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Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
PER SUSHMA CHOWLA, VP This bunch of cross appeals filed by the assessee as well as Revenue are against separate orders of CIT(A)-III, New Delhi, relating to assessment years 2002-03 to 2008-09 respectively against the order passed under section 153A/143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
2. This bunch of cross appeals relating to Assessment Years 2002-03 to 2008-09 were heard together and are being disposed of by this consolidated order for the sake of convenience.
3. The Ld. AR for the assessee, at the outset, pointed out that the jurisdictional issue raised in the present bunch of appeals needed to be adjudicated first. He stressed that the issue stands covered by the order of the Tribunal in the case of sister concern i.e. M/s. Soul Space Projects Ltd. in and 1849/Del/2015 along with C.O. Nos.271 & 274/Del/2015, relating to Assessment Years 2007-08 and 2008-09.
4. The assessee has raised several grounds of appeal, but the jurisdictional issue is raised by the assessee vide ground of appeal nos. 1 to 3, which read as under:- 2
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014 “1. That on the facts and circumstances of the case, the CIT(A) erred in not quashing the order dated 10.08.2010 passed by the assessing officer under section 153A as barred by limitation since the same had been passed beyond time limit specified under section 153B(1) of the Income Tax Act, 1961 (‘the Act’) inasmuch as: a) the audit conducted by the special auditor under section 142(2A) of the Act was not required because the assessing officer did not point out any complexity in the books of accounts of the appellant before issuing any such directions; and b) in any case, the extended time period allowed to the special auditor for furnishing audit report could not be excluded in terms of clause (ii) of Explanation under section 153B since such extension having been granted by the CIT, instead of the assessing officer as required under section 142(2C) of the Act was invalid in law.
2. That the CIT(A) erred on the facts and circumstances of the case in not appreciating that various disallowances/ additions made by the assessing officer (separately challenged infra) were beyond jurisdiction and scope of assessment under section 153A of the Act since the same were not based on any incriminating materials/documents found in the course of search.
3. That on the facts and circumstances of the case, the impugned assessment framed by the assessing officer is bad in law and void-ab- intio inasmuch as the requisite notice issued under section 143(2) of the Act was served on the appellant after the prescribed time period”.
In order to adjudicate the issue raised in the present bunch of appeals, we refer to the facts in relating to Assessment Year 2002-03.
Briefly in the facts of the case, the assessee had furnished the return of income on 03.10.2002. Search and seizure operation under section 132 of the Act in the case of the assessee and other group of companies was conducted on 19.02.2008. The Assessing Officer issued notice under section 153A of the Act on 24.12.2008. In response thereto, the assessee filed return of income on 20.02.2009. The case of the assessee was taken up for scrutiny and notice
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014 under section 143(2) of the Act was issued on 30.09.2009. Show-cause notice were issued by the Assessing Officer dated 27.11.2009 requisitioning the assessee as to why special audit under section 142(2A) of the Act should not be directed for Assessment Years 2002-03 to 2008-09. The assessee filed its objection to the same by letter dated 04.12.2009. The said objections raised by the assessee were rejected by the Assessing Officer vide letter dated 08.12.2009. On 09.12.2009, show-cause notice was issued by the Commissioner prior to grant of approval under section 142(2A) of the Act for Assessment Years 2002-03 to 2008-09. The assessee filed reply to the same and the Commissioner vide his order dated 15.12.2009 approved special audit for the aforesaid Assessment Years under section 142(2A) of the Act, to be completed within the period of 120 days. Directions for special audit thereafter were issued by the AO for the said assessment years vide letter dated 15.12.2009. Under the provisions of the Act i.e. section 153B of the Act, the limitation was 21 months which expired on 31.12.2009. On 25.03.2010, request was made by the special auditor for extension of time to complete the special audit under section 142(2A) of the Act on the ground of non- cooperation by the assessee. On 13.04.2010, letter was issued by the Assessing Officer intimating communication that extension of 60 days has been granted by the Commissioner vide letter dated 12.04.2010, received from the office of Commissioner. The said letter issued by the Commissioner granted approval for extension of time in the case of the assessee before us and in the case of the ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014 group concern i.e M/s Soul Space Projects Ltd. Thereafter, special Audit Report was received and assessment order was passed on 13.06.2010.
