TaxTMI 
TaxTMI 
2018 (3) TMI 802
X X X X Extracts X X X X
X X X X Extracts X X X X
....der Section 143(2) of the Income Tax Act,1961 ('Act', for short) was issued. 4. As per the petitioner, assessment proceedings had remained dormant for nearly twenty eight months till notice dated 17th January, 2013 was issued. Petitioner was required to produce books of accounts for the first time on 28th February, 2013, barely a month before the expiry of time limit for passing the assessment order on 31st March, 2013. Petitioner submits that books of accounts and vouchers were voluminous (described as truck loads), and accordingly, the Assessing Officer had asked the petitioner to furnish books of account in a manner they could be easily examined. On 8th March, 2013, books were submitted in Systems Applications and Products (SAP) format. Trial balance in soft and hard copies was also provided. Petitioner's request to specify ledger accounts required to be produced was rejected by the Assessing Officer with the direction to produce all accounts by 11th March, 2013. Petitioner on 11th March, 2013 had submitted a soft copy of the books of accounts in Excel sheet format, including trial balance and more than 600 pages of general ledger accounts etc. In the proceedings held on 14....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l compliance was never made. Soft copy of the books of accounts furnished in SAP format could not be accessed by using an accounting software and had to be converted, and hence cannot be termed as production of books of accounts. Authorized representatives of the petitioner had expressed their inability to explain accounts in entirety and reconcile the details furnished with the accounts. Given the said facts, the Assessing Officer had drawn the proposal for special audit. 9. On the aspect of opportunity, the respondents assert that the petitioner was deliberately marking time, knowing that the last date for passing of the assessment order was 31st March, 2013. Commissioner of Income Tax, Delhi-V, though not mandated as per the provisions of the Act, had issued opportunity notice to the petitioner to attend and explain vide letter dated 26th March, 2013. An attempt to serve the opportunity letter on the authorized representative was made on 26th March, 2013 itself. However service was refused on the ground that this was against the policy of the Chartered Accountant firm. At 11.45 a.m. on 28th March, 2013, authorized representative had appeared and confirmed having received the en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o serve the order under Section 142(2A) of the Act for the Assessment Year 2009-10. As per the said report, two persons, who were present at the reception of the said office, had initially refused to accept the letter, but after talking to the senior officers on phone, they had accepted the letter at 5.45 P.M. 12. The petitioners, however, vehemently deny having received the order under Section 142(2A) of the Act by any of the aforesaid modes on or before 31st March, 2013. It is stated that only 5 pages, i.e. covering letter of two pages and Terms of Reference of three pages, were sent by two fax messages on 30th March, 2013, and not the entire order of 22 pages under Section 142(2A) of the Act. Reliance is placed on two fax message confirmation reports submitted by the respondents, indicating that five pages were transmitted. Similarly, postal receipt Nos. ED867855480IN and ED867855493IN mention the weight of the envelopes as 20 grams and the fee charged as Rs. 17/-, which was payable for packets up to 50 grams. Order under Section 142(2A) of 22 pages would have weighed much more and was not enclosed in the said envelopes. Moreover, as the envelopes were handed over to the postal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... petitioner as an assessee and the right of the authorities to make and cause assessment got extinguished. Once the right was extinguished, it cannot get revived by a subsequent communication. Hence the assessment proceedings for the Assessment Year 2009-10 have abated. Communication of the Terms of Reference cannot be construed as communication of the order under Section 142(2A). Reliance is placed on Rajinder Nath versus Commissioner of Income Tax, Delhi, AIR 1979 SC 1933 and Arun Kumar Aggarwal versus State of M.P., AIR 2011 SC 3056. 14. The aforesaid contentions raised by the petitioner raise two distinct aspects and issues. First, what was the "effective" date of the order under Section 142(2A) directing special audit for exclusion under Clause (iii) of Explanation 1 of Section 153 of the Act. In other words, whether the Act requires and mandates that the order under Section 142(2A), even if passed earlier, must be served on the assessee on or before the last date for passing of the assessment order. Intertwined is the question of effect of service of Terms of Reference within the limitation. Second dispute is factual as it relates to the date when the order under section 142(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tioner also accepts that on 1st April, 2013, the Special Auditor had visited the premises of the petitioner and an employee of the petitioner had made a noting that the petitioner company was aware of the appointment of the Special Auditor and they would like to explore legal options and respond within seven days. Reference was to the service affected on 31st March, 2013. Petitioner in the written replies dated 6th April, 2013 and 10th April, 2013, had not stated or claimed that the order under section 142(2A) of the Act was not communicated/served on them within the limitation period. No such assertion was made by the petitioner in Writ Petition (C) No. 2798/2013, which was withdrawn with liberty to file