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Income Tax Appellate Tribunal, CHANDIGARH BENCH ‘A’, CHANDIGARH
Before: SHRI SANJAY GARG & SMT.ANNAPURNA GUPTA
Per Annapurna Gupta, Accountant Member:
All the above appeals have been preferred by the same assessee against separate orders of the Learned Commissioner of Income Tax (Appeals)-1, Ludhiana [(in short the ‘Ld. CIT(A)] all dated 25.03.2013 relating to assessment years 2003-04 to 2005-06 respectively, passed
ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 2 of 12
u/s 250(6) of the of the Income Tax Act, 1961 (hereinafter
referred to as ‘Act’).
It was common ground that identical issue was involved in all the above appeals, hence, the same were taken up together for hearing and are being decided by a common order for the sake of convenience.
Ld.Counsel for the assessee pointed out that identical
grounds had been raised in all the appeals which read as under:
“1. That the Ld. Commissioner of Income Tax (Appeals) gravely erred in upholding assessment made u/s 153A read with section 143(3) which was otherwise time barred in as much as the very reference u/s 142(2A) was unwarranted against law and facts on the file.
The assessment framed on the basis of audit report u/s 142(2A) deserves to be quashed in as much as the special auditor has travelled beyond the provisions of section 142(2A) for the purpose of conducting the audit.”
Referring to the above, the Ld.Counsel for the assessee
stated that in all the three appeals a common solitary
ground was being pressed relating to the assessment order
being time barred, having been passed in the extended time
limit on account of reference made for conducting special
ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 3 of 12
audit u/s 142(2A) of the Act, which reference was not in Nos.154 to 157/Chd/2013 vide order dated 15.06.2018. The Ld.Counsel for the assessee pointed out that the facts in the case of M/s Sunder Mal Satpal (supra) were identical to the case of the assessee. He stated that the assessee had been subjected to search proceedings u/s 132 of the Act on 24.10.2007 and during search certain incriminating
documents relating to M/s Sunder Mal Satpal, who was a sister concern of the assessee, were found and seized.
Accordingly proceedings u/s 153C of the Act were initiated
and assessment completed on M/s Sunder Mal Satpal. He
contended that during assessment proceedings of both the assessee and M/s Sunder Mal, a reference for special audit
u/s 142(2A) of the Act was made by a common letter and the reasons for making the reference was identical. Our
attention was drawn to the letter of the AO dated
2010 directing the assessee and M/s Sunder Mal
ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 4 of 12
Satpal to get their accounts audited u/s 142(2A) of the Act,
placed at Paper Book page Nos.8 and 9 as under:
“No .ACIT/CC -III/ Ldh/489 Off ice of the Asstt. Commissioner of Income Tax Central Circle- III, Ludhiana. Dated Ludhiana th e 1 3.01.2010 To Shri Ravi Kumar Bansal c/ o M/s Chet R am Ravi K umar, 2-Ne w Grain Mark et, Muk tsar. Sir, Sub :- Regard ing Sp ecial au dit u/s 142(2A ) of Income Tax A ct, 1961 in the cases of M/s Chet Ram R avi Ku mar , M/s Sunder Mal Sa t P al & Sh.Ravi Ku mar Bansal of Muktsar. *** The Commissioner of Income Tax (Cen tral), Ludhiana Vide Order No.C IT(C)/Ldh/(JB/ 09-10/ 4166 dated 23/12/2009 the f ollowing c ases hav e b een ap proved f or special audit and app ointed of M/s P .C.Goy al & Comp any , 62 New Lajp at Nagar, P akhowal Road, Ludhiana f or this purposes. S.No. Name of th e assessee As tt. Year
M/s Chet Ram Ravi Kumar ,101 2002-02 to 2007-08 New Gr ain Mark et ,Muk tsar
Sh.Ravi Ku mar Bansal c/ o ab ove. 2002-03 to 2008-09
M/s Sunder Mal Sat P al, 2002-03 to 2008-09 101, New Grain Mark et, Muk tsar The purpo se of th e special audit is:- i) To tr anslate the b ook s f ound f rom Mahajan i to English. ii) To b if urcate the trans actions recorded in the kacha cash book so as to clar if y whe th er they pertain to M/ s Chet Ram R avi Kumar or Sunder Mal Sa t P al. iii) To bifurcate th e accoun ted transac tion f rom unaccounted transac tion to arrive at a def inite conclusion and also reconc ile the regular b ook s of accounts with these seized book s. iv) Reconciliation of the p romo tes wi th th e r egular b ook s of account to bif urcate the accoun ted f or p ronotes f rom the unaccoun ted ones and to work out the in teres t income earned on thes e advances and also to check the source of inves tmen t made in these advances, on yearly b asis f rom Asstt.Year 2002-03 to A ss tt.Year 2008-09. v) To redraw the balance sheet, P &L a/ c f rom A.Y.2002-03 to 2008-09 so as to arr ive at a true and correc t income. vi) To check the loose pap ers f ound and reconcile th em with ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 5 of 12
