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2016 (2) TMI 154 - ITAT DELHI

2016 (2) TMI 154 - ITAT DELHI - TMI - Validity of assessment u/s 153 - extension of period of limitation - whether the extended period of limitation as provided under Explanation 1(iii) of Section 153 is available to the Assessing Officer for completion of assessment u/s 143(3), or not? - Held that:- A notice u/s 148 or reasons recorded by the A.O prior to re-opening of assessment cannot be challenged separately. But an assessment order can be challenged in an Appeal before the Ld. CIT(A) or the .....

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mitation. Thus, we reject this contention of the Ld. CIT. DR.

Extension of time framed by the A.O for submission of audit report u/s 142 (2C) of the Act vide order dated 28th June, 2004 is bad in law. Consequently the Assessing Officer would not get extension of time for completion of assessment in terms of Explanation 1 (iii) to Section 153 for the purpose of computation of limits. Hence, the assessments are barred by limitation as per the table given at Para 7 of the order. The Asse .....

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Reddy, AM And Suchitra Kamble, JM For the Appellants : Shri S D Kapila & Shri R R Maurya, Advs. For the Respondents : Smt Sulekha Verma, CIT (DR) & Shri Vikram Sahay, Sr. DR ORDER Per Suchitra Kamble, JM These appeals are filed by the assessee against the order dated 04.03.2005 passed by CIT(A)-XVII, New Delhi. 2. The primary Grounds raised by the assessee on Section 142(2A) read with Section 142(2C) & Section 153 of the Income Tax Act, 1961 in all these appeals are as follows: &quo .....

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-XVII, erred in law and on the facts of the case, by holding that the extensions of time for completion of audit under Section 142(2A) of the Act and for submission of the Special Audit Report were proper and valid and that the Assessment was not barred by limitation or without jurisdiction on account of such illegal, unlawful and invalid extension of time. Ground No. 5 That order of the Ld. CIT(A) has been passed in violation of the Rule against Bias which is a principle of Natural Justice whic .....

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e Seed Act, 1966. For producing the seed in commercial quantities, the assessee purchases the basic input of parent seed from the Indian Branch of POC in large quantities. The assessee company claims that it had taken on lease, agricultural lands from over 6000 small and marginal farmers for a particular cropping season of 4-6 months. These lands are spread across various districts of Andhra Pradesh and Karnataka. It claims that right from the inception the practice followed by the assessee comp .....

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reals. For this purpose, the company employs experts for supervising the farmers and also for giving them training. The most expensive input, parent seed, is provided free of cost and the farmers are paid cost of fertilizer and pesticide on a standardized basis. Token cost of supervision is deducted from the wages for labour. The assessee has been following the custom of using the output of the quantity of parent seed as the measure for calculating the value of labour. The company pays advances .....

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Asstt. /Income assessed (Rs.) Date of issue of Notice u/s. 148 Remarks 1996-97 19/11/1996 10374615 24.12.1998/ 10439865/- 21.03.2003 u/s.143(3) (beyond 4 years 1997-98 29.11.1997 18906373 2.12.1999/ 18906373/- 21.03.2003 -143(3) (beyond 4 years) 1998-99 26.11.1998 12357390 22.12.2000/ 12357390/- 21.03.2003 u/s.143(3) (within four years) 1999- 2000 27.12.1999 9954500 28.09.2000/ 9954500 21.03.2003 u/s.143(1)(a) (within four years) 2000- 2001 22.11.2000 16980790 13.07.2001/ 16980790 21.03.2003 u/ .....

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ing exemption u/s 10(1) of the I. T Act in respect of income derived from production and sales of hybrid seeds in the A.Y 1996-97. The Ld. ITAT in its judgment dated 3.1.2003 in the case of M/s Proagro seeds P. Ltd for the A.Y 1994-95 and 1997-98 have upheld the addition made by the AO on a/c of income from hybrid seeds, which the assessee has claimed as exemption as agricultural income. In view of the above judgment I have reason to believe that income from production and the sale of hybrid see .....

