PROVIDENT INV. & INDUSTRIES (P) LTD.,NEW DELHI vs. ITO, NEW DELHI

Provident Inv & Industries Private Limited V ITO ITA No 1003/Del/2015 A Y 2008-09

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 1003/Del/2015 (Assessment Year: 2008-09) Provident Inv & Industries P Ltd, Vs. ITO, Ward-14(2), 4th Floor, ITO, A-49, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi CR Building, New Delhi PAN:AABCJ4816P (Appellant) (Respondent)

Assessee by : Sh. Venugopal Nair, CA Revenue by: Sh. FR Meena, Sr. DR Date of Hearing 11/04/2017 Date of pronouncement 17/05/2017 O R D E R PER PRASHANT MAHARISHI, A. M.

Provident Inv & Industries Private Limited V ITO ITA No 1003/Del/2015 A Y 2008-09

Provident Inv & Industries Private Limited V ITO ITA No 1003/Del/2015 A Y 2008-09

was sent to the assessee. Meanwhile, prosecution proceedings were also launched against the assessee. 5. Meanwhile, assessee, on 6.4.2011, approached Hon'ble Delhi High Court challenging the order of the ld Assessing Officer u/s 142(2A) of the Act. The Hon'ble High Court on 08.04.2011 dismissed the petition of the assessee holding that the intention and purpose behind filing that petition was to delay and stall the proceedings. 6. Subsequently, on 27.06.2011 audit report was submitted on various terms of references. As the assessee did not submit details with respect to its contention the ld Assessing Officer passed order u/s 144 of the Act on 26th August 2011 determining assessed income of the assessee at Rs. 2118156814/- against the returned loss of Rs. 129603/-. The Assessee aggrieved by the order-preferred appeal before the ld CIT (A), challenging the order on limitation as well as on merits. The ld CIT (A) dismissed the appeal of the assessee on both the counts and therefore, assessee is in appeal before us. 7. The ld AR on the first ground of appeal of limitation submitted as under:- „ “The impugned order is barred by limitation:-  Normal date for completion of assessment: 31 -12-2010- For A Y 2008-09  AO gave direction U/S 142(2A) on 28-12-2010 which arrested period of limitation. It will restart only at the expiry of the last day on which report is to be furnished.  As maximum of 180 days had been given , last day on which the report was required to be furnished is 25-6-2011 or 26-6-2011 depending upon whether 28-10-2010, date of receipt of direction is to be included or not by invoking Sec 9 of General clauses Act  Question, whether date of receipt of direction is to be included in determining 180 days and Section 9 of General Clauses Act is applicable has been addressed in Dhariwal Enterprises vs ITO-20 ITD 478 Page 61 to 63 of P Book -II Holding that "both the days are to be included and Sec 9 of general Clauses Act is not applicable"  Thus Limitation restarted on 25-6-2011 and not on 27-6-2011 when the report was furnished., For exclusion for limitation the date on which report was actually furnished is totally inconsequential as per decisions in CIT vs Ulike Promoters P Ltd - Delhi H C Page 1-16 - Paper Book II DCIT 4(1) Vs M/s Jindal Dyechem Industries P Ltd- ITAT Del-Page 38-58 - PB -II CIT VS Dhariwal Sales - MP High Court - Page 59-60 - Paper Book -II

Provident Inv & Industries Private Limited V ITO ITA No 1003/Del/2015 A Y 2008-09

 Allahabad HC has held in CIT vs Drs Xray and Pathology Institute P Ltd-Pg 34-37 of Paper Book-ll the moment the event arresting Limitation is vacated , limitation restarts  Question whether general Clauses Act itself is applicable for income tax proceedings, is addressed in Agricultural Produce Mkt vs CIT Civil Appeal of 2008 arising out SLP(C)No6761 DCIT vs Ramchandra Dashrath Hande & co- ITAT Mum Pg 35-41 of Paper book Holding "when specific provisions exist in an act, General Clauses Act is not applicable  Stand that the last day which AO possibly could have allowed the assesee to furnish the report-The 180 th day being a holiday, report could be furnished only the next working day, and as a consequence, limitation restarted only on the day on which assesee could possibly have submitted the report, is not supported by decision of Hon Delhi HC in Uttam Suchrotech International Ltd Vs UOI & Ors - Page 17-33 of P B -II -Holding, days on which courts were closed could not be added for exclusion for limitation though assessee could have furnished the report only on the next working day, even in cases where invoking section 10 of general clauses Act, or Limitation Act is permissible.  Honorable ITAT Chennai K Eswarappa vs DCIT- holds AO gets total of 240 days for framing the assessment from the date of direction.  Hence in the present case the 240 days from 28-12-2010, the date of direction expired on 24-8-2011 and not on 26-8-2011  Assessment order of 26 Aug is passed on 242nd day from 28 Dec  No court ever stayed the special audit or assessment proceedings. Mere approaching the court is not tantamount to granting of stay or injunction by court to qualify for exclusion y By invoking Sec 153(3) Explanation 1(ii)  Hence no exclusion for the non-existent stay/injunction is available for exclusion as AO in remand report is claiming.  Without Prejudice, act of filing a complaint for prosecuting the assesee for not carrying out audit U/S 142 (2A) on June 10, 2011 is tantamount to the AO being convinced that audit report will not be furnished. Hence he must avail 60 days from June 10 MP HC in CIT VS Dhariwal Sales Enterprises 221 ITR 240- Page 60 of Paper Book -II. In that event the assessment order should have been framed on 9Th August 2011.”

Provident Inv & Industries Private Limited V ITO ITA No 1003/Del/2015 A Y 2008-09

“4. The AR of the appellant submitted as under; "On behalf of M/s Provident Investment & Industries P Ltd we address you and request to adjudicate Grounds 3 & 5 to determine the question of limitation as Supreme Court in UOI & Another with British India Corporation And Others [(2004) 268 ITR 481 (SC) holds "Question of limitation is a mandate to the forum and irrespective of the fact whether it was raised or not, the forum must consider and apply if there is no dispute to the facts. a) Audit U/s 142(2A) not ordered as per Board Circular in this respect-Ground 3 b) Assessment framed beyond the period of Limitation after permitted exclusions-Ground 5 Survival of assessment boils down to the following 5 vital questions 1 For ordering audit U/s 142(2A) is the AO not bound by CBDT Circular 1076? As per this circular, regarding companies, only those cases to be referred for special audit where: (i) There are reports of misfeasance, gross neglect or breach of duty on the part of the principal officer or director in relation of the affairs of the company, or (ii) The company's affairs have been the subject of a search or seizure under the IT Act or been the subject of a probe under the Foreign Exchange Regulations Act, or (iii) The company has foreign collboration arrangements, or (iv) Where the company's principal is a foreign company and deduction of head office expenses, etc., have been claimed, or (v) Where the company has import/export business with a yearly turnover w more crore of rupees, or (vi) Where there are allegations of substantial tax evasion, or (vii) Where the ITO has any other information necessitating special audit The Order sheet in Page 1-10 of Paper book will show that there is no mention of any of the above parameters necessitating special audit. Based on a plethora of cases we contended that board instructions are binding on the department. The direction for audit being not as per the instructions, direction itself is invalid. Consequently there should be no exclusion of any period and the corresponding extention of time for assessment as provided by Section 153 of the Income Tax Act. Decision in Freezeking Industries P Ltdvs ACIT - 62 ITD 1 Delhi (Enclosed ) stresses the need for AO to follow these guidelines before audit U/s 142(2A) is directed.

