Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘C’ : NEW DELHI
Before: SHRI A.T. VARKEY & SHRI O.P. KANT
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘C’ : NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER and SHRI O.P. KANT, ACCOUNTANT MEMBER ITA No.4809/Del./2007 (ASSESSMENT YEAR : 2003-04) DCIT, Circle 4 (1), vs. M/s. Jindal Dyechem Industries Pvt. Ltd., New Delhi. 110, Babar Road, New Delhi – 110 011. (PAN : AAACJ0719Q) CO No.179/Del/2008 (in ITA No.4809/Del./2007) (ASSESSMENT YEAR : 2003-04) M/s. Jindal Dyechem Industries Pvt. Ltd., vs. DCIT, Circle 4 (1), 110, Babar Road, New Delhi. New Delhi – 110 011.
(PAN : AAACJ0719Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Salil Aggarwal, Advocate & Shri Shailesh Gupta, CA REVENUE BY : Shri A.K. Saroha, CIT DR & Shri Anil Jain, Senior DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER :
2 ITA No.4809/Del./2007 CO No.179/Del/2008
The appeal filed by the revenue and cross objection filed by the
assessee are directed against the order of the CIT (Appeals)-VII, New Delhi
dated 26.9.2007 for assessment year 2003-04.
2 The grounds taken by the revenue in ITA No.4809/Del/2007 are as
under;
“1 The order of the ld. CIT(A) is erroneous and contrary to facts and law. 2 The ld. CIT(A) erred in law and on the facts in holding the assessment made by the AO on 14.9.2006 as barred by limitation u/s 153(1) of the I.T.Act, 1961 without considering the fact that in pursuance to proviso to section 142(2C) and proviso to explanation 1(iii) to section 153(3) of the I.T. Act, 1961 the limitation for completion of assessment expired on 15.9.2006. Thus the order passed u/s 143(3) of I.T. Act, 1961 passed on 14.9.2006 is within the statutory limit. 3 The ld. CIT(A) erred in law and on the facts in relying on the arguments based on incorrect submission of the assessee while ignoring the facts on records as under:- a) The date of filing audit had been extended to 17.7.2006 b) Even on that date the assessee did not file the audit report c) On that date i.e. 17.7.2006, Special Auditor filed a copy of the report before AO d) Ld. CIT(A) New Delhi did not take cognizance of provision of section 142(2C) e) Ld. First Appellate Authority has wrongly interpreted the provisions of explanation 1(iii) to section to section 153(3) of I.T. Act, 1961 in holding that the last date is one decided by AO whereas the date of compliance extends upto 180 days
3 ITA No.4809/Del./2007 CO No.179/Del/2008
f) The assessee tried to take advantage of its own fault in discharging its own statutory liability in getting the accounts audited and submit the report before AO within the prescribed time g) AO had been liberal in granting extensions for filing the audit report and further in the assessment proceedings while substantially reducing the quantum of addition suggested by Special Auditors but the assessee has taken the advantage of the liberal attitude of AO in assessment proceedings. 4 The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of the hearing.”