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of the relevant assessment year and as the original assessments was completed u/s. 143(3) of the Income Tax Act, 1961 and reasons to that effect was recorded by the AO. The said reasons were provided to the assessee for reopening of the assessment for each year and assessee filed its objections which was disposed off by AO vide order dated 04.03.2004. The limitation date for completion of each assessment for each year and the actual date of completion are mentioned below:- A.Y.s Date of receipt .....

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9.04 99- 00 9.3.04 120 days 7.7.04 26.6.04 24.7.04 9.8.04 22.9.04 27.9.04 00- 01 9.3.04 120 days 7.7.04 26.6.04 24.7.04 9.8.04 22.9.04 27.9.04 01- 02 26.2.04 120 days 24.6.04 28.6.04 24.7.04 9.8.04 23.8.04 27.9.04 4. The Ld. Counsel for assessee submitted that the orders passed by the Assessing Officer extending the last date of submission of the audit report on 28/6/2004 for A. Y 1996-97 and on 26/6/2004 for A.Y 1997-98 to A. Y 2000-01 & 2001-02 are suo motu and that the same are illegal an .....

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er u/s 142 (2C) of the Act, was incorrectly held to be valid by the Ld. CIT(A). The Ld. Counsel for assessee also made supplementary submission that in absence of any order u/s 142(2A) for either the Assessment Year 1996-97 or the Assessment Year 1998-99 depending on the validity of corrigendum order dated 9/8/2004 passed by the assessing officer, are without jurisdiction and barred by limitation. This is because if the order u/s 142(2A) for assessment year 1996-97 is valid, then there is no ord .....

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r computation the period of limitation. 4.1. The Ld. Counsel for the assessee submitted the case law of CIT Vs. Bishan Saroop Ram Kishan Agro (P.) Ltd. [2011] 15 taxmann.com 221 (Delhi), the Hon ble Delhi High Court held that (para 15) "…the provisions as existing in sub-section (2C) of Section 142 before 1.4.2008 did not empower the Assessing Officer to "suo motu" extend the time for submission of audit report under subsection (2A). This is also clear from the memorandum e .....

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was to be applicable with effect from 1st April, 2008 only. …." Thus the Ld. Counsel for the assessee submitted that the extension granted was "suo motu" in assessee s case as assessee company has never asked for extension at any time. The letters which were addressed by the Auditor s and Advocate s or by the assessee company was not an extension application. The second case law relied upon by the Ld. AR is Asstt. CIT Vs. Sushila Milk Specialties (P) Ltd. (DEL) (SB) 126 TT .....

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of Rajesh Kumar vs. CIT while deciding the appeal in IT Appeal No. 184 of 2009 by order dt. 9th April, 2009 have upheld the order of Tribunal. Therefore, in view of the decision of jurisdictional high Court, the issue no longer survives and is required to be decided against the assessee." Para 15 of the said order held as "15. All irregular or erroneous or even illegal orders cannot be held to be null and void as there is fine distinction between the orders which are null and void and .....

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suo motu extension order are not legal for these assessment years. Thus the order is null, non-est and void ab initio. 4.2. The submissions of Shri S.D. Kapila, Ld. Counsel for the assessee can be summarized as below:- (a) Ground No. 10, 11 of the assessment year1996-97 not pressed. (b) Ground No. 11 & 10 A. Y 1996-97 not pressed. (c) Ground No. 11 & 12 A.Y 1997-98 not pressed. (d) Ground . 11 & 12 A.Y 1998-99 not pressed. (e) Ground 11 & 12 A. Y 1999-2000 not pressed. (f) Groun .....

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s withdrawn. (c) The additional ground filed for the Assessment Year 1998-99 that no order u/s 142 (2A) was passed for Assessment Year 1998- 99 is withdrawn. (d) The initiation of special audit was bad in law, as no opportunity was given to the assessee by the Assessing Officer before appointment of special auditor and consequently the order is bad in law and the assessments barred by limitation. (e) Extension of time for completion of special audit u/s 142(2A) was made u/s 142 (2C), without an .....