The assessee is aggrieved by the extension of 60 days for completing the special audit under section 142(2A) of the Act. The case of the assessee is that the said extension had to be granted by the Assessing Officer, but in the present case, the same had been granted by the Commissioner vide letter dated 12.04.2010 and the Assessing Officer had only communicated the same vide letter dated 13.04.2010. The case of the Revenue on the other hand is that the Assessing Officer had applied his mind for the said grant of extension of time for completing the special audit and the necessary exercise in this regard was completed by him. The Ld. AR for the assessee after taking us through the sequence of events pointed out that vide letter dated 12.04.2020, extension of 60 days was granted by the Commissioner for completing the special audit in the case of assessee and M/s Soul Space Projects Ltd. vide common letter. The Ld. AR for the assessee also pointed out that common search was conducted at the premises of the assessee and M/s Soul Space Projects Ltd. and even same Punchnama refers to both the entities. Our attention was drawn to pages 42 to 49 of the Paper book in this regard. He then drew our attention to pages 83 & 84 of the paper book i.e communication for extension of 60 days for conducting the special audit. The Ld. AR for the assessee stressed that the same Assessing Officer and same Commissioner had conducted the proceedings in the case of the assessee. He placed reliance on the order of the Tribunal in the case of M/s
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014 Soul Space Projects Ltd. (Supra) and stressed that the issue stands covered in favour of the assessee.
The Ld. DR for the Revenue fairly stated that the facts of the case are identical to the facts of the M/s Soul Space Projects Ltd. However, he placed reliance on his written submission. He further referred to paras 8 to 11 of his written submissions which read as under:-
8. While arguing in Soul Space Projects Ltd., Ld. AR relied on the following decision in support of the argument that approval from higher incompetent authority is improper:-
1. CIT v. SPL’s Siddhartha Ltd. : 345 ITR 223 (Del.) 2. Ghanshyam K. Khabrani v. ACIT : 346 ITR 443 (Bom.) 3. CIT v. Soyuz Insdustrial Resources Ltd. : [2015] 232 Taxman 414 (Del. HC) 4. Yum Restaurants Asia Pte Ltd. v. DDIT : 397 ITR 639 (Del.)
MY SUBMISSION ON THE ABOVE It is humbly submitted that all these decisions are on the subject of reopening of assessment u/s 147 and the authority who should be satisfied for on the reasons recorded by the assessing officer. Therefore, these decisions are in respect of satisfaction for initiation of reassessment proceedings. None of the decision is related for extension of time period of audit of books of accounts, where the initiatives of assessment proceedings are not challenged. Therefore, these cases are distinguishable on the facts of the case.
In all these cases, the jurisdiction was challenged on the basis of either initiation of assessment or search authorization or level of interest which is distinguishable on the facts of the case, which is only extension of time period for audit u/s 142(2A).
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014
9. While arguing in Soul Space Projects Ltd., Ld. AR relied on the following decisions on the argument that power vested in an authority by statute to be exercised strictly by such authority.
1. CIT v. Anjum M.H. Ghaswala: 252ITR 1 (SC) 2. CIT v. Elelvinator of India Ltd.: 256 ITR 1 (Del. HC) (FB) 3. Dr. Nalini Mahajan v. DIT: 252 ITR 123 (Del. HC)
MY SUBMISSION ON THE ABOVE In this regard, following submissions may be considered showing that all these case laws are distinguishable on facts. a) Anjuman M.H. Ghaswala:- This case related to Power of Settlement Commission Vs. CBDT for waiver of interest u/s 234A, 234B & 234C of IT Act. b) Kelvinator of India Ltd:- Issue of change of opinion for the reason to believe escapement of income. c) Dr. Nalini Mahajan:- These issue was exercising power to issue authorization u/s 132 by Additional Direction.