The assessee has taken the following grounds in the Cross Objection
No. 179/D/2008 :-
“1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in not deleting the addition of Rs. 74,90,362/- on account of alleged unrecorded cash sales made by the appellant company by invoking the provisions of section 69A of the Act. 2. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in not deleting the disallowance of Rs. 50,33,653/- out of Rs. 60,33,653/- incurred on foreign travelling by the appellant company. 3. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in not deleting the addition of sum of Rs. 1,96,71,741/- on account of alleged unexplained investment by computing the purported negative stock. 4. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and, on facts in not deleting the addition of Rs. 1,55,15,069/- on account of alleged undisclosed investment in stock. 5. That the learned Commissioner of Income Tax (Appeals) has further erred in not deleting the addition of Rs. 41,30,033/- u/s 92C of the Act. 6. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in not deleting the disallowance of sum of
4 ITA No.4809/Del./2007 CO No.179/Del/2008
Rs. 5,06,150/- out of expenditure incurred on business promotion claimed by the appellant company. 7. That the Commissioner of Income Tax (Appeals) has erred both in law and on facts in not deleting the addition of Rs.5,76,521/- on account of alleged unrecorded sales of silver by the appellant company. 8. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in not deleting the disallowing a sum of Rs.73,604/- out of expenditure claimed on travelling by the appellant company on an erroneous assumption that such expenditure incurred was personal in nature and, in disregard of the fact that, the assessee company has any claimed Rs. 32,000.50/- as expenditure in the return of income. 9 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, the appellant company, under misconception of law had offered an income of Rs. 1,50,00,000/- on the date of survey u/s 133A of the Act erroneously and, as such he ought to have also deleted the addition of said sum, while disposing off the appeal. 10. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in not deleting the levying interest of Rs.75,20,977/- and Rs.3,39,889/- under section 234B and section 234D of the Act respectively.”
The facts in brief are that return of income was filed on 2.12.2003
showing total income at Rs. 2,04,84,373/-. The return was processed u/s
143(1) of the Income Tax Act, 1961 (hereinafter "the Act") on 15.3.2004.
M/s Sushil Jeetpuria & Co., Chartered Accountants, New Delhi (hereinafter
called Special Auditors) were allotted the task of special audit u/s 142(2A)
of the Act vide order F.No. DCIT/Circle 4(1)/2005-06/142(2A)/871 dated
17.2.2006. The report dated 7.7.2006 of the special auditor was received by
the AO on 17.7.2006. After receipt of the special audit report u/s 142(2A)
5 ITA No.4809/Del./2007 CO No.179/Del/2008
on 17.7.2006 an order dated 14.9.2006 was passed under section 143(3) of
the Act. On appeal the CIT(A) quashed the assessment on the ground it is
barred by limitation vide order dated 26.9.2007 by observing as under:
“6 I have carefully considered the findings contained in the order of assessment, submission of the appellant company, comments of the learned Assessing officer, rejoinder submission made by the appellant and material on record. The contention of the appellant company is that, the impugned assessment dated 14.9.2006 is barred by limitation. Thus, the issue, which requires determination, is whether the assessment made on 14.9.2006 can be held to have been made within the statutory period of limitation provided in section 153(1) and, the Explanation 1 of section 153(1) of the Act. 6.1 Before proceeding to adjudicate on this issue, it would be relevant to extract the statutory provisions of law. The relevant portion of section 153(1) of the Act and, the Explanation 1 of section 153(1) of the Act reads as under: “153(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……… ……..(Explanation 1-In computing the period of limitation for the purpose of this section …….. (iv) the period commencing from the date on which the [Assessing] Officer 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: Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-section (1), [1A), (1B)} (2) and (2A) available to the Assessing officer for making an order of assessment, reassessment or re-computation, 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……”
6 ITA No.4809/Del./2007 CO No.179/Del/2008