another Writ raising new contentions. Petitioner does claim that they did not earlier understand and appreciate the legal implications or effect of failure to serve the order under Section 142(2A) of the Act. This assertion may be plausible and in light of the contentions raised, we have examined the legal position whether the assessment proceedings had abated. In view of legal findings recorded below, our factual finding on the date of service would be somewhat insignificant and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Income Tax, Delhi-5, again", which are missing in the copy filed by the petitioner as Annexure B-8 with the rejoinder affidavit. It is obvious that there are two separate letters of the Assessing Officer, both bearing the date 2nd April, 2013, but with material and significant addition of words in one which is the copy available on official records. This is objectionable. Any such fault by an assessee would have resulted in severe reprimand, if not penal action. As per the petitioner, addition was made subsequently when issue of non service of order under Section 142(2A) was raised with plea of abatement. Noticeably, letter dated 2nd April, 2013 written by the Assessing Officer to the petitioner has not been placed on record by the respondents along with their affidavit. 21. What is equally disturbing and a matter of concern is that the direction for special audit, which has the effect of extension of time for completion of the assessment proceedings, was initiated about ten days before the last date for passing of the assessment order vide show cause notice dated 21st March, 2013. The order for special audit under Section 142(2A) was passed on 30th March, 2013, whereas the time f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....schedule, and had made it difficult and did try to obstruct. To this extent the petitioner is also to be blamed. Having considered the contents of the order sheets, queries raised and issues relating to accounts, which have been fairly elaborately explained and elucidated in the order and counter affidavit, we are satisfied that a case for special audit was made out. To be fair to the respondents, we deem it appropriate to record that the petitioner did not in the oral arguments before us specifically question and challenge the order under Section 142(2A) on merits, though plea in this regard is somewhat raised in the written submissions. 24. We will now examine the legal position and answer whether the assessment proceedings would have abated if the order under Section 142(2A) was passed on 30th March, 2013 and was received or served on or after 1st April, 2013. To decide this controversy, we must reproduce Sections 142(2A), 142(2C) and clause (iii) of Explanation to Section 153 of the Act and they read:- "Section 142(2A) of the Act "142 (2A) If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume....
X X X X Extracts X X X X
X X X X Extracts X X X X
....counts audited under sub-section (2A) of Section 142, ending with the last date on which the assessee is required to furnish a report of the special audit; or when such directions are successfully challenged in the Court the date on which the order setting aside such direction is received by the Commissioner, would be excluded. In other words, in case we uphold the order of special audit, the time period from the date when the order was passed on 30th March, 2013 till the special audit is completed and report is submitted, would be excluded. Sub-section (2C) to Section 142 states that report will be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer. The proviso states that the Assessing Officer on his own or on an application by the assessee, and for good and sufficient reason, can extend the period for special audit for further period or periods, but the aggregate of such periods cannot exceed 180 days from the date on which direction "under sub-section (2A) is received by the assessee". 26. The petitioner had emphasised on the aforesaid words "direction under sub-section (2A) is received by the assessee". It was ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....communicated to the assessee. Time period stipulated by the Assessing Officer for completion of special audit would commence only from the date when the assessee is communicated and receives the order and not the date of the order. Outer time limit of 180 days specified in the proviso has been fixed with reference to the date on which direction under sub-section (2A) to Section 142 is received by the assessee and not from the date of the passing of the order. 29. We would now refer to the case law dealing with the question of passing of the order and service of the order and whether non service or failure to serve the order under Section 142(2A) of the Act within the limitation period for passing of the order is fatal and would make the order passed null and void. 30. We begin by referring to the decision relied upon by the petitioner in Shreyansh Industries (supra) which dealt with interpretation of sub section 10 to section 11 of the Punjab General Sales Tax Act, 1948. Statutory period of completion of assessment of the dealers who had filed regular returns as prescribed was 3 years from the last date prescribed for furnishing the return. Referring to sub section 10 to section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as communicated to him before that date. The ordinary meaning of the word "communicate" is to impart, confer or transmit information. (Cf. Shorter Oxford English Dictionary, Vol. 1, p. 352). As already stated, telegrams, dated July 31, and August 2, 1958, were despatched to the respondent at the address given by him where communications by Government should be despatched. Both the telegrams transmitted or imparted information to the respondent that he was suspended from service with effect from August 2, 1958. It may be that he actually received them in or about the middle of August 1958, after the date of his retirement. But how can it be said that the information about his having been suspended was not imparted or transmitted to him on July 31 and August 2, 1958 i.e. before August 4, 1958, when he would have retired? It will be seen that in all the decisions cited before us it was the communication of the impugned order which was held to be essential and not its actual receipt by the officer concerned and such communication was held to be necessary because till the order is issued and actually sent out to the person concerned the authority making such order would be in a position....