the assessee regular book s of account. You are again requested to coop erate wi th M/s P .C.Goy al & Comp any , 62-New Lajp at Nagar, P ak howal R oad, Ludhiana f or the purpose of sp ecial audit immedia tely , so that the necessary audit may b e done in time and the special aud it repor t is submitted to the undersigned by 31/ 03/ 2010. - Yours f aithf ully , (Dr.D.S.SID HU) Asstt.Commissioner of Income T ax, C entr al Circle- III, L udhiana
The Ld.Counsel for the assessee pointed out that in the case of M/s Sunder Msal Satpal, the ITAT had held the reference of the AO u/s 142(2A) of the Act as not in accordance with law and accordingly the assessment order
passed was held to be barred by limitation since the extended period taken under the guise of special audit could
not have been counted. Our attention was drawn to the order in the case of M/s Sunder Mal Satpal (supra), placed
at Paper Book page Nos. 31 to 44. The Ld.Counsel for the assessee thereafter pointed out that subsequently the Department had filed a Miscellaneous Application in the said order before the ITAT raising the contention that the ITAT did not have the juri iction to adjudicate the validity
of the order for special audit , basing its contention on the decision of the Hon'ble Supreme Court in the case of Sahara ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 6 of 12
9/Chd/2019 dated 19.03.2021. Copy of the order was placed
before us. The contents of the same from para 2 to 5 are as under:
“2. The recall is being sought for identical reasons in all the four Miscellaneous Applications, being that the ITAT had acted beyond its juri iction while adjudicating the validity of the reference made by the AO for special audit as per the provisions of section 142(2A) of the Income Tax Act,1961 (in short ‘the Act’) in the impugned appeals. The Revenue, for the said proposition, has relied upon the decision of the Hon'ble Apex Court in the case of Rajesh
During the course of hearing before us it was pointed out at bar to the Ld. DR that the Hon'ble Delhi High Court, in the case of Consulting Engineering Services Private Limited Vs. ITAT & Another in WP(C)7734/2017 dated 01.09.2017 ,on being seized with the identical issue whether the challenge to the order u/s 142(2A) could be raised before the IT AT in view of the decision of the Hon'ble Apex Court in Sahara India (Firm) Vs. CIT (supra), had held that the observation made in that decision was in the peculiar facts of that case and was not meant to be a general observation applicable across the board for all cases. That at para 9 of the order the Hon'ble High Court had categorically held that the IT AT ought to have entertained the additional grounds pertaining to the validity of reference made u/s 142(2A) of the Act.
The Ld. DR, af ter going through the aforesaid order, fairly agreed that the issue had been considered as above by the Hon'ble High Court in the aforesaid decision.
In vie w of the above, we do not f ind any merit in the Miscellaneous Applications filed by ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 7 of 12
the Revenue since the adjudication of the reference to special audit by the ITAT has been held to be well within its juri iction by the Hon'ble High Court of Delhi in the case of Consulting Engineering Services Private Limited Vs. IT AT & Another (supra), that too af ter considering the decision of the Hon'ble Apex Court in Sahara India(supra). Therefore, with regard to the same, there is no mistake in the order of the IT AT.”
The Ld.Counsel for the assessee, therefore, stated that the issue in the impugned cases stood squarely covered in favour of the assessee by the order of the ITAT in the case of M/s Sunder Mal Satpal (supra).
The Ld. DR, on the other hand, vehemently contested
the stand of the Ld.Counsel for the assessee. The primary
contention being that the ITAT had no juri iction to decide
the validity of the order for special audit and she relied
heavily on the order of the Hon'ble Apex Court in the case of through the order of the ITAT in the case of M/s Sunder Mal
ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 8 of 12
Satpal (supra), the order of the AO directing special audit as brought to our notice by the Ld.Counsel for the assessee
and also the order passed by the ITAT in Miscellaneous
Application filed by the Revenue in the ITAT order passed in the case of M/s Sunder Mal Satpal (supra).
On going through the contents of the above, there is no doubt that vis a vis the issue before us of validity of reference made by AO for special audit u/s 142(2A) of the Act, the facts and circumstances of the present case are identical to that in the case of M/s Sunder Mal Satpal
(supra). We have noted from the letter of the AO directing
special audit(P.B 8-9), that the reference in the impugned
case was made along with that for M/s Sunder Mal Satpal
(supra), for identical reasons, which reasons were found to be insufficient for directing a special audit ,by the ITAT in the case of M/s Sunder Mal Satpal. It was so held noting
that there was no complexity in the accounts pointed out by the AO while making the reference, which was a prerequisite
for making reference for special audit.