Provident Inv & Industries Private Limited V ITO ITA No 1003/Del/2015 A Y 2008-09

Without Prejudice to the above 2 of the 5 balance questions to be addressed are- (Ground 5) 2. Whether AO has the power to allow to the assessee even a single day beyond what is in proviso to Section 142(2C) which expressly provides " The period or periods ... shall not in any case exceed one hundred eighty days to furnish the report. 3 Can Sec 10 of General clauses bve-pass the term "Not in any case" in the proviso and authorize AO and allow assessee to furnish the report after the expiry of the initial 180 days?

We contend that contrary to AO's stand, General Clauses Act is not applicable to Income Tax proceedings. For this we had enclosed the decision of DCIT vs Ramchandra Dashrath Hande & Co (2O10) 36 DTR(Mum) , Since decision of non jurisd ctional Tribunal may perhaps not be acceptable to you, we rely on decision of .Jurisdictional Delhi High court who held Sec 3(31) of General Clauses Act would not apply due to presence of specific provisions in income tax Act. This should apply muatis mutandi to us. Also it was held that while interpreting a taxing statute, one has simply to look to what is clearly stated therein. Relevant part of the order is: "Any determination of the question by reference to Section 3(31) of the General Clauses Act, 1897 would, therefore, no longer hold the key to the correct understanding or interpretation of the expression as it now has to be understood or interpreted in the light of the amended provision. Reliance upon the provisions of the General Clauses Act, 1897 would, in fact, be permissible only in cases where the enactment in which the expression occurs does not itself provide for a definition or meaning to be given to the same. It is possible that expression which is defined under the General Clauses Act, 1897 iSf a t the same time, a I so give n a me a n in q or definition under a special enactment which meaning may be different fro m the one given in the former A ct '.. The decision of this Court in the previous round of litigation does not, therefore, provide a complete answer to the question that arises for the year under consideration in the present appeal. We say so for two distinct reasons. Firstly because the expression municipal committee appears in a taxing statue and must, therefore, be construed strictly. It is fairly well-settled by a long line of decisions rendered by the Supreme Court that while interpreting a taxing statute, one has simply to look to what is clearly stated therein. There is, in fiscal statutes, no room for any intendment nor is there any equity about the levy sanctioned under the same. The following passage from Cape Brandy 6

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Syndicate Versus IRC, 1921 (1 ) KB 64 has been approved bv the Aoex Court in the decisions rendered by their Lordships...... in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can omy look fairly at the language used." We also enclose decisions of Bombay High Court and ITAT Delhi where ratio of Cape Brandy Syndicate Versus IRC. 1921 (1) KB 64 has been reiterated Again we contend that it is well settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. The language employed in a statute is a determinative factor of the legislative intent. If the language of the enactment is clear and unambiguous, it would not be proper for the Courts to add any words thereto and evolve some legislative intent, not found in the statute. Reference in this regard may be made to the decision in Ansal properties and Industries limited versus State of Haryana (2009 (3) SCC 553). "Further, it is also a well established principle of statutory interpretation that the legislature is specially precise and careful in its choice of language. Thus, if a statutory provision is enacted by the legislature, which prescribes a condition at one place but not at provision, the only reasonable interpretation which can be resorted to by the courts is that such is that was the intention of the legislature and that the provision was concisely enacted in that by incorporating the condition at one place in the provision the legislature also intended the condition to be applied at some other place in that provision." Also In B. Premanand and others vs Mohan Koilkal and others reported in (2011) 4 SCC, 266, the Supreme Court, inter alia, held as under:- "It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the mischief rule, purposive interpretation, etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible result or if read literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule. In Prakash Nath Khanna vs. CIT it has been held tiiat "The language employed in a statute is the determinative factor of the legislative intent. The legislature is presumed to have made no mistake. The presumption is that it intended to say what it has said. Assuming there is a defect or an omission in the words used by the legislature, the court cannot correct or make up the deficiency, vide Delhi Financial Corp. vs. Rajiv Anand. Where the legislative intent is clear from the language, 7

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the Court should give effect to it, vide Govt. of A.P, v. Road Rollers Owners Welfare Assn, and the Court should not seek to amend the law in the garb of interpretation." Thus, we contend that Income Tax Act does not empower the AO to grant more than ISO days due to use of "Not in any case exceed one hundred days"in proviso to Section 142(2C). This indicate the strictness with which the period of 180 days has to be adhered to while determining the last day on which assessee is required to furnish the report. Hence it is not for the AO to add intent to this provision by taking shelter under Section 10 of General Clauses Act and say Assesee is required to submit on the next working day even beyond the initial 180 days. We rebute AO'S contention that General Clauses Act is applicable as Board Circular permitted filing return of income on the next working day when the last day was a holiday, by drawing your attention to the relevant sections in income tax where the strict term " In any case" is conspicuous by its absence. - Even there the assessee had not been granted the benefit of section 10 of genera! clauses Act automatically. The Board has to issue a circular for giving this benefit. There is no circular for furnishing of audit report U/s 142(2A) availing benefit of Section 10 of General Clauses Act simply because even the Board has no power to allow furnishing of report the following day due to the Strict term " In Any Case" in the proviso to 142(2C), We humbly state that no one can, without the authority of board circular, or Judicial pronouncement, can circumvent a clear provision of Income Tax Act by taking shelter under General Clauses Act. We also draw your attention to the contention of AO given in his remand report that for computing 180 days the first day on which assessee received the order should be excluded. For rebutting these we take the aid of the various decisions referred to above showing that there has been case where court has held General Clauses Act does not apply where there is specific provision in income tax . We also draw your attention to DCIT vs Ramchandra Dash rath Hande & Co (Supra) where it has been clearly held so. Again since the words used in proviso to 142(2C) specifically provides "Period Commencing from" this 180 days will certainly include the first day - i.e 28 th Dec 2010 - being day on which the order was received by assessee as the beginning of the period on which Assesee received the order and ending on the last day on which he was required to furnish. Looked in this perspective the last day required for furnishing the report was 25 June 25,2011 and the last day for framing of assessment was 24 Aug 2011 and not June 25,2011 which was again conveniently considered as June 26/2011 by the AO invoking erroneously the General Clauses Act and then availed the extended limitation of 60 days by availing Sec 153 Now we draw your attention to the order of Special Audit whejp the AO auditor and not the assesse to furnish the report within 90 days from 8

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direction u/s 142(2A) is received by the assessee. We object to this order* the AO can direct the assessee to get the accounts audited and furnish not provide for directing the auditor to furnish a report. Since the direction furnish the report to the AO is not equivalent to the order to the assesse and report furnished, there is no order of special audit m place for exclusions and further extent/on provided by Section 153 and thus the order framed on August 25 is barred by Limitation. Without prejudice to the stand that assessment framed subsequent to Dec 31,2010 sans a valid order u/s 142(2A) to the assessee, is barred by limitation we , relying on CIT vs Ekbal and co (1945) 13 ITR 154 (Bom) & M Srinivasalu v UOI & Ors contend that the aggregate number of days that the auditor has been to furnish the report is 179 days as initially it was within 90 days and further extended by another 90 days. Thus the audit report was to be furnished on 179 th day from Dec 28,2010 -I.e June 24,2011 and availing further 60 days the assessment is to be framed by August 23,2011 and thus the order August 25 is barred by limitation Without prejudice to our stand inter alia, that last day for furnishing the report was June 23,2011 , not a holiday , the next question that needs to be addressed is 4. Does the benefit of Section 10 of General Clauses Act , if at all allowed to be given to the assessee, and consequently the report is furnished after the thresh hold of 180 days , alter the last date on which he was required to furnish originally to the next day. Is "Permitted/Allowed "synonymous to " Required to"? We contend that even where the AO has been large hearted to allow the assessee liberty to furnish the report on next working day beyond the 180 th day by overlooking the provisions of Income Tax Act, it is only a concession and not a right for the assessee to claim to be entitled to. Terms "Allowed/Permitted" to certainly are not synonymous to the term Required to. Last date on which assessee is required to furnish the report, remains the 180 th day regardless of holiday. Without Prejudice to our stand, inter alia, that last day for furnishing the report was June 23, 2011, not a holiday, yet another important question that would determine whether the order survives or not due to it being framed within or after the period of limitation is 5 For excluding the days for computation of Limitation for framing the assessment as provided by Sec 153 of Income Tax Act- Uoto what day the exclusion be made - The 180 th day which is a Holiday or to the__next_succeedjng_ day on which assessee fjf at alt permitted is to furnish, bv im/oking of Section 1Q of General Clauses Act? We believe that the issue up-to what day the exclusion is to be made for computing Limitation has been addressed by Jurisdictional Delhi High Court in M/s Uttam Sucrotech International P Ltd vs Union of 9