In all these cases, the jurisdiction was challenged on the basis of either initiation of assessment or search authorization or level of interest which is distinguishable on the facts of the case, which is only extension of time period for audit u/s 142(2A).
10. Ld. AR argued that exercise of statutory power of an authority at the discretion of another authority vitiates the proceedings.
The Purtabpore Co. Ltd. v. Cane Commissioner of Bihar and others: 1969(1) 2. Commissioner of Police, Bombay v. Gordhandas Bhanji: AIR 1952 SC 16 3. Anirudhsinji Karansinhji Jadeja and Another v. State of Gujarat: (1995)5 SCC 302 4. State of U.P. & others v. Maharaja Dharamander Prasad Singh & others: (1989)2 SCC 505
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014
MY SUBMISSION ON THE ABOVE In this regard, following submissions may be considered showing that all these case laws are distinguishable on facts. a) The Purtabpore Co. Ltd. (Cited Supra) -- The issue was for quasi judicial power of commission v. Chief Minister. The facts in present case are entirely different. b) Gordhandas Bhauii (Cited Supra) -- The issue was the power of commission vis-a vis the interference of the government. These facts are clearly distinguished in the present case. c) Anirudh Sinhji Jadeja (Cited Supra) -- The issue was the power of DSP for prior approval for recording information about commission of offence u/s Terrorist & Disruptive Activities (Prevention) Act, 1987. The facts are clearly distinguishable. d) Maharaja Dharamander Prasad Singh & Others. -- The issue was related to permission for development of land by private part under U.P. Urban Planning Development Act, 1973. These facts are not applicable in the present case.
11. OVERALL SUMMARY OF MY SUBMISSIONS:
(i) Based upon the written submissions made above, it may kindly be seen that the statute provided the only condition to be satisfied for extending the time, is the satisfaction the Assessing Officer .
(ii) The assessing officer in present case has applied his mind and found the case suitable for extension as can be seen from the letter of the assessing officer dated 11.02.2020. Therefore, conditions for extending the time period under the above proviso is met expect the grant of extension by CIT for administrative reason on account of special audit pending in other group cases.
(iii) Therefore, it is submitted that since on substantial basis the requirement of proviso has been met, just on account of 8
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014 only administrative approval of CIT for sectioning the extension should not vitiate the extension of time for special audit.
(iv) Without prejudice to above submission it may be mentioned that CIT is the approving authority for special audit u/s 142(2A) and therefore his involvement for extension of time as per proviso is inherent.”
We have heard the rival contention and perused the records. The issue which is raised in the present bunch of appeals relating to Assessment Years 2002-03 to 2008-09, where the cross appeals are filed by the assessee and the Revenue, is against the grant of extension for further period for conduct of special audit under section 142(2A) of the Act by the Commissioner and whether the same is legally valid or not. The sequence of the events is tabulated here under:-
Date Particulars 03.10.2002 Return of income for assessment year 2002-03 filed under section 139(1) of the Act. 19.02.2008 Search and seizure operation under section 132 of the Act in the case of the appellant and other group companies. 24.12.2008 Notice under section 153A of the Act issued by the assessing officer for assessment year 2002-03 20.02.2009 Assessee filed return of income pursuant to aforesaid notice 30.09.2009 Notice under section 143(2) of the Act issued by the assessing officer 07.10.2009 Notice under section 143(2) of the Act served on the assessee (barred by limitation) 27.11.2009 Show-cause notice issued by the assessing officer requiring explanation why special audit under section 142(2A) of the Act should not be directed for assessment years 2002-03 to 2008-09 04.12.2009 Objections/reply to aforesaid show-cause notice filed before the assessing officer 08.12.2009 Letter by assessing officer rejecting the objections raised by the assessee for assessment years 2002- 03 to 2008-09 09.12.2009 Show-cause notice issued by CIT prior to grant of 9
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014 approval under section 142(2A) of the Act for assessment years 2002-03 to 2008- 09 14.12.2009 Reply to aforesaid show-cause notice filed by the assessee before the CIT 15.12.2009 CIT approved special audit for assessment years 2002-03 to 2008- 09 under section 142(2A) of the Act to be completed within a period of 120 days 15.12.2009 Direction for special audit by the assessing officer for assessment years 2002-03 to 2008-09 to be completed within 120 days. 31.12.2009 Normal limitation period of 21 months under section 153B of the Act for completion of assessment 25.03.2010 Request by special auditor for extension of time on the ground of alleged lack of cooperation by the assessee 13.04.2010 Letter issued by the assessing officer intimating/ communicating that extension of 60 days has granted by CIT vide letter dated 12.04.2010 received from the office of the CIT.
