Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (4) TMI 581 - ITAT DELHI

2016 (4) TMI 581 - ITAT DELHI - TMI - Validity of assessment u/s 153 - period of limitation - extension of period of audit - Held 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 Expla .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

For The Assessee : Shri Salil Aggarwal, Advocate and Shri Shailesh Gupta, CA For The Revenue : Shri A.K. Saroha, CIT DR and Shri Anil Jain, Senior DR ORDER PER A.T. VARKEY, JUDICIAL MEMBER : 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 co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 wrongl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ceedings 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. 3. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n facts in not deleting the addition of sum of ₹ 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 ₹ 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 ₹ 41,30,033/- u/s 92C o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Income Tax (Appeals) has also erred both in law and on facts in not deleting the disallowing a sum of ₹ 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 ₹ 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rief are that return of income was filed on 2.12.2003 showing total income at ₹ 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 w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

om 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 subsection…….…….. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

en 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 furni .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tatutory 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

om 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 therefor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

her 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. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 17.7.2006 should be adopted as the date for determining the period of limitatio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch 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……. …….. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing 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 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 provi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ollowing directions: S No. Date of the order for extension for period of audit under Proviso to section 142(2C) of the Act Period Extend ed Date by which the assessee was required to furnish the audit report u/s 142(2A) of the Act Remarks, if any 1 24.03.2006 45 days 08.05.2006 2 10.05.2006 30 days 07.06.2006 Order was made after 08.05.2006 and, not before or 08.05.2006 3 09.06.2006 10 days 17.06.2006 Order was made after 07.06.2006 and, not before or 07.06.2006 4 21.06.2006 7 days 27.06.2006 Or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the special auditor so as to enable him to file the report within stipulated time. It may be noted that no further extension will be granted after 7.7.2006 11. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 off .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

counts 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:- Amendment of time limit for completion of assessments and reassessments 49.1 Under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nue, 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 Assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. (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 req .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g barred by limitation and annul the same. 12. Having regard to the above, we hold that the CIT(A) was justified in concluding the order of assessment is barred by limitation. 13. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essee, 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. 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 bas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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, suomotto in the circumstances of non-co-operation by the assessee of course within over all limit o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on 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. 14. 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 endors .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 furt .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r 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 ass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

7.07.2006 was otherwise not a valid order. Reliance in support of the above submission was placed on the following judgments: (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 (Na .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ll 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 powe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version