Himachal Pradesh State Forest Corporation Ltd. vs Joint Commissioner of Income Tax and Another

C.K. Thakker, C.J.—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-I issued by the Joint Commissioner of Income Tax, Special Range, Shimla, H. P., on June 19, 2000. By the said communication, a special audit was sought to be conducted in accordance with Sub-section (2A) of Section 142 of the Income Tax Act, 1961 (hereinafter referred to as "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 interests 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 assessment years 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 Commissioner of Income Tax, Shimla, and he has directed the office of the Joint Commissioner of Income Tax to get the accounts of the petitioner audited by M. Kamal Mahajan and Co., Chandigarh.

Several contentions were raised at the time of hearing. In fact, in the first session, after hearing learned counsel for the parties, we had admitted the main matter and confirmed ad interim relief which had been granted on July 26, 2000, in C. M. P. No. 886 of 2000.

In the second session, however, a request was made by Mr. Indar Singh, learned counsel for the respondents, that if the court was satisfied about the grievance voiced by learned counsel for the petitioner, the petition may be finally disposed of by issuing appropriate directions. Mr. Khanna, 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-Learned counsel for the petitioner raised several contentions. He submitted that the provisions of Sub-section (2A) of Section 142 of the Act were not been complied with by the Assessing Officer. According to him, conditions precedent for the exercise of power under Sub-section (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 Assessing Officer before taking the action. He submitted that in view of the non-fulfilment of the conditions and non-application of mind by the Assessing Officer, the order deserves to be quashed and set aside.

Sub-section (2A) of Section 142 of the Act, which is material, reads as under :

"(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."

A bare reading of the above provision makes it clear that there must be an application of mind on the part of the Assessing Officer for an eventuality which necessitates exercise of power under Sub-section (2A), namely, (i) the nature and complexity of the accounts ; (ii) the interests of the Revenue ; and (iii) previous approval of the Chief Commissioner or the Commissioner, as the case may be. Reading the order at annexure P-l, nothing has been stated by the Assessing Officer about the fulfilment of the above conditions.

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 :

(1) Swadeshi Cotton Mills Company Ltd. Vs. Commissioner of Income Tax and Another, ;

(2) PEERLESS GENERAL FINANCE AND INVESTMENT CO. LTD. AND ANOTHER Vs. DEPUTY COMMISSIONER OF Income Tax AND OTHERS., ;

(3) U.P. State Handloom Corporation Ltd. Vs. Commissioner of Income Tax and Another, ; and

(4) Muthoottu Mini Kuries Vs. Deputy Commissioner of Income Tax and Another, .

In all the above cases, it has been held by the various High Courts that there must be an application of mind on the part of the authority before taking action under Sub-section (2A) of Section 142 of the Act.

Mr. Indar Singh, on the other hand, supported the order passed by the authorities in annexure P-1. Relying upon an affidavit and further affidavit of the respondents, it has been submitted that the 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 V. D. I. S.; (iii) it had not filed audited accounts as is required u/s 44AB of the Act and keeping in view all the circumstances, the Assessing Officer was satisfied that this was a fit case to exercise the power and after taking prior approval of the Commissioner the action has been taken. He has further submitted that the petition deserves to be dismissed as no fault can be found against the action taken u/s 142(2A) of the Act.

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-section (2A) of Section 142 of the Act. But, it is equally true that so far as the order passed vide annexure P-l, impugned in the present petition is concerned, it does not state that the Assessing Officer had considered the relevant factors which were required to be borne in mind under Sub-section (2A) of Section 142 of the Act. It is, no doubt, true 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-l, 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, Bombay Vs. Gordhandas Bhanji, , public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations 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 actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself, (see also Mohinder Singh Gill and Another Vs. The Chief Election Commissioner, New Delhi and Others, .

For the foregoing reasons, the petition deserves to be allowed and order at annexure P-I, passed by the Joint Commissioner of Income Tax, Special Range, Shimla, on June 19, 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.