6.2 From the perusal of the aforesaid provisions, it will be seen that, an order of assessment has to be made within a period of two years from the end of the assessment year in which, the income was first assessable. It has been further provided in the Explanation that in computing the period of limitation, the period commencing from the date on which, the A.O. directs the assessee to get his accounts audited under sub section (2A) of section 142 of the Act and end with the last date on which the assessee is required to furnish the report of Special Audit under that section is to be excluded. In other words, the period from the date of direction of the audit to the last date on which the assessee is required to furnish a report of such audit u/s 142(2A) of the Act is to be excluded while computing the period of limitation as provided u/s 153(1) of the Act. However, the proviso further provides that, where immediately after the exclusion of the aforesaid period, the period of limitation available to the AO for making an order of assessment is less than 60 days, such remaining period shall be extended to 60 days and the aforesaid period of limitation shall be extended accordingly. 6.3 Applying the aforesaid statutory provisions to the facts of the instant case, it is evident that, the impugned assessment for assessment year 2003-04 had to be completed by 31.3.2006. However since the AO had directed the assessee to gets its accounts audited u/s 142(2A) of the Act, the period of limitation had to be extended in view of the provisions contained in Explanation 1 to section 153(1) of the Act. From the facts on record, it is evident that, period to be excluded ended on 7.7.2006 which is the date on which the assessee was required to furnish the report of special audit. This is in view of fact that, the learned AO had vide order dated 16/17.2.2006 directed the assessee to get his accounts u/s 142(2A) of the Act within a period of 35 days. He further extended this period subsequently through directions dated 24.3.2006 (for a further period of 45 days) dated 10.5.2006 (for a further period of 30 days) dated 9.6.2006 (for a further period of 10 days) dated 21.6.2006 (for a further period of 7 days) and dated 28th June’ 06 (for a further period of 7 days). Accordingly, total period to get the accounts audited as directed by him was 134 days. However, in the extension dated 28th of June 2006, the date stated for completion of audit was 7th of July 2006. Thus as a matter of fact, taking into account all the aforesaid extensions, the assessee was required to furnish the audit report by 7.7.2006. Accordingly, in terms of Explanation to section 153 of the Act, the period of limitation expired on 6.9.2006, whereas the instant assessment had been framed on 14.9.2006. Thus the assessment order is barred by the limitation in view of the provisions contained in section 153 of the Act, and consequently the same is void ab-initio and, deserves to be annulled as such.”
7 ITA No.4809/Del./2007 CO No.179/Del/2008
Before us, the ld. CIT DR pointed out that a reference was made in
this case under section 142(2A) the Income Tax Act, 1961 for the
assessment year 2003-04. After seeking certain extension (by the assessee
company), a report from Special Auditor dated 7.7.2006 was received by
AO on 17.7.2006. It was stated that report was received within statutory
time limit of 180 days provided proviso to section 142(2C) of the Act. It
was further submitted that after exclusion of period under section 142(2C)
and proviso to Explanation 1(iii) to section 153(3) of the Act, the limitation
for completion of assessment was to expire on 15.9.2006. It was submitted
that order passed under section 143(3) of the Act on 14.9.2006 was therefore
within the statutory limit and CIT(A) was in error in holding the assessment
is barred by limitation.
The learned counsel for assessee however submitted that in the instant
case, in normal course, the instant assessment could have been framed till
31.3.2006 i.e. within a period of two years from the end of the assessment
year. The Assessing officer vide his order dated 16/17.2.2006, directed the
assessee to get his accounts audited u/s 142(2A) of the Act, within a period
of 35 days. He further extended this period subsequently through directions
8 ITA No.4809/Del./2007 CO No.179/Del/2008
dated 24.3.2006 (for a further period of 45 days) dated 10.5.2006 (for a further period of 30 days), dated 9.6.2006 (for a further period of 10 days), dated 21.6.2006 (for a further period of 7 days) and dated 28th June’ 06 (for a further period of 7 days. He stated that total period to get the accounts audited was 134 days. It was submitted that in the extension dated 28th of June’ 06, the date stated for completion of audit was 7th of July’ 06. Thus the assessee was to get his accounts audited by 134 days from 17.2.2006, but since the AO had stated in the extension dated 28th of June’ 2006, that the audit was to be completed by 7th of July, 2006, therefore, the period from 17.2.2006 to 7.7.2006 is to be excluded in terms of Explanation to section 153 of the Act. It was submitted that period of limitation expired on 6.9.2006, whereas the instant assessment had been framed on 14.9.2006. It was therefore submitted that the assessment order is barred by the limitation stipulated u/s 153 of the Act. It was submitted that the date of 17.7.2006 is the date of furnishing the report by special auditor and, it is not the date on which the special auditors were required to furnish the special audit report and therefore the date on which the special auditor were required to furnish the report was 7.7.2006 and as such, the contention of the learned DR that
9 ITA No.4809/Del./2007 CO No.179/Del/2008
17.7.2006 should be adopted as the date for determining the period of
limitation is based on misinterpretation of the provisions of law.