Provident Inv & Industries Private Limited V ITO ITA No 1003/Del/2015 A Y 2008-09

India & ANR holding that "if the period of the last day ..... comes in the midst of a vacation or a holiday, the said period would not osi_e_xclude_d but is extended by applicability of Section 4 of the Limitation Act or Section 10 of the General Clauses Act. The proposition due to limitation period expiring on a Saturday the petitioner became entitled to benefit Q_t_th_ejholid.ays and only thereafter limitation_wpuld commence runs counter to principles laid down by the court. Here the Honorable court had allowed presentation of appeal on the next working day when the last day was a holiday due to absence of the strict term " Not in any case" in the relevant sections dealing with appeal. Still, for the purpose of exclusion required for computing the additional 30 days determining the limitation for arriving at the last day the court did not allow the benefit of holidays, before commencing the period of limitation. This should eradicate all the doubts, once and for all, as to the last day up-to which exclusion be made for limitation after asesse:? has carried out the act. In any ca.se the AC, for framing assessment is not dependent upon the receipt of audit report. His laments of his helplessness in commencing framing of assessment from the 180th day- a holiday, due to inability of the assessee to furnish the report on a holiday and hence his submitting on the following working day, should be of no avail. For this we again drew your attention to Section 142(2C) as per which the Last date on which "required to furnish the report and not the day on which is report was furnished" as was before amendmend. For our contention that for the purpose of limitation u/s 153 the day on which assessee submitted/Could Submit the report is not relevant, we relied upon a) CIT vs ULIKE PROMOTERS PVT L TD to) E.Amul Prakash & Ors vs DCIT - c) IT AT in Dhriwal Sales Enterprises(Supra) We in our earlier submissions have demonstrated that these decisions have laid down that irrespective of when or whether assesses furnished audit report U/s 142(2A), the limitation for AO commences from the Day required to Furnish. No further exclusion for any stay or injunction is permitted as there was never any stay by injunction. From reading in conjunction & not in isolation of the relevant sections of Income Tax Act, with ratio laid down by Supreme court , by Jurisdictional High Court and by other courts, against which there are no contradictory decisions , it emerges that the last day required for furnishing the audit report was either 24 June 2011 or 25 th June 2011, but certainly not 26 th June 2011-Not that it makes any difference for computation of limitation, Only if it is held to be 27th June 2011 it will matter. We summarize the emerging situation as under: a) Proviso to Sec 142(2C) stipulates-AO cannot in any case grant more than 180 days. b) Delhi High Court in Agricultural Produce Market Committee(Supra)-,Reliance upon provisions of General Clauses Act would be permissible only in case income Tax Act does not provide a 10

Provident Inv & Industries Private Limited V ITO ITA No 1003/Del/2015 A Y 2008-09

meaning to an expression . Thus, when Income Tax Act lays down that in No case AO can give more than 180 days, no clarification is required from General Clauses Act as meaning of In no Case is very clear. This decision and another of ITAT Delhi & yet another of Bombay High Court reiterates the ratio of Rowlett 3 in Cape Brady Syndicate VS IRC(Supra) Again observations of the Honorable Supreme Court in Ansal Properties and Industries(Supra) and B Premanand and Others(Supra) and in Prakash Nath Khanna Vs CIT should eradicate any doubt of the compulsion to literally interpret the statute (Literal interpretation of the term "In No Case" in 142(2C)). These authorities makes it abundantly dear that the day the report is required to furnish is at the end of the period given by the AO. AO can give less than 180 days but in no case more than 180 days. Here the AO directed the furnishing of report with in 180 days. As per ratio of Bombay High Court in Ekbal & co (Supra) and Karnataka High Court in M . Srinivasalu ( Supta), the assessee gets 179 dear days which expires on 24 th June 2011.- Even without any contradictory decisions from any other court ,If your good-self do not accept the principle, then the last day for report to be furnished is on 25 th June 2011. c) As per Income Tax Act- Exclusion contemplated where audit u/s 142(2A )was ordered is, the period commencing from the day AO directed the audit- on Dec 28,2010 and ending with the last day on which assessee was required to furnish the report- 24th or 25tn June. AO's justification for exclusion til! 27 th june by resorting to genera! clauses Act ( Which has been shown to be not as per law in (b) above) amount to computation of limitation from the day on which assessee furnished the report - Violation of the provisions of Income Tax Act post amendment on 01-04-1997 and ratio of Delhi High Court in Ulike Promoters (Supra),E.Amul Prakash (Supra) and Dhariwal Sales En terprises(Supra) d) Delhi High Court in Uttam Sucrotech International P Ltd(Supra) - Even where General Clauses Act was applicable , stand that limitation commences after excluding day/days on which the court was closed runs counter principles laid down by the court. Without prejudice to tnese we contended that as per decision in Dhariwal Sales Enterprises(Supra), con firmed by M P High Court the assessment order should have been framed by availing 60 days from June 10,2011 when the AO filed complaint with the Add! Chief Metropolitan Magistrate alleging Special Audit is not carried out. Filing of Complaints indicated the satisfaction of AO that no report is likely to be furnished The commencement of period of limitation, thus, has no relation whatsoever with the furnishing of report and it must commence immediately after mandatory days allowed to be excluded strictly as per provided in Income Tax Act are thus excluded. As per MP H/gh Court in CIT vs Dhariwal Sales Enterprises "Provisions of the Income-tax Act have to be construed specifically. Being nealiaent on the part of the authorities cannot be countenanced for construing the provisions of limitation." 11

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The AO resulted in the assessment framed after period of Limitation. He cove excuses like: A) Director of assessee asking for copy of order on Feb 9,2011- b) The Assesee's approaching the court - Same as obtaining stay of order of c) Sec 10 of The General Clauses Act sans direct Board Circular/Judicial pronouncements overrides the strict provisions in proviso to Sec 142(2C) -Empowers him to allow furnishing the report even beyond the upper limit of 180 days - He can avail 60 days for assessment from the day assessee was allowed to furnish the report and not from the day assessee was required to furnish the report. We have already made submissions to show how the issues which the AO claimed are the basis for his adhoc additions suffer from many defects and hence pleaded or deletion of the adhoc additions based on the pillars which themselves are shaky. We also showed how addition U/s 68 is not warranted as the assessment records would show that the alleged credit is only due to a journal or book entry without any inflow of funds. We pointed out that bank statements having been held not to be books of accounts, AO perceiving credit in bank statements is not strict compliance of conditions precedent for invoking Sec 68. We relied on decision of jurisdictional Delhi High Court to contend that we identified the parties and gave their address & PAN. Hence AO is to make further enquiries and not make addition straightaway. Lastly we demonstrated how the inability of AO & special auditor in understanding the transactions led to adhoc addition of Rs 1.50 crores on share purchases and how there are contradicting statements in audit report. Trust we have made out a case for quashing the assessment as the order framed is clearly barred by limitation. Trust we have made a case for deletion of additions on merits as well." Findings: 5. The matter was referred to the AO for a report. The AO sent a report as under'. "The special audit report furnished on 27.06.2011 and assessment order passed on 26.08.2011 is within the time limit as per the provision of section 142(2C) read with section 153 of the I. T. Act, 1961. In this connection, I would like to draw your kind attention to the following: 1.1. Section 142(2C) of the I. T. Act, 1961 which deals with the time limit for furnishing of special audit report reads as under "Every report under sub-section (2A) shall be furnished by the assessee to the AO within such period as may be specified by the AO: Provided that the AO may, 5suo 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 12

