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2018 (4) TMI 628

dered a detailed reply of the appellant by two letters dt.01/07/2014 [one in reply to AO’s letter dt 25/06/2014 and second requesting amendment of orders u/s.142(2A)] as also letter dt. 29/07/2014 and 25/09/2014, explaining how the Accountant appointed u/s.142(2A) of the Act actually performed duties assigned to him, particularly the fact that the Accountant failed to even commence the Special Audit for the first 60 days after the appointment on 26/03/2014 and did not even spend a single day for audit work. - Accountant failed to supply the Audit Reports to the appellant as mandated by the provisions of S.142(2A) of the Act before the due date and actually supplied the same after the due date, even after availing the maximum period of 180 days and in spite of the appellant’s AR having alerting him of approaching limitation. These letter’s reference has also been given in the order of the ld. CIT(A). In our considered opinion AO did not have any “good and sufficient” reasons for extending the period of audit “suo motu” to the maximum permissible extent, and was not correct in casually attaching the tag of non-cooperative attitude to the appellant. - AO has exercised beyond h .....

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in deleting the additions made by the A.O. by holding that the additions made by the A.O. de hors the reference or foundation in incriminating seized material are not sustainable. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of ₹ 31,33,414/- being interest payment though the assessee had made interest free advances out of interest bearing funds. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition on account of washing/handling loss of ₹ 7,07,322/-. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the disallowance of employees provident fund u/s.36(1)(va) amounting to ₹ 9,394/-. 5. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. 3. The relevant facts as culled out from the materials on record are as under:- In the case of Friends Group, search operation u/s.132 of the Act was carried out on 15/06/2011. The assessee's case was also covered in t .....

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m permissible time limit as per provisions of sec. 142(2C) of the I.T. Act. The Accountant furnished his report on 22.09.2014, a copy of which was also received from the assessee on 26.09.2014. In view of the observations of the Accountant, a show-cause notice was issued to the assessee on 29-09-2014 requiring its explanation on the discrepancies noticed by the Accountant. The assessee has filed a reply letter dated 27/10/2014 on 29/10/2014. In the said reply the assessee has once again objected reference for special audit u/s.142(2A) asunder:- "Before we submit our reply to the issues raised in the notice under reply we may bring to your kind notice the fact that these assessment proceedings have, in our considered view, barred by limitation for the reason that the order u/s.142(2A) of the Act was passed only to unlawfully extend the limitation brushing aside our factual and legal objections filed in response to the notice proposing the said action. We therefore request you to kindly give due consideration to the factual and legal objections raised against the proposal for passing the order for special audit u/s.142(2A) of the Act, and to kindly drop the assessment proceeding .....

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sment proceedings by the assessee. However, assessee s reply is cryptic and not to the point. It is to be further observed that when the assessee itself is not supplying information, then this fact itself refers to the complexity of the accounts. The Court decision quoted by the assessee to the position the amendment in the section 142(2A) which came into effect from 01/06/2013. In view of the fact lying on the assessment records, I am satisfied that it is a fit case for reference to Special Audit u/s.142(2A) of the Act, having regard to the nature and complexity, volume, doubt and the correctness of the accounts of the assessee and the interest of the revenue. Therefore, approval is hereby accorded u/s.142(2A) of the Act for referring the aforementioned case for Special Audit". In view of the facts mentioned above the objection of the assessee is not tenable, as the reference was made after complying with the due procedure laid down under the Act for obtaining necessary sanction of the Competent Authority. The contention that only to buy time, the action was taken, cannot be accepted since notice was issued on 26/02/2014, where admittedly, the proceedings were getting time ba .....

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rial available on record, he dismissed the ground no.1. 9. So far making of disallowance de hors incriminating material found during the search in making assessment that had attained finality prior to search is concerned. AO relied on various authorities to support the arguments that no addition de hors the incriminating material seized during the course of the search can be made in these unabated assessments reframed u/s.153A. Ld. AR argued that original assessment for the assessment years under reference were earlier and before the date of the search completed and concluded, as under, and thus, these assessments did not abate within the meaning of second proviso to section 153A(1). Sr. No. A.Y. Order u/s. Date of order 1. 2006-07 143(3) 22/12/2008 2. 2007-08 143(1) 30/03/2009 3. 2008-09 143(3) 19/11/2010 10. It was further submitted that during the course of assessment proceedings u/s.153A, for making various additions as tabulated in assessment order, the ld. AO simply relied on the report and comments of the Special Auditor which, in turn, is based on audited books of accounts which were the foundation of returns filed u/s.139 at appropriate time as above, and were already cons .....

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reference has also been given in the order of the ld. CIT(A). In our considered opinion AO did not have any good and sufficient reasons for extending the period of audit suo motu to the maximum permissible extent, and was not correct in casually attaching the tag of non-cooperative attitude to the appellant. 13. Therefore, in our considered opinion, ld. AO has exercised beyond his power. We can also see from the order of the lower authorities that no incriminating documents were found during the search and whatever document were found in earlier year for completed the assessment u/s.143(3) and 143(1). In our considered opinion, additions made were having no foundation or reference of any seized document al all. So whatever additions have been made by the AO were on the basis of commenced of special auditor. 14. In our considered opinion, ld. CIT(A) has passed detailed and reasoned order and ld. DR could not point out any ambiguity in the order passed by the ld. CIT(A) and he did not cited any case of law before us on the basis of which we could have taken adverse view against the assessee. 15. In the result, both the appeals filed by the department in ITA Nos. 143 & 144/Ahd/201 .....

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