2015 (6) TMI 1238 - AT - Income Tax

Assessment u/s 153A r.w.s. 144 - Period of limitation - Validity of special audit u/s 142A - assessments made in the period specified u/s 153B - special audit was ordered by AO giving 45 days time for the assessee to get the books audited and furnish the audit report - when the said audit report was not furnished by the assessee AO suo motu extended the period vide his letter dated 10.3.2008 by giving another 135 days time totalling to 180 days permitted maximum time under the statute - HELD THAT - As considered the submissions of the ld. DR in regard to the nature of amendment to proviso to section 142(2C) of the Act. In our opinion the said amendment relates to the suo motu powers of the AO in extending due dates in matters relating to special audit. We do not want to go into this issue of suo motu powers of the Assessing Officer as it becomes an academic exercise considering the submissions of the ld. Counsel relating to the ordering for special audit after the assessments have already time barred on 31.12.2007. Therefore on hearing both the parties and going through the chronology of the dates and the manner of computing time limitations in the form of charts furnished which are made part of this order we are of the view that the direction of the Assessing Officer for special audit was served on the assessee on 25.1.2008 which must be considered for the purpose of computing the limitation of time in making assessment. In that case the direction of the Assessing Officer was subsequent to the expiry of the due date for making assessment. Also without prejudice even if the date 25.1.2008 considered by the Assessing Officer as the date of service of the direction and not 28.1.2008 as considered by the CIT(A) is taken into account still the assessments were not made in the period specified u/s 153B of the Act. Accordingly from all these points of view we are of the opinion that the assessments made by the Assessing Officer for all these five assessment years uniformly on 24.9.2008 are bad in law. Thus this part of Ground No.2 in all the appeals are allowed in favour of the assessee.

Summary

Issues Involved:
1. Limitation of time in completion of assessments.
2. Validity of special audit order under section 142(2A) of the Income-tax Act.
3. Powers of the Assessing Officer for suo motu extension of time under proviso to section 142(2C) of the Income-tax Act.

Detailed Analysis:

1. Limitation of Time in Completion of Assessments:
The primary issue revolves around whether the assessments made by the Assessing Officer were barred by the limitation of time. The assessee was covered under section 132 of the Income-tax Act on 26.10.2005, and notices under section 153A were issued on 10.7.2006. The due date for completing the assessments was 31.12.2007. However, the Assessing Officer ordered a special audit on 10.12.2007, which was served on the assessee on 25.1.2008, after the due date. The assessments were eventually made on 24.9.2008.

The Tribunal found that the assessments were indeed time-barred. The CIT(A) had erroneously considered the date of service as 28.1.2008 instead of 25.1.2008 and failed to account for the leap year in 2007. The Tribunal concluded that the assessments made on 24.9.2008 were invalid as they were beyond the permissible time limit.

2. Validity of Special Audit Order Under Section 142(2A):
The Tribunal examined whether the special audit order was valid considering the timeline. The special audit order dated 10.12.2007 was served on the assessee on 25.1.2008, after the due date for completing the assessments (31.12.2007). The Tribunal held that the order for a special audit was invalid as it was communicated after the due date for making assessments had expired. Even if the date of the order (10.12.2007) was considered, the assessments should have been completed by 24.9.2008, which was not the case.

3. Powers of the Assessing Officer for Suo Motu Extension of Time:
The Tribunal also addressed the issue of the Assessing Officer's powers to extend the time limit suo motu under the proviso to section 142(2C). The amendment granting these powers came into effect from 1.4.2008, which was after the relevant assessment years. The Tribunal noted that the Assessing Officer extended the period without a written application from the assessee, which was not permissible under the law at that time. The Tribunal did not delve deeply into this issue as it became academic due to the assessments being time-barred.

Conclusion:
The Tribunal concluded that the assessments made by the Assessing Officer on 24.9.2008 were barred by limitation and thus invalid. Consequently, the appeals were partly allowed in favor of the assessee, and other legal issues and merits were dismissed as academic.

Order:
The appeals were partly allowed, and the order was pronounced in the open court on 05th June 2015, at Chennai.