We have considered the submission of both the parties and carefully
gone through the material available on the record. We find that the CIT(A)
quashed the assessment order dated 14.9.2006 on the ground it is barred by
limitation. Section 153(1) of the Act provides as under:
“153(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……… ……..(Explanation 1-In computing the period of limitation for the purpose of this section …….. (iv) the period commencing from the date on which the [Assessing] Officer 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: Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-section (1), [1A), (1B)} (2) and (2A) available to the Assessing officer for making an order of assessment, reassessment or re-computation, 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……”
A plain reading of the above would make it apparent that an order of
assessment has to be made within a period of two years from the end of the
assessment year. According to the Explanation the period commencing from
10 ITA No.4809/Del./2007 CO No.179/Del/2008
the date on which, the AO directs the assessee to get his accounts audited
under sub-section (2A) of section 142 of the Act and the last date on which
the assessee is required to furnish the report of special auditor is to be
excluded in computing period of limitation. The proviso further provides
that, where immediately after the exclusion of the aforesaid period, the
period of limitation available to the AO for making an order of assessment is
less than 60 days, such remaining period shall be extended to 60 days and
the aforesaid period of limitation shall be extended accordingly.
In the instant case, the AO vide order dated 16/17.2.2006 directed the
assessee to get his accounts u/s 142(2A) of the Act within a period of 35
days. He further extended this period subsequently vide following
directions:
S No. Date of the order Period Date by which the Remarks, if any for extension for Extend assessee was period of audit ed required to furnish under Proviso to the audit report u/s section 142(2C) 142(2A) of the Act of the Act 1 24.03.2006 45 08.05.2006 days 2 10.05.2006 30 07.06.2006 Order was made days after 08.05.2006 and, not before or 08.05.2006 3 09.06.2006 10 17.06.2006 Order was made days after 07.06.2006 and, not before or 07.06.2006
11 ITA No.4809/Del./2007 CO No.179/Del/2008
4 21.06.2006 7 days 27.06.2006 Order was made after 17.06.2006 and, not before or 17.06.2006 5 28.06.2006 7 days 04.07.2006 Order was made However AO has after 27.06.2006 stated time till and, not before or 07.07.2006. 27.06.2006 Total 134 Days
The contention of the ld. AO before the CIT(A) in the remand report
was that, since the audit report was received on 17.7.2006, the period to be
excluded does not end on 7.7.2006 but ended on 17.7.2006. We are in
agreement with the conclusion of the CIT(A) that section 153(1) of the Act
clearly provides that the period of limitation is to be governed by not the
actual date of furnishing the report but the last date on which the assessee is
required to furnish report of such audit. This fact is fully explicit from the
order dated 28.6.2006 made by the learned AO u/s 142(2A) read with
section 142(2C) of the Act which reads as under:
“This has reference to your letter dated 27.6.2006 received from your authorized representative in this office on 28.6.2006. You have requested for extension of time allowed to the special auditor for filing his report by one week. It had earlier been undertaken that no further extension will be sought after one week. 2 Your application has been considered. The time allowed for completion of the special audit is further extended by one week i.e. upto 7.7.2006, as requested in your letter under reference in view of the powers conferred by the proviso to section 142(2A) of Income Tax Act, 1961. You are advised to extend full cooperation to the special auditor so as to enable him to file the report within stipulated time.
