M/S Rps Associates v. The Director Of Income Tax (Investigation) And Others
[Citation -2015-LL-0923-58]

Citation 2015-LL-0923-58
Appellant Name M/S Rps Associates
Respondent Name The Director Of Income Tax (Investigation) And Others
Court HIGH COURT OF ALLAHABAD
Relevant Act Income-tax
Date of Order 23/09/2015
Judgment View Judgment
Keyword Tags business premises • natural justice • partnership firm • principal place of business • principles of natural justice • search and seizure operation • seized material • special audit • an application of mind
Bot Summary: The Assistant Commissioner of Income Tax,Meerut issued a notice dated 25th November, 2009directing the petitioner to submit various information inconnection with the assessment proceedings underSection 153A of the Act. With these facts, the petitioner filed the presentwrit petition praying for the quashing of the order dated23rd September, 2008 passed by the Commissioner ofIncome Tax, New Delhi and the corrigendum dated 26 thOctober, 2009 transferring the proceedings underSection 127 of the Act to the Assistant Commissionerof Income Tax, Meerut. The petitioner has also prayedfor the quashing of the notice under Section 153A ofthe Act dated 30th October, 2009 issued by theAssistant Commissioner of Income Tax, Meerut for theassessment years 2002-03 to 2007-08 and forquashing the order dated 18th December, 2009 issuedby the Assistant Commissioner of Income Tax, Meerutdirecting special audit to be conducted under Section142(2A) of the Act for the assessment years 2002-03 to2008-09 by M/s Tandon Seth and Company, CharteredAccounts of Kanpur. The learned counsel for the petitioner contendedthat the order of the Commissioner of Income Tax, NewDelhi passed under Section 127 of the Act transferringthe jurisdiction to Assistant Commissioner of IncomeTax, Meerut was wholly illegal and in violation of theprinciples of natural justice. Assertions havebeen made in paragraph 14, 17, 18 and 28 of the writpetition and it has also been specifically asserted in theobjection filed by the petitioner before the authority videtheir letter dated 1st October, 2009, Annexure 15 to thewrit petition. The learned counsel further contended thatthe notice dated 7th December, 2009 and,subsequently, the order dated 18th December, 2009directing to conduct a special audit under Section142(2A) of the Act was wholly illegal and that noreasons have been specified either in the notice or inthe order to show as to how the accounts maintainedby the petitioner were complex requiring special audit to be conducted under Section 142(2A) of the Act. Having given our thoughtful consideration, we findfrom a perusal of paragraph 8 of the counter affidavitthat for the assessment year 2008-09, the petitioner'scase was selected for scrutiny through computer aidedselection scheme and notice was generated by thecomputer since the PAN of the petitioner was still lyingwith the Assistant Commissioner of Income Tax, Circle22(1), New Delhi, inasmuch as the PAN of thepetitioner had not migrated to the new Assessing Officer of Okhla and the AssistantCommissioner of Income Tax, Circle 22(1), New Delhiretained the jurisdiction.


AFR


Civil Misc. Writ Petition (Tax) No.165 of 2010


M/S Rps Associates ..... Petitioner
Vs.


The Director Of Income Tax (Investigation)
And Others .. Respondents



******************
Hon'ble Tarun Agarwala, J.
Hon'ble Surya Prakash Kesarwani, J.

(Per: Tarun Agarwala, J.)


petitioner is partnership firm and came into
existence on 18th August, 2003 and, therefore, first
assessment year was 2004-05. petitioner is
engaged in business of development of real estate.
The principal place of business as indicated in the
returns was situate at E-41, Ashok Vihar, Phase I, New
Delhi. Subsequently, office was shifted on 18 th
October, 2007 at A-193, Ist Floor, Okhla Industrial
Area, Phase I, New Delhi. Due intimation was given to
the income tax authorities on 18th October, 2007 and
acknowledgement was received by petitioner on
14th November, 2007 through National Securities
Depository Ltd. (NSDL) which is agency outsourced
by income tax authorities for purpose of
processing pan cards, change of address, etc.
(2)

