income of an assessee. 4.9 Reference was also made to the decision of this court in the case of Takshashila Realties (P.) Ltd. v. Deputy Commissioner of Income Tax, Circle-4(1)(2) (supra), wherein the court held that as per the amended section 142(2A) of the Act, apart from the nature and complexity of Page 31 of 94 C/SCA/6632/2019 JUDGMENT the accounts, etc., even in case of multiplicity of transactions in the accounts or specialized nature of business activity of the assessee and the interest of the Revenue, the Assessing Officer can pass an order for special audit in exercise of powers conferred under section 142(2A) of the Act. Therefore, while forming an opinion to get the accounts audited by Special Auditor; considering the specialized nature of business activities of the assessee, there need not be any books of account before the Assessing Officer. In the facts of the said case, having found that there are complex issues relating to introduction of land by the partners into the firms; revaluation of land; credit of partners in capital account equal to revalued amount of land; conversion of capital account to loan account of shareholders and issues relating to issuance of equity shares against the balances of revaluation credits at an unreasonable premium, and after having been satisfied that considering the specialized nature of business activities of the assessee, the Assessing Officer has passed an order of special audit in exercise of powers under section 142(2A) of the Act. The court found that the decision for audit of the assessees’ account is backed by proper material on record and reasons recorded by the Assessing Officer. The court was of the view that his formation of belief that looking to the multiplicity of the transactions in the accounts and specialized nature of business activities of the assessee, a special audit is called for, and cannot be faulted. 4.10 Reference was also made to the decision of this High Court in the case of Ulhas Securities (P.) Ltd. v. Deputy Commissioner of Income Tax, [2017] 79 taxmann.com 256 (Gujarat), wherein the court has reiterated Page 32 of 94 C/SCA/6632/2019 JUDGMENT what is held in its decision in the case of Takshashila Realties (P.) Ltd. v. Deputy Commissioner of Income Tax, Circle-4(1)(2) (supra) and has further observed that from the provisions of section 142(2A) of the Act, it appears that object and purpose of special audit is as such to facilitate the Assessing Officer to arrive at correct taxable income and for which the Assessing Officer is authorized to direct the assessee to get books of account audited by the accountant authorized by the Assessing Officer, in case, the Assessing Officer is of the opinion that books of account are complex in nature and there are multiplicity of transactions, for which, accounts are required to be audited through special auditor. The court further observed that as per sub-section (3) of section 142 of the Act, ample opportunity shall be available to the assessee to make submission/comments on the report of the special auditor and therefore, there shall not be any prejudice caused to the assessee if the accounts are ordered to be audited through special auditor under section 142(2A) of the Act. 4.11 Reliance was also placed upon an unreported decision of this court in the case of Cama Hotels Ltd. v. Samir Vakil or his successor Dy. CIT (OSD), rendered on 12.7.2019 in Special Civil Application No.13445 of 2007, wherein the court has held that the question of complexity of accounts has to be judged applying the yardstick or test; whether the accounts would be complex and difficult to understand to a normal Assessing Officer who has basic understanding of accounts etc., without the aid, assistance and help of a Special Auditor. Thus, due regard has to be given to nature and character of transactions, method of accounting, Page 33 of 94 C/SCA/6632/2019 JUDGMENT whether actuarial were adopted for making entries, basis and effect thereof, etc., though mere volume and complexity are somewhat different. The court further held that the powers under section 142(2A) of the Act have to be exercised in terms of the legislative provisions. The object and purpose behind the legislation is to facilitate investigation and proper determination of the tax liability. The importance and relevancy of the legislation cannot be underestimated and it is a power available with the Assessing Officer to aid and assist him. 4.12 Reliance was also placed upon the decision of the Madhya Pradesh High Court in the case of Sewaram Takhtani v. Assistant Commissioner of Income Tax, [2004] 138 TAXMAN 290 (MP), wherein the court held thus: “8. As taken note of supra, it is not in dispute that the block assessment proceedings in question are initiated in consequence of the raid conducted in petitioner's business premises. It is also not in dispute that in this raid, the Department was able to collect/seize several incriminating documents indicating petitioner's as also his associates' involvement in various kinds of Benami transactions which obviously did not reflect in regular books of accounts maintained by the petitioner. It was also noticed that even the books of accounts maintained had several evasions, alterations and corrections. 9. It is with this background if the authority feels that books of accounts are complex in nature and need to be scrutinized by another chartered accountants then in my view, no fault can be found in such approach. It is a case where one can easily conclude that formation of opinion is based on relevant material on record. In other words, it is a case where AO had before him adequate material to form an opinion needed for giving direction to get an audit done. Obviously, it is in the interest of Revenue because if it is found in raid, that petitioner has Page 34 of 94 C/SCA/6632/2019 JUDGMENT indulged in several Benami transactions, it was obviously to evade tax. 10. Submission of learned counsel for the petitioner was that neither there was any material to form any such opinion nor any opinion was formed and hence, the impugned order is not sustainable. I do not agree. In the first place, it is dealt with supra and held against the petitioner. Secondly, mere perusal of assessment proceedings (Annex. P-4) pending before AO also indicates that AO did go into the material seized as also the books of accounts in the course of assessment proceedings and then passed the impugned order. It cannot, therefore, be contended by the petitioner that there was no material on record for forming an opinion, or that there was no application of mind to the facts of the case before passing the impugned order. I am supported by authorities reported in Kumar Films (P) Ltd. v. CIT, (2002) 258 TTR 257 (Pat), Shivkant and Bros. v. Union of India and Living Media v. CIT, (2002) 255 ITR 268 (SC).” 11. In my opinion, it is the subjective satisfaction of the authority concerned to decide on the basis of material on record, as to whether the accounts are complex in nature, or not? The word \"complex\" is not defined in the Act and hence, it has to be given its wide and liberal meaning. As in this case, if the authority noticed that large number of transactions are executed in Benami by the petitioners and that none of them are reflected in books of accounts and that the books of accounts maintained by the petitioner contains several discrepancies, erasures and overwritings, etc. then certainly such accounts are not dependable for determining the exact tax liability. Indeed, the application of mind by the authority is also discernible when one peruses the impugned order. They need to be reaudited in accordance with law. In such circumstances, the authority has only option to take recourse to the provision of Section 142(2A) ibid and issue necessary direction. It is not for the Court to again examine whether accounts in question are complex, or not? Because, the writ Court do not act as an appellate Court over such decisions of Assessing Officer.” 4.13 Reliance was also placed upon the decision of this Page 35 of 94 C/SCA/6632/2019 JUDGMENT court in the case of Asharam Thaumal Harplani (Asaram Bapu) v. Deputy Commissioner of Income Tax (supra), wherein the court found that the contention of the petitioner that the Principal Commissioner of Income Tax had mechanically granted approval to the proposal made by the Assessing Officer, had no substance. The court observed that the learned counsel appearing for the revenue had placed before the court entire file from the office of the Assessing Officer as well as the Principal Commissioner of Income Tax and after perusal of the same, it appeared that a detailed proposal with reasons why in that case the accounts of the petitioner required special audit had been sent by the Assessing Officer. The same was sent through the proper channel, i.e., office of the Joint Commissioner of Income Tax and thereafter, after preparing a detailed satisfaction note, the proposal had been approved by the Principal Commissioner of Income Tax. The court noted that the satisfaction note demonstrated application of mind by the Principal Commissioner of Income Tax agreeing with the proposal of the Assessing Officer for special audit. The proposal and the satisfaction note had been shown to the learned counsel appearing on behalf of the petitioner. Under the circumstances, it cannot be said that while granting approval, there is non-application of mind by the Principal Commissioner of Income Tax. The court held that by preparing a detailed satisfaction note and having been satisfied that in that case, looking to the multiplicity and complexity of transactions and in the larger interest of the revenue, the special audit is required, thereafter the proposal had been approved and thereafter, the Assessing Officer had passed the impugned order. It was further noted that in the facts of the said case, Page 36 of 94 C/SCA/6632/2019 JUDGMENT the Assessing Officer had thought it fit to get the accounts audited by the Special Auditor as requisitioned material were to the extent of 40,000 papers in 45 gunny bags, which were found during the search conducted of the premises of Asharam Bapu and others. The court found that when large number of papers were required to be considered/verified vis- à-vis the assessee and other persons whose names figured in the requisitioned papers, and when considering section 142(2A) of the Income Tax Act, the Assessing Officer thought it fit to exercise powers under section 142(2A) of the Act, it cannot be said that the Assessing Officer has committed any error and/or illegality. Mr. Bhatt submitted that in the facts of the present case, the extent of papers found during the course of search are around two lakh pages and the documents are more voluminous than in the cited decision. 4.14 The attention of the court was invited to the first sub-paragraph of paragraph 4 of the affidavit-in-reply filed on behalf of the respondents, wherein it has been averred that during the search proceedings, several documents and digital evidences in the form of mobile SMS and WhatsApp chat were found and seized from the petitioner’s premises. The total volume of digital data runs into 6 HD drives of 1 TB each. Only the WhatsApp chat back up of the petitioner’s phone runs into more than 60,000 pages. From these evidences, it was gathered that the petitioner was running an organized business of money laundering and accommodation entry providing. It was submitted that the total volume of the documents would come to around two lakh pages and that it is in these circumstances, after considering the volume of the documents, multiplicity of transactions as well as the Page 37 of 94 C/SCA/6632/2019 JUDGMENT specialized business of the assessee, that the reference to special audit under section 142(2A) of the Act has been made, which is wholly justified. 4.15 It was, accordingly, urged that the Assessing Officer was wholly justified in invoking the provisions of section 142(2A) of the Act and that the petition being devoid of merits, deserve to be dismissed. 5. In rejoinder, Mr. R. K. Patel, learned advocate for the petitioner, invited the attention of the court to the proposal for special audit of books dated 21.12.2018 and more particularly to the subject thereof, which reads thus: “Your search assessment – A.Y. 2011-12 to 2017-18 – Proposal for special audit of books – notice of opportunity – Regarding”, to submit that the proposal was for special audit of books. Reference was made to the communication dated 29.11.2017 of the petitioner addressed to the Deputy Commissioner of Income Tax, to point out that the petitioner has stated that the balance sheet and profit and loss account are not maintained by him. It was submitted that the preliminary record is not there and that whatever queries were raised have been replied by the petitioner. It was submitted that in the order in the case of the Trust, there is not even an iota of evidence that the assessee is engaged in the business of accommodation entries. It was submitted that in case of assessment Zee Marking and the Trust, nothing has been done in their case and that the appointment of special auditor under section 142(2A) of the Act in the case of the petitioner is merely an eyewash. The attention of the court was invited to the terms of reference under section 142(2A) of the Act issued Page 38 of 94 C/SCA/6632/2019 JUDGMENT by the Assessing Officer, to point out that there is reference to regular books of account at various places, to submit that therefore, even according to the respondents books of accounts are necessary for conducting special audit. It was submitted that in this case, the auditor is doing the job of an Assessing Officer. 