12 ITA No.4809/Del./2007 CO No.179/Del/2008
It may be noted that no further extension will be granted after 7.7.2006”
The above conclusion is also strengthened from the fact that the
interpretation of AO is based on the law as stood prior to amendment by
Finance No. 2 Act, 1996 w.e.f. 1.4.1997 and, not on the law relevant to the
instant year. The findings of CIT(A) in this regard are as under:
“6.5 Infact, I may hasten to add here that, the interpretation of the learned office is otherwise not in accordance with law since it is based on the interpretation of the statutory provisions of the Act as they stood prior to amendment by Finance No. 2 Act, 1996 w.e.f. 1.4.1997. The provisions prior to amendment read as under; “Explanation 1-In computing the period of limitation for the purposes of this section- …… (iii) the period commencing from the date on which the [Assessing officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with substituted for “the date on which the assessee furnishes” by the Finance (No. 2) Act, 1956 w.e.f. 1.4.1997 [the last date on which the assessee is required to furnish] a report of such audit under the sub-section or ……. 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), [(1A), (1B),[ (2) and (2A) available to the Assessing officer for making an order of assessment, reassessment or re-computation, 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.]” 6.6 The conclusion is further supported from the Memorandum Explaining the Provisions of Finance Bill and Notes on Clauses reported in 220 ITR 89 (Statue) “Amendment of time limit for completion of assessments and reassessments.
13 ITA No.4809/Del./2007 CO No.179/Del/2008
Under the existing provisions of Income Tax Act, the time limit for making an order of assessment is two years from the end of the assessment year in which the income was first assessable. However in certain circumstances the time is extended, or certain periods are excluded from the period of limitation. In case where special audit is ordered, the Assessing Officer is of the opinion that, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, it is necessary so to do, he may with the previous approval of the Chief commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant nominated by the Chief Commissioner or the Commissioner in this behalf. The assessee is required to furnish a report of such audit in the prescribed form duly signed and verified by the accountant. In such cases, the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under section 142(2A) and ending with the date on which the assessee furnishes a report of such audit is excluded while reckoning the period of limitation for completion of the assessment. As per the existing provisions, the special audit report is to be submitted within the time allowed by the Assessing Officer subject to a maximum of 180 days. It has been the experience of the Department that in a few cases where special audit is ordered, the assessees to not co-operate with the accountant as a result of which the report is not prepared and, therefore, not furnished. In such cases the normal time limit of two years is operative and the Assessing Officer does not get any additional time for the purpose of making an assessment because the time taken for furnishing the audit report is excluded only if the report of such audit is furnished. In order to overcome this problem, it is proposed to provide that the period commencing from the date on which the assessing officer directs the assessee to get his accounts audited and ending on the date on which the report of such audit was required to be furnished, shall be excluded from the period of limitation The proposed amendment will take effect from 1st April 1997and will accordingly, apply in relation to assessment year 1997-98 and subsequent years.” 6.7 Likewise even the CBDT Circular No. 762 dated 18.2.1998 reported in 230 ITR Page 12 (Statue) at page 44 provides:-
14 ITA No.4809/Del./2007 CO No.179/Del/2008
“Amendment of time limit for completion of assessments and reassessments 49.1 Under the existing provisions of the Income Tax Act, the time limit for making an order of assessment is two years from the end of the assessment year in which the income was first assessable. However, in certain circumstances the time is extended, or certain period are excluded from the period of limitation. 49.2 In case where special audit is ordered, the Assessing Officer is of the opinion that, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, it is necessary so to do, he may with the previous approval of the Chief commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant nominated by the Chief Commissioner or the Commissioner in this behalf. The assessee is required to furnish a report of such audit in the prescribed form duly signed and verified by the prescribed form duly signed and verified by the prescribed accountant. In such cases, the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under section 142(2A) and ending with the date on which the assessee furnishes a report of such audit is excluded while reckoning the period of limitation for completion of the assessment. As per the existing provisions, the special audit report is to be submitted within the time allowed by the Assessing Officer subject to a maximum of 180 days. 49.3 It has been the experience of the Department that in a few cases where special audit is ordered, the assessees to not co-operate with the accountant as a result of which the report is not prepared and, therefore, no furnished. In such cases the normal time limit of two years is operative and the Assessing Officer does not get any additional time for the purpose of making an assessment because the time taken for furnishing the audit report is excluded only if the report of such audit is furnished. In order to overcome this problem, the Act provides that the period commencing from the date on which the Assessing officer directs the assessee to get his accounts audited and ending on the date on which the report of such audit was required to be furnished, shall be excluded from the period of limitation. The amendment will take effect from 1st April 1997 and will, 49.4 accordingly, apply in relation to the assessment year 1997-98 and subsequent years.”