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ssing Officer is not "suo moto" and was a proper extension. Therefore, the assessments are not barred by limitation. The Ld. DR further submitted that the order for Special Audit passed under Section 142 (2A) cannot be challenged before the CIT(A) and ITAT. The DR further pointed out that before CIT(A) only the second extension was challenged by the Assessee. The extension was given by the Assessing Officer for the benefit of the assessee, as the time was expiring on 24.07.2004 as henc .....

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oathe to quash the impugned orders. Accordingly, we hold that the law on the subject, clarified by us, will apply prospectively and it will not be open to the appellants to urge before the Appellate Authority that the extended period of limitation under Explanation 1 (iii) to Section 153 (3) of the Act was not available to the Assessing Officer because of an invalid order under Section 142 (2A) of the Act. However, it will be open to the appellants to question before the appellate authority, if .....

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assessee which had, the duty cast on it, for submission of a special audit report. The Ld. DR further relied upon the case of Rajesh Kumar Vs. CIT, Central (3) New Delhi of the Hon ble Delhi High Court. The Ld. DR submitted that the question of validity of the order of the assessing officer should have been contested before the Ld. CIT(A) by the assessee, but was not done by the Assessee. Hence, in light of these two judgments, the Ld. DR submitted that the Assessment Orders were rightly passed .....

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Tribunal (ITAT). That it is open for the assessee to question the issue by way of a writ petition before the High Court and not having done so, it is not open to take the plea in this proceedings. (b). The Ld. CIT(A) has explained and given the detailed background and circumstances in which the Assessing Officer had to extend the time granted for the submission of audit report u/s 142(2C) in the interest of Revenue and hence these orders for the extension are validly passed. (c). The Assessing O .....

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and with a view to avoid making a best judgment assessment u/s 144(1) (b), for the benefit of the assessee, the extension was granted and hence the judgment of the Hon ble Delhi High Court in the case of Bishan Saroop Ram Kishan Agro (P). Ltd. supra is distinguishable on facts. (d). The issue whether the Revenue should not be given opportunity to the assessee before appointing special auditors u/s 142(2A) is no more res integra in view of the judgment of the larger Bench of the Hon ble Supreme C .....

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s 126 TTJ 289 Delhi Special Bench, cannot be considered as sufficient opportunity was granted to the assessee and the Assessing Officer has issued numerous show cause letters for which the Assessee has submitted his replies. (e). The technical meaning of term "suo motu" is "on his own motion" meaning thereby that no other external influence should be there on the A.O in taking a decision. The plea that the A.O has "suo motu" extended the time of special audit is fac .....

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he time of special audit for the second time, based only on the circumstances which the assessee company made him aware of, from time to time, by way of correspondence and this is a good and sufficient reason for grant of extension of time for special audit. (g). In case of Bishan Saroop Ram Kishan Agro (P) Ltd., (supra) the A.O extended the period of special audit for the first time on the basis of auditors request and the second and third time on his own and hence the Hon'ble High Court he .....

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. CIT(A) denying an assessee s liability to be assessed to tax or disputing the amount of income tax demanded. (b) That the provisions of u/s 142(2A) and 142(2C) read with Explanation 1(iii)of Section 153 are integral to the process of making an assessment and it is open for the assessee to challenge the assessment on the ground that the period of limitation prescribed has expired on these orders were erroneous or passed without jurisdiction. (c) That the A.O as well as the Ld. CIT(A) have state .....

