KANPUR DEVELOPMENT AUTHORITY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The petitioner an 'authority' constituted under provisions of the U.P. Urban Planning and Development Act, 1973 has filed the present writ petition questioning the legality and validity of the order passed under section 142 (2A) of the Income Tax Act for the Assessment Year 2005-2006 i.e. the Financial Year 2004-2005. The petitioner claims that its income has been exempted vide certificate dated 25th of July, 2005 issued under section 12A of the Income Tax Act. Its return of income was exempt for the Assessment Year 2003-2004 and assessment for the Assessment Year 2004-2005 is pending. Its income of return for the relevant Assessment Year 2005-2006 was filed on 29th of October, 2005 claiming exemption under section 11 read with section 12 of the Act. The return was accompanied with an audited statement of account, tax audit report in form no.3 CD under section 44AB of the Act. The notice for assessment was issued on 19th of July, 2006, in response thereof the petitioner appeared and sought adjournment. During the course of assessment proceedings, the Assessing Authority raised number of queries which could not be replied by the petitioner fully. Only part compliance was made. A show cause notice under section 142 (2A) dated 12th of November, 2007 was served on the petitioner for making reference to get the books of account audited by a chartered accountant having regard to the nature of complexity of accounts of the assessee and the interest of the Revenue. Cause was shown which was not found satisfactory. The reference was made by the Assessing Authority to the Commissioner of Income Tax who vide his order dated 18th of December, 2007 found that there are various complexities in the accounts of the assessee and it is not possible to arrive at the correct income of the assessee on the basis of the tax audit report furnished with the return of the income. Consequently, it granted the approval for getting the account books audited under section 142 (2A) of the Act and appointed M/s. Tandon Seth & Co. as the auditor. Challenging the order dated 18th of December, 2007, the present writ petition has been presented on 5th of March, 2008.

(2.) In reply, the Department came out with the case that the present writ petition has been filed with deliberate intention just to avoid the proceedings under section 142 (2A) of the Act. The petitioner neither cooperated with the assessment proceedings pending before the Assessing Authority nor appeared before the Special Auditor whereas the limitation is prescribed for completing the audit proceedings. All the three conditions for invoking the provisions of section 142 (2A) of the Act exist. Even the auditor of the petitioner who submitted the tax audit report under section 44 AB has pointed out the complexities on several points which are vital for determination of the income of the assessee. The details have been enumerated in para-3 (e) of the counter affidavit. In substance, the case of the respondent is that from the observations made by the assessee's auditor in para-12 (a) it becomes evident that the assessee has not valued its assets and properties fully as they stood on 31st of March, 2004, the process of identification and quantification of all assets is under progress. Various other remarks made by the petitioner's auditor in the audit report have been referred and relied upon in the counter affidavit in support of the impugned order.

(3.) In the rejoinder affidavit, the stand taken in the writ petition has been reiterated.