15 ITA No.4809/Del./2007 CO No.179/Del/2008
6.8 Infact, even in the decision of Nagpur Bench of Hon’ble Tribunal in the case of Mahakoshal Engineers & Contractors Co. (P) Ltd. vs. ACIT reported in 85 ITD 267, it has been held as under; “The conclusion that one can draw on a plain reading of section 153 Explanation 1(iii) in our view is that the period as fixed under section 142(2A) alone needs to be excluded and not a period of 180 days referred to in section 142(2C)” 6.9 It is thus evident that, the period required to be excluded is the period from which the assessee is directed to gets his accounts audited and ends with the date on which the assessee is required to furnish his report u/s 142(2A) of the Act and, therefore, since in the present case, the assessee was required to furnish its report u/s 142(2A) of the Act by 7.7.2006 and, not by 17.7.2006 the limitation for the various reasons as discussed hereinabove, for framing assessment expired on 6.9.2006. Accordingly, the assessment made on 14.9.2006 is clearly barred by limitation in terms of section 153(1) of the Act. In that view of the matter, I hold that, said assessment to be invalid being barred by limitation and annul the same.”
Having regard to the above, we hold that the CIT(A) was justified in
concluding the order of assessment is barred by limitation.
Apart from the above the learned DR in written submission has
submitted as under:
“3 It is reiterated that impugned assessment is not barred by limitation and is based on the fact that the report of Special Auditor had been received by AO on 17.7.2006 only. The AO had himself extended the last date for the submission of Special Audit Report to be to 17.7.2006 (as evident from the notings on letter dated 12.7.2006 of the assessee; page no 5 of the paper book). The said fact has been completely ignored by the ld. CIT(A). Hence 17.7.2006 is the time given by the AO to submit the audit report and not 7.7.2006. As per own admission of the assessee, the details were submitted at 5:0 PM of 7.7.2006 (page no. 6 of the paper book) i.e. the last date of submission of the report. It means that due to (mis)deed of the assessee, it became impossible to comply with the deadline set by the AO to submit the report. Hence, AO had to extend the date to make sec. 142(2C) of the Act workable.
16 ITA No.4809/Del./2007 CO No.179/Del/2008
4 Proviso to section 142(2C) empowers the AO to extend the time period to submit the audit report. Hence, the AO has rightly extended the period of submitting the audit report u/s 142(2A) till 17.7.2006. Such power is always inherent in quasi-judicial authorities. The later amendment giving suo-motto power of extension to AO is basically clarification of the intention which was existing from the day one when this provision was brought into the statue. It is no body’s case that the amendment giving suo-motto power of extension to AO is due to change of intention of parliament. 5 Also, the provision of extension by application from the assessee side is a check on the AO’s power, in order to protect undue harassment of the assessee. Any contrary interpretation is leading to absurd situation where assessee willfully comes in way of natural course of law and gets benefit, also. Therefore, following the ratio of Hon’ble SC, laid down in case Tarula Shyam (108 ITR 345-copy enclosed), we will have to go into the intention of the legislature and make an interpretation which makes the provisions workable. The only interpretation in such circumstances would be to that the AO has inherent power to increase date of compliance, suo- motto in the circumstances of non-co-operation by the assessee of course within over all limit of six months provided by the Act. 6 The assessment was made in pursuance to proviso to section 142(2C) and proviso to explanation 1(iii) to section 153(3) of the I.T. Act, 1961. The Special Audit was granted vide order u/s 142(2A) vide order dated 17.2.2006, hence the number of days remaining for making assessment were 42 days till 31.3.2006. The extended date by which Special Audit Report was required to be furnished is 17.7.2006. The period of limitation of 60 days (as per proviso to explanation to section 153) starts from 17.7.2006 and the limitation to complete the assessment falls on 15.9.2006. The assessment order was passed on 14.9.2006 within 60 days period as stipulated. In view of these facts, the assessment order passed is not barred by limitation.”
