ITO Vs. Babu Lal Somani (ITAT Jaipur)
Mere Special audit and consequent additions not amounts to rejection of books in absence of specific exercise of powers U/s. 145(3)
There is no specific finding which has been recorded by the assessing officer in the assessment order recording his satisfaction as to rejection of the books of accounts and the result so declared by the assessee. It is true that the matter was referred for special audit under section 142(2A) but that by itself will not result in an implied finding of the assessing officer about his non-satisfaction about the books of accounts and rejection thereof. As noted by the Coordinate Bench as well, the basic purpose for special audit was for examination of the books of accounts and to give specific comments on specific issues and it cannot be inferred that the matter for special audit was referred for getting the whole of the books of account re casted and preparation thereof afresh. The defects so pointed out by the special auditor have been incorporated in the re casted books of accounts effectively means taking into consideration the results already declared by the assessee in respect of its declared transactions and the results as per unrecorded transactions relating to purchase and sales and other income, presenting an overall position regarding the business results in relation to activities carried out by the assessee. Therefore, we are of the considered view that merely because the matter was referred for special audit and the assessing officer has made certain additions based on the observations of the special auditor, it cannot be held that the assessing officer has rejected the books of account of the assessee. There has to be a specific finding given by the assessing officer in terms of satisfaction of any or all of the conditions as specified under section 145(3) before he rejects the books of accounts of the assessee. Further, the assessing officer has to specify the reasons as to why he feels that the results declared by the assessee as per the books of accounts are not acceptable.
Books of account can be rejected only at the instance of AO and not on assessee’s request.
During the course of assessment proceedings, in response to each of the queries raised by the assessing officer in relation to observations of the special auditor, the assessee has repeatedly stated that his books of account should be rejected as done in past assessment years. The question that arises for consideration whether the powers to be exercised under section 145(3) can be exercised at the request of the assessee. To recapitulate, section 145(3) provides that where the assessing officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the assessing officer may make an assessment in the manner provided in section 144 of the Act. It is for the assessee to declare its results and offer its books of accounts for verification and then, it is for assessing officer to determine whether the book results so declared are correct or not or the books of accounts have to be rejected as not depicting correct state of affairs of the assessee. In our considered view, there is nothing in the said provisions when empower the assessee to request the assessing officer to reject his books of accounts.