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hundred and eighty days from the date on which the direction under sub-section (2A) is received by the assessee." From the perusal of the above section it may be observed that time limit for completion of audit is 180 days from the date on which order for direction of special audit is received by the assessee. In this connection, it is important to draw your kind attention to letter F. No. ITOA/Vard-14(2)/Special audit u/s 142(2A)/2010-11/607 dated 14.02.2011 (copy enclosed) relevant extract of which is reproduced below: "In the above context, it is iO inform you that on being request made from the assessee, the desired inspection of record has been conducted/completed on 09.02.2011 by M/s Nisha Gupta (Director of the company) herself in the present of Shri Ramesh Shah CA (AR) of the assessee} and Shri Ransh Mehto (Business Manager-Employee in the company). The desired certified copy of the order-sheet has been give to Ms. Nisha Gupta, Director of the company. During the inspection of record, it was also claimed by Ms. Nisha Gupta, Director of the assessee company that we do not have the order u/s 142(2A) dated 28,12.2010. Considering the request of the Director of the company, the certified copy of the said order has been provided. You are therefore, requested to please co-operate with the assessee and complete the audit within stipulated period." From the perusal of the tetter which is part of the record it may be observed own submission the order dated 28.12.2010 for direction of sped the assessee on 28.12.2010 but the same has been received by the assessee during the course of inspection of the record on 09.02.2011 and as such the assessee has not allowed the special auditor to start the audit. As such in this case 180 days for completion of audit will start from 09.02.2011 and as the time granted for special audit was 180 days as such the date on which special audit report was required to be furnished was 08.08.2011 (February 19 + March 31 + April 30 + May 31 + June 30 + July 31 + Aug 8). Further the order of assessment was required to be passed upto / October, 2011 i.e. within 60 days (August 23 + September 30 + October 07). However, in this case special audit report have been received on 27.06.2011 and assessment order was passed on 26.08.2011 are within the statutory time limit as per the provision of section 142(2C) of the I T. Act, 1961 read with section 153 of the i. T. Act, 1961. 1.2. Without prejudice to above if it is assumed ihat the direction for special audit has been received by the assesses on 28.12.2010 then also the special audit order and assessment order passed is within the time limit provided as per section 142(2C) read with section of the I. T. Act, 1961 as per the details given below: (a) First it is important to draw your attention to the settled legal principle as well as judicial ruling in the case of CIT vs. Highway 13

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Construction Co. (P) Ltd. 1997 92 Taxman 365, 1997 138 CTR 43, 1997 223 ITR 32 (Gauhati) as per which where a statutory period runs from a named date to another or the statue requires prescribes some period of days of weeks or months or years within some acts has to be done generally the first day of the period will be excluded from the reckoning and consequently the last day will be included. Thus where the assessment was permissible within one year from the date of return, the assessment made on 23.03,1984 on the return filed on 23 03.1983 could not be held time barred as the first day had to be excluded. The above decision have been given by the Hon'ble High Court by following section 9 of the General Clauses act as per which in any 1 (Central Act) or regulation made after the commencement of this act, it shall be sufficient, for the purpose of excluding the first in a series of days or any other period of time, to use the word "from", and for the purpose of including the last in a series of days or any other period of time, to use the word "to". Following the above principle the working of 180 days for furnishing of the special audit (on the basis of assumption that he direction for special audit has been received by the assessee on 28.12.2010) is given below. Month No. of days December, 2010 03 January, 2011 28 February, March, 2011 31 April, 2011 30 May, 2011 31 26 (26th June being Sunday) June, 180 days As per the above working the report of special audit should have been submitted on 26.06.2011. However 26.06.2011 was Sunday as such the report was submitted on 27.06.2011 as per section 10 of the General Clauses Act. (b) For the sake of convenience section 10 of the General Clauses Act "(1) Where, by any [Centra! Act] or Regulation made after the commencement or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that fay or the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open: Provided that nothing in this section shall apply to any act or proceeding to which the Indian Limitation Act, 1877 (15 of 1877)20 , applies (2}_ This section applies also to all '9 [Central Acts] and Regulations made on or after the fourteenth day of January, 1887." In this connection it is important to note here that provision of General clauses act is applicable to income tax act to understand the intention subject to the condition that provisions of income tax act provides to the contrary. Attention 14

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is also drawn to the CBDT Circular: No. 639, dated 13.11.1992. Date 13.11.1992 in which section 10 of the General Clauses act have been followed and the same is reproduced below: "1. Representations have been received by the Board seeking clarifications as to whether, the assessee could file a return of income/loss under the Income-tax Act, 1961 on the next working day following a holiday and claim it to have been filed within the statutory time limit. 2. The matter has been examined in consultation with the Ministry of Law and the Board are advised that, in such cases, section 10 of Me General Clauses Act, 1897 will be applicable. According to this section, where any act or proceeding is directed or allowed to be done or taken in any court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the court or office is open. 3. In view of the above, it is hereby clarified that where the last day for filing return of income/loss is a day on which the office is closed, the assessee can file the return on the next day afterwards on which the office is open and, in such cases, the return will be considered to have been filed within the specified time limit. 4. This clarification also applied to the returns under other direct tax enactments." As the CBDT has followed the General clauses act while issuing the circular as such it is established beyond doubt that provisions of General clauses act is applicable in the I. T. Act, 1961. (c) As the provision of General clauses act is applicable in this case as the 2&h June was holiday and such special audit report was required to be furnished on the next working day i.e. on 27th June. Now we would like draw your kind attention that as per provision of section 153ofthel. T. Act, 1961, 60 days was available to the AO from the date on which special audit report was required to be furnished (i.e. 60 days was available from 27.06.2011). Now the working of 60 days upto which order of assessment was required is given below: Month No. of days June, 2011 03 July, 2011 31 August, 2011 26 60 According to the above working the order of assessment should have been passed up to 26.08.2011. In this case assessment order has been passed on 26.08.2011 as such the same is within the time limit as per the provision of section 153 of the I. T. Act. 1.3.(a) Without prejudice to above it is important to draw your kind attention that the assessee has filed writ petition on 06 April, 2011 before the Hon'ble High Court of Delhi challenging the order u/s 142(2A) appointing the special auditor. The said writ petition was dismissed o8th April, 2010 by Hon'ble High Court of Delhi. In view of the above in computing the period of limitation for the purpose of section 153 of the I. T. Act, 1961, period between 6th April, 2011 to 8th April, 15