5.1 Next, it was submitted that the decision of the Supreme Court in the case of Central Bureau of Investigation v. V. C. Shukla and others (supra) is rendered in the context of section 34 of the Evidence Act, whereas this matter relates to the provisions of the Income Tax Act, 1961, wherein it is section 2(12) which provides for the scope and ambit of accounts. The attention of the court was also invited to Form 6B prescribed under rule 14A of the Act, to point out that it is in this format that the Special Auditors are required to submit their report. It was pointed out that the accountant has to state therein that they have examined the balance sheet as well as the profit and loss account of the assessee. It was submitted that in the present case, in the absence of any liability to maintain books of account or balance sheet or profit and loss account on the part of the petitioner, it would not be possible for the Special Auditor to submit the prescribed Form 6B. It was submitted that insofar as the decision of the Delhi High Court in the case of DLF Ltd. v. Additional Commissioner of Income Tax (supra), there is a specific finding with regard to the existence of accounts and accuracy thereof. Similarly, in the case of Takshashila Realties (P.) Ltd. v. Deputy Commissioner of Income Tax, Circle-4(1) (2) (supra) also, there was existence of accounts and the assessee therein was required to maintain accounts. It was Page 39 of 94 C/SCA/6632/2019 JUDGMENT pointed out that in the decision in case of Asharam Thaumal Harplani (Asaram Bapu) v. Deputy Commissioner of Income Tax (supra), audited accounts were available. It was submitted that therefore, the above decisions were rendered in the context of facts wherein the assessee was statutorily required to maintain accounts and hence, no reliance can be placed upon the same by the revenue. 5.2 The attention of the court was further invited to the terms of reference issued under section 142(2A) of the Act vide communication dated 30.12.2018, to point out that the Assessing Officer has directed the Special Auditor to look into various points. It was pointed out that it is an admitted position that certain points are not germane, despite which, there is reference to such points, which would itself vitiate the reference. 5.3 Insofar as the contention raised on behalf of the revenue that the petitioner has approached this court after considerable delay from the date of making reference to the Special Auditor, the learned advocate placed reliance upon the decision of this court in the case of Alidhara Texpro Engineering (P.) Ltd. v. Deputy Commissioner of Income Tax (supra), to submit that in that case, the assessee had come to the court after the assessment orders came to be framed, despite which, the court had entertained the petition. 5.4 As regards the contention that the petitioner had acquiesced with the directions under section 142(2A) of the Act, reliance was placed upon the decision of this court in the case of Commissioner of Income Tax v. Jolly Fantasy Page 40 of 94 C/SCA/6632/2019 JUDGMENT World Ltd., [2015] 373 ITR 530 (Guj.), wherein the court has held that it is well settled legal position that there cannot be any estoppel or waiver against statute or law. The court has referred to its earlier decision in the case of P. V. Doshi v. Commissioner of Income Tax, [1978] 113 ITR 22, wherein it has been held that the legal position about waiver of such a mandatory provision created in the wider public interest to operate as fetter on the jurisdiction of the authority is well settled that there could never be waiver, for the simple reason that in such cases, jurisdiction could not be conferred on the authority by mere consent, but only on conditions precedent for the exercise of jurisdiction being fulfilled. If the jurisdiction cannot be conferred by consent, there would be no question of waiver, acquiescence or estoppel or the bar of res judicata being attracted because the order in such cases would lack inherent jurisdiction unless the conditions precedent are fulfilled and it would be a void order or a nullity. 5.5 Reliance was placed upon an unreported decision of this court in the case of Nitin Babubhai Rohit or his successor in office v. Ashok Bhavanbhai Patel rendered on 14.3.2018 in Special Civil Application No.22960 of 2017, wherein the court has held that in view of serious illegalities committed by the Commissioner of Income Tax in passing the revisional order, mere fact that some time had passed before the department took a formal decision to challenge the same, and to file the petition and the fact that in the meantime partially the directions were carried out, would not detain it from interfering with such order. 5.6 In conclusion, it was urged that in the present case, there Page 41 of 94 C/SCA/6632/2019 JUDGMENT are no books of account and hence, there is no question of complexity of accounts and, therefore, the reference under section 142(2A) of the Act to the Special Auditor, has no basis and the terms of reference issued under section 142(2A) of the Act as well as all proceedings pursuant thereto, are required to be quashed and set aside, and the petition deserves to be allowed. 6. Before adverting to the merits of the rival submissions, the factual background giving rise to the present petition may be adverted to for giving a better picture of the controversy in issue. 7. In this case, a search came to be conducted at the residential premises of the petitioner on 29.11.2016. Pursuant thereto, separate notices under section 153A of the Act came to be issued to the petitioner on 12.5.2017 for assessment year 2011-12 to 2016-17. In response to such notices, the petitioner filed his return of income for the respective assessment years on 10.6.2017. Thereafter, notices dated 19.9.2017 under section 143(2) of the Act came to be issued by the Assessing Officer for the above six assessment years, calling upon the petitioner to attend his office on 29.9.2017 either in person or by an authorized representative or produce or cause to be produced any documents, accounts and any other evidence on which he may rely in support of the return filed by him. In response thereto, the petitioner gave replies dated 29.9.2017 enclosing therewith return of income and statement of income and stating that he does not maintain balance sheet and profit and loss account. Page 42 of 94 C/SCA/6632/2019 JUDGMENT 7.1 Thereafter, the petitioner filed his return of income for assessment year 2017-18 on 31.10.2017, whereafter notice dated 3.4.2018 under section 143(2) of the Act for the said assessment year came to be issued by the Assessing Officer to the petitioner, calling upon him to attend his office on 9.4.2018 either in person or by an authorized representative or produce or cause to be produced at the said time any documents, accounts and any other evidence on which he may rely in support of the return filed by him. In continuation of the notice, the petitioner was called upon to produce the documents enumerated thereunder. The record produced before the court, does not indicate whether the petitioner responded to the said notice. While the petitioner had averred regarding receipt of such notice, he has not stated anything about his having filed any reply thereto. 7.2 Thereafter, a computer aided scrutiny notice dated 25.9.2018 came to be issued to the petitioner for assessment year 2017-18, wherein the issue identified for examination was “Cash deposit during demonetization period”. In response thereto, the petitioner gave a reply dated 28.9.2018 acknowledging receipt of the notice and stating that they understand that their case is selected for scrutiny assessment. 7.3 Notice under section 142(1) of the Act dated 25.9.2018 for assessment years 2011-12 to 2016-17 came to be issued to the petitioner stating that during the course of search at his residential premises, several incriminating documents as per Annexure A/1 of panchnama dated 1.12.2016 were found and seized; accordingly, proceedings under section 153A of the Act were initiated by issuing notices under section 153A for Page 43 of 94 C/SCA/6632/2019 JUDGMENT assessment years 2011-12 to 2016-17. It is further stated therein that copies of seized material were provided to the petitioner during post-search proceeding for furnishing page- wise explanation with respect to the noting on the seized papers. However, it is seen after perusal of records that he has not yet furnished page-wise explanation of the incriminating documents seized during the search from his residential premises. The Assessing Officer, accordingly, called upon the petitioner to furnishing page-wise explanation of each and every transaction of noting mentioned in the seized documents along with corroborative/supportive evidence. From the record as available before the court, it appears that the petitioner has not given any reply to the notice. 7.4 On 19.11.2018, notice under section 142(1) of the Act came to be issued by the Assessing Officer to the petitioner to furnish in writing, verified in the prescribed manner, the information called for as per Annexure “A” to the notice and on the points or matters specified therein. At point No.15 thereof, the petitioner was, inter alia, called upon to furnish the financial year-wise statements of the following: - Statement of affairs − Statement of income and expenditure − Statement of receipts and payments − Fund flow statement 7.5 In response to the said notice, the petitioner, through his Chartered Accountants – M/s Apaji Amin & Co., LLP, gave a point-wise reply dated 23.11.2018. In response to point No.15, the petitioner replied that he does not have any personal Page 44 of 94 C/SCA/6632/2019 JUDGMENT business; hence, he has not maintained any books of account. The petitioner has further stated that he is a Chartered Accountant and a partner in the partnership firm – M/s Apaji Amin & Co., LLP. His source of income includes income from house property, salary from partnership firm and income from other sources, so he is not required to maintain any personal books of accounts. 7.6 On 12.12.2018, the Assessing Officer issued another notice to the petitioner in respect of assessment proceedings under section 153A of the Act for assessment years 2011-12 to 2016-17 and under section 143(3) of the Act for assessment year 2017-18, inter alia, stating that in his reply dated 23.11.2018, which was received by the office on 10.12.2018 and 12.12.2018, no statement of the petitioner on specific issues emanating from the seized documents during the search has been supported by documentary evidence and, therefore, it is not to the satisfaction of the Assessing Officer. A final opportunity has been granted before taking any adverse view and making additions on the basis of the evidence seized during the search. 7.7 In response thereto, the petitioner, through his Chartered Accountants, gave a reply dated 17.12.2018 enclosing therewith opinion of the petitioner on the contents noting on the seized documents point-wise. It was also stated therein that this was the first notice whereby the petitioner was asked for specific points of the seized documents. 7.8 Thereafter, a Mazharnama came to be drawn on 20.12.2018 recording that the seal of the hard disc seized Page 45 of 94 C/SCA/6632/2019 JUDGMENT from the residential premises of the petitioner was removed and was connected to system for data retrieval. Back up of this disc was made and was taken on a 2TB external hard disc for use as a working copy. The original seized hard disc was sealed again in the presence of the assessee and the two witnesses. 7.9 Thereafter, the Assessing Officer issued a detailed notice dated 21.12.2018 to the petitioner for getting the accounts audited by an accountant having regard to the nature and complexity of accounts, volume of accounts, doubts of the correctness of the accounts, multiplicity and specialized nature of transactions and the interests of the revenue. It is stated therein that the petitioner is involved in specialised business of providing accommodation entries and income earned out of it is not apparently reflected in his books/returns filed. Moreover, there are several other incriminating suspicious documents seized during the search which raise a question mark on the correctness of his books. For example: “i. Agreement of purchase of agricultural land with Baldevbhai R. Patel and Lalitbhai R. Patel. Since, you are not a farmer, the said agreement becomes doubtful in nature (A-1 Page 41-47). ii. Agreement for purchase of land for Rs.145.43 crore with unnamed persons. (A-1 Page 29-37). iii Agreement for purchase of land from Mrs. Vanita M. Shah as the PoA holder of several other persons. The agreement is for an amount of Rs.65.08 crore (A-1 Page 46 of 94 C/SCA/6632/2019 JUDGMENT Page 3-6). iv. Letter on letterhead of M/s Zee Marketing (Guj) Pvt. Ltd. signed by you as the director of the company addressed to Ramadevi J. Reddy requesting for release of Rs.100 crore. However, no such transaction has been noticed in any of your/ company’s bank accounts. Moreover, it is stated by Shri Mahesh Shah on oath in his statement u/s 132(4) that he has borrowed cash loans of around 70-80 lacs from you. However, you have not shown the same in your books. All these facts make your books unreliable and raise doubt about correctness of your accounts.” In terms of the above notice, hearing was fixed on 24.12.2018. 7.10 The petitioner addressed a letter dated 22.12.2018 to the respondent No.1 in connection with the proceedings under section 153A of the Act, asking for bank statements of the parties mentioned therein. It appears that pursuant thereto copies of such statements came to be given to the petitioner on 24.12.2018 as is borne out from the endorsement on the said document. 