U.P.COOPERATIVE FEDERATIONLTD,LUCKNOW vs. ITO-2(3), , LUCKNOW

6. Because learned CIT(Appeals) has failed to appreciate that Appellant was prevented by sufficient and reasonable cause in not complying with the orders passed u/s 142(2A) because the maximum period permissible to the auditor to carry out special audit is 120 days under section 142(2A) proviso 2 thereto and the Appellant was dully occupied in challenging the order passed under section 142(2A) before different forums including High Court, Lucknow Bench.

7. Because the fact that the Appellant was occupied in challenging order u/s 142(2A) before High Court has been duly acknowledged by the learned ITAT who vide order dated 08.06.2006 has been pleased to dismiss penalty order levied by the Assessing Officer under section 271(b) of the Act vide order dated 08.06.2006.

8. Because the learned CIT(Appeals) has failed to appreciate that order u/s 142(2A) dated 08.03.2006 has come to an end with efflux of time and on expiry of 120 days from the date the said order was issued and the subsequent order dated 25.08.2014 passed by the Assessing Officer directing the Appellant to get its account auditee SR order u/s142(2A) and the same is therefore, required to be governed by the prevailing provisions of section 142(2A) with regard to prior approval of the PCIT and section 142(2D) proviso thereto with regard to payment of renumeration etc to the auditor by the Central Government and Rule 14B of the Income Tax Rules, 1962 that have not been followed by the Assessing Officer while passing order dated 25.08.2014.

9. The appellant further craves leave of the learned ITAT to raise by fresh ground that may arise in future.”

, at the time of hearing, the Ld. Authorized Representative (AR) for the assessee placed reliance on the written submissions. For the sake of clarity, the submissions of the assessee are reproduced as under: - Page 4 of 21 “1. On assessment order dated 28.8.2014, giving effect to order passed by this learned Tribunal date: 30.4.2008 is barred by limitation under section 153(2A) of the Income Tax Act, 1961. a. This learned Tribunal vide order dated 30.4.2008 in & 548/Luc/07 while deciding the appeal of the appellant has restored various disallowances made in the assessment order dated 9.6.2006 to the file of Assessing officer. While doing so this learned Tribunal had directed the appellant assessee to produce relevant documents /books of accounts before the assessing officer who will verify the actual state of affairs and will thereafter decide whether there is a case of making disallowances out of expenses. It therefore, implies that the learned Tribunal had set aside the assessment order dated 9.6.2006 and therefore, the limitation for passing fresh assessment order will be governed by the provisions under section 153(2A) of the Act which in this case subsisted upto 31.3.2010. b. To give effect to the order passed by this learned tribunal dated.30.4.2008 the Assessing’ officer has vide order/Notice of Demand under section 156 of the Act, dated 31.12.2008 has set-aside the earlier assessment order dated 9.6.2006 and has reduced the demand to NIL. A copy of the above order/Notice of demand dtd.31.12.2008 is annexed herewith as ANNEXURE NO. -1 c. As stated earlier, fresh assessment order should have been passed by the Assessing officer on or before 31.3.2010 as per the requirement of section 153(2A) of the Act. However, in the present case, the learned Assessing officer has passed assessment order under section 144/ 251/254 of the Act, on 25.8.2014. While passing the above assessment order the Assessing officer has relied upon the provisions of section 153(3)(ii) of the Act where no time limit is prescribed for giving effect to the appellate order whereby the matter has been restored to the file of assessing officer. d. It is an admitted fact that to give effect to this learned Tribunal’s order dtd. 30.4.2008 restoring the matter to the file of Assessing officer, the Assessing officer has set aside the original assessment order dated 9.6.2006 and has reduced the demand to NIL and thereafter a fresh assessment order has been passed on 25.8.2014. e. It is further submitted that the Assessing officer on the basis of assessment order dtd.9.6.2006 had levied penalty under section 271(1)(c)of the Act on the present appellant vide order dated 31.3.2008. In appeal, the learned Commissioner (Appeal) vide order dated 26.8.2010 while holding that the appeal has become infructuous has held that the limitation period as per the provisions of Section 153(2A) of the Act to pass assessment order in the present case had already expired on 31.3.2010. A copy of the order passed by the learned ClT9Appeal) dated 26.8.2010 is annexed herewith as ANNEXURE NO. -2