search and seizure operation took place on 15th
February, 2008 under Section 132(1) of Act at the
business premises of petitioner's firm at A-193, Ist
Floor, Okhla Industrial Area, Phase I, New Delhi.
Number of documents and cash was seized and a
panchanama was prepared. It transpires that the
Commissioner of Income Tax, Delhi-VIII issued an
order dated 23rd September, 2008 under Section 127 of
the Act transferring case from Assistant
Commissioner of Income Tax, Circle 23(1), New Delhi
to Assistant Commissioner of Income Tax, Central,
Circle Meerut. petitioner contended that he was
unaware of this order and came to know for first
time on 31st August, 2009 when he received notice
under Section 153A of Act issued by Assistant
Commissioner of Income Tax, Meerut intimating the
petitioner that income tax return for assessment
year 2008-09 has not been filed and directed the
petitioner to show cause as to why action under
Section 271F of Act should not be initiated. The
petitioner appeared and filed his objections contending
that Assistant Commissioner of Income Tax, Meerut
had no jurisdiction to proceed with case and that
the order of Commissioner of Income Tax, New
Delhi dated 23rd September, 2008 was patently illegal,
inasmuch as it was passed in violation of principles
of natural justice. It was contended that no notice or
opportunity of hearing was provided by the
Commissioner of Income Tax, New Delhi before
(3)

transferring jurisdiction to Commissioner of
Income Tax, Meerut and, therefore, said order is
void. Inspite of such objection being filed, Assistant
Commissioner of Income Tax, Meerut issued notice
under Section 143(2) of Act directing petitioner
to attend proceedings for completion of the
assessment for assessment year 2008-09.

Assistant Commissioner of Income Tax,
Meerut issued notice dated 25th November, 2009
directing petitioner to submit various information in
connection with assessment proceedings under
Section 153A of Act. As many as 43 queries were
raised and query no.43 directed petitioner to
produce complete books of accounts including
subsidiary books of accounts and bills and vouchers
and fixed 4th December, 2009 for hearing. The
petitioner has contended in paragraph 39 that no
hearing took place on 4th December, 2009 as the
Assistant Commissioner of Income Tax, Meerut was
preoccupied with other official engagements and,
therefore, books of accounts could not be
examined. Thereafter, it is contended that Assistant
Commissioner of Income Tax, Meerut issued show
cause notice dated 7th December, 2009 directing the
petitioner to show cause as to why order for
conducting special audit under Section 142(2A) of the
Act be not passed since authority was of the
opinion that there was inaccuracy in accounts and
complexity arising therefrom. petitioner filed his
(4)

objection and, thereafter, authority passed order
dated 18th December, 2009 directing that accounts
should be audited under Section 142(2A) of Act for
the assessment years 2002-03 to 2008-09 by M/s
Tandon Seth and Company, Chartered Accountants,
Kanpur. petitioner also contended that the
Commissioner of Income Tax, New Delhi issued a
corrigendum dated 26th October, 2009 correcting an
error in its order dated 23rd September, 2008. The
petitioner contended that even this order was passed
ex-parte without issuing any notice and without giving
an opportunity of hearing.

With these facts, petitioner filed present
writ petition praying for quashing of order dated
23rd September, 2008 passed by Commissioner of
Income Tax, New Delhi and corrigendum dated 26 th
October, 2009 transferring proceedings under
Section 127 of Act to Assistant Commissioner
of Income Tax, Meerut. petitioner has also prayed
for quashing of notice under Section 153A of
the Act dated 30th October, 2009 issued by the
Assistant Commissioner of Income Tax, Meerut for the
assessment years 2002-03 to 2007-08 and for
quashing order dated 18th December, 2009 issued
by Assistant Commissioner of Income Tax, Meerut
directing special audit to be conducted under Section
142(2A) of Act for assessment years 2002-03 to
2008-09 by M/s Tandon Seth and Company, Chartered
Accounts of Kanpur.
(5)

In this backdrop, we have heard Sri Ashish
Bansal, learned counsel for petitioner and Sri
Krishna Agrawal, learned counsel for income
tax department.