7.11 In response to the show cause notice dated 21.12.2018 for proposal for specific audit under section 142(2A) of the Act, the petitioner gave his reply dated 26.12.2018, inter alia, contending that during the course of Page 47 of 94 C/SCA/6632/2019 JUDGMENT search action, no unaccounted investment was found; during the course of search action, several alleged incriminating papers were found and seized; while recording statement under section 132(4) of the Act during search operation, officer in-charge of search had not raised any questions relying on alleged incriminating documents considering that said seized material nothing but scribbling papers in the legal parlance known as dumb documents; even after post search operation, the petitioner has not been called upon to give explanations on the basis of the seized materials. It was further stated that even after initiation of assessment proceedings under section 153A of the Act, no further investigation was conducted for a period of eighteen months; when show cause notice dated 12.12.2018 was issued by the Assessing Officer in consensus with the JCIT, none of the authorities noticed any complexities which can attract section 142(2A) of the Act; after filing returns of income for more than one year, the Assessing Officer did not conduct any assessment proceedings as well as no requisite inquiries were made in respect of seized materials; the assessee being an individual is not required to maintain books of account; though the petitioner has not maintained any regular books of accounts for his personal affairs, the Assessing Officer found it complex and hence, proposed that books of accounts are complex and hence, special audit is required to be conducted under section 142(2A) of the Act. It was alleged that second show cause notice was issued after the petitioner informed the Assessing Officer that he is going to make complaint against him with higher authorities for such illegal conduct and malice motive for issue of such ridiculous show cause notice; and just to safe guard their illegal conduct and save skin for unethical Page 48 of 94 C/SCA/6632/2019 JUDGMENT conduct and to put pressure on the assessee, the show cause notice for special audit under section 142(2A) of the Act has been issued. It was also contended that the Assessing Officer has not called for production of books at any point of time and that the assessee is not maintaining any personal books of account, so question of complexities and special audit of it does not arise. It was contended that if the Assessing Officer found any such complexities, which attract section 142(2A) of the Act, he should not have issued show cause notice on the basis of the seized material for addition of Rs.3,000 crore, which clearly proves that till 12.12.2018, both the authorities did not find any complexities in the seized materials and that the show cause notice for special audit was issued merely to protect their malice motive and illegal conduct and prevent the assessee from filing a complaint about his illegality arbitrariness and high handedness. Referring to various documents referred to in the show cause notice, it was submitted that none of the above documents has any relevance with complexities of accounts and that all such documents were in their possession before issuance of show cause notice 12.12.2018. It was also stated that the show cause notice has never invoked the provisions of section 69 for unaccounted investments and now, the irrelevant issue has been raised by the authority. It was, accordingly, requested to drop the show cause notice for issue of proposal for special audit under section 142(2A) of the Act. 7.12 By an order dated 26.12.2018, the Assessing Officer disposed of the objections raised by the petitioner to the show cause notice. In paragraph 4 thereof, the Assessing Officer has referred to the assessee’s letter dated 27.12.2018 and has Page 49 of 94 C/SCA/6632/2019 JUDGMENT dealt with the objections raised. It is, inter alia, stated that during the search and seizure action, several documents and mobile connections were recovered and confronted to the assessee, which pointed out that the assessee was engaged in the activity of converting black money into white money by misuse of bank accounts of trusts and charitable organizations. Some documentary evidence showing such activities are annexed to the application. It is stated that such specialized nature of activities require help of an auditor and for this reason, the case of the assessee was found to be fit for audit under section 142(2A) of the Act. It is also stated that the revenue shall be adversely affected if the special audit is not sought in this case. 7.13 Thereafter, the petitioner addressed a letter dated 26.12.2018 to the second respondent – Principal Commissioner of Income Tax requesting for personal hearing if he received any proposal for special audit in his case. By a letter dated 27.12.2018, the petitioner was informed that opportunity to represent his case before the Principal Commissioner of Income Tax (Central), Ahmedabad personally was fixed on 28.12.2018. 7.14 The petitioner addressed a letter dated 28.12.2018 to the Principal Commissioner of Income Tax reiterating what is stated in the letter dated 26.12.2018 and also complaining about the illegal conduct and highhandedness of the officers, mental harassment and abuse of power and requesting him to drop the show cause notice issued for proposing special audit under section 142(2A) of the Act. Page 50 of 94 C/SCA/6632/2019 JUDGMENT 7.15 By the impugned communication dated 30.12.2018, the Assessing Officer directed the petitioner to get his accounts audited for the financial years corresponding to assessment years 2011-12 to 2017-18 by the approved auditors M/s T. R. Chadha & Co., LLP (hereinafter referred to as “the Special Auditors”). It was, inter alia, stated therein that the nominated accountant will be required to submit the report as per rule 14A of the Income Tax Rules and in prescribed Form No.6B. In addition, the nominated accountant is issued various directions some of which are not germane. As noted earlier, the learned counsel for the petitioner has stressed upon item x/vi which reads thus: “Any other issue that the Pr.CIT, Central (Ahmedabad) may deem fit.” It has also been pointed out that there is reference to books of account at various places in such instructions. 7.16 By communications dated 4.2.2019, the Special Auditors called upon the petitioner to furnish details with respect to the terms of reference issued by the ACIT CC-1 vide letter dated 30.12.2018 and Form 6B. The annexure to the letter contained a statement of the terms of reference and the requirement list in respect of the individual terms of reference as well as a statement of points of Form 6B and details required. 7.17 By a letter dated 19.2.2019 addressed to the Principal Commissioner of Income Tax, the petitioner has stated that the Chartered Accountants were not conducting audit work which they have been assigned and the persons deputed are sitting in their office merely to increase billable hours. Page 51 of 94 C/SCA/6632/2019 JUDGMENT 7.18 In response to the notice dated 4.2.2019 of the Special Auditors, the petitioner addressed a reply dated 20.2.2019 to the Special Auditors expressing surprise at the level of their understanding as the Special Auditors which according to him, could be seen from the details which they had asked and stating that looking to the details mentioned therein without any doubt it is proved that they have lack of knowledge of their jurisdiction to conduct audit as required under section 142(2A) of the Act and alleging that they have for the reasons best known to them, without any authority, stepped into the shoes of the Assessing Officer to conduct the assessment. Various other allegations reflecting on the competence of the Chartered Accountants are made and dishonest motives have also been attributed to them. 7.19 By a letter dated 1.3.2019, the Special Auditors responded to the above letter dated 20.2.2019, denying the allegations and tabulating the relevance of the details asked vide their letter dated 4.2.2019. They have requested the petitioner to provide the details asked by them at the earliest and have further stated that out of the 120 days allotted for completion of audit, approximately 61 days have already elapsed and that the audit is required to be completed within the strict timelines allotted by the department. 7.20 Thereafter, by a letter dated 15.3.2019 addressed to the petitioner, the Special Auditors called for certain clarifications as detailed therein. It is further stated that in addition to the details/clarifications asked for in the said letter, they are awaiting pending details asked for vide their letters Page 52 of 94 C/SCA/6632/2019 JUDGMENT dated 31.12.2018, 9.1.2019, 30.1.2019, 4.2.2019, 5.2.2019 and 1.3.2019. It is also stated that out of 120 days allotted for completing the audit, 75 days have already elapsed. 7.21 Thereafter, this petition came to be filed on 2.4.2019. Notice came to be issued on 8.4.2019 and further proceedings came to be stayed. On 6.5.2019, the interim relief came to be modified by permitting the Special Auditors to proceed further under section 142(2A) of the Act. It was, however, ordered that the final audit report shall not be submitted without the prior permission of the court. 8. In response to the averments made in the petition, an affidavit-in-reply had been filed on behalf of the respondents, wherein it has, inter alia, been stated that the main allegations leading to the search action in the case of the petitioner was that he was engaged in laundering of unaccounted money of several persons. During the search proceedings, several documents and digital evidences in the form of mobile SMS and WhatsApp chat were found and seized from the petitioner’s premises. The total volume of digital data runs into 6 HD drives of 1 TB each. Only the WhatsApp chat back up of the petitioner’s phone runs into more than 60,000 pages. From these evidences, it was gathered that the petitioner was running an organized business of money laundering and accommodation entry providing. In the mobile chat of the petitioner, there are several communications of the petitioner with different persons which show that the petitioner was providing accommodation entries through several bank accounts held in the names of different persons and operated by him with the help of his associates. It is further averred that Page 53 of 94 C/SCA/6632/2019 JUDGMENT from the evidences found, it was gathered that the petitioner was maintaining and operating several bank accounts held in the names of different persons. Most of these persons were either the employees of the petitioner, his associates or entities whose books the petitioner or his firm was auditing. The petitioner, in his statement recorded under section 132(4) during the search proceedings, admitted to having made all or most of the transactions in these bank accounts. It is further stated that several original documents belonging to a registered charitable trust, namely, Environment Research and Development Centre (ERDC) were also found from the possession of the petitioner. Further, from the bank statement of the trust, it was seen that one of the employees of the petitioner was making huge cash withdrawal from the bank account of the trust. This employee of the petitioner was also withdrawing cash from other bank accounts being operated by the petitioner. On being asked to explain, the petitioner, in his statement under section 132(4), had admitted that the employee was making withdrawals under his instructions and the money was received by him. He also stated that the money withdrawn from the bank accounts was either re- deposited in any other account or used of. In his statement, the petitioner has also admitted that the money withdrawn by his employee and used by him is not reflected in his books of account. It is also stated that the petitioner himself had sworn affidavit dated 24.12.2016 taking full responsibility of all the activities of the trust and all the transactions in its bank account. It is averred that the reasons which led to forming belief that the accounts of the petitioner are complex in nature, voluminous and doubtful and there is multiplicity of transactions in his accounts and also that the petitioner was Page 54 of 94 C/SCA/6632/2019 JUDGMENT involved in a business having specialized nature, i.e., business of accommodation entry providing, are enumerated therein as follows: i. Accommodation entries with the help of Trust, namely, Environment Research and Development Trust. ii. Control and operation of the bank account of the above named trust – noticed from the evidences seized as well as his admission in statement under section 132(4). iii. Misuse of bank account of the above named Trust and wrongful claim of tax benefits for self and family members. iv. Indulgence in money laundering activity – from the analysis of petitioner’s communications with different persons, viz., Manish M. Patel, Sebastian and Veeramani etc., it has been seen that there were discussions regarding conversion of black money into white by routing the same through the bank accounts of different entities including charitable organizations. v. Misuse and operation of several bank accounts held in the names of the other persons, viz., Neil Master, Arti Panchal, Rajesh Panchal, Devina Panchal, Mehul Lall, Kaushal Shah, Mitesh Jani, Samir Patel and Regency Spin Tex Ltd. admitted by him in his statement under section 132(4). Most of the transactions in these accounts are interlinked and have been used to rotate funds for layering for money laundering. vi. Several documents recording transactions running into Page 55 of 94 C/SCA/6632/2019 JUDGMENT hundreds of crore of rupees were found and seized. However, these transactions do not appear in the income tax returns filed or details submitted during the assessment proceedings. vii. Petitioner claimed to have given Rs.60 – 70 lakh in cash as loans to Mahesh C. Shah. But no such details are seen in the details filed by him. viii. Petitioner claimed to have invested rupees one crore in cash in a Joint Venture (JV) with his friend Shri Neil Master. However, no such details are available in his accounts or in the details submitted by him.” 8.1 It is further averred that the very fact that several notices were issued before recording satisfaction that there were complexities in the petitioner’s books shows that material available on record was gone through and verified in light of whatever partial, incomplete, cryptic and substantiated (sic. unsubstantiated) replies were filed. In the material seized from the petitioner’s premises, there was huge amount of digital data running into 6 Hard Disc Drives of 1 TB capacity each. As can be seen from the annexure to the petitioner’s petition, he never filed any detailed reply on this data despite being given repeated opportunities. On this huge data containing records of numerous transactions, the petitioner’s cryptic reply was that “it was either irrelevant or was related to his clients”. The petitioner never made any attempt to identify before the Assessing Officer as to which data was related to his clients and which were his own transactions. 