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2011 (Three days) has to be excluded as per explanation 1 of section 153 of the I. T. Act. (b) In the case of Auto and Metals Engineering and others vs. Union of India and other 229 ITR 399 (SC) it has been held that sub-section (1) of section 153 prescribed the period of limitation within which an order of assessment could be passed. For the assessment years in question the last ddte for making the order of assessment under the said provision was March 31. 1972. By Explanation 1 to section 153 the period of limitation prescribed under sub-section (1) for making the order of assessment was extended by the period during which the assessment proceeding was stayed by an order or injunction of any court. The object of the Explanation seems to be that if the AO was unable to complete the assessment on account of an order or injunction staying the assessment proceeding passed by a court the period during which such order or injunction was in operation should be excluded for the purpose of computing the period of limitation for making the assessment order. In the act the provisions regarding procedure for assessment are contained in Chapter XIV (Section 139 to 158). Under the said provisions the process of assessment involves (i) filing of the return of income under section 139 of under section 142 in response to & notice issued u/s 142(1): (ii) inquiry by the AO in accordance with the provisions of section 142 and 143: (Hi) making of the order assessment by the AO u/s 143(3) of section 144: and (iv) issuing of the notice of demand u/s 156 on the basis of the order of assessment The process of assessment thus commences with the filing of the return or where the return is not filed, by the issuance by the AO of notice to file the return u/s 142(1) and it culminates with the issuance of the notice of demand u/s 156. The making of the order of assessment is, therefore, an integral part of the process of assessment, having regard to the fact that the object underlying the explanation is to extend the period prescribed for making the order of assessment, the expression" assessment proceedings" in the explanation must be construed to comprehend the entire process of assessment starting from the stage of filing of the return u/s 139 or issuance of notice u/s 144. Since the making of the order of assessment u/s 143(3) or section of the act is an integral part of the assessment proceeding, it is not possible to split the assessment proceedings and confine it up to the stage of inquiry u/s 142 and 143 and exclude the making of the order of assessment from its ambit. (c) from the perusal of the above it may be observed that as the provisions of special audit is part of chapter XIV (section 139 to 158) of the I. T. Act, as such 3 days will have to be added while calculating 180 days for finding the date on which special audit report was required to be furnished. Now attention is drawn to the working given in the para 1.2(a) as per which 29th June 2011 (26th June + 3 days) will be the date one which special audit report was required to be furnished. Now as per the provisions of section 153 of the I. T. Act, the order of assessment was required to be passed up to 28th August 2011 (June 1 + July 31 + August 28). In this case assessment order has been passed on 26.08.2011 as such the same is within the time limit as per the provision of section 153 of the I. T. Act.] 16

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1.4. Without prejudice to the above, the provisions of section 153 of the I. T. Act, 1961 provides the procedure for assessment. The clause (Hi) of the Explanation 1 provides that in computing the period of limitation for the purposes of this section "The period commencing from the date on which the AO directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assessee is required to furnish a report of such audit under that sub-section shall be excluded." In present case, the report u/s 142(2A) was to be submitted by 26th June, 2011. The said date being a Sunday, the report was submitted on 2fh June, 2011, being the next working day, in terms of General Clauses Act. „A proviso has been inserted by the Finance (No. 2) Act, 1991, w.e.f. 27.09.7 or idea as under: "provided that where immediately after the exclusion of the aforesaid time of period of perioq^e perio&pf limitation referred to in sub section (1), (1A), (IB), (2A) and (4) availabie'tjt&'the AQ for making |n order of assessment, reassessment or re-computation, as the case may tfa, js less than sixty efayis, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly." In the case of the assessee, the last date for completion of assessment shall be worked out as under The required date of submission of report The date on which report was submitted (In terms of clause 10 of General Clauses Act) 26th June, 2011 27th June, 2011 The period available to the AO to complete the assessment. 60 days The last date to complete the assessment is worked out as under: June, 2011(w.e.f. 28th June, 2011 after excluding the 27th June, 2011) 3days July,2011 31 days August, 2011 31 days Thus, the assessment order passed by the AO on 26"1 August, 2011 is not barred by limitation prescribed under the Act. The reliance is placed on the judgement of Hon'ble Delhi High Court in ITA Nos. 1528/2010, 1529/2010, 1530/2010 & 1532/2010 in the case of CIT vs. Ulike Promoters (P) Ltd. dated 24.01.2012. The Hon'ble High Court in para no. 18 has observed as under; "18. The proviso quoted above has an object and purpose. It stipulates that the AO should have a minimum period of 60 days to complete the assessment, in case after exclusion of period under the Explanation, the period for completing the assessment is less than 60 days. Every time this situation occurs, the proviso comes into play and has to be applied. The proviso can come into operation on one, two or more occasions in the same assessment/reassessment proceedings. In the present case, the respondent assessee had filed a writ petition. Because of the stay order passed, the 17

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period during which the stay order was in operation in the High Court has to be excluded Thereafter the AO passed an order under Section 142(2A) of the Act and the period for conducting special audit has io be excluded. The proviso to Explanation stipulates that the AO can pass the assessment order within 60 days, if after excluding the time mentioned in the Explanation, the time for completing the assessment is less than 60 days. In terms of the said proviso, the AO had the extended period to complete the assessment proceedings. The AO had to complete the assessment within 60 days from the date on which the spec/a/ audit report was to be submitted to him." In view of the above assessment order passed on 26.08.2011 is within the time limit as per the provision 153 of the I. T. Act." 5.1. The AR of the appellant submitted his reply on remand report: "Our Comments: a) Such a stand would boomerang on the AO himself as his admission as 09 Fen 2011 as the date on which order of Special Audit is received means that the order was received after Dec 31, 2010, the last date for framing assessment in normal course. Hence assessment framed on June 26 is barred by limitation by miles as the order U/s 142(2A) served after Dec 31 has no locus standi. Hence computation of fast day for framing of assessment order as Aug 08,2011 and the last day for completion to be Oct 7,2011 are all irrelevant. He, in complaint to Addl Chief Metropolitan Magistrate (Page 12 of Paper Book -Para 5) affirms date of service of order U/s 142(2A) as Dec 28,2010 and now he cannot take a different date Then in Para 1.2 ~ Then he attempts to draw support from Section 9 and 10 of General Cfauses Act, to determine the last day on which assessee is required to report. For this he quotes a decision in CIT vs Highway Construction co wherein it was held that since assessment of the year under within one year from the date of filing return by invoking section 9 of general clauses Act excluding the first day of filing the return . With these he arrives at 26 th June 2011 and not 25 June 2011 as the last day for the assessee to furnish the report. Our comment: Decision that the AO relied upon to justify June 26 as the day on which the assessee was required to furnish the audit report is totally distinguishable as ; In that case assessment is to be completed within one year of filing RQI. in our case Proviso to Section 142(2C) provides " The period or periods so extended for furnishing the audit report shall not in any case exceed one hundred Eighty days from the date on which the direction Under sub -section (2A] is received by the assessee:. There is no dispute that the date on which assessee received direction for audit U/s 142C2A) was 28 Dec 2010 as AO admits in the order sheet - Page 5 Of Paper Book and in Complaint filed in Court of Ld Add! Chief Metropolitan Magistrate. There is also no ambiguity in the term "Period Commencing From" which is 28 Dec 2010. If at all there is any exclusion is to be done - that is the aggregate number of days available to the assesses to furnish the audit report- That is he has 179 clear days to furnish as the AO has used the term Within 90 days to start with and then extended by further 90 days. We had relied on following decisions for this proposition 18