2. On deduction under section 8O0P 2 of the Act is not dependent on quantification of claim made as an addition made to the income specified under s 80P(2) create tax neutral. a. This learned Tribunal vide order dated 30.4.2008 in has allowed the claim of deduction under section 80P(2) in respect of seed section. Regarding claim under section 80 P(2)(e)

Page 5 of 21 and 80P(2)(d) the learned Tribunal has restored the matter to the file of the Assessing officer to verify the claim on the basis of facts and after necessary verification. The learned Assessing officer in assessment order dated 25.8.2014 has allowed the claim of deduction under section 80P (2) but the same has not been allowed to the extent of Gross Total Income as already held by the learned C.I.T.(Appeals)/ITAT/High Court for the assessment year 2009-10 and A.Y. 2010-11 as also followed by the Assessing officer himself in the assessment order for the A.Y.2011-12. Copy of order passed by CIT (A) for the A.Y. 2008-09 and Copy of order dated 03.02.2017 for the A.Y 2010-11 passed Hon’ble High Court ANNEXURE NO. 3 & 3A.” Additional written submissions on behalf of the assessee The present submissions are being filed by the Appellant in compliance with the directions issued by the Hon’ble Tribunal to submit brief synopsis including chronology explaining history of the case along with the compilation of the relevant documents/orders. A. Issue of limitation period for passing the assessment order dated 25.08.2014 a. It is respectfully submitted that the Hon’ble Tribunal had passed the order dated 30.04.2008 (Annexure 2) setting aside the additions made vide the assessment order therein, and directed the Ld. AO to conduct fresh assessment. b. The Appellant had filed appeal against the Order dated 30.04.2008 passed by this Hon’ble Tribunal. The Hon’ble High Court while allowing the appeal of the Appellant vide order dated 28.08.2009 (Annexure 4) has been pleased to remit the matter to this Hon’ble Tribunal to (i) examine the question of fact with regard to completion of special audit within stipulated period of 30 days/period extended by the Ld. AO and (ii) whether the Appellant has cooperated with the Auditor or not and to record a categorical finding after examining the entire evidence as per law and to pass necessary orders de-novo after admitting any additional evidence. c. In compliance of the above order passed by Hon’ble High Court the learned Tribunal vide order dated 05.01.2012 (Annexure 6) has been pleased to hold that the Assessment order was framed within time. The learned Tribunal was further pleased to hold that the assessee did not’ cooperate with the Auditor and did not file any objections against the letter dated 08.03.2006 (Annexure 1) regarding order under section 142(2A) and therefore the Assessing Officer was forced to pass assessment order under section 144 of the Act. d. The above order passed by ITAT dated 05.01.2012 (Annexure 6) was challenged by the Petitioner / Appellant in before Hon'ble High Court Lucknow and the same was dismissed by the Hon’ble Court vide order dated 18.12.2013 (Annexure 7). e. It is the submission of the Appellant that at no point in time any stay was granted by the Hon’ble High Court or Supreme Court. Therefore, the period of limitation u/s 153(2A) should start from this Hon’ble Tribunal’s Order dated 30.04.2008 (Annexure 2).