8.2 It is further stated that the notice under section 143(2) of Page 56 of 94 C/SCA/6632/2019 JUDGMENT the Act for assessment year 2017-18 was for complete scrutiny in consequence to search and seizure action. Search assessment proceedings for assessment year 2017-18 in consequence to notice under section 143(2) of the Act dated 3.4.2018 are pending. The second notice under section 143(2) of the Act dated 25.9.2019 issued for limited scrutiny under CASS module has no impact on the pending proceedings for assessment year 2017-18 and does not cause any material change on the same. A copy of the approval granted by the Principal Commissioner of Income Tax dated 29.12.2018 and nominating M/s T.R. Chadha & Co., LLP as accountant to get the accounts audited under section 142(2A) of the Act has been annexed along with the affidavit. 9. The petitioner has filed affidavit-in-rejoinder to the affidavit-in-reply filed on behalf of the respondents, denying the averments and contentions raised in the affidavit-in-reply. Along with the affidavit-in-rejoinder, a copy of the statement recorded under section 132(4) of the Act on 29.11.2016 as well as assessment orders of Environment Research & Development Centre for assessment years 2011-12, 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 have been annexed. A copy of the assessment framed in the case of the petitioner under section 143(3) read with section 147 of the Act for assessment year 2010-11, a copy of the reasons recorded for reopening the assessment as well as a copy of the statement of the time spent on audit in the case of the petitioner for special audit, have also been annexed. 10. It is in the backdrop of the aforesaid facts and contentions, that the validity of the direction under section Page 57 of 94 C/SCA/6632/2019 JUDGMENT 142(2A) of the Act to the petitioner to get the accounts audited by an accountant is required to be examined. 11. At this stage, it may be germane to refer to the provisions of section 142 of the Act, which read thus: 142. Enquiry before assessment.— (1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under Section 115-WD or Section 139 or in whose case the time allowed under sub-section (1) of Section 139 for furnishing the return has expired a notice requiring him, on a date to be therein specified,— (i) where such person has not made a return within the time allowed under sub-section (1) of Section 139 or before the end of the relevant assessment year, to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or: Provided that where any notice has been served under this sub-section for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not made a return within the time allowed under sub-section (1) of Section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this sub- section. (ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or (iii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require: Provided that— Page 58 of 94 C/SCA/6632/2019 JUDGMENT (a) the previous approval of the Joint Commissioner shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts; (b) the Assessing Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year. (2) For the purpose of obtaining full information in respect of the income or loss of any person, the Assessing Officer may make such enquiry as he considers necessary. (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. (2-B) The provisions of sub-section (2-A) shall have effect notwithstanding that the accounts of the assessee have been audited under any other law for the time being in force or otherwise. (2-C) Every report under sub-section (2-A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer: Provided that the Assessing Officer may, suo motu, or on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; Page 59 of 94 C/SCA/6632/2019 JUDGMENT so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under sub-section (2-A) is received by the assessee. (2-D) The expenses of, and incidental to, any audit under sub-section (2-A) (including the remuneration of the accountant) shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner (which determination shall be final) and paid by the assessee and in default of such payment, shall be recoverable from the assessee in the manner provided in Chapter XVII-D for the recovery of arrears of tax: Provided that where any direction for audit under sub- section (2-A) is issued by the Assessing Officer on or after the 1st day of June, 2007, the expenses of, and incidental to, such audit (including the remuneration of the Accountant) shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner] in accordance with such guidelines as may be prescribed and the expenses so determined shall be paid by the Central Government. (3) The assessee shall, except where the assessment is made under Section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any enquiry under sub-section (2) or any audit under sub-section (2-A) and proposed to be utilised for the purposes of the assessment. (4) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year. 11.1 Sub-section (2A) of section 142 of the Act came to be amended by the Finance Act, 2013, prior thereto, it reads thus: Page 60 of 94 C/SCA/6632/2019 JUDGMENT “(2A) If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts 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 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.” 12. In the context of the unamended provisions of section 142(2A) of the Act, the Supreme Court in Sahara India (Firm) (1) v. Commissioner of Income Tax, (2008) 14 SCC 151, held thus: “6. A bare perusal of the provisions of sub-section (2- A) of the Act would show that the opinion of the assessing officer that it is necessary to get the accounts of the assessee audited by an accountant has to be formed only by having regard to: (i) the nature and complexity of the accounts of the assessee; and (ii) the interests of the Revenue. The word “and” signifies conjunction and not disjunction. In other words, the twin conditions of “nature and complexity of the accounts” and “the interests of the Revenue” are the prerequisites for exercise of power under Section 142(2-A) of the Act. Undoubtedly, the object behind enacting the said provision is to assist the assessing officer in framing a correct and proper assessment based on the accounts maintained by the assessee and when he finds the accounts of the assessee to be complex, in order to protect the interests of the Revenue, recourse to the said provision can be had. 7. The word “complexity” used in Section 142(2-A) is not defined or explained in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. v. CIT, (1998) 171 ITR 634, Page 61 of 94 C/SCA/6632/2019 JUDGMENT it is a nebulous word. Its dictionary meaning is: “ ‘The state or quality of being intricate or complex “or” that is difficult to understand.’ However, all that is difficult to understand should not be regarded as complex. What is complex to one may be simple to another. It depends upon one’s level of understanding or comprehension. Sometimes, what appears to be complex on the face of it, may not be really so if one tries to understand it carefully.” (emphasis supplied) Thus, before dubbing the accounts to be complex or difficult to understand, there has to be a genuine and honest attempt on the part of the assessing officer to understand accounts maintained by the assessee; appreciate the entries made therein and in the event of any doubt, seek explanation from the assessee. But opinion required to be formed by the assessing officer for exercise of power under the said provision must be based on objective criteria and not on the basis of subjective satisfaction. 8. There is no gainsaying that recourse to the said provision cannot be had by the assessing officer merely to shift his responsibility of scrutinising the accounts of an assessee and pass on the buck to the special auditor. Similarly, the requirement of previous approval of the Chief Commissioner or the Commissioner in terms of the said provision being an inbuilt protection against any arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said high-ranking authority to see to it that the requirement of the previous approval, envisaged in the section is not turned into an empty ritual. Needless to emphasise that before granting approval, the Chief Commissioner or the Commissioner, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the assessing officer. The approval must reflect the application of mind to the facts of the case.” 13. In Rajesh Kumar v. Commissioner of Income Tax, (2007) 2 SCC 181, the Supreme Court held thus: “11. We may at the outset notice that the following are the relevant factors for invoking Section 142(2-A) of Page 62 of 94 C/SCA/6632/2019 JUDGMENT the Act: (i) the nature of accounts, (ii) complexity of accounts, and (iii) interest of the Revenue. 12. The formation of opinion of the assessing officer must be on the premise that while exercising his power regard must be had to the factors enumerated therein. The use of the word “and” shows that it is conjunctive and not disjunctive. All the aforementioned factors are conjunctively required to be read. The formation of opinion indisputably must be based on objective consideration. 13. The expression “complexity” would mean the state or quality of being intricate or complex or that it is difficult to understand. Difficulty in understanding would, however, not lead to the conclusion that the accounts are complex in nature. No order can be passed on whims or caprice.” 14. However, with effect from 1st June, 2013, the words “the nature and complexity of the accounts of the assessee and” came to be substituted by the words “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”. 15. While prior to its amendment, sub-section (2A) of section 142 of the Act could be invoked only upon considering two factors, viz., the nature and complexity of the accounts of the assessee and the interests of the revenue, now the Assessing Officer can invoke the said sub-section if he is of the opinion that having regard to: (i) the nature and complexity of the accounts, (ii) volume of the accounts, (iii) doubts about the correctness of the accounts, Page 63 of 94 C/SCA/6632/2019 JUDGMENT (iv) multiplicity of transactions in the accounts or (v) specialised nature of business activity of the assessee, and the interests of the revenue, it is necessary so to do. 16. Thus, apart from the nature and complexity of the accounts, there are four other contingencies under which the Assessing Officer can invoke the provision. Out of these five contingencies, while four refer to accounts, the fifth is independent and refers only to specialised nature of business activity of the assessee. 17. At this juncture, it may be germane to refer to the explanatory notes to the provisions of the Finance Act, 2013 issued by the Central Board of Direct Taxes vide Circular No.03/2014 dated 24th January, 2013, which to the extent the same are relevant for the present purpose, read thus: “35. Direction for special audit under sub-section (2A) of section 142 35.1 Sub-section (2A) of section 142 of the Income-tax Act, before its amendment by the Act, inter-alia, provided that if at any stage of the proceedings, the Assessing Officer having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the approval of the Chief Commissioner or Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit in the prescribed form. The expression “nature and complexity of the accounts” has been interpreted in a very restrictive manner by various courts. 35.2 Sub-section (2A) of section 142 has been amended to provide that 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, Page 64 of 94 C/SCA/6632/2019 JUDGMENT doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialized 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 Chief Commissioner or the Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit in the prescribed form. 35.3 Applicability: – This amendment takes effect from 1st June, 2013.” 