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a) CIT vs Ekba! & co (1945) 13 ITR 154 (Bom) b) Mr Srinivasalu vs Union of India & Ors (1999) 156 CTR (Kar) c) DCIT vs Ramchandra Dashrath Hande & Co (2010) 36 DTR(Mum) d) Mrs Deepika A Mehta vs ACIT (1997) 57 TTJ (Mum) Thus the assessee gets 179 clear days to furnish the report - i.e. 24 th June 2011 was the last day on which assessee was required to furnish the repor. After excluding the period of 28 Dec 2010 to 24 June 2011,- the remaining period of 6 days being less than 60 days and hence AO gets 60 days from 24 June 2011- i.e He must frame the order on or before 23 August 2011. The order he framed on 26-08-201 Us thus barred by limitation. If for your good self is not inclined to follow the above High Court Decisions of Bombay & Karnataka even though there is no contrary decisions and your good self is also not inclined to follow Supreme court decision in CIT vs Vegetable products about applicability of decisions favoring the assessee , we draw your attention to decision in Dhariwal Sales entergrises vs ITO - Page 103 to 105 of the Paper book directly dealing with number of days available and state that both days on which direction is received by assessee and the days on which direction is received by assessee and the dya on which he is to furnish the report are to be included and Section 9 of General Clauses Act is also not applicable here. Thus we object to AO'S contention that 26 June 2011 is the last day for assessee to furnish the report. It is either 24 June 2011 -If clear 179 days is agreed upon or 25 June 2011 is the last the part(b) of para 1.2 AO invokes Section 10 of General Clauses Act and contends that he is entitled to compute 60 days from the day on which the auditor furnished the report for completing assessment as per provisions of Section 153. Our Comments: The question of applicability or non applicability of General Clauses Act for enabling the assessee to furnish the audit report is totally irrelevant for determining the days to be excluded and thereafter for determining the period of limitation by availing the period permitted by section 153 of Income Tax Act. This is because it is for assessee to take shelter under general clauses Act, if so advised ,from escaping the consequences of non furnishing the audit report with-in the period strictly laid down by Section 142(2C) of Income Tax Act. As far as AO is concerned due to the strict terminology of "not in any case exceed one hundred eighty days” used in Section 142(2C} he just cannot have any liberty to hold that the day the assessee is required to furnish the audit report is after the one hundred Eightieth day , for whatever^ regsorif assuming he validly had allowed the maximum period permitted. The moment that period expires the meter for completion of assessment starts ticking. He cannot wait for the extra day/(s) which might be available to the assessee due to (Whether available or not is itself debatable). His stand that only on receipt following working day after the 180 th day, a holiday, the limitation commt his invoking provisions given in Explanation to Section 153 prior to the at 1997 and thus he would be violating provisions existing at present as per which:- 19

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(iii) The period commencing from the date on which the AO directs the assessee to get his accounts audited under sub-section (2A) of sect/on 142 and ending with the last date on which the assessee is required to furnish a report of such audit under that sub-section Shall be excluded .Thus to repeat , what is to be excluded for commencement of period of limitation is the day on which assessee is required to furnish the report which cannot exceed 180 days in any case due to provisions of Section 142(2C) from the date on which AO directed for audit of accounts u/s 142(2A) . Our this contention is supported by the following decisions, one by Jurisdictional Delhi High Court which we believe is binding on the department d) CIT vs ULIKE PROMOTERS PVT LTD -( Delhi)- order enclosed in Page 69 of the Paper book already furnished - In page 73 in last line of Para 7 the Honorable High Court holds " Submission of report is not re levant^ for the exclusion of Section 153B(1) of The Act. "The provisions of 153B applicable mutatis mutandis to Section 153(3)(iii) of The Income Tax Act 1961. e) E.Amul Prakash & Ors vs DCIT - Decision already Enclosed - Page 8 of the order - Para 13 reads " ...just because the audit report was dated 03-06- 2000 and received by assessee on 05-O6-2000 applicability of Explanation 1 to Section 158BE , more specifically clause (ii) thereof would not get obliterated. It is for this reason that the said clause mentions period commencing from the date on which the AO directs the assesee is required to furnish a report of such report. So what is relevant is the date on which the ae is required to furnish a report. Actual furnishing the report is not relevant for calculating the time limit mentioned U/s 158BE of the Act. Assesee was required to furnish a report by 01-06-2000 on which day the ISOdays time period expires. Thus .... ..audit report furnished after the time limit and its effect on time limit prescribed u/s 158BE OF THE Act does not hold water." f) Also ITAT in Dhriwal Sales Enterprises(Supra) in para 6 has computed the last day for finalizing assessment by reckoning the last day on which assesee was required to furnisti the report, ie 31-03-1985 though it was a public holiday as mentioned in Para 3 -Page 103. The AO's completion qfj:fie^>rderby taking into account 2nd September 2005f the first working day as the (ast day for furnishing audit report by resorting to General Clauses Act was not accepted.- Identical facts as in our case as the last day on which assessee was required to file report - A Saturday . The AO's completion of order by availing 60 days permitted by Section 153 from the next working day , a Monday becomes unacceptable as per this decision.Jhus in our case , the day on which the report was Required to be submitted by the assessee: June 24 ,2011 or June 25,2011 Submitted by the auditor : June 27,2011 Ratio laid down by Delhi High Court in Ufike Promoters Pvt Ltd, ITAT Chennai in E.Amul Prakash & Ors & ITAT in Dhriwal Sales Enterprises (Supra) leaves us with no doubt whatsoever that June 27,2011 certainly is not the relevant date for determining the commencement of Limitation by availing benefit of Section 153 If still any doubt is harbored as to exclusion of the days 20

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for the purpose of computation of limitation , the following observation of the Jurisdictional Delhi High court in CIT vs M/s Uttam Sucrotech International P Ltd vs Union of India & ANR- Order enclosed in Page 101 in Para 24 eradicates all the doubts "To put it differently, if the period of the last day ..... comes in the midst of a vacation or a holiday, the said period wvuld not oef excluded but is extended by applicability of Section 4 of the Limitation Act or Section 10 of the General Clauses Act which enables the affected party to prefer ......... on the date when the Court or the office reopens. The submission of Mr. Gupta, learned counsel for the petitioner is that as limitation period of 60 davs expired on 28th October, 2006 which was a Saturday, the petitioner was entitled to benefit of 28th and 29th October, 2006 being Saturday and Sunday and, thereafter, the further period of 30 davs would commence............ The said proposition, in our considered opinion, runs counter to the principles which are culled out from the authorities we have referred to hereinbefore" Thus allowing the stand of the AO stand that assesee is permitted to furnish the audit report on 27 June 2011 as 25 June 2011 or 26 th June 2011 was a holiday and hence the period of limitation commences from 25 June 2011 is tantamount to not following the ratio laid down ~5fiurisdictional Delhi High Court. To further buttress our contention that the 60 days permitted by Section 153 of Income Tax Act 1961 must start immediately from the last day on which assessee was required to furnish the report, though that last day happened to be a holiday , we take the following analogy - If the assessee does not furnish the report itself- It does not mean AO will not frame the assessment as he in the present case is saying. He says only on the following Monday which is after the 180th day when the assessee furnished the report he could possibly have started finalizing assessment. This certainly is not the intention of the legislature. The legislature requires the AO, to immediately on the expiry of the last day on which assessee was required to furnish the report, avail the 60 days, if the days available for him to complete assessment after excluding the period • commencing from the day on which AO directed the audit and ending with the last day on which assessee was required to furnish the report as per provisions of 142(2C) is less than 60 days. Similarly if the assessee furnishes the report say on 120 th day even though he was entitled to furnish the report only in 180 days , the assessee cannot insist that AO should compute his 60 days permitted for completion of assessment from the 120'" day - i.e The day he furnished the report and not from the 180th day when he was required to furnish the report. Thus when the Legislature amended the Income Tax Act w.e f 01-04-1997 by substituting the words " Required to Furnish" in place of " Furnish" the intention is to make clear that irrespective when and whether the assessee furnishes the report the limitation is to commence immediately on the expiry of the day assessee was Required to furnish. That there should be no doubt about the term "Required" is again explained by an analogy . The office timing of income Tax department is say 10.00am -6.00pm. There is a grace period of 10 minutes given to the staff for reaching the office beyond which they could be hauled up by their superiors. In this case there should not be any doubt that the Staff is required to be at office at 10.00am and that they 21