The learned counsel for the assessee rebutting the above contention
submitted that the aforesaid contention has been raised before the Tribunal
for the first time. It was submitted that revenue has placed reliance on an
endorsement made on the reverse side of a copy of letter dated 12.07.2006
17 ITA No.4809/Del./2007 CO No.179/Del/2008
addressed by “M/s Sushil Jeetpuria & Co.” to the learned Commissioner of
Income Tax-II and, received by the Assessing Officer on 13.07.2006. It was
submitted that no such letter was addressed to the AO but was addressed to
the Commissioner of Income Tax, It was further submitted that, if copy of
such a letter was received by AO, then it is not known on what date and,
how such a letter was received by AO. It was submitted that there is no
material brought on record to state that, purported endorsement could have
been made or was made on 13.07.2006 unilaterally, particularly when it is
not denied that, copy of the report was received even by the Commissioner
of Income Tax to whom this letter was addressed. It was also submitted that
such an endorsement which had not been even communicated, as is so
admitted could not be regarded as an extension u/s 142(2C) of the Act and
runs contrary to earlier extensions. It was further submitted that the
contention thus raised is based on non-existent material. In nutshell it was
contended that aforesaid endorsement cannot be read to be an order in law
under proviso to section 142(2A) of the Act for the following reasons:
“a) Firstly there was no such copy of the letter was available with the AO on 13.07.2006. b) Secondly, there was no such alleged endorsement made, as there was no occasion to have made such an endorsement;
18 ITA No.4809/Del./2007 CO No.179/Del/2008
c) In any case, it can never be treated to be order under proviso to section 142(2C) of the Act since report had already been furnished and, further-more there was no good and, sufficient reason to grant such an extension; d) In any case, such an purported extension by way of endorsement to furnish a copy of the report by 17.7.2006 was never communicated, though the same was an order under the statutory provisions of law and sought to have been communicated to the assessee who was supposed to have obtained, assuming it was in law it was the assessee who was to have obtained. It needs to kindly appreciated that the alleged endorsement and stated to be an order granting an extension within the meaning of proviso to section 142(2C) of the Act, cannot be stated to be an order of extension for the various reasons stated above and more particularly when it is seen that where the learned AO had been allowing extension albeit without jurisdiction, yet he had specifically passed such orders dated 24.03.2006 (page 6), 10.05.2006 (page 7- 8), 9.06.2006 (page 9), 21.06.2006 (page 10), 28.06.2006 (page 11 & 12). Thus, it is more than vocal that the alleged endorsement which is a manipulated endorsement and is unquestionably afterthought cannot be read as an order granting extension within the meaning of proviso to section 142(2C) of the Act; e) It was never even whispered much less contended till 12.02.2009, that the period to furnish a report was extended till 17.7.2006 as would be evident from order of assessment and, remand report of AO dated 11.06.2007 (pages 1015 to 1022 of PB-“E”), wherein too no such allegation was even made; f) Lastly, it is submitted that, the alleged endorsement on the aforesaid letter is an act of manipulation and has been made later for collateral purpose.” 15. The ld Advocate further contended that since there was no application
for extension of period of audit, there was no order u/s 142(2C) of the Act
dated 13.07.2006 and, as such, the purported order dated 13.07.2006
granting extension till 17.07.2006 was otherwise not a valid order. Reliance
in support of the above submission was placed on the following judgments:
19 ITA No.4809/Del./2007 CO No.179/Del/2008
(i) M/s Sunder Exports v DCIT in ITA No. 766/D/2008 for Assessment Year 2003-04 and upheld by the Hon’ble High Court by its judgment dated 27.05.2011 (ITA 1350/2010). (ii) Madhuvana House Building Co-Operative Society v ACIT 76 TTJ 948 (Bang) (iii) DCIT v. Popular Automobiles 90 ITD 333 (Coch) (iv) Mahakoshal Engineers & Contractors Co. (P.) Ltd. v ACIT 85 ITD 267 (Nag) (v) CIT v Bishan Saroop Ram Kishan Agro (P) Ltd 203 Taxman 326 (Del)