18. Thus, it is the restrictive interpretation of the expression “nature and complexity of the accounts” by various courts that has occasioned the amendment, evidently, therefore, the intention of the legislature was to widen the scope and ambit of sub-section (2A) of section 142 of the Act. The scope and ambit of sub-section (2A) of section 142 of the Act has, therefore, become wider upon its amendment with effect from 1st June, 2013 and cannot be construed in the same restrictive manner as it was prior to its amendment. 19. As noted hereinabove, sub-section (2A) of section 142 of the Act can be invoked 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. Thus, four contingencies in which section 142(2A) of the Act can be invoked, relate to accounts. 20. The question that then arises for consideration is what meaning has to be assigned to the expression “accounts”. The expression “account” has been defined in the Black’s Law Dictionary to mean thus: “A detailed statement of the mutual Page 65 of 94 C/SCA/6632/2019 JUDGMENT demands in the nature of debit and credit between parties, arising out of contracts or some fiduciary relation. A statement in writing, of debits and credits, or of receipts and payments, a list of items of debits and credits, with their respective dates. A statement of pecuniary transactions; a record or course of business dealings with parties; a list or statement of monetary transactions, payable, accounts receivable, etc. in most cases showing a balance or result of comparision between items of an opposite nature”. In P. Ramanatha Aiyar’s Law Lexicon, “account” has inter alia been defined to mean: (i) a statement of moneys received and paid with calculation and balance, (ii) a formal record of debts and credits relating to the person named or caption placed at the head of the ledger account, (iii) computation, and (iv) a statement of fact or occurrence. Thus, the expression “account” also takes within its ambit a statement of pecuniary transactions, a record or course of dealings with parties as well as computation. The expression “accounts”cannot be read to mean ‘books of account’ which are statutorily required to be maintained by certain classes of assessees, but has to be given a wider meaning. 21. It is the case of the petitioner that he does not maintain any personal books of account as he is statutorily not required to maintain the same. In effect and substance, therefore, the petitioner seeks to equate the expression “accounts” with “books or books of account” as contemplated under section 2(12A) of the Act. However, as rightly submitted by the learned counsel for the respondents, the expression used in the sub-section is “accounts” and not “books of account”, and had the legislature so intended, it would have employed the expression “books of account” instead of “accounts”. Page 66 of 94 C/SCA/6632/2019 JUDGMENT 22. In CBI v. V.C. Shukla (supra), the Supreme Court though dealing with a case relating to section 34 of the Indian Evidence Act, had occasion to construe the scope and ambit of the expression “account”. The Court held thus: “20. Mr Sibal, the learned counsel for the Jains, did not dispute that the spiral notebooks and the small pads are “books” within the meaning of Section 34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor were they regularly kept in the course of business. He submitted that at best it could be said that those books were memoranda kept by a person for his own benefit. According to Mr Sibal, in business parlance “account” means a formal statement of money transactions between parties arising out of contractual or fiduciary relationship. Since the books in question did not reflect any such relationship and, on the contrary, only contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr Sibal. He next contended that even if it was assumed for argument’s sake that the above books were books of account relating to a business still they would not be admissible under Section 34 as they were not regularly kept. It was urged by him that the words “regularly kept” mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions he also relied upon the dictionary meanings of the words “account” and “regularly kept”. 21. The word “account” has been defined in Words and Phrases, Permanent Edn., Vol. I-A at pp. 336 to 338 to mean (i) a claim or demand by one person against another creating a debtor-creditor relation; (ii) a formal statement in detail of transactions between two parties arising out of contracts or some fiduciary relation. At p. 343 of the same book the word has also been defined to mean the preparation of record or statement of transactions or the Page 67 of 94 C/SCA/6632/2019 JUDGMENT like; a statement and explanation of one’s administration or conduct in money affairs; a statement or record of financial transactions, a reckoning or computation; a registry of pecuniary transactions or a reckoning of money transactions; a written or printed statement of business dealing or debits and credits; or a certain class of them. It is thus seen that while the former definitions give the word “account” a restrictive meaning the latter give it a comprehensive meaning. Similarly is the above word defined, both restrictively and expansively, in Black’s Law Dictionary (Sixth Edn.) to mean: “A detailed statement of the mutual demands in the nature of debit and credit between parties, arising out of contracts or some fiduciary relation. A statement in writing, of debits and credits, or of receipts and payments; a list of items of debits and credits, with their respective dates. A statement of pecuniary transactions; a record or course of business dealings between parties; a list of statement of monetary transactions, such as payments, losses, sales, debits, credits, accounts payable, accounts receivable, etc., in most cases showing a balance or result of comparison between items of an opposite nature.” 22. Mr Altaf Ahmed relied upon the wider definition of the word “account” as mentioned above to contend that MR 71/91 fulfils the requirements of “account” as it records a statement of monetary transactions — such as receipts and payments — duly reckoned. Mr Sibal on the other hand urged that business accounts must necessarily mean only those accounts which record transactions between two parties, arising out of a contract or some fiduciary relations (a meaning accepted by the High Court). He submitted, relying upon the definition of “memorandum” as appearing in Words and Phrases, that MR 71/91 could at best be described as a memorandum of some transactions kept by a person for his own benefit to look into the same if and when the occasion would arise. 23. From the above definitions of “account” it is evident that if it has to be narrowly construed to mean a formal statement of transactions between two parties including debtor-creditor relation and arising out of contract, or some fiduciary relations, undoubtedly the book MR 71/91, would not come within the purview of Section 34. Conversely, if the word “account” is to be given wider meaning to include a record of financial transactions properly reckoned the above book would Page 68 of 94 C/SCA/6632/2019 JUDGMENT attract the definition of “book of account”. 24. It cannot be gainsaid that the words “account”, “books of account”, “business” and “regularly kept” appearing in Section 34 are of general import. Necessarily, therefore, such words must receive a general construction unless there is something in the Act itself, such as the subject-matter with which the Act is dealing, or the context in which the words are used, to show the intention of the legislature that they must be given a restrictive meaning. Thus, if the word “account”is to be given a wider meaning, it would include a record of financial transactions and not merely a formal statement of transactions. 23. It has been oft repeated by the learned counsel for the petitioner that the petitioner being an individual, is not under any statutory obligation to maintain any books of account and has not been maintaining any books of account and that in the absence of any accounts, the question of complexity in the accounts does not arise and hence, it is not permissible for the Assessing Officer to invoke the said provision. It has also been contended that even if the amended provision talks of audit for specialised nature of business activities of assessee, the prerequisite condition of maintenance of books of account as per statutory requirement is a must. Besides, the petitioner has consistently taken a stand in the proceedings under section 153A of the Act and pursuant to the notice for referring the matter for special audit that he does not maintain books of account. However, a perusal of the statement of the petitioner as recorded under section 132(4) of the Act, a copy whereof has been annexed by the petitioner along with his affidavit-in- rejoinder, shows that at item No.12, the following question has been posed to the petitioner: “Please state where do you Page 69 of 94 C/SCA/6632/2019 JUDGMENT maintain and keep your books of accounts?” In reply to which, the petitioner has stated “All the books of accounts are maintained in TALLY program as is available at my office at 304, Akanksha Building, Opp. Vadilal House, Navrangpura, Ahmedabad.” At item No.18, the question put to the petitioner is: “During the course of search action under section 132 of the I.T. Act, 1961, cash of Rs.7,14,700/- has been found from your residence. Please furnish whether the same has been reflected in your regular books of accounts?” In response thereto, the petitioner’s answer is: “I do acknowledge that during the course of search action under section 132 of the I.T. Act, 1961, cash of Rs.7,14,700/- has been found from my residence. In this regard, I want to state that this cash is duly reflected in my books of accounts and in fact as date i.e. on 29.11.2016 I am having a cash balance of Rs.2 crores less approx. Rs.40 to 50 lakhs deposited in bank. Therefore, the same is duly reflected in my books of account.” Thus, in his statement under section 132(4) of the Act, the petitioner has referred to his books of account; whereas subsequently, he has taken a stand that he does not maintain books of account. 24. Be that as it may, assuming that the petitioner does not maintain books of account as he is statutorily not mandated to do so, does it mean that merely by dint of this reason, sub- section (2A) of section 142 of the Act cannot be invoked in his case? In the opinion of this court, such an intention cannot be attributed to the legislature while enacting the amended sub- section (2A) of section 142 of the Act. As noted hereinabove, the sub-section came to be amended because of the restrictive meaning assigned to it by the court. The legislature, therefore, obviously intended to give it a wider meaning. Page 70 of 94 C/SCA/6632/2019 JUDGMENT 25. In this case, voluminous documentary evidence has been seized from the premises of the petitioner running into more than two lakh pages. The documentary evidence includes records of financial transactions which would clearly fall within the ambit of the expression “accounts”. Considering the nature of the documentary evidence seized during the course of the search, according to the Assessing Officer, the income shown by the petitioner in his return of income is not commensurate with the seized material. Vide notice dated 19.11.2018, the Assessing Officer called upon the petitioner to furnish a brief note of business/professional activities carried by him during the respective years along with any other activity by way of which income has been generated in respective years as well as various other details. It has been further stated therein that a search came to be conducted at the residential premises of the petitioner, wherein several incriminating documents came to be seized and that, by a notice dated 25.9.2018, the petitioner was requested to give page-wise explanation of the incriminating documents seized from his residence; however, he had made a very general submission. The Assessing Officer has specifically put to the petitioner the nature of the incriminating material seized and asked the petitioner to explain each one of them; for example, the payment of Rs.2 crores for transfer of ownership of trust – Environment Research and Development Centre; huge cash withdrawals from the account of the Trust by an employee of the petitioner; investment in a joint venture by the petitioner; cheques issued by Sahajanand Construction Company in favour of the petitioner for a total sum of rupees eleven crores found during the course of search at the office premise of Zee Page 71 of 94 C/SCA/6632/2019 JUDGMENT Marketing Pvt. Ltd. (the petitioner’s company); offer of an amount of Rs.4.5 crores and jewellery of Rs.1.25 crores to the petitioner’s wife for agreeing for separation; various WhatsApp messages containing incriminating information which show suspicious transactions/activities in the nature of accommodation entries; cash payments to several persons; transactions relating to purchase of immoveable properties. 