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have only been permitted/allowed to take 10 minutes grace period. Thus the term Required to to be taken very strictly and it cannot be diluted by any concession given under any peculiar circumstances . Thus it is from this last day on which required to furnish and not from the day on which allowed to furnish( Debatable - Whether allowed or not ) the 60 days contemplated in section 153 should start and thus period of limitation also to commence. This proposition is strengthened by the observation of many courts on many occasions that submission of report is not relevant for the AO to start his job of framing the order by availing the additional 60 days permitted by section 153. 'With these analogies , Decision of Jurisdictions! Delhi High courts Madhya Pradesh High court and ITAT Chennai & Indoref we trust that we have now eradicated all doubts that whether General Clauses Apply or not, whether assessee allowed to furnish the report on the succeeding working day or not , the limitation starts from the day on which assessee was Required to furnish applied with all strictness and in undiluted form Then in Para 1.3(a) - The AO points out that assessee had fifed writ petition on 06 April 2011 which was dismissed on 08 April 2011. Hence he contends 3 days be excluded. Our contention is as per Section 153 itself, the period during which the assessment proceeding is staved by an order or injunction of any court is what is to be excluded. We request you to call upon the AO to produce any order or injunction of the court which stayed the assessment proceedings during 06 April 2011 to 08 April 2011. You will observe that there is no such order that the AO can produce. Hence even this line of defense for exceeding the period of limitation in framing the order has no merit Then the AO has quoted Para 18 of the decision CIT vs UL1KE PROMOTERS PVT LTD -where Honorable Delhi High Court has laid down that when more than one events , namely where there is an order of injunction staying assessment proceedings and also an order for Special Audit the AO must get minimum 60 days for completing assessment after excluding period involved in each of this event. Our contention: No dispute on this issue. But in our case there has been no order of injunction staying the assessment proceedings. There was only an order for special audit. Hence the days between order U/S 142(2A) and the day required to furnish the report is to be excluded. Assessment order passed is beyond the time permitted after such exclusion. ^^^ ^ After thus filing our rejoinder and with the aid of the decisions of " -other decisions pointing out that assessment ought to have been framed byfe'fther^ 24-08-2011 and certainly not 25-08-2011 we without prejudice to the$s - also';'-' submission already made pointing out that a) The order U/s 142(2A) was not made in accordance with Binding Board Circular laying down the cases that could be referred to special audit. Thus the order itself being invalid the assessment should have been framed by 31 Dec 2010 and he has no jurisdiction to exclude the 180 days and then avail further 60 days b) On June 10,2011 AO had filed complaint with the court of Add! Chief Metropolitan Magistrate. Such complaints are filed when AO is certain that the report is not likely to be furnished. Hence as per decision in Dhriwal 22

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Sales Enterprises(Supra) he ought not to have waited till the expiry of 180 days and framed the assessment order availing 60 days from 10 June 2011- i.e On or before 9 August 2011 With these trust we have made out a strong case for quashing the assessment framed on August 26,2011 is clearly barred by limitation . We rely on submissions already made for deletion of addition on other grounds" I shall now take up the various grounds of appeal. 6. Ground No. 1 is not pressed. 7. Ground No. 2 is in respect of issuing notices u/s 143(2) without examining return of income. This contention of the appellant has no basis and is not supported by any evidence. Therefore, this ground of appeal is ruled against the appellant. 8. Ground No. 3 & 4 is in respect of the AO ordering audit u/s 142(2A) and ordering special audits without examining books of accounts. There is no lapse in this regard. Due procedure was followed by the AO. These grounds of appeal are therefore ruled against the appellant. 9. Ground No. 5 is in respect of the AO framing order u/s 144 after the period of limitation. The appellant has stated that the order is time barred. 9.1. In the remand report the AO has clearly explained that the order made u/s 144 is within time. 9.2. I shall now quote section 153(iii): "153. Time limit for completion of assessments and reassessments. — (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of— (a) two years from the end of the assessment year in which the income was first assessable; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub- section (4) or sub-section (5) or section 139, whichever is later. (2) No order or assessment, reassessment or recomputation shall be made under section 147 after the expiry of ?one years from the end of the financial year in which the notice under section 148 was served-' Provided that where the notice under section 148 was served on or before the 1st day of April, 1999, but before the Jsf day of April, 2000, such assessment, reassessment or recomputation may be made at any time up to the 31st day of March, 2002. Notwithstanding anything contained in sub-sections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under section 250 or section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under section 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner ; 23

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Provided that where the order under section 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such an order of fresh assessment may be made at any time up to the 31st day of March, 2002. (3) The provisions of sub-sections (I) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of subsection (2A) be completed at any time— (i) Omitted by FA 2001, wef. 1-6-2001; (ii) where the assessment, reassessment or recomputation is made on the assesses 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 crder of any court in a proceeding otherwise than by way of appeal or reference under this Act; (iii) where in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147. 3(4) Notwithstanding anything contained in the foregoing provisions of this section, subsection (2) of section 153 A and sub-section (1) of section 153B, the order of assessment or reassessment, relating to any assessment year, which stands revived under sub-section (2) of section 153A, shall be made within one year from the end of the month of such revival or within the period specified in this section or sub-section (1) of section 153B, whichever is later. Explanation 1. —In computing the period of limitation for the purposes of th (i) the time taken in reopening the whole or any part of the pro opportunity to the assessee to be re-heard under the proviso to section. (ii) the period during which the assessment proceeding is stayed by an order or injunction of any court, or 2(iia) the period commencing from the date on which the AO intimates the Central Government or the prescribed authority, the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, under clause (i) of the proviso to sub-section (3) of section 143 and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, as the case may be, under those clauses is received by the AO; (Hi) the period commencing from the date on which the AO directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assessee is requuired to furnish a report of such audit under that sub-section, or (iv) Omitted by Street Tax Laws (Amend.) Act, 1987, wef 1-4-89 (iva) the period (not exceeding sixty days) commencing from the date on which the AO received the declaration under sub-section (1) of section 158A and ending with the date on which the order under sub-section (3) of that section is made by him, or (v) in a case where an application made before the Income-tax Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under sub- 24

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section (1) of section 2450 is received by the Chief Commissioner or Commissioner under sub-section (2) of that section, shall be excluded. Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-sections (1), (2), (2A) ^and (4) available to the AO for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. ^Provided further that where a proceeding before the Settlement Commission abates under section 245HA, the period of limitation available under this section to the AO for making an order of assessment, reassessment or re- computation, as the case may be, shall, after the exclusion of the period under sub-section (4) of section 245HA, be not less than one year : and where such period of limitation is less than one year, it shall be deemed to have been extended to one year ; and for the purposes of determining the period of limitation under sections 149, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or section 244 or, as the case may be, section 244A, this proviso shall also apply accordingly. Explanation 2.— Where, by an order referred to in clause (ii) of sub-section (3), any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order. Explanation 3. —Where, by an order referred to in clause (ii) of sub-section (3), any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for tJbg42U£pcses of section 150 and this section, be deemed to be one made in consequence of any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed." 9.3. The AO has also that the proviso makes it very clear that the period would be sixty days and not less. In my view aiso the proviso to section 153 quoted above does make it clear that if the period is less than 60 days, the period would be extended to 60 days. The AO has quoted the case of CIT vs. Ulike Promoters (P) Ltd. (Delhi High Court). 9.4. The decision is quoted again as under: "18. The proviso quoted above has an object and purpose. It stipulates that the AO should have a minimum period of 60 days to complete the assessment, in case after exclusion of period under the Explanation, the period for completing the assessment is less than 60 days. Every time this situation occurs, the proviso comes into play and has to be applied. The proviso can come into operation on one, two or more occasions in the same assessment/reassessment proceedings. In the present case, the respondent assessee had filed a writ petition. Because of the stay order passed, the period during which the stay order was in operation in the High Court has to be excluded. Thereafter, the A O passed an order under Section 142(2A) of the Act and the period for conducting special audit has to be excluded. The proviso to Explanation stipulates that the AO can pass the assessment 25