Having considered the judgment of Hon’ble Delhi High Court in the
case of CIT v Bishan Saroop Ram Kishan Agro (P) Ltd. 203 Taxman 326 we
notice that Their Lordships have held as under:-
“19. It was to rationalize the said proviso that the word "suo motu" came to be added by way of amendment with effect from 1st April, 2008. As per Clause 27.3 of the Circular dated 27th March, 2009 while the Assessing Officer shall continue to have the power to grant extension on an application made in this behalf by the Assessee, he could also grant extension of his own when there are good and sufficient reasons for such extension. Thus, it is noticed that sub-section (2C) before the amendment did not empower the Assessing Officer to extend the time for submissions of special audit report under sub-Section (2A). Further, the power of extension of time for submission of special audit report is also subject to limitation of a period of 180 days from the date on which the directions under section 142(2A) of the Act for the audit was received by the Assessee. It is an admitted fact that in the present case, the assessee had not made any application for extension of period of audit report. Therefore, the extension which was granted by the Assessing Officer on the request of the Auditor could be taken to be a suo motu action of the Assessing Officer which power, as noted above, was not available with the Assessing Officer prior to the amendment with effect from 1st April, 2008. Not only this, said power of extension was also further controlled in the words, "for any good and sufficient reasons". This would mean that the Assessing Officer was supposed to record reasons for granting extension on his own. Clause 27.4 of the Circular also clarifies that this amendment has been made applicable with effect from 1st April, 2008 and it is from this date onwards that the Assessing Officer shall have power to extend the period of furnishing of special audit report suo motu.
20 ITA No.4809/Del./2007 CO No.179/Del/2008
In the light of interpretation of the proviso as is existed before or after the amendment and the legislative intent behind the amendment as gathered from the memorandum and the circular noted above, we are not persuaded to agree with the interpretation as given by the Punjab and Haryana High Court in the case of Jagjit Sugar Mills Company Limited (supra). Further in view of our above discussion, it comes to be concluded that the Tribunal was correct in holding that the Assessment Order was barred by limitation. That being so, we answer Question No.1 in affirmative in favour of the Assessee and against the revenue. 21. In view of foregoing discussion that the amendment whereby the word 'suo motu' were inserted in sub-section (2C) of Section 142 of the Act was to be applicable with effect from 1st April, 2008 only, the amendment cannot be said to be clarificatory or retrospective in nature. The amendment was prospective and was to be applicable with effect from 1st April, 2008 only. Accordingly, we answer Question No.2 against the revenue.”
Applying the ratio of the aforesaid judgment, it is not denied and
disputed that there was no application for extension of period of audit and
therefore order u/s 142(2C) of the Act dated 13.7.2006 granting extension
till 17.7.2006 was not a valid order. In view of the above the only conclusion emerges that audit was to be completed by 7th of July’2006 and,
as such the period from 17.02.2006 to 07.07.2006 is to be excluded in terms
of Explanation to section 153 of the Act. Further, after considering the
period of 60 days, as provided in the proviso to Explanation 1 to section
153(1) of the Act, the period of limitation expired on 6.09.2006; whereas the
instant assessment had been framed on 14.09.2006 and therefore, the
assessment order is barred by the limitation
21 ITA No.4809/Del./2007 CO No.179/Del/2008
As we have already upheld the order of the ld. CIT(A) in annulling the assessment in the case of the assessee on the ground of limitation, the cross objection filed by the assessee in CO. No. 179/D/2008 supporting the order
of the ld. CIT(A)-VIII, New Delhi also becomes infructuous and the same is also dismissed. Order pronounced in open court on this 23RD day of February, 2016.
SD/- SD/- (O.P. KANT) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 23RD day of February, 2016 TS