26. Thereafter, another notice dated 12.12.2018 came to be issued by the Assessing Officer pointing out the issues in respect of which additions are required to be made and calling upon the petitioner to give a reply. The Assessing Officer has pointed out the contents of numerous seized documents and his opinion thereon. He has further called upon the petitioner to furnish the source of the cash deposits in his bank accounts, etc. and has called upon the petitioner to furnish his submission by 17.12.2018. The petitioner has given his reply on 17.12.2018; however, the Assessing Officer has found that the replies are not clear cut and that the petitioner’s responses are partial, incomplete and unsatisfactory. The Assessing Officer was further of the opinion that the seized documents, inquiries conducted and statements recorded, revealed that the petitioner was engaged in the specified business of converting black money into white for various persons and has given certain details for forming such opinion. The Assessing Officer has found that the SMS chat and email communications pertain to money laundering and has given details thereof. He has also found that the petitioner is involved in the specialised business of providing accommodation entries and income earned out of it is not reflected in his books/returns filed. Page 72 of 94 C/SCA/6632/2019 JUDGMENT 27. The petitioner was, therefore, called upon to produce accounts of such transactions. In the opinion of this court, if the returns of income had duly reflected such transactions, the submission of the petitioner that he is not required to maintain accounts may have been justified, but if the same are not reflected in the returns of income, the petitioner cannot be heard to say that though his income is not correctly reflected in the return of income, he is not required to explain the financial transactions recorded in the seized material merely because the statute does not require him to maintain books of account. The petitioner has tried to equate accounts with books of account and despite the fact that records of various financial transactions have been found from the seized material, has tried to shrug away the liability to explain such transactions under the specious plea that he is not required to maintain any accounts statutorily. 28. Thus, though the petitioner may not maintain books of account as he is not statutorily required to do so, pursuant to the search, when the seized material indicating various financial transactions was put to him, and he was called upon to explain the same, he was required to explain the same to the satisfaction of the Assessing Officer. However, while the petitioner did offer some explanation, the same was not to the satisfaction of the Assessing Officer. In the absence of any satisfactory explanation coming forth, the Assessing Officer is required to consider the seized material and compute the income of the petitioner for the assessment years under consideration. Considering the nature of the documentary evidence which, in the opinion of the Assessing Officer, reveals Page 73 of 94 C/SCA/6632/2019 JUDGMENT that the petitioner is involved in the business of accommodation entries and money laundering, there is multiplicity of transactions, and furthermore, such documentary evidence is voluminous and complex for him to decipher on his own, the Assessing Officer has thought it fit to resort to special audit under the provisions of section 142(2A) of the Act. In the opinion of this court, the material found during the course of search wherein various financial transactions have been recorded, which may have a bearing on the determination of income of the petitioner for the relevant assessment years, will be required to be examined for the purpose of computation of the correct income of the petitioner. 29. While it is true that the petitioner being an individual may not be required to maintain accounts statutorily, but that does not mean that he is not required to give a correct account of his income in his return of income. If the computation of his income as shown in his return of income is not commensurate with his real income or the evidence collected by the authorities during the course of the search, he is required to give a proper account of the same. When the voluminous documents seized during the course of search show that various financial transactions recorded in the seized material do not form part of the computation of income as reflected in the return of income, it means that the income is not properly accounted for and the petitioner can be called upon to state the correct accounts. Merely not maintaining accounts, or there not being any statutory obligation to maintain accounts, does not mean that the petitioner is discharged from the obligation of showing the correct accounts of the financial Page 74 of 94 C/SCA/6632/2019 JUDGMENT transactions carried out by him in the assessment years under consideration. The contention that because the petitioner is not required to maintain books of account the Assessing Officer cannot direct him under sub-section (2A) of section 142 of the Act to get the accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288, therefore, does not merit acceptance. 30. Besides, as pointed out by the learned counsel for the revenue, reference to special audit can also be made having regard to the specialised nature of the business activity of the assessee. In this case, the Assessing Officer is of the opinion that the petitioner is involved in the business of providing accommodation entries and money laundering. While such business may not be legal, even then it is a specialised business activity and the Assessing Officer may not have the wherewithal to decipher the documentary evidence. Under the circumstances, when the Assessing Officer finds that having regard to the specialised nature of business activities of the assessee, the accounts are required to be audited by an accountant as contemplated under sub-section (2A) of section 142 of the Act, it is permissible for the Assessing Officer to do so. Therefore, even if for the sake of argument the petitioner’s contention that as he is not required to maintain accounts statutorily the question of complexity and volume of accounts would not arise were to be accepted, even then the petition would fail on the count that a direction to get the accounts audited by an accountant can also be given if the Assessing Officer having regard to the specialised nature of business of the petitioner is of the opinion that it is necessary to do so. Page 75 of 94 C/SCA/6632/2019 JUDGMENT 31. It has been contended on behalf of the petitioner that the Assessing Officer could have made additions in terms of the show cause notice issued by him and that there was no necessity for referring the matter for special audit under section 142(2A) of the Act. In the opinion of this court, if instead of making a high pitched assessment merely because the petitioner has not explained the documentary evidence seized during the search, the Assessing Officer, in his wisdom, has thought it fit to get the material verified by an accountant as defined in the Explanation below sub-section (2) of section 288 of the Act nominated by the Principal Commissioner of Income Tax in this behalf to furnish a report of such audit in the prescribed Form 6B and having regard to the fact that the other relevant parameters for referring the matter for special audit have been satisfied, no fault can be found in the action of the Assessing Officer in referring the matter for special audit under sub-section (2A) of section 142 of the Act. 32. The decisions on which reliance has been placed by the learned counsel for the petitioner may now be adverted to. 32.1 In Alidhara Texpro Engineering (P.) Ltd. v. Deputy Commissioner of Income Tax (supra), there were, in all four petitions. In case of two petitions, the court entertained them and granted relief for the reason that the entire notice granting opportunity of hearing for special audit under section 142(2A) of the Act proceeded on the footing that only two companies were involved though notice was addressed to all the four companies. Therefore, in view of the fact that in case of two companies, in the show cause notice, there was no whisper as regards any complexity of their accounts, the court interfered even though assessment proceedings were over, but in respect of the other two companies, the court did not grant any relief as section 142(2A) of the Act had been exhausted and rejected those petitions. It is in the backdrop of the Page 76 of 94 C/SCA/6632/2019 JUDGMENT above facts that this court had entertained two of the petitions after the stage of assessment orders and hence, the said decision would have no applicability to the facts of the present case. 32.2 In DLF Commercial Projects Corporation v. Assistant Commissioner of Income Tax (supra), the Delhi High Court, in the facts of the said case, as a matter of fact, found that the Assessing Officer had expressed a clear opinion that “the apparent complexities noticed and confronted to the assessee have been answered to by the assessee”. The court observed that the sequitur of this statement is that the Assessing Officer did not form the opinion that the accounts of the assessee were complex and in order to protect the interests of the revenue, a special audit was required. In the facts of the said case, the Court also found that there were circumstances to indicate that the opinion formed by the Assessing Officer on 27.12.2011 was not his own. In the facts of the present case, the Assessing Officer has specifically observed that there are ample evidences in the seized material which reveals that the assessee’s books of account are complex in nature and not true. There is plethora of documents found and seized during the search action in the assessee’s case which involve huge sums of money running into thousands of crores of rupees and large amounts of cash transactions. Therefore to arrive at correct taxable income and the extent of real fund flow, this exercise of carrying out independent audit within the meaning of section 142(2A) of the Income Tax Act, 1961 becomes inevitable. 32.3 In Delhi Development Authority v. Union of India (supra), the court held thus: Page 77 of 94 C/SCA/6632/2019 JUDGMENT “24. We have referred to the aforesaid note in detail for two reasons. Firstly, the note reveals that the Assessing Officer felt that the case required detailed scrutiny or monitoring, verification of entries, which were substantial in number. Detailed scrutiny of large number of entries by itself, on standalone basis, will not amount to complexity of accounts. The accounts do not become complex because merely there are large number of entries, e.g., a petrol pump may have substantial sales, to thousands of customers daily at prices fixed under law/Rules, but this by itself will not be the accounts complex. Similarly, an Assessing Officer is required to scrutinize the entries and verify them, but this does not require services of a special auditor or a Chartered Accountant to undertake the said exercise. Section 142(2A) is not a provision by which the Assessing Officer delegates his powers and functions, which he can perform to the special auditor. The said provision has been enacted to enable the Assessing Officer to take help of a specialist, who understands accounts and accounting practices to examine the accounts when they are complex and the Assessing Officer feels that he cannot understand them and comprehend them fully, till he has help and assistance of a special auditor. Interest of the Revenue being the other consideration. In the present case, the Revenue has not submitted that test check of entries was undertaken, but anomalies or mistakes were detected. For proceeding further, and to compute the taxable income, help and assistance of an accounting expert was required. Secondly, we notice that the Assessing Officer felt that special auditor is required for determining and deciding certain legal issues, i.e., nature and character of Nazul I and Nazul II land, payments received and the treatment of the said payments, receipts or expenditure in the books for the purposes of taxation. The special auditor cannot go into and examine the said legal issue or question regarding taxability. This has to be determined and decided by the Assessing Officer. This determination/decision requires passing of the assessment order. However, at this stage, the Assessing Officer should indicate his prima facie or tentative view on why the legal issue requires examination of accounts by the specialist. A Chartered Accountant, a specialist in accounts does not have a Page 78 of 94 C/SCA/6632/2019 JUDGMENT role to play and cannot be delegated and asked to decipher, decide or express his opinion on nature and character of Nazul I or Nazul II land receipts and payments. In a given case, the complexities of account and the legal issue may be intertwined or connected and, therefore, examination of accounts may indirectly or directly require his opinion on a legal matter/issue, but this is not true or so stated in the present case. The case and the stand of the assessee is that as per the statute, including the Rules, Nazul I and Nazul II land, payments received, expenditure incurred etc., belong to the Central Government and nothing whatsoever can be attributed to them. There is no examination, consideration of the legal aspect and formation of a tentative view. The decision on this legal issue cannot be transposed and passed to the Chartered Accountant as a special auditor as he is not a specialist and mandated by the Act to undertake the said exercise. The case of the assessee is that it is maintaining separate accounts for Nazul I and Nazul II lands and the General Development Account. The said accounts are audited by the Comptroller and Auditor General and have been accepted by the Central Government. 