Page 6 of 21 f. To give effect to the order dated 30.04.2008, passed by this Ld. Tribunal, the Ld. AO vide notice of demand dated 31.12.2008 (Annexure 3) has admitted that the matter has been set aside and the earlier demand raised was reduced to nil. g. The Ld. AO however, passed the fresh assessment order on 25.08.2014 which is well beyond the limitation period. h. The above assessment order dated 25.08.2014 was challenged by the Appellant in appeal before Ld. CIT(A) raising specific ground of limitation u/s 153(2A). Ld. CIT(A) while dismissing the appeal has held that the assessment could not have been proceeded because of the filing of appeal by the Appellant before the Hon’ble High Court Lucknow. The submission has no legs to stand on and is outrightly liable to be rejected. It is trite law that until a stay is granted by any court or tribunal, the Assessing Officer is not discharged from rigors of limitation. Further, the contention of the Ld. CIT(A) that there was a direction for audit of accounts in its order dated 30.04.2008 (Annexure 2), therefore, the limitation is governed u/s 153(3)(ii) of the Act is erroneous and bad in law because, the Hon’ble Tribunal did not direct the Appellant to get the accounts audited but had only upheld the directions issued by the Ld. AO qua statutory audit. i. That, even otherwise, even if the contention of the Ld. CIT(A) that the present case is covered u/s 153(3){ii) of the Act is accepted it is trite law that if any provision is silent on the question of limitation, a reasonable period of limitation (of four years) would automatically be read into the said provision. In the present facts, the Respondents have cited the filing of appeal by the appellant as a reason for noncompletion of assessment, however, the Ld. CIT(A) has erred in not taking into consideration that no stay was granted by either the Hon’ble High Court or the Hon’ble Supreme Court. In the absence of any stay granted to the Appellant, the delay is unreasonable, unwarranted and arbitrary. j. That without prejudice, the Hon’ble High Court vide its order dated 28.08.2009 (Annexure 4) directed the Hon’ble Tribunal to re-adjudicate only these two issues. This Hon’ble Tribunal vide order dated 05.01.2012 (Annexure 6) re-adjudicated the two issues only upholding the action of the Ld. AO qua the audit, but did not issue any directions to conduct special audit u/s 142(2A) of the Act. Therefore, there existed no direction to conduct any special audit and the case of the assessee was covered u/s 153(2A) of Act. k. Therefore, even otherwise, if it is presumed that the period of limitation would start from the date of the order passed by this Hon’ble Tribunal dated 05.01.2012 (Annexure 6), the limitation period would come to an end on 31.03.2013, however, in the present case, the Respondents have passed the assessment order only on 25.08.2014 making the assessment illegal and beyond jurisdiction. L. Therefore, the Impugned Assessment Order is beyond the limitation period and liable to be set-aside. B. Allegation of contempt put forth by the Department for alleged non- compliance of the order of special audit u/s 142 (2A) of the Act Page 7 of 21 a. It is outrightly submitted that the stand taken by the Ld. AO qua the audit letter dated 06.01.2014 (Annexure 8) is arbitrary, perverse and illegal. b. Firstly, a fresh audit letter dated 06.01.2014 was issued by the Ld. AO in order to overcome the issue of limitation while relying on the order passed by this Hon’ble Tribunal dated 30.04.2008. c. Later, when the Appellant filed the objections dated 07.02.2014. (Annexure 9) to the audit proceedings on ground of limitation and conduct of audit professional, and also sought clarity on the fees, the objections were arbitrarily rejected by the Ld. AO holding that the audit of accounts was necessary in light of the directions of the Hon’ble High Court in its order dated 18.12.2013 (Annexure 7), however, to the contrary there was no direction in the said order to get the accounts audited but the Hon’ble Court only upheld the action of the Ld. AO in its order dated 08.03.2006 (Annexure 1) for directing the audit of the Appellant’s accounts. Therefore, clearly, the audit order dated 06.01.2014 was a fresh order. Further, taking a contrary view, the Ld. AO held that the fresh audit proceedings were only an extension of the earlier audit proceedings and the same could not be said to be fresh audit proceedings, therefore, the Appellant was liable to bear the fees of the audit. If this submission of the Ld. AO was accepted then the fresh audit proceedings became time-barred in terms of Section - 142(2C) which provides for a maximum period of 180 days for conducting audit which ended September 2006. These illegalities gave rise to the non-cooperation with the audit proceedings. d. Further on merits, it is the submission of the Appellant that an appeal was filed against the order dated 30.04.2008 (Annexure 2) passed by the Hon’ble Tribunal only on the ground of limitation and audit u/s 142(2A) of the Act. Accordingly, the Hon’ble High Court vide its order dated 28.07.2009 directed the Hon’ble Tribunal to re-adjudicate only these two issues. This Hon’ble Tribunal vide order dated 05.01.2012 (Annexure 6) re- adjudicated the two issues only upholding the action of the Ld. AO qua the audit, but did not issue any directions to conduct special audit u/s 142(2A) of the Act. Therefore, there existed no direction to conduct any special audit and the case of the assessee was covered u/s 153(2A) of Act. C. Deduction u/s 80P of the Act is not dependent on quantification of claim made as any addition made to the income would become tax neutral a. The Appellant had claimed the deduction u/s 80P(2)(a)iv), (d) and (e) of the Act, and the same was accordingly allowed to the extent of claim made. However, the impugned additions had resulted in an increase in the ‘gross total income’ of the appellant. The additions made b. It is the submission of the Appellant that the Ld. AO and CIT(A) has erred in allowing the deduction u/s 80P only to the extent of claim made in the return and not to the ‘gross total income’ of the Appellant even though it is well settled that the deduction u/s 80P is allowable to the extent of ‘gross total income’ of the Appellant after any addition has been made. Reliance is placed on the order passed in appellant’s own case for the AY(s) 1998-99, 2009-10 and 2010-11. c. It is therefore, the submission of the Appellant that any addition made/confirmed by way of the Impugned Order will become tax neutral.”