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he single Judge and Division Bench of the Punjab and Haryana High Court had held that the Government employee had retired from service rendering the enquiry and the ultimate dismissal invalid for the order of suspension was served post 4th August, 1958. In this case, reference was made to decision of the Supreme Court in Bachhittar Singh versus The State of Punjab, [1962] 3 Supp. SCR 713 and State of Punjab versus Sodhi Sukhdev Singh, [1961] 2 SCR 371 to argue that an uncommunicated order on the file was inconsequential. Reference was also made to Sardar Pratap Singh versus State of Punjab, (1966) ILLJ 458 SC wherein two Judges of the Supreme Court had held that an order of suspension would be effective, the moment it was issued. However, three other Judges in Sardar Pratap Singh (Supra) had not expressed any view on the said aspect. Thus, Khemi Ram (Supra) holds that communication would be effective when it was dispatched, no matter when it was actually received. Once an order was dispatched and goes out of the control of the authority, there was no chance whatsoever of the authority changing its mind or modifying the order. The judgment also observed that the communication could ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ondition of a case pending adjudication on the date of the settlement application is not satisfied. As such, the Settlement Commission had no jurisdiction to entertain the plea of settlement. Because, it is only a "case" as defined in section 31(c) which could be the subject matter of settlement. Section 31(c) defines "case" to mean any proceeding for the levy, assessment and collection of excise duty, "pending before an adjudicating authority on the date on which an application under sub-section (1) of section 32E is made". Once, the order leaves the hands of the adjudicating authority in the sense explained above, the 'case' can no longer be said to be pending before him. Conversely, the proceeding would be regarded as pending before an adjudicating authority till the order does not go out of his control. In the present case, this happened on 31.12.2009 Thus, on 08.01.2010, when the settlement applications were filed by the petitioners, the matter before the adjudicating authority had already been adjudicated." In the said case, the petitioners therein had challenged the order passed by the Customs and Central Excise Settlement Commission holding that the settlement applications....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing of the order or its content. Communication in the second sense is different from communication in the first sense i.e. the first principle. Communication in the second sense must be satisfied before the decision is said to be conclusive or binding. This principle is not dependent upon provisions of a particular statute but under the general law. 38. Pertinently, in M.M. Rubber and Company (supra) it was observed that knowledge of the party affected by the decision may be either actual or constructive. Knowledge of the party effected by the decision either actual or constructive, is the essential element which must be satisfied. This is a salutary and just principle. 39. We often overlook the aforesaid distinction when we examine the question as to whether an order has been passed within the period of limitation and apply decision with first and second principle interchangeably, which is impermissible and wrong. It is in this context we would also like to refer to the decision of the Supreme Court in Commissioner of Income-tax Vs. Major Tikka Khushawant Singh, (1995) 212 ITR 650 (SC) which referred to the earlier decision in the case of R.K. Upadhyay Vs. Shanabhai P. Patel, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e means of knowing it. To make an order complete and effective, it should be issued so as to beyond the control of the authority from possible change or modification therein. This, it was observed, should be done within the prescribed period though actual service of the order may be beyond that period. In this case, the Authority/Revenue had failed to produce evidence and material that the order was sent out within the prescribed period. To this extent, therefore, decision of Kerala High Court in Government Wood Works (supra) would not support the petitioners for in the present case order under Section 142(2A) was communicated, i.e. it was "sent out" and dispatched within the prescribed period of limitation. 43. In the aforesaid situation and to meet the argument, that 'Terms of Reference' were communicated and received by the petitioner alongwith letter dated 30th March, 2013 on 31st March, 2013, reference was made to Rajinder Nath and Others (Supra). This decision draws a distinction between 'finding' and 'direction' in the context of Section 153(3)(ii) of the Act, which removes bar of limitation period for making of assessment under Section 143 or 144 or 147 of the Act. Bar of ....