learned counsel for petitioner contended
that order of Commissioner of Income Tax, New
Delhi passed under Section 127 of Act transferring
the jurisdiction to Assistant Commissioner of Income
Tax, Meerut was wholly illegal and in violation of the
principles of natural justice. It was urged that no notice
or opportunity of hearing was given. Assertions have
been made in paragraph 14, 17, 18 and 28 of writ
petition and it has also been specifically asserted in the
objection filed by petitioner before authority vide
their letter dated 1st October, 2009, Annexure 15 to the
writ petition. learned counsel further asserted that
the Assistant Commissioner of Income Tax, Meerut had
no jurisdiction to issue notice under Section 153A of
the Act for initiating assessment proceedings for the
assessment year 2002-03 to 2008-09 and, therefore,
the said notice dated 30th October, 2009 should be
quashed. learned counsel further contended that
the notice dated 7th December, 2009 and,
subsequently, order dated 18th December, 2009
directing to conduct special audit under Section
142(2A) of Act was wholly illegal and that no
reasons have been specified either in notice or in
the order to show as to how accounts maintained
by petitioner were complex requiring special audit
(6)

to be conducted under Section 142(2A) of Act.

On other hand, learned counsel for the
department contended that notice under Section 127 of
the Act was issued to assessee and since no
objection was filed nor petitioner appeared,
consequently, order was passed transferring the
jurisdiction to Meerut. It was therefore, contended that
notice and opportunity of hearing was given, which the
petitioner did not avail and that principles of natural
justice was complied with. It was also contended that
the Assistant Commissioner of Income Tax, Meerut had
the jurisdiction to complete assessment
proceedings and was competent to issue order
under Section 142(2A) of Act after considering that
the nature of transactions and vouchers seized
holding that accounts were of such complexity that
it required special audit under Section 142(2A) of the
Act. learned counsel submitted that orders are
perfectly valid and that writ petition was liable to be
dismissed.

Having given our thoughtful consideration, we find
from perusal of paragraph 8 of counter affidavit
that for assessment year 2008-09, petitioner's
case was selected for scrutiny through computer aided
selection scheme and notice was generated by the
computer since PAN of petitioner was still lying
with Assistant Commissioner of Income Tax, Circle
22(1), New Delhi, inasmuch as PAN of the
petitioner had not migrated to new Assessing
(7)

Officer of Okhla and, therefore, Assistant
Commissioner of Income Tax, Circle 22(1), New Delhi
retained jurisdiction. It was further submitted that
before passing order under Section 127 of Act,
the Commissioner of Income Tax-VIII, New Delhi
issued notice dated 28th August, 2008, which was
sent by registered post on 29th August, 2008. Since no
reply was received till 23rd September, 2008, order
dated 23rd September, 2008 was passed transferring
the jurisdiction to Assistant Commissioner of Income
Tax, Meerut.

In paragraph 10 of counter affidavit vague
reply has been given that before issuing the
corrigendum, notice was issued to petitioner and
since no reply was received, corrigendum was
passed. No proof of issuance of notice has been filed.

In our opinion, assertion made in paragraph 8
and 10 of counter affidavit is not only vague, and
cannot be believed. Service of notice is required to be
made in manner specified under Section 282 of the
Act. One of methods of service is as per the
procedure prescribed under Code of Civil
Procedure. Order V of Code of Civil Procedure
requires that summons is required to be served at the
place of business or residence of person to whom
summons have to be served. In instant case, it has
not been disputed that petitioner's principle place of
business shifted from Ashok Vihar to New Okhla, New
Delhi on 18th October, 2007. Due intimation was given
(8)

to income tax authorities through their agency
NSDL and change of address was acknowledged by
this agency vide their letter dated 14th November, 2007.
Further, department knew about change of
address, inasmuch as, search was carried out at the
new address under Section 132 of Act on 15 th
February, 2008. Therefore, it does not sounds logical
nor reasonable for Commissioner of Income Tax,
New Delhi to issue notice dated 28th August, 2008 at
the old address of petitioner at Ashok Vihar. The
notice, if any, should have been sent to principal
place of business, which had shifted to New Okhla
where search under Section 132 of Act was
carried out by department.