25. We also find merit in the contention raised by the petitioner that the Assessing Officers have repeatedly in all orders, for the purpose of recording reasons, taken the \"notes of accounts\" and verbatim incorporated the same. This is apparently correct and, therefore, discloses non-consideration and non-application of mind, which constitutes an error in the decision making process. It is an easy and convenient manner to transfer the obligation of scrutiny and examination to the special auditor. It may be true and correct that certain aspects mentioned in the Notes of Accounts may, if required and necessary and after in depth examination, justify appointment of a special auditor but the Assessing Officer has to be cautious and careful to segregate them from others while recording the reasons. If such an exercise is undertaken, it will show due and proper application of mind and not exercise of power under section 142(2A) on the pretend or on the pretext that such power exists and, therefore, should be exercised. Existence of the power is not in dispute; it is the exercise of power, which is in dispute and question. The exercise of power must withstand and meet the Page 79 of 94 C/SCA/6632/2019 JUDGMENT requirements prescribed. Failure to exclude irrelevant and extraneous matters negates the \"opinion\" as the said matters should not cloud or dent formation of opinion. Reasons recorded must be genuine and have a nexus with the twin statutory requirements i.e. complexity of accounts and interest of the Revenue.” In the facts of the said case, the court held that the existence of power is not in dispute. It is the exercise of power which is in dispute. The court held that the exercise of power must withstand and meet the requirements prescribed. In the light of the above discussion wherein the court has held that the requirements of the section have been duly satisfied in the facts of the present case, the above decision would have no applicability to the facts of the present case. 32.4 In Commissioner of Income Tax v. Bhaichand N. Gandhi (supra), it was held that the pass book supplied by the bank to its constituent is only a copy of the constituent’s account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. The court held that the pass book supplied by the bank to the assessee could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. Reverting to the facts of the present case, it is not the case of the Assessing Officer that the passbook should be considered as books of account of the petitioner; under the circumstances, the above decision would have no applicability to the facts of the present case. 32.5 In West Bengal State Co-operative Bank Ltd. v. Page 80 of 94 C/SCA/6632/2019 JUDGMENT Joint Commissioner of Income Tax (supra), in the proceedings under section 147, the assessee wanted special audit. The court held that under the scheme of section 142, it is the obligation of the Assessing Officer to give a direction for production of accounts, wherever it is necessary. The Assessing Officer has to form an opinion as regards the complexity of nature in relation to the accounts. He has to take such measure for examining the books of account as of necessity. The above decision came to be rendered in February, 2004, which is prior to the amendment of sub- section (2A) of section 142 of the Act. Besides, in the facts of the present case, the Assessing Officer did put all the seized material to the petitioner and called upon him to explain the same. It is only upon finding the explanation to be not satisfactory and considering the nature of the material on record and the specialised nature of business of the petitioner, that the Assessing Officer has resorted to the provisions of section 142(2A) of the Act. 32.6 While it is true that in Asharam Thaumal Harplani (Asaram Bapu) v. Deputy Commissioner of Income Tax (supra) and Takshashila Realties (P.) Ltd. v. Deputy Commissioner of Income Tax (supra), the assessee was required to maintain the accounts, whereas there is no statutory duty cast upon the petitioner to maintain accounts statutorily, in the light of the reasoning adopted by this court hereinabove wherein the expression ‘accounts’has been given a wider meaning to bring within its scope record of financial transactions and computation of income, the said decision would also not come to the aid of the petitioner. Page 81 of 94 C/SCA/6632/2019 JUDGMENT 33. Out of the decisions relied upon by the learned counsel for the respective parties, majority of such decisions have been rendered prior to the amendment of sub-section (2A) of section 142 of the Act. However, four decisions of this court have been rendered in the context of the amended sub- section (2A) of section 142 of the Act. These are the decisions in the cases of Ulhas Securities (P.) Ltd., Takshashila Realties (P.) Ltd., Asharam Thaumal Harplani (Asaram Bapu) (supra) and Cama Hotels Ltd. v. Samir Vakil or his successor Dy. CIT (OSD) rendered on 12.7.2019 in Special Civil Application No.13445 of 2007. 33.1 In Ulhas Securities (P.) Ltd. (supra), this court held thus: “8. In the present case, the AO has thought it fit to get account audited by the special auditor has requisitioned materials are to the extent of 40000 papers found from the 14 gunny bags, which were acquisition from Asharam Bapu and others. It appears that many of the persons with whom the petitioner assessee has transaction/ relation/dealing are common and therefore, it cannot be said that the persons/Shadahaks named in the requisition material are alien to the petitioner- assessee. Under the circumstances, when large number of papers are required to be considered / verified vis-a- vis assessee and other persons whose names figured in the requisitioned papers and when considering Section 142(2A) of the Act, the AO has thought it fit to exercise of powers under Section 142(2A) of the Act, it cannot be said that the AO has committed any error and / or illegality. It is required to be noted that impugned order has been passed after given an opportunity to the petitioner assessee and having satisfied with respect to the complexity and multiplicity of transactions.” 33.2 In Takshashila Realties (P.) Ltd. (supra), which is the Page 82 of 94 C/SCA/6632/2019 JUDGMENT most relevant insofar as the applicability of the amended sub- section (2A) of section 142 of the Act is concerned, this court has held thus: “17. Now so far as submission made on behalf of the petitioner that the Assessing Officer cannot direct special audit under Section 142 (2A) of the Act before calling for the accounts from the petitioner in the assessment proceedings and without doubting the accounts and/or considering the complexity in the accounts is concerned, it is required to be noted that as per amended Section 142 (2A) of the Act, apart from the nature and complexity of the accounts, etc., even in case of multiplicity of transactions in the accounts or specialized nature of business activity of the assessee and the interests of the Revenue, the Assessing Officer can pass an order for special audit in exercise of powers conferred under Section 142 (2A) of the Act. Therefore, while forming an opinion to get the accounts audited by special auditor; considering the specialized nature of business activities of the assessee, there need not be any books of account before the Assessing Officer. In the present case, having found that there are complex issues relating to introduction of land by the partners into the firms; revaluation of land; credit of partners in capital account equal to revalued amount of land; conversion of capital account to loan account of shareholders and issues relating to issuance of equity shares against the balances of revaluation credits at an unreasonable premium, and after having been satisfied that considering the specialized nature of business activities of the assessee, the Assessing Officer has passed an order of special audit in exercise of powers under Section 142 (2A) of the Act. 18. We see that the decision for audit of the assessees' account is backed by proper material on record and reasons recorded by the Assessing Officer. His formation of belief that looking to the multiplicity of the transactions in the accounts and specialized nature of business activities of the assessee, a special audit is called for, and therefore, it cannot be faulted. 20. Considering the aforestated facts and circumstances Page 83 of 94 C/SCA/6632/2019 JUDGMENT of the case and having regard to the multiplicity and specialized nature of transactions and in the interests of the Revenue, when the Assessing Officer has passed the impugned orders of special audit under Section 142 [2A] of the Act, the same cannot be faulted with.” 33.3 In Asharam Thaumal Harplani (Asaram Bapu) (supra), the court held thus: “[6.3] In the present case, the Assessing Officer has thought it fit to get account audited by the Special Auditor as requisitioned materials are to the extent of 40000 papers found from the 14 gunny bags, which were requisitioned from Asharam Bapu and others. It appears that many of the persons with whom the petitioner assessee has transaction/relation/ dealing are common and therefore, it cannot be said that the persons/ Shadahaks named in the requisitioned material are alien to the petitioner-assessee. Under the circumstances, when large number of papers are required to be considered / verified vis-à-vis assessee and other persons whose names figured in the requisitioned papers and when considering Section 142(2A) of the IT Act, the Assessing Officer has thought it fit to exercise of powers under Section 142(2A) of the IT Act, it cannot be said that the Assessing Officer has committed any error and / or illegality. It is required to be noted that impugned order has been passed after given an opportunity to the petitioner assessee and having satisfied with respect to the complexity and multiplicity of transactions. [6.4] Now, so far as the contention on behalf of the petitioner assessee that one of the requirement for exercising the powers under Section 142(2A) of the IT Act that the Assessing Officer must be satisfied in interest of revenue, the account is required to be audited by the Special Auditor is concerned, it is required to be noted that considering the amended provision of Section 142(2A) of the IT Act which has come into force w.e.f. 01.06.2013, the Special Auditor can be appointed if at any stage of the proceedings before him, the Assessing Officer having regard to the nature and complexity of the account of the assessee Page 84 of 94 C/SCA/6632/2019 JUDGMENT and the interest of the revenue, is of the opinion that it is necessary so to do, he may direct the account to be verified by the Special Auditor. Therefore, having regard to the nature and complexity of the account, if the Assessing Officer is satisfied and/or is of the opinion that accounts are required to be verified by the Special Auditor, he may pass such order. Therefore, on the aforesaid ground that the Assessing Officer has not stated that the accounts are required to be audited by Special Auditor in the interest of Revenue, the impugned order is not required to be quashed and set aside, more particularly, when it is stated in the order that looking to the complexity and the multiplicity of transactions, accounts are required to be verified by the Special Auditor. Considering the object and purpose of Section 142(2A) of the IT Act, it appears that the accounts are required to be audited by the Special Auditor under Section 142(2A) of the IT Act with a view to facilitate the Assessing Officer in passing the Assessment order and with a view to arrive at right conclusion.” 33.4 In Cama Hotels Ltd. (supra), the court has not specifically dealt with the amended provisions of section 142(2A) of the Act. 33.5 On a plain reading of the above decisions of this court, it is amply clear that the same do not support the case of the petitioner and on the contrary lean in favour of the revenue. 34 A contention has been raised on behalf of the petitioner that the Principal Commissioner of Income Tax has not applied his mind and has mechanically passed the order under sub- section (2A) of section 142 of the Act. In DLF Commercial Projects Corporation v. Assistant Commissioner of Income Tax (supra), the Delhi High Court has held that the provision of sub-section (2A) of section 142 of the Act requires the Assessing Officer to form an opinion that having regard to Page 85 of 94 C/SCA/6632/2019 JUDGMENT the nature and complexity of the accounts of the assessee and the interests of the revenue, it is necessary to get the accounts audited by a special auditor nominated by the CIT or the CCIT. The proviso makes it incumbent upon the Assessing Officer to give the assessee a reasonable opportunity of being heard before special audit is directed. The direction to conduct special audit has to be, under the sub-section, given with the previous approval of the CIT or the CCIT. It is, thus, the Assessing Officer who is to form the opinion and not anyone else. The approval to be granted by the CIT or the CCIT, as held by the Supreme Court in the case of Sahara India (Firm) is an inbuilt protection against arbitrary or unjust exercise of power by the Assessing Officer and therefore, a heavy duty is cast on the high ranking authority to see that the approval is not granted in a ritualistic manner; he is required to examine the material on the basis of which an opinion for conducting special audit was formed by the Assessing Officer. According to the judgment, the approval must reflect the application of mind to the facts of the case. 34.1 In this regard, the learned counsel for the revenue had produced the entire files relating to the proposal for special audit under section 142(2A) of the Act as well as the approval given by the Principal Commissioner of Income Tax for the perusal of this court. A perusal of the files revealed that a detailed proposal setting out the reasons as to why the accounts of the petitioner required special audit, had been sent by the Assessing Officer through the Joint Commissioner of Income Tax and thereafter, after preparing a detailed satisfaction note, the proposal has been approved by the Principal Commissioner of Income Tax. A perusal of the Page 86 of 94 C/SCA/6632/2019 JUDGMENT satisfaction note duly reflects proper application of mind on the part of the Principal Commissioner of Income Tax who has looked into the material on record and has independently arrived at the conclusion that a special audit is required. The contention that the Principal Commissioner of Income Tax has granted approval in a mechanical manner, therefore, does not merit acceptance. 