Himachal Pradesh H.C : Mr. Indar Singh appears and waives service of notice of admission on behalf of the respondents.

High Court Of Himachal Pradesh

H.P. State Forest Corporation vs. JCIT

Section 142(2A)

Asst. year 1997-98, 1998-99 1999-2000

C.K. Thakker, C.J. & Arun Kumar Goel, J.

Civil Writ Petn. No. 503 of 2000

5th June, 2001

Counsel Appeared

M.M. Khanna & Rakesh Sharma, for the Petitioner : Indar Singh & Vijay Thakur, for the Respondent



Admitted. Mr. Indar Singh appears and waives service of notice of admission on behalf of the respondents. In the facts and circumstances of the case, the petition is taken up for final hearing today. This petition is filed by the petitioner for quashing and setting aside the order (Annexure P-1) issued by the Joint CIT, Special Range, Shimla, H.P. on 19th June, 2000. By the said communication, a special audit was sought to be conducted in accordance with sub-s. (2A) of s.142 of the IT Act, 1961 (‘the Act’).

It was stated in the impugned order that having regard to the nature and complexity of the accounts of the assessee- company and in the interest of the Revenue, it has been considered necessary to get its accounts audited for the financial years 1996-97 to 1998-99 relevant to the asst. yrs. 1997-98 to 1999-2000, as provided in the Act. It was further stated that for the said purpose, necessary approval had been accorded by the CIT, Shimla, and he has directed the office of the Joint CIT to get the accounts of the petitioner audited by M. Kamal Mahajan & Co., Chandigarh. Several contentions were raised at the time of hearing. In fact, in the first session, after hearing the learned counsel for the parties, we had admitted the main matter and confirmed ad interim relief which had been granted on 26th July, 2000 in C.M.P. No. 886 of 2000.

In the second session, however, a request was made by Mr. Indar Singh, the learned counsel for the respondents, that if the Court was satisfied about the grievance voiced by the learned counsel for the petitioner, the petition may be finally disposed of by issuing appropriate directions. Mr. Khanna, the learned counsel for the petitioner, has also agreed for the disposal of the petition. In our opinion, the request of Mr. Indar Singh was reasonable, and hence, in the second half, we have taken up the matter for final hearing.

The learned counsel for the petitioner raised several contentions. He submitted that the provisions of sub-s. (2A) of s. 142 have not been complied with by the AO. According to him, conditions precedent for the exercise of power under sub-s. (2A) were not present. Nothing was mentioned in the order impugned in the present petition from which it can be said that there was application of mind by the AO before taking the action. He submitted that in view of the non-fulfilment of the conditions and non-application of mind by the AO, the order deserves to be quashed and set aside. Sub-s. (2A) of s. 142, which is material, reads as under : “(2A) If, at any stage of the proceedings before him, the AO, 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 CIT or CIT, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-s. (2) of s. 288, nominated by the Chief CIT or CIT 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 AO may require.” Bare reading of the above provision makes it clear that there must be application of mind on the part of the AO for an eventuality which necessitates exercise of power under sub-s. (2A), namely : (i) the nature and complexity of the accounts; (ii) the interest of the Revenue; and (iii) previous approval of the Chief CIT or the CIT, as the case may be. Reading the order at Annexure P-1, nothing has been stated by the AO about the fulfilment of the above conditions.

7. It was also contended by Mr. Khanna that no opportunity of hearing had been afforded and on that ground also, the petition deserves to be allowed by quashing and setting aside the order passed by the authorities. Our attention was invited to the following decisions : Swadeshi Cotton Mills Co. Ltd. vs. CIT (1987) 63 CTR (All) 335 : (1988) 171 ITR 634 (All) : TC 2R.639; Peerless General Finance & Investment Co. Ltd. vs. Dy. CIT (1999) 156 CTR (Cal) 512 : (1999) 236 ITR 671 (Cal); U.P. State Handloom Corpn. Ltd. vs. CIT (2000) 164 CTR (All) 27 : (2000)

245 ITR 192 (All); and Muthoottu Mini Kuries vs. Dy. CIT (2001) 166 CTR (Ker) 180 : (2001) 115 Taxman 216 (Ker). In all the above cases, it has been held by various High Courts that there must be application of mind on the part of the authority before taking action under sub-s. (2A) of s. 142.

8. Mr. Indar Singh, on the other hand, supported the order passed by the authorities Annexure P-I. Relying upon affidavit and further affidavit of the respondents, it has been submitted that relevant considerations have been kept in mind before taking the action. It was, inter alia, contended that considering (i) past history; (ii) the fact that the petitioner had gone under VDIS; (iii) it had not filed audited accounts as is required under s. 44AB of the Act and keeping in view all the circumstances, the AO was satisfied that this was a fit case to exercise the power and after taking prior approval of the CIT, the action had been taken. He has further submitted that the petition deserves to be dismissed as no fault can be found against the action taken under s. 142(2A).

We have considered the rival contentions of the parties and in our view, the petition deserves to be allowed. It is true that the power has been exercised under sub-s. (2A) of s. 142. But, it is equally true that so far as order passed vide Annexure P-1, impugned in the present petition, is concerned, it does not state that the AO had considered the relevant factors which were required to be borne in mind under sub-s. (2A) of s. 142. It is, no doubt, true that in the affidavit and further affidavit, several factors have been pointed out before this Court as to why the action was required to be taken. In our opinion, however, when those factors have not been reflected in the impugned order, Annexure P-1, the same cannot be pressed in aid at the time of hearing of the petition.

As held by the Supreme Court in Commissioner of Police vs. Gordhandas Bhanji AIR 1952 SC 16, public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanation subsequently given by the officer making the order of what he meant, or of what was in his mind or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the acting and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.—Mohinder Singh Gill vs. Chief Election Commissioner AIR 1978 SC 851.

For the foregoing reasons, the petition deserves to be allowed and order at Annexure P-1, passed by the Joint CIT, Special Range, Shimla on 19th June, 2000, is hereby quashed and set aside. It is, however, open to the authorities to take appropriate action in accordance with law. It is also made clear that in case the decision is against the petitioner, it is at liberty to approach the appropriate forum. The petition, is accordingly, allowed in the aforesaid terms.

No order as to costs.

[Citation : 252 ITR 833]

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