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cords as well as the orders of the authorities below and case laws cited we hold as follows. At the outset the following grounds by the assessee are dismissed as not pressed. The grounds are as follows: (a) Ground No. 10, 11 of the assessment year1996-97 not pressed. (b) Ground No. 11 & 10 A. Y 1996-97 not pressed. (c) Ground No. 11 & 12 A.Y 1997-98 not pressed. (d) Ground . 11 & 12 A.Y 1998-99 not pressed. (e) Ground 11 & 12 A. Y 1999-2000 not pressed. (f) Ground No. 11 & 13 .....

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s dismissed as withdrawn. Similarly, the additional ground filed for the A. Y 1998-99, with respect to passing of an order u/s 142(2A) is also dismissed as withdrawn. 7.2. The only question which we adjudicate in this order is "whether the assessment orders for all the six assessment years are barred by limitation, in view of provisions of Section u/s 142(2A) 142(2C) read with Explanation 1 (iii) of Section 153 of the Act." In other words the issue which is to be adjudicated is, " .....

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ngs what we are examining, is whether the extended period of limitation as provided under Explanation 1(iii) of Section 153 is available to the Assessing Officer for completion of assessment u/s 143(3), or not. The assessee contends that the order u/s 142(2C), extending the period granted for completion and submission of audit report is made without an application being made for extension by the assessee and for any good and sufficient reason, and hence the extension is bad in law and hence the .....

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s 142(2C) cannot be appealed separately. But when an assessment order is challenged, then the different aspects which are integral to the process and ultimate completion of amount can be challenged in Appeal. For example a notice u/s 148 or reasons recorded by the A.O prior to re-opening of assessment cannot be challenged separately. But an assessment order can be challenged in an Appeal before the Ld. CIT(A) or the ITAT on the ground that the re-opening itself is bad in law, as the notice is il .....

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er the issue whether the order passed by the A.O extending time granted for submission of special audit report dated 28th June 2004, is in accordance with law or not. For the ready reference, we extract the order as follows: Office of the Assistant Commissioner of Income Tax, Circle 14(1), C.R. Building, I.P. Estate, New Delhi Pin: 110002 Date: June 28, 2004 Order Whereas, in exercise of the powers conferred in terms of the provisions of Section u/s 142(2A) of the Income Tax Act, 1961, the asses .....

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equired audit report for the assessment years 1996-97 to 2001-02 is being extended to 24/7/2004. 7.6 In response to the above order, the assessee on 5th July 2004, has written to the Assessing Officer on the above issue seeking rectification u/s 154. This letter is extracted for ready reference:- July 5, 2004 The Assistant Commissioner of Income Tax Circle 14(1), New Delhi Ref: Audit u/s 142(2A) your order No. F No/ACIT Cir 14(1)/2004-05 u/s 142(2A)/362 dated June 28, 2004. Application for recti .....

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urther time to comply with the directions. In fact, vide letter dated June 3, 2004 duly filed in your office, it was clearly explained that the company had duly complied with the directions and fully cooperated in this regard and that the delay in the starting or completing the audit was not attributable to the company in any manner whatsoever. It is accordingly prayed that the order referred above may kindly be rectified u/s 154 of the Income Tax Act 1961 by deleting/expunging the words " .....

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riod as may be specified by the 3[Assessing] Officer: Provided that the 3[Assessing] Officer may, 4[suo motu, or] on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under subsection (2A .....

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Officer, while extending the period granted vide order dated 28th July 2004 cannot in our view replace an application made by the assessee for grant of extension of time, which is a requirement of the Act. When the assessee has not made a specific application for extents or sought for the time to set the audit completes, the A.O cannot based on correspondence draw an inference and grant an extension of time. He should write to the assessee in case of doubt. 7.9. Even otherwise, the assessee has .....

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ons of Section 144 of the Act. When the assessee does not ask for time and specifically states so, the A.O cannot thrust an extension on it. 7.10. The Ld. DR had submitted that the terms suo motu means on its own motion and that Assessing Officer has not acted on his own. The requirement of the Act does not speak of suo motu. It speaks of extension being granted on an application being made by the assessee and also for good and sufficient reason. In this case, there is no specific application by .....

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