35. It has also been contended on behalf of the petitioner that the reference to special audit has been made only with a view to buy time as the assessment was becoming time barred. In this regard, it may be noted that in the objections raised by the petitioner against reference to special audit under section 142(2A) of the Act, no such contention with regard to resort to the provisions having been made with a view to buy time has been made, nor has such contention been raised before the Principal Commissioner of Income Tax except that in the letter dated 26.12.2018 addressed to the Principal Commissioner of Income-tax requesting to provide personal hearing before granting any approval for the action proposed under section 142(2A) of the Act, it has been stated that the show cause notice for special audit has been issued just 10 days before time barring assessment. Thus, it is only before this court that such contention has been raised for the first time. Having regard to the sequence of events as referred to hereinabove as well as the facts and circumstances of the case, the court is of the view that such contention does not merit acceptance. 36. Another notable aspect of the matter is that at the relevant time when the reference to special audit came to be Page 87 of 94 C/SCA/6632/2019 JUDGMENT made, the petitioner did not approach this court and on the contrary, complained to the Commissioner of Income Tax that the Chartered Accountants were doing their own work at his premises for the purpose of billable hours. The Chartered Accountants issued notice to the petitioner calling upon him to produce the details called for therein, in response to which the petitioner made allegations attributing dishonest motives to them and casting aspersions on their competence. The Chartered Accountants brought it to the notice of the petitioner that the audit was to be completed within the stipulated time frame, that is, 120 days and that, 60 days were already over, but to no avail. Another notice was sent pointing out that 75 days were already over, and more than 15 days thereafter the petitioner approached this court challenging the reference to special audit. Thus, it appears that initially the petitioner acquiesced with the reference to special audit. Moreover, though the period for completion of special audit was 120 days, after approximately two thirds of the period had elapsed, the petitioner belatedly approached this court challenging the same. This conduct of the petitioner also disentitles him to the grant of discretionary relief under article 226 of the Constitution of India. 37. A contention has also been raised that in this case that the petitioner has alleged mala fides against the Assessing Officer and that therefore, the reference to special audit is actuated by mala fides. In this regard, a perusal of the averments made in the petition shows that no such allegations of mala fides find place therein. Such allegations of mala fides have been made in the objections raised against the special audit as well as before the Principal Commissioner of Income Page 88 of 94 C/SCA/6632/2019 JUDGMENT Tax; however, such allegations are on the ground that as the petitioner had stated that he would complain against the Assessing Officer to the higher authorities, the Assessing Officer had resorted to special audit. In the opinion of this court, except for the bald allegations of mala fides, nothing substantial has been brought out so as to establish actual mala fides on the part of the Assessing Officer. Besides, if mala fides are alleged, the same have to be specifically spelt out in the petition so as to afford an opportunity to the Assessing Officer to deal with the same. 38. It has been also contended on behalf of the petitioner that for assessment year 2017-18, the petitioner has received a notice for limited scrutiny under CASS and hence, it is not permissible for the Assessing Officer to examine any other issue except as provided in such notice in view of the CBDT instructions dated 26th September, 2014, 29th December, 2015 and 30th November, 2017, copies whereof have been annexed along with the petition and therefore, for this assessment year, no reference could have been made for special audit. Before adverting to the merits of the contention, it may be noted that the CBDT instructions apply in cases selected for scrutiny under Computer Aided Scrutiny Selection. The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice under section 143(2), after generation from AST, is issued to the taxpayer with the remark “Selected under Computer Aided Scrutiny Selection (CASS)”. The Assessing Officer while issuing notice under section 142(1) of the Act in such cases is required to proceed to verify only the specific aspects requiring examination/verification. Thus, the limited scrutiny is Page 89 of 94 C/SCA/6632/2019 JUDGMENT applicable only to those cases in which the returns are selected for scrutiny through CASS. Returns selected for scrutiny through CASS may also be for complete scrutiny. However, in the facts of the present case, the notice dated 3.4.2018 under section 143(2) of the Act for assessment year 2017-18 was issued by the Assessing Officer pursuant to the search conducted at the residential and office premises of the petitioner. Therefore, scrutiny assessment was not initiated through CASS. Subsequently, the computer aided scrutiny notice based on the return of income filed by the petitioner came to be issued on 25.9.2018 on the limited issue of “Cash deposit during demonitisation”. Therefore, in this case, it is not as if the Assessing Officer has proceeded on the basis of the computer aided scrutiny notice and then sought to widen the scope of the inquiry, which is not permissible in view of the CBDT instructions. In this case, the Assessing Officer has initiated scrutiny proceedings based on the material seized during the course of search and hence, the scope of inquiry would not be limited to the issue stated in the computer aided scrutiny notice as the scrutiny assessment has not been initiated through CASS and therefore, the CBDT instructions pertaining to limited scrutiny through CASS would not be applicable to the facts of the present case. 39. Section 153A of the Act provides for taking action thereunder for six assessment years preceding the assessment year relevant to the previous year in which the search came to be carried out. Therefore, for the assessment year relevant to the previous year in which the search was carried out, the Assessing Officer would be required to resort to scrutiny assessment, which he has done in this case as the Page 90 of 94 C/SCA/6632/2019 JUDGMENT search came to be carried out in the previous year 2016-17 and the corresponding assessment year is assessment year 2017-18. 40. As discussed hereinabove, the specific object behind enacting section 142(2A) of the Act is to assist the Assessing Officer in framing an assessment when he finds the nature of accounts of the assessee to be complex, finds the accounts to be voluminous, doubts the correctness of the accounts, finds multiplicity of transactions in the accounts or finds the business activity of the assessee to be of a specialized nature and in the interest of revenue, by having the services of a special auditor at hand. In this case, considering the specialised nature of the petitioner’s business, which is not reflected in his returns of income, the Assessing Officer has, in the interest of the revenue, thought it fit to direct the petitioner to get his accounts audited by an accountant as envisaged under sub-section (2A) of section 142 of the Act, instead of merely making additions on the basis of the seized material in the absence of any explanation coming forth on the part of the petitioner. In the opinion of this court, considering the nature of the documents and other material and the volume thereof, the multiplicity of transactions and the specialised nature of the business of the petitioner, no fault can be found on the part of the Assessing Officer in invoking the provisions of sub-section (2A) of section 142 of the Act. 41. Insofar as the procedure for invoking sub-section (2A) of section 142 of the Act is concerned, there is no infirmity in the process as the petitioner has been given opportunity of hearing by the Assessing Officer as well as the Principal Page 91 of 94 C/SCA/6632/2019 JUDGMENT Commissioner of Income Tax. The Assessing Officer has duly considered the objections raised by the petitioner before passing the order disposing of the objections. The Principal Commissioner of Income-tax has duly given an opportunity of hearing to the petitioner and after applying his mind to the material on record and satisfying himself as regards the necessity of directing the petitioner to get his accounts audited by an accountant as envisaged under section 142(2A) of the Act has granted approval for the proposal for special audit. 42. One of the contentions raised on behalf of the petitioner is that in the terms of reference, various irrelevant directions are issued without application of mind and therefore, the reference to special audit under section 142(2A) of the Act stands vitiated. While it is true that some of the directions contained in the terms of reference to the Special Auditors are not germane, it appears that such directions are issued in some standard format. In the opinion of this court, merely because the terms of reference contain some irrelevant directions, the same would not vitiate the entire process as is sought to be contended on behalf of the petitioner. Needless to state that the Special Auditors would confine the inquiry only to the relevant directions. 43. Insofar as the contention regarding separate assessment year wise show cause notices not having been issued for different assessment years is concerned, the same is beyond the scope of the present petition, wherein the subject matter of challenge is the direction to get the accounts audited by an accountant as envisaged under sub-section (2A) of section 142 Page 92 of 94 C/SCA/6632/2019 JUDGMENT of the Act and further proceedings pursuant thereto. 44. It has also been contended on behalf of the petitioner that the entire basis for referring the matter to Special Auditor under section 142(2A) of the Act is that the petitioner is engaged in the business of accommodation entries of Trust, whereas in the case of the Trust the Assessing Officer has framed assessment orders on 28.12.2018 without making any reference under section 142(2A) of the Act and that in the orders of the Trust there is not even a whisper of any accommodation entry in the case of the Trust or involvement of the petitioner in any manner whatsoever. The petitioner has placed reliance upon the assessment orders passed in the case of Environment Research Centre, namely the Trust in question, copies whereof are placed on record along with the affidavit-in-rejoinder. In this regard, a perusal of the assessment orders made in the case of the Trust reveal that it is the consistent stand of the Trust that it is unaware of any transaction in its bank account, which has not been believed by the Assessing Officer. Upon verification of it bank statement, the Assessing Officer found that the money credited in the bank has either been withdrawn in cash immediately or transferred to other bank accounts and then withdrawn and was of the view that this proves that the donations received in the bank account were not used for the purpose of the Trust but were diverted for personal usages or some other activities. He has accordingly held that the total deposits in the account are not eligible for exemption under section 11 and 12 of the Act and are to be treated as income in the hands of the recipient, that is, the Trust for the assessment years 2011-12 to 2017-18. Page 93 of 94 C/SCA/6632/2019 JUDGMENT 45. The petitioner has also placed on record the assessment order for assessment year 2010-11 made in his case. A perusal thereof shows that for assessment year 2010-11, an amount of Rs.47,40,000/- has been treated as income in the hands of the petitioner and added to his income as he had actually received RS.47,40,000/- which was withdrawn by Shri Vijay Solanki from the bank account of the Trust. Another Rs.12,78,000/- came to be added by treating such cash deposits in the bank account of the Mr. Neil Master as the unaccounted income of the petitioner. 46. In view of above discussion, this court does not find any infirmity in the procedure for initiation of proceedings under section 142(2A) of the Act as well as directions issued by the Assessing Officer for special audit under section 142(2A) of the Act so as to warrant interference. 47. The petition, therefore, fails and is, accordingly, dismissed. Rule is discharged with no order as to costs. The interim relief granted earlier stands vacated. (HARSHA DEVANI, J) (VIRESHKUMAR B. MAYANI, J) B.U. PARMAR Page 94 of 94 "