The Revenue has been unable to controvert the aforestated facts. The issue therefore stands squarely
covered by the order of the ITAT in the case of Sunder Mal
Satpal (supra).
ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 9 of 12
The Revenues contention questioning the juri iction of the ITAT to adjudicate the validity of the reference for special audit u/s 142(2A) of the Act, admittedly also stands u/s 142(2A) can be challenged, albeit for this limited
purpose alone. It has been held that for coming to a conclusion that the assessment order is barred by limitation, all aspects integral to the process and ultimate
ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 10 of 12
completion of assessment can be challenged and considered
for deciding the same. The relevant decisions are: /Del/2013 dated 08.04.2016: “Furthermore, the judgments relied upon by the revenue also do not lead us to take different view of the matter The first judgment relied upon is the case of Rajesh Kumar and Ors v CIT (supra). In this case the Hon'ble Court has held in para 34 that the order of assessment can be subject matter of an appeal; and not, a direction issued u/s I42(2A) of the Act. In this appeal there is no challenge to the directions u/s 142(2A) of the Act. The challenge is that order of assessment is barred by limitation which is a valid contention supported by the judgment of Hon'ble Supreme Court in the case of Sahara India (Firm) v CIT (supra). The challenging to the validity of order u/s 142(2A) of the Act is confined to the extent that order is barred by limitation and not to the extent of refunding the fees or any other consequence flowing out of the order u/s 142(2A) o f the Act. Further observation of Hon'ble Court that principles of natural justice arc required to be complied with has also been reaffirmed in the case of Sahara India (Firm) (supra). The judgment of AT&T Communication Services India (P) Ltd. v CIT (supra) is on facts and has no application to the case of appellant company. Also the judgment in the case of DLF Ltd. v Addl. CIT (supra), has no application as hereto none of the contentions raised before us have been decided to the contrary. The learned counsel for the revenue has not been able to point out any material so as to arrive at different view of the matter.”
Consulting Engineering Services India Pvt. Limited vs ACIT (2019) 198 TTJ 0121 (Del):
“17. The quarrel before us is as to whether the assessment order framed u/s 143(3) is passed within the period of limitation period prescribed under the Act or not. In our considered opinion, for coming to such a conclusion, we can examine whether the order passed u/s 142(2A) of the Act is in accordance with law or not. It is true that the order passed u/s 142(2A) of the Act is not appealable but when an assessment order is challenged, then the different aspects,
ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 11 of 12
which are integral to the process and ultimate completion of the amount can be challenged in appeal and since the ground before us is challenged for assessment being barred by limitation, we are well within our rights to consider all material aspects which were considered while framing the assessment order u/s 143(3) of the Act.”
Further as noted in the order passed by the coordinate
bench of ITAT in Miscellaneous Application filed in the case
of Sunder Mal Satpal (supra) the Hon’ble Delhi High Court
in the case of Consulting Engineering Services Private
Limited Vs. ITAT & Another in WP(C)7734/2017 dated
2017, has categorically held that it is well within
the juri iction of the ITA T to entertain the grounds
relating to validity of reference to special audit, after
noting that the observation to the contrary by the apex
court in the case of Sahara India (supra) was specific to those cases.
The distinction therefore sought to be made by the Revenue, from the decision of the ITAT in the MA in the case of Sunder Mal Satpal (supra), we hold is of no relevance.
In view of the above since undisputedly the issue
raised before us, of the assessment order passed being
barred by limitation on account of an invalid reference made
for special audit, arises in the background of facts which are identical to that in the case of M/s Sunder Mal Satpal,
ITA Nos.696 to 698/Chd/2013 A.Ys. 2003-04 to 2005-06 Page 12 of 12
it stands covered by the decision of the ITAT in the said case, following which we hold that the reference for special audit in the present cases, u/s 142(A) of the Act, is invalid and the assessment orders so passed in the extended time are held to be barred by limitation.
In the result, all the captioned appeals of the assessee are allowed.
Order pronounced on 4 th October, 2021. संजय गग" अ"नपूणा" गु"ता (ANNAPURNA GUPTA) (SANJAY GARG) "याय"क सद"य/Judicial Member लेखा सद"य/Accountant Member "दनांक /Dated: 4th October, 2021 *रती*
आदेश क" ""त"ल"प अ"े"षत/ Copy of the order forwarded to : 1. अपीलाथ"/ The Appellant
""यथ"/ The Respondent 3. आयकर आयु"त/ CIT 4. आयकर आयु"त (अपील)/ The CIT(A)
"वभागीय ""त"न"ध, आयकर अपील"य आ"धकरण, च"डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File
आदेशानुसार/ By order, सहायक पंजीकार/