Page 8 of 21 5. The Ld. Departmental Representative (DR) for the Revenue relied on the written submissions filed on behalf of the Revenue. For the sake of clarity, the submissions of the Revenue are reproduced as under:-

“From the grounds numbered 5, 6, and 7, submitted before the Hon'ble ITAT, Lucknow Bench, for adjudication, it is evident that the assessee has deliberately avoided the Special audit for the current year, despite the directions of the Hon'ble jurisdictional High Court and the Hon'ble ITAT, Lucknow Bench. For reference, these grounds are as follows: 5. Because the learned CIT(Appeals) has failed to appreciate that the various objections raised by the Appellant with regard to the Auditor nominated under section 142(2)(a) has not being resolved both by the CIT as well as elaborating on the conduct of the auditor the Appellant submits that in the subsequent years where order u/s 142(2)(a) has been passed and a different auditor has been nominated by the CIT, the accounts have been properly audited and the same have been accepted by the Assessing Officer.

6. Because learned CIT(Appeals) has failed to appreciate that Appellant was prevented by sufficient and reasonable cause in not complying with the orders passed u/s 142(2A) because the maximum period permissible to the auditor to carry out special audit is 120 days under section 142(2A) proviso 2 thereto and the Appellant was dully occupied in challenging the order passed under section 142(2A) before different forums including High Court, Lucknow Bench." From the above, it is evident that the assessee was deliberately avoiding the special audit proceeding, which is further strengthened by the observation of A.O at para 6, and para 13 (page 4 and page 6 of AO order) in which AO has specifically mentioned that: ..........6. To comply with the above orders, there is no other option but to get the accounts audited u/s 142(2A) to decide the issues restored by the Hon'ble ITAT to the AO. (Vide letter F.No.ITO2(3)/Lko/2013-14 dated 06.01.2014 the assessee was directed to get its account audited by M/s Mridul Agarwal and Associates with reference to this office letter F.No.ITO- 2(3)/Lko./2005-06 dated 08.03.2006.) The audit report was required to be submitted within a period of 30 days from the receipt of the letter. The time of submission of audit report has been extended up to 180 days as the assessee has been non-cooperative in getting accounts audited. The assessee from time to time raised objections like time barring matter, fee of CA etc either before the higher authorities or before the Assessing Officer with a view to avoid special audit u/s 142(2A). All the issues have been decided and duly informed to the assessee at every level. As far as time barring matter is concerned, the assessee was rebutted that the instant case is covered by the provisions contained u/s 153(3)(ii), where no time limit is prescribed for giving effect to the directions of various authorities including ITAT. After elapse of 180 days, the assessee failed to produce special audit report. The appointed CA has also informed, vide his letter Page 9 of 21 dated 07-07-2014 that due to non-cooperation of the assessee, the work of Special Audit could not be done.

Prayer In view of the above facts and circumstances, discussion and submission made by the undersigned, it humbly prayed that the order of the Ld./AO may kindly be held and therefore, the appeal of the assessee may kindly be dismissed.”