Most importantly, letter dated 12.04.2010 [page 84] clearly states that approval for extension has been considered and granted by the CIT in the following cases: 1. B.L. Kashyap & Sons (appellant) 2. Soul Space Projects Ltd. (group company)
Pertinently, extension granted by the CIT instead of ‘assessing officer’ (appropriate authority) invalid in terms of proviso to section 142(2C) of the Act.
Fact that extension was granted by the CIT is patently clear from letter dated 12.04.2020, letter dated 13.04.2020 and is 83-84 3 Date Particulars Page No. (PB) also expressly mentioned by the assessing officer on page 2 of the assessment order. 14.04.2010 120th day - the last day on which the Special Auditor was required to complete special audit. 11.06.2010 Special audit report filed before the assessing officer 13.06.2010 Limitation for passing assessment order, after excluding 120 days granted for completion of special audit (without considering extension granted on 13.04.2010) 10.08.2010 Assessment order passed under section 153A/143(3) of the Act
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014
The issue which arises in the present appeal before us is whether where the extension for conduct of special audit had not been given by the Assessing Officer, who was the only authority to grant the same is the extension granted by the Commissioner is nullity in the eyes of law? The relevant proviso below section 142(2C) of the Act reads as under:-
Provided that the [Assessing] Officer may, [suo motu, or] on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under sub-section (2A) is received by the assessee,
Similar issue arose before the Tribunal in the case of M/s Soul Space Projects Ltd. (supra) and after referring to the arguments of the Ld. CIT-DR which are reproduced in para 11 at pages 10 to 14 of the order, vide para-12, reference was made to the information received from Assessing Officer during proceedings before Tribunal and the arguments with regard to grant of permission in connection with extension of the period for audit was reproduced and it reads as under:-
“12. The information received by the revenue during the arguments with regard to the granting of permission in connection with the extension of the period for audit is as under: OFFICE OF THE ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-15, NEW DELHI Room No. 245, ARA Centre, E-2, Jhandewalan Extn., New Delhi - 110055.
F. No. ACIT/CC-15/2019-20/1605 Dated: 11.02.2020 To The Commissioner of Income Tax(DR), G-Bench, ITAT, 7th Floor, Lok Nayak Bhawan, Khan Market, New Delhi. 11
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014 Sir, Subject: Second appeal in the case of ACIT Vs Soul Space Projects Ltd., for A.Y.2007-08, 1849/Del/2015 for A.Y.2008-09 and 4352/Del/2015 for A.Y. 2009-10 - matter reg. Ref: F.No. CIT/DR/ITAT/G-Bench/2019-20/195 dated 27.01.2020. Kindly refer to the above noted subject.