We also find that there is nothing to indicate by the
department that petitioner was still carrying on his
business from old place at Ashok Vihar or that the
said place was still in existence and was under the
control of petitioner. We also find that no proof has
been filed by department to show that notice dated
28th August, 2008 sent by registered post was actually
received by petitioner. notice sent by registered
post raises presumption of service but this presumption
is rebuttal. In instant case, petitioner has denied
receiving any such notice. Once receipt of notice is
denied by petitioner, onus shifts back on the
department. In fact, we find that department has
conveniently sworn paragraph 8 of counter affidavit
on basis of legal advice and has not sworn it on the
(9)

basis of personal knowledge or on basis of record.
Thus, such assertions made in paragraph 8 cannot be
relied upon. Similarly, no proof has been filed by the
department to assert that before issuing the
corrigendum dated 26th October, 2009 petitioner
was put to notice. Neither copy of notice nor proof of
sending said notice by registered post has been
filed. reply given in paragraph 10 is patently vague
and unreliable.

In light of aforesaid, this Court is of the
opinion that impugned order dated 23 rd September,
2008 passed by Commissioner of Income Tax-VIII,
New Delhi transferring case to Assistant
Commissioner of Income Tax, Meerut was patently
illegal and in gross violation of principles of natural
justice. It was imperative for authority to give notice
and opportunity of hearing to petitioner before
transferring case under Section 127 of Act,
which in instant case has not been done. Therefore,
the impugned order dated 23rd September, 2008 as well
as corrigendum dated 26th October, 2009 issued by
the Commissioner of Income Tax-VIII, New Delhi under
Section 127 of Act cannot be sustained.

In light of aforesaid, all consequential
proceedings initiated by Assistant Commissioner of
Income Tax, Meerut by issuance of notice dated 30th
October, 2009 and notice dated 7th December,
2009 and consequential order dated 18th
December, 2009 directing to conduct special audit
(10)

under Section 142(2A) of Act being without
jurisdiction also cannot be sustained.

One of contention raised by petitioner is
that order passed by Assistant Commissioner of
Income Tax, Meerut dated 18th December, 2009 under
Section 142(2A) of Act was passed mechanically
without application of mind and without giving any
reason appears to be correct. In this regard, we find
that said authority issued notice dated 25 th
November, 2009 directing petitioner to produce the
books of accounts including subsidiary books of
accounts, bill, vouchers, etc. on 4th December, 2009. In
paragraph 39 of writ petition, petitioner
specifically averred that he appeared before the
authority on 4th December, 2009 along with books of
accounts but no hearing took place as Officer was
preoccupied with some official work. This fact has not
been denied in paragraph 32 of counter affidavit. In
fact, respondents have categorically contended that
the books of accounts was not produced and that the
impugned order under Section 142(2A) of Act was
passed on basis of documents found during the
course of search, which indicated complexity of the
accounts. We are of opinion that order dated
under Section 142(2A) of Act entails civil
consequences and, order is required to be passed
upon application of mind and with due care.
Complexity of accounts can only be judged upon a
perusal of books of accounts and after inviting
(11)

explanation from assessee. If books of
accounts are not perused, question of complexity
cannot be judged. We are of opinion that order
under Section 142(2A) cannot be passed on basis
of seized material unless assessee failed to
produce books of accounts, which in instant case
has not happened, inasmuch as no hearing took place
on 4th December, 2009 on date when petitioner
was required to produce books of accounts.

We are, therefore, of opinion that order
dated 18th December, 2009 was passed mechanically
and without any application of mind. We are also of the
opinion that impugned order does not contain any
reasons. In our opinion, it is necessary and essential
for authority to give reasons indicating the
complexity of accounts and need to get the
accounts audited under Section 142(2A) of Act. We
also find that identical order was issued to another
assessee which order was quashed by this High Court
on ground that no reasons had been given.

For reasons stated aforesaid, order dated
23rd September, 2008 passed by Commissioner of
Income Tax, Delhi-VIII, New Delhi and corrigendum
issued by said authority on 26th October, 2009 are
quashed as consequence thereof notices issued
under Section 153A of Act dated 30 th October, 2009
issued by Assistant Commissioner of Income Tax,
Meerut as well as notice dated 7 th December, 2009
and order dated 18th December, 2009 issued by the
(12)

said authority under Section 142(2A) of Act are
quashed.

writ petition is allowed.

It would be open to competent authority to
pass fresh order in accordance with law in light of
the observations made above, if law permits the
department to do so.
Date:23.9.2015
Bhaskar


(Surya Prakash Kesarwani, J.) (Tarun Agarwala, J.)
M/S Rps Associates v. Director Of Income Tax (Investigation) And Other
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