7. On the other hand, as per Revenue, provisions of section 153(3)(ii) of the Act are applicable which is reproduced as under: - “153(3)(ii) The provisions of sub-section (1) and (2) shall not apply to the following classes of assessments, reassessments and re-computations which may, [subject to the provisions of sub-section (2A)] be completed at any time – (ii) where the assessment, re-assessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or 264 [or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act].”

8. The assessment order under challenge was passed on 25.08.2014. Admittedly, there is no dispute with regard to the fact that the impugned assessment order was passed subsequent to the directions of the Tribunal. It is noteworthy that Tribunal had earlier disposed of the appeal vide order dated 30.04.2008. The assessee had preferred an appeal u/s 260A of the Act, which was disposed of by the Hon’ble High Court vide judgment dated 28.08.2009. It is seen from the record that the assessee has Page 15 of 21 unsuccessfully challenged the issues relating to the appointment of the auditor as well as the question of limitation. The case of the assessee has throughout been that the Assessing Officer ought to have completed the assessment within sixty days from the date of the first appointment of the auditor. It is an undisputed fact that the assessee had challenged the appointment of auditor and question of limitation by filing Income Tax Appeal No. 7 of 2012 for A.Y. 2003-04 before the Hon’ble Jurisdictional High Court and thereafter carried the matter unsuccessfully up to the Hon’ble Supreme Court. Under these circumstances, it is apparent that the assessee had been prolonging the proceedings on one pretext or the other. It is also pertinent to note that the original assessment order was passed by the Assessing Officer as early as on 09.06.2006. The assessee preferred an appeal against the said order, which was dismissed by the Ld. CIT(A) vide order dated 07.12.2006. Aggrieved, the assessee further carried the matter before the Tribunal. Vide order dated 30.04.2008, co-ordinate Bench of ITAT observed that the assessee had not cooperated with the Assessing Officer in complying with statutory requirements, such as the production of books of account and facilitation of compulsory audit u/s 142(2A) of the Act. The Tribunal further observed that no conclusive finding could be recorded as to whether the expenses were incurred wholly and exclusively for business purposes unless the relevant material was examined by the Assessing Officer. Accordingly, the Tribunal restored the matter back to the file of the Assessing Officer with a direction to carry out the special audit as per section 142(2A) of the Act and thereafter adjudicate the issue relating to disallowance of expenses. The assessee further challenged the said order before the Hon’ble “From the record, it appears that on 08.03.2006, the AO has passed the order to get accounts audited by special auditor under section 142(2A) of the Income Tax Act. The said order was served upon the assessee on 13.3.2006. The time limit was fixed for 30 days for completing the special audit. Against the order the assessee has filed a writ petition before this Hon’ble Court which was dismissed. Subsequently SLP was filed which was also dismissed by the Hon'ble Supreme Court. Hence, the validity of the notice issued by the AO. Hence, the validity of the notice issued by the AO on 8.3.2006 attains the finality vide the said notice he has directed for the special audit. Before us, the question is as to whether the assessment made by the AO was barred by limitation or not. Section 153 of the Income Tax Act deals with time limit for completion of the assessment. As per Clause (iii) to Explanation 1of section 153, the period commencing from the date on which the AO directs the assessee to get his account audited under section 142(2A) till the last day on which assessee was required to furnish the report of such audit would be excluded for the purpose of limitation. pertaining to assessment order. In the instant case, the A.O. has directed the assessee to get his account audited by his letter - dated 8.3.2006 and the tine given, the assessee to furnish the report within. 30 days after receiving the letter. The letter was served on the assessee on 13.3.2006. Thus, special’ audit report was supposed to be furnished within 30 days. from the said date i.e. 13.3.2006. However, from the record, it is not evident that as to under what circumstances the special audit was not completed within the stipulated period of 30 days or whether the period is extended by the AO. It is also not evident as to whether the assessee has cooperated with the auditor Not. As these questions of fact has not been dealt by the Tribunal in its impugned order and as such we set aside the impugned order passed by the Tribunal and remit the matter to examine the aforesaid questions of fact and record a categorical finding after examining the entire evidence as per law and pass necessary order de novo by providing a reasonable opportunity to the assessee. The Tribunal will be at liberty, in the interest of justice, to admit the fresh evidence, if need be.”

in this appeal are dismissed.

13. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 19/12/2025.