On perusal of assessment and special audit records in the case of Soul Space Projects Ltd, it is found that M/s Dinesh Mehta & Co., Special Auditor appointed in the case of Soul Space Projects Ltd., has filed an application on 08.04.2010 related to extension of time for furnishing the special audit report. Accordingly, the then AO has forwarded a letter to Ld. CIT, Central - II, New Delhi on 08.04.2010 regarding extension of special audit in this case and stated as under:- "2. M/s Dinesh Mehta & Co. has filed a request vide letter dated 25.03.2010 for granting extension of time for a further period of two months for submission of the aforesaid report because there is delay on the part of assessee to furnish details and information required by the auditors as per annexure appended by the auditors with the aforesaid letter (Copy of letter with enclosures is enclosed for ready reference).
3. In this connection, it is also informed that the auditors M/s Sanjay Satpal & Associates appointed for special audit in the case of the flagship company for the group i.e. M/s B .L. Kashyap & Sons Ltd. has also requested for extension of time for further 2 months for the similar reasons. The application filed by M/s Sanjay Satpal & Associates has already been forwarded to your good self on 07.04.2010 for favourable consideration. Since, M/s Soul Space Projects Ltd. has large numbers of intergroup transactions with M/s B. L. Kashyap & Sons Ltd., it is necessary that both the auditors should work in close cooperation with each other and should exchange one other's finding before reaching any conclusion. Hence, it is recommended that the extension of time may also be granted to M/s Dinesh Mehta & Co. if extension of time is granted by your good self to M/s Sanjay Satpal & Associates."
Further, the Ld.CIT, Central-11, New Delhi, vide letter No.CIT/(C)- ll/10- 11/24 dated 12.04.2010 has conveyed the extension of 60 days for the purpose of furnishing the audit report and directed ‘‘No further extension will be allowed and the auditors may be asked to adhere to the extended time limit for the purpose”. Accordingly, the assessing officer vide letter F.No.DCIT-CC-17/Special Audit/2010-11/40 dated 13.04.2010 has informed that the extension of further 60 days granted to the Special Auditors M/s Dinesh Mehta & Co., Chartered Accountants, for furnishing the audit report u/s 142(2A) in the case and also requested to the assessee to provide the requisite information
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014 immediately under information to the undersigned so the special audit may be completed in a smooth manner.
On perusal of relevant records, it is ascertained that the Assessing Officer has applied his mind in the letter dated 08.04.2010 therein he has given the reasons for extension for furnish the special audit report. Consequently, the Ld.CIT has considered the facts (application of mind of AO) and directed to the AO to convey the extension of 60 days for the purpose of furnishing the special audit u/s 142(2A). Therefore, it is clear that the extension of period u/s 142(2C) was granted by the AO after applying his mind, not by the Ld. CIT, Central-ll and the Ld. CIT, Central-ll has only directed to the AO to convey the extension of period to the Special Auditors. The above referred letters are also enclosed herewith for ready reference.”
Further, reference was made to the letter of the DCIT, dated 13.04.2010 and the same was reproduced under para 13 and it reads as under:-
“13. The order of the DCIT, Central Circle-17, which is an important document to determine whether the provisions of Section 142(2C) are followed or not. F.No. DCIT-CC-17/Special Audit/2010-11/40
Office of the Deputy Commissioner of Income Tax Central Circle -17, Room No. 353, ARA Centre, Jhandewalan Extension, New Delhi Phone No. 23593441 Date: 13/04/2010 To, The Principal Officer, M/s Soul Space Projects Ltd. A-21/B-1 Extn., Mohan Co-operative Industrial Area, Mathura Road, New Delhi
Sub: In the matter of M/s Soul Space Projects Ltd. - Assessment Year 2006-07 to 2008-09 - Special Audit under section 142(2A) of the Income Tax Act, 1961... regarding Sir, Please refer to the above. In this connection you are hereby informed that the Commissioner of Income Tax (Central) - II, New Delhi vide his office letter F.No. CIT/(C)- 11/10-11/24 dated 12/04/2010 has granted extension of 60 days to 13
ITA Nos. 4897 to 4903/Del/2014 to 5546/Del/2014