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2013 (5) TMI 222 - AT - Income TaxAddition on undisclosed income - search u/s 132 - time limit for completion of Block assessment - whether 31-01-03 or 31-03-03 - addition of donations, estimation of income for the entire block period - Held that:- In spite of repeated requests by assessee, the order of the CIT on special audit was never furnished to assessee and it has been placed on record only in the present appeal proceedings - there is no reference to the period under which the audit was to be completed either in the order or in the communication by AO. This comes out only from the letter written by the said auditor to assessee and to the ACIT for extension of period. It is a fact that assessee was not given any opportunity before preferring to the Special Audit, as seen from the notices issued in the course of block assessment proceedings before referring to the special audit by AO, assessee/ AR was attending before AO and was furnishing various information as required. As decided in Rajesh Kumar vs. Deputy Commissioner of Income-tax (2006 (11) TMI 135 - SUPREME Court) formation of opinion before invoking section 142(2A) indisputably must be based on objective consideration. The factors enumerated in section 142(2A) are not exhaustive. Once it is held that the assessee suffers civil consequences and any order passed by it would be prejudicial to him, principles of natural justice must be held to be implicit. In the instant case itself, the assessees were not made known as to what led the Deputy Commissioner to form an opinion that all relevant factors including the ones mentioned in section 142(2A) were satisfied. If even one of them was not satisfied, no order could be passed. If the attention of the Commissioner could be drawn to the fact that the underlined purpose for appointment of the special auditor was not bona fide he might not have approved the same. Assuming that two sets of accounts were being maintained, the same would not mean that the nature of accounts was difficult to understand. It could have furthermore not been shown that the power was sought to be exercised only for an unauthorised purpose, viz., for the purpose of extension of the period of limitation as provided for under Explanation 2 to section 158BE. Thus, the order passed by the Deputy Commissioner under section 142(2A) without giving opportunity of hearing to the assessee and refusing the assessee's request for supplying reasons for passing such order, could not be sustained". As AO has only power to extend the time limit originally granted only when the assessee makes an application. He has no suo motu powers which were subsequently inserted with effect from April 1, 2008. Case of B.N. Amarnath v. CIT (2002 (10) TMI 81 - KARNATAKA High Court) will equally apply to the facts of this case. Since the assessee had not made any request for extension of time, the action of the Assessing Officer in extending the period by another three months was not according to the provisions of the law. AO has no jurisdiction to extend the period granted originally for completion of audit which was up to end of April 2003. Therefore, the time period to be counted, even if the reference was considered valid, for the extension of time barring period can only be upto 30.04.03. In view of these two reasons ie. assessee was not given an opportunity before ordering special audit and further extended the time from April 03 to July 03 being bad in law the orders so passed in September 2003 is beyond the time limit permitted under the Act and therefore, order so passed becomes bad in law. Since the period from Feb 2003 to Sep. 03 was taken under the guise of Special audit, which is held without proper jurisdiction, the time so taken can not be counted and the period does not get extended. The order at best could have been completed by 31-01-03 or by 31-03-03. Since the order was passed on 22-09-03, the same has to considered, as time barred. Therefore, the order passed by AO suffers from legal jurisdiction and is therefore, bad in law. Even on merits assessee's contentions seems to be prima facie correct as the addition of donations, estimation of income for the entire block period without there being any evidence for that period on the limited material for the year of search and further bringing to tax the entire amount which was already offered in the regular return cannot be sustained in the block assessment - appeal filed by assessee allowed.
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