Special Civil Application Nos. 4613, 4614, 4619 and 4620 of 2017. Case: Takshashila Realties Pvt. Ltd. Vs Deputy Commissioner of Income Tax, Circle-4(1)(2) and Ors.. Gujarat High Court

Case Number:Special Civil Application Nos. 4613, 4614, 4619 and 4620 of 2017
Party Name:Takshashila Realties Pvt. Ltd. Vs Deputy Commissioner of Income Tax, Circle-4(1)(2) and Ors.
Counsel:For Appellant: J.P. Shah, Sr. Advocate and Manish J. Shah, Advocate and For Respondents: Nitin K. Mehta, Advocate
Judges:M.R. Shah and B.N. Karia, JJ.
Issue:Constitution of India - Article 226; Income Tax Act, 1961 - Sections 142, 142(2A), 143(3), 148, 288
Judgement Date:March 21, 2017
Court:Gujarat High Court
 
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Judgment:

M.R. Shah, J.

  1. Rule in each case, returnable forthwith. Learned counsel Shri Nitin K Mehta waives service of notice on behalf of the respondent-Revenue.

  2. With the consent of the learned advocates appearing for and on behalf of the respective parties, these matters were heard together.

  3. As common question of law and facts arise in this group of petitions and as such in respect of the same assessee, but with respect to different assessment years, all these petitions are disposed of by this common judgment and order.

  4. In all these writ petitions preferred under Article 226 of the Constitution of India, the common assessee has challenged impugned orders passed by the respondent No. 1-Assessing Officer by which, in exercise of power under Section 142 [2A] of the Income-tax Act, 1961 [hereinafter referred to as, "the Act"], the Assessing Officer has directed the petitioner to get its accounts audited for Assessment Year 2009-2010, as a successor of erstwhile firm-Chanakya Infracon Private Limited [Special Civil Application No. 4619 of 2017]; for Assessment Year 2009-2010, as successor of erstwhile firm-Youngstar Infracon Private Limited [Special Civil Application No. 4613 of 2017]; for A.Y 2009-2010, as a successor of erstwhile firm-Chanakya Buildcon Private Limited [Special Civil Application No. 4614 of 2017]; and for A.Y 2009-10, as a successor of erstwhile firm-Takshashila Properties Private Limited [Special Civil Application No. 4620 of 2017].

  5. The facts leading to the present Special Civil Applications, in nutshell, are as under:

    5.1 That, in the case of erstwhile firms viz., Chanakya Infracon Private Limited; Youngstar Infracon Private Limited; Chanakya Buildcon Private Limited and Takshashila Properties Private Limited, the assessment proceedings for Assessment Year 2009-2010 were completed. That, pursuant to an order dated 22nd March 2011 passed by the High Court of Gujarat in Company Application No. 263 of 2011, five companies viz., Chanakya Buildcon Private Limited; Chanakya Infracon Private Limited; Takshashila Properties Private Limited; Takshashila Realities Limited and Youngstar Infracon Private Limited came to be amalgamated with Takshashila Gruh Nirman Private Limited. Messrs. Takshashila Gruh Nirman Private Limited is subsequently named as Takshashila Realities Limited. It appears that in case of transferee companies viz., Takshashila Gruh Nirman Private Limited; Chanakya Buildcon Private Limited; Chanakya Infracon Private Limited and Youngstar Infrastructure Private Limited, reassessment proceedings came to be initiated for A.Y 2009-2010. Notices under Section 148 of the Act came to be issued and served upon the respective assessees. The aforesaid transferee companies-original assessees preferred Special Civil Applications No. 13971 of 2016; 14018 of 2016; 14071 of 2016 and 14794 of 2016 before this Court challenging Notices under Section 148 of the Act and the reassessment proceedings. That, by a detailed judgment and order dated 5th December 2016, Division Bench of this Court, dismissed the said Special Civil Applications.

    5.2 That thereafter, the petitioner herein-Takshashila Realities Private Limited has been served with a Notice under Section 142 [2A] of the Act and the petitioner, as the successor of firms viz., Chanakya Buildcon Private Limited; Chanakya Infracon Private Limited; Takshashila Properties Private Limited and Youngstar Infracon Private Limited was called upon to show cause why an order for special audit under Section 142 [2A] of the Act may not be passed. In the show cause notice, it was noted that the conversion of five firms into companies, after revaluation of land, merger of five companies with Takshashila Gruh Nirman Private Limited; later with issue of equity shares against the balance 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 a 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 into companies which merged with 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 directors is involved, and therefore, 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 interest of the Revenue, the accounts are required to be got 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.

    5.3 That, the petitioner-assessee filed its objections, which came to be disposed of by the Assessing Officer. That thereafter, the Assessing Officer sent a proposal to the Principal Commissioner of Income-tax, Ahmedabad IV for its approval. That the said Principal Commissioner of Income-tax granted his approval and appointed respondent No. 3 as a Special Auditor. Thereafter, by two communications, the petitioner has been called upon to get the accounts audited for A.Y 2009-2010, as the successor of viz., Chanakya Infracon Private Limited; Youngstar Infracon Private Limited; Chanakya Buildcon Private Limited and Takshashila Properties Private Limited by the Special Auditor.

  6. Feeling aggrieved and dissatisfied by the impugned order passed by the respondent No. 1-Assessing Officer passed under Section 142 [2A] of the Act, the assessee has preferred by the present Special Civil Applications.

  7. Heard Shri JP Shah, learned senior advocate appearing with Mr. Manish J Shah, learned advocate for the petitioner and learned advocate Mr. Nitin Mehta for the respondent-Revenue.

  8. It is vehemently submitted by Shri JP Shah, learned counsel for the petitioner that the impugned orders passed in exercise of power under Section 142 [2A] of the Act appointing Special Auditor is absolutely bad, illegal and contrary to the provisions of Section 142 [2A] of the Act. It is further submitted by Shri J.P Shah, learned counsel for the petitioner that the Division Bench of this Court by its judgment and order dated 5th December 2010 had dismissed the writ petitions preferred by the transferee companies in which reassessment proceedings for A.Y 2009-2010 were challenged and thereafter immediately, the Assessing Officer, without even return being filed by the petitioner pursuant to the Notice under Section 148 of the Act and without there being any accounts available before him and/or even verification of the accounts, has passed the impugned orders under Section 142 [2A] of the Act of Special Audit, which is absolutely contrary to the provisions of Section 142 [2A] of the Act. It is vehemently submitted by Shri J.P Shah, learned counsel for the petitioner that the language used in Section 142 [2A] of the Act is that, "the Assessing Officer, having regard to the nature and complexity of the...

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