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order within 60 days, if after excluding the time mentioned in the Explanation, the time for completing the assessment is less than 6O days. Tn terms of the said proviso, the AO had the extended period to complete the assessment proceedings. The AO had to complete the assessment within 60 days from the date on which the special audit report was to be submitted to him. 19. The decision in the case of Hope Textiles Limited (supra) relied upon by the tribunal is not apposite. In this case, the assessee had preferred an appeal against the decision of the Madhya Pradesh High Court. The contention of the assessee before the Supreme Court was that by virtue of clause (ii) sub- section 3 to Section 153 of the Act, the High Court should have directed the AO to pass the reassessment order pursuant to the reassessment notice notwithstanding the expiry of period prescribed in sub-section 2 to Section 153. It is apparent that the AO had not passed a reassessment order and in that context the Supreme Court observed that the courts cannot issue a direction to the authority under the Act, to ignore the limitation period as the AO was not passing an order in the reassessment proceedings and had allowed the limitation period to lapse. Tn the present case, we have not given any direction to the authorities contrary to the period prescribed under Section 153B. We have interpreted Section 153B and accordingly computed the period of limitation stipulated therein. We have applied the proviso to Section 153B, which is applicable. 20. In view of the aforesaid discussion, the question of law mentioned above is answered in favour of the Revenue and against the respondent assessee. The tribunal through the appeals on merits. The parties will appear before the Assistant Regisrar March, 2012, when a date of hearing will be fixed. No costs,." 9.5. The report of the audit was submitted on 27.06.2011 as 26.06.2011 was a Sunday. The said report was required to be submitted on 26.06.2011, but since that day was a Sunday by no logic can the limitation be counted from 26.06.2011. The AO was not at fault and therefore the entire period of sixty days should be made available to the AO. 9.6. The AO received the special audit report on 27,06.2011 and sixty days ended on 26.08.2011, on which date the order was passed. The order u/s 144 is therefore not barred and is a valid order. The ground of appeal is ruled against the appellant.”

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and sufficient reasons, extend the said period as he thinks fit, Subject to the condition that it cannot exceed 180 days from the date on which the direction for audit is received by the assessee. In the present case, the Ld. assessing officer issued direction on 28/12/2010, the time limit after 180 days expires on 26/06/2011, which happens to be Sunday, and the audit report was furnished on 27/06/2011. We agree that the date of furnishing of the audit report is not relevant, but the last due date of furnishing of the audit report by the assessee is relevant for clause (iv) of explanation 1 to section 153 of the income tax act. In any way, the due date was falling on a holiday and therefore it is extended on the next working day i.e. on 27/06/2011. Originally, AO was required to pass assessment order by 31/12/2010 but due to special audit, the time line is extended by 180 days by virtue of clause (iv) of explanation 1 to section 153 of the Act. Therefore, the extended time limit shall accordingly was to expire on 30/6/2011. Now by virtue of the first proviso to explanation to section 153 of the act, if the assessing officer has less than 60 days available with him at the time of exclusion of time limit specified under explanation 1, then such period shall be further extended to 60 days. In the present case, due date for furnishing of the audit report was expiring on 27/06/2011. Time limit for passing assessment order is expiring on 30/06/2011. As the Ld. assessing officer has received audit report on 27th of June 2011, therefore, the time available with the him for making assessment is less than 60 days, hence; the time limit shall now be extended from 27/06/2011 by 60 days to 26/08/2011. In the present case, the Ld. assessing officer has passed order on 26/8/2011 and therefore according to us the assessment order passed by the Ld. assessing officer is not barred by limitation. In view of this, various decisions cited before us are not relevant as there is no dispute on various dates of milestones discussed above. 11. There is another view to the whole issue. Assessee has challenged the order under section 142 (2A) of the Income Tax Act before the Hon‟ble Delhi High Court on 06/04/2011, which was dismissed by Hon‟ble high court on 08/04/2011. It is a fundamental principle of law of limitation as contemplated under section 14 of the limitation act, 1963 that in reckoning the period of limitation, the period during which some incidental proceedings remain subjudiced in good faith of parties to the dispute, then same is required to be excluded for the purpose of limitation. Section 14 of the limitation act 1963, provides as under:- 27

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"14. Exclusion of time of proceeding bona fide in court without jurisdiction.— (1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature is unable to entertain it.

(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule 1 of that Order, where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature. Explanation.—For the purposes of this section,

(a) in excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted; (b) a plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding; (c) misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction."

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framing of assessment without examining returns of income. The Ld. authorized representative of the assessee did not press any argument on this ground and therefore ground No. 2 of the appeal of the assessee is dismissed. Ground No. 3 of the appeal of the assessee is against the order of the Ld. 1st 14. appellate authority in not passing speaking orders for dismissing the ground against the order of audit under section 142 (2A) of the act without adhering to the instructions of the Central board of direct taxes and without examining the books of accounts in forming satisfaction of the complexity in the books of accounts. The Ld. authorized representative did not press any argument on this ground and therefore it is dismissed.

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of the above software these companies were to be issued share capital. Therefore, these two parties‟ accounts were credited as the share application money. 18. The Ld. departmental representative vehemently submitted that assessee has credited the sum in the books in the name of these two companies for purchase of software of more than Rs. 200 crores. He questioned that the entry of purchase of software of such a magnitude was passed by the assessee and the sum was credited in the name of these two companies. He submitted that assessee has neither filed any confirmation nor explained the details of software purchased, therefore on the front of the identity, creditworthiness and genuineness of the transaction the claim of the assessee fails. He submitted that there is no reason that why a company, which is having a meager resources, will buy a software of Rs. 200 crores and in turn will issue shares to two non descript companies. . He therefore submitted that the sum is credited in the books of accounts of the assessee and therefore the Ld. assessing officer has rightly applied the provisions of section 68. 19. We have carefully considered the rival contentions and the orders of the lower authorities. It is apparent that assessee has not produced any detail about what kind of software it has purchased and how these two companies were in possession of software worth Rs. 200 crores. The assessee has produced neither the confirmation nor the details of the software. It is interesting to note that assessee has reversed this transaction in the next year, no reasons were provided for this action. The purpose and intent behind entering into this transaction was not known. Hence looking at the whole transaction , it is apparent that lacks characteristics of a genuine transaction. Further, the identity of the parties whose account is credited is also not proved and in absence of any details about their business as well as any other activity the creditworthiness of those parties for supply of the software not proved. It is interesting to note that this company has returned loss of Rs. 1.29 Lacs and is in possession of intangible assets worth 245.67 crores, including impugned softwares of Rs. 200 crores for which share application money account has been credited. In view of this, we do not find any infirmity in the order of Ld. assessing officer in making addition of the above sum and in the order of Ld. 1st appellate authority in confirming the same. In the result ground No. 5 of the appeal of the assessee is dismissed.

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-Sd/- -Sd/- (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 17/05/2017 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi