TMI Blog2023 (12) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... frame. Having noted the diametrically opposite assertions made on the aspect of delay, in our opinion, the legal tenability of the decision taken in the matter depends on which specified authority was invested with the power to extend the timeframe. As discussed above, since the legislature vested the discretion to extend the timeframe solely in the AO, he could not have abdicated that function and confined his role to only making a recommendation to the CIT. CIT had no role in extending the timeframe as the AO was in seisin of the assessment proceedings. As has been correctly submitted on behalf of the respondent/assessee, the decision taken to get an audit conducted u/s 142(2A) of the Act is a step in the process of assessment proceedings and, therefore, is clearly not an administrative power; as the appointment of a special auditor entails civil consequences. We may note that the decision relied upon on behalf of the appellant/revenue in the matter of Yum Restaurant [ 2005 (5) TMI 55 - DELHI HIGH COURT] has been disapproved in Rajesh Kumar s case [ 2006 (11) TMI 135 - SUPREME COURT] . Furthermore, the judgment in Rajesh Kumar s case has been reaffirmed by the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hort, BLK ]. 4. Thus, having regard to the aforesaid, counsel for the parties agreed that the decision the Court would take vis- -vis the present appeals concerning the question of law framed would also apply to appeals filed by the appellant/revenue in matters concerning BLK. Background 5. Since the facts and issues which arise in the two above-captioned appeals are identical, reference will be made to the facts obtaining in ITA 526/2023 concerning AY 2007-08. Thus, to adjudicate the appeal, the following broad facts are required to be noticed. 5.1 The respondent/assessee, engaged in the business of construction and allied services, was subjected to a search action on 19.02.2008 under Section 132 of the Income Tax Act, 1961 [hereafter referred to as Act ]. Resultantly, on 24.12.2008, a notice under Section 153A of the Act was issued to the respondent/assessee by the Assessing Officer (AO). 5.2 Nearly eleven months later, i.e., on 27.11.2009, the AO issued a show cause notice to the respondent/assessee seeking its response to having a special audit conducted concerning its affairs in the exercise of powers under Section 142(2A) of the Act. 5.3 In response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the request and had conveyed that an extension of 60 days for furnishing the audit report, as requested by the concerned auditor via the letter dated 26.03.2010, had been granted, with a caveat though that no further extension would be allowed. The AO on the very next day, i.e., 13.04.2012, conveyed to the respondent/assessee that the CIT had granted the auditor, i.e., Messrs Dinesh Mehta and co, an extension of 60 days for furnishing the audit report. 6. Thus, the moot issue that arises for consideration is whether the extension of time for submitting the audit report was granted by the specified authority having regard to the provisions of the proviso appended to Section 142 (2C) of the Act. It is not in doubt that if one were to hold that the extension was granted as envisaged under the said provision, then the assessment order would be within the prescribed period of limitation. Submissions of Counsel 7. It is against this backdrop that the instant appeal has been preferred by the appellant/revenue. Arguments on behalf of the appellant/revenue were advanced by Mr Sanjeev Menon, standing counsel, while Mr Rohit Jain advanced submission on behalf of the respondent/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a technicality would be wholly incorrect. (viii) Assuming that the AO made a mistake by seeking approval of the PCIT, it would not be fatal to the assessment proceedings. The defect can be cured by having recourse to Section 292B of the Act. (ix) The prejudice test would have to be applied. The assessee has not been able to demonstrate any prejudice caused by the extension of the timeframe. Therefore this case would fall within the purview of Section 292B of the Act [ See CIT v Jagat Novel Exhibitors Pvt. Ltd., (2013) 365 ITR 559 (Del); State of Karnataka v Kuppuswami Gownder, (1987) 2 SCC 74 and Fertico Marketing Investment Pvt. Ltd. Ors. v Central Bureau of Investigation Anr., (2021) 2 SCC 525]. (x) Procedure is a handmaiden of justice. Therefore, substantive justice cannot suffer at the hands of technical formality. (xi) Since the approval of the CIT is required to be taken under Section 142(2A) of the Act by the AO for issuance of a direction to the assessee for conducting an audit, it is implicit that the CIT also exercises administrative power while granting such approval. If that be so, Section 21 of the General Clauses Act, 1897 [in short, G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se v. Bar Council of Kerala, [1999] 3 SCL 422 (SC); Dharani Sugars and Chemicals Ltd. v. Union of India, [2019] 153 SCL 224 (SC); Dipak Babaria v. State of Gujarat, [2014] 3 SCC 502]. (vi) The power/jurisdiction conferred upon a specific authority must be exercised only by such authority; it cannot be abdicated in favour of another authority even if he is higher in rank than the one in which the authority/jurisdiction is vested. An action contrary to this principle would be void ab initio and nullity in the eyes of law, as it would amount to usurpation of jurisdiction. [ See Anirudhsinhji Karansinhji Jadeja v. State of Gujarat, [1995] 5 SCC 302; Commissioner of Police v. Gordhandas Bhanji, AIR 1952 SC 16; The Purtabpore Co. Ltd. v. Cane Commissioner of Bihar Ors., 1969 (1) SCC 3085; State of UP v. Maharaja Dharamander Prasad Singh, (1989) 2 SCC 505; Rajesh Awasthi v. Nand Lal Jaishwal, (2013) 1 SCC 501] (vii) A perusal of the letter dated 08.04.2011 would show that the AO did not just seek approval of the CIT for extension of time but abdicated the discretion conferred on him by the statute regarding extension of time. It is essential to bear in mind that no approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Therefore, the assessment order dated 10.08.2010 was barred by limitation. Analysis and Reasons 10. Before we proceed further, reference to the relevant provisions would be in order. 142. Inquiry before assessment.- (1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 [or in whose case the time allowed under subsection (1) of section 139] for furnishing the return has expired] a notice requiring him, on a date to be therein specified,- (i) where such person has not made a return [within the time allowed under sub-section (1) of section 139] or before the end of the relevant assessment year], to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or: [Provided that where any notice has been served under this sub-section for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been audited under any other law for the time being in force or otherwise. (2C) Every report under sub-section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer: Provided that the Assessing Officer] may, 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 sub-section (2A) is received by the assessee. 10.1 A plain reading of sub-section (2A) of Section 142 of the Act would show that the AO has been invested with the power to direct the assessee to get its accounts audited at any stage of the proceedings, with the previous approval of the authority specified in that provision, if in his opinion it is necessary to do so, having regard to the following: (i) Nature and complexity of the accounts. (ii) Volume of the accounts. (iii) Doubts about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etting the accounts audited and nominate the accountant to audit the account. 13. As noticed above, it is the AO who, in his proposal, sets up a case for issuance of a direction to the assessee to get its accounts audited, having regard to the circumstances referred to in subsection (2A) of Section 142, keeping in mind the interests of the revenue. Once the specified authority grants its approval, it is obliged to nominate the accountant who would then proceed to audit the assessee's account and generate a report which would advert to the particulars indicated in the prescribed form and, more importantly, other particulars which the AO may require the accountant to elicit from the assessee s accounts. Significantly, this exercise is to be completed within the timeframe that the AO prescribes. 13.1 Therefore, the circumstances which, according to the AO, propel him to seek an audit of the assessee's accounts, the information that he wants the accountant to ferret out, and the timeframe within which the said exercise is to be completed by the AO are aspects which are within the sway of the AO. The provision is clearly AO-centric. AO centricity is quite understandable as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposal containing the facts an opportunity of being heard was granted to the assessee on 9/12/2009. The matter was fixed for 14/12/2009. On the said date, Sh. Raj Kumar Gupta CA appeared and filed the details. The same have been considered. After consideration , I am satisfied that it is necessary to get the accounts of the assessee M/s Soul Space Projects Ltd. for AY 2006-07 to 2008-09 audited having regard to the nature and complexity in [sic of] the accounts and in the interest of revenue as pointed out by you in your letter cited above. xxx xxx xxx [Emphasis is ours] 17.1 As alluded to above, on the same date, i.e., 15.12.2009, the AO communicated the CIT's approval to the respondent/assessee. 17.2 In the interregnum, though, as noted above, the CIT had also issued a show cause notice on 09.12.2009, qua which objections were filed by the respondent/assessee on 14.12.2009. 17.3 The record shows that the auditors of both the respondent/assessee and its group company, i.e. BLK, had sought an extension of time, which the AO forwarded via letter dated 07.04.2010 to the CIT, albeit through the ACIT. The DCIT headquarters, via communication dated 12.04.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uest received by the auditors to his superiors, who then processed the matter and directed a grant of extension of time for completion of the audit. 18.1 The record also shows that while the matter was pending adjudication with the Tribunal, internal communication was exchanged between departmental representatives to elicit the recommendation of the AO concerning the extension of time. The recommendation of the AO is part of the communication dated 11.02.2020 exchanged between the departmental representative tasked with canvassing the case of the appellant/revenue before the Tribunal and the ACIT. Since much emphasis is laid on this communication, the relevant part of the same is extracted hereafter F.No. ACIT/CC-15/2019-20/1605 Date : 11.02.2020 To The Commissioner of Income Tax (DR) G-Bench, ITAT, 7th Floor Lok Nayak Bhawan, Khan Market, New Delhi. Sir, Subject: Second appeal in the cases of ACIT Vs Soul Space Projects Ltd., ITA No. 193/Del/2015 for AY 2007-08, 1849/Del/2015 for AY 2008-09 and 4352/Del/2015 for AY 2009-10 matter reg. Ref: F.No.CIT/DR/ITAT/G-Bench/2019-20/195 dated 27.01.2020. Kindly refer to the above noted su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tants, for furnishing the audit report u/s 142(2A) in the case and also requested to the assessee to provide the requisite information immediately under information to the undersigned so that special audit may be completed in a smooth manner. 4. On perusal of relevant records, it is ascertained that the Assessing Officer has applied his mind in the letter dated 08.04.2010 therein he has given the reasons for extension for furnish the special audit report. Consequently, the Ld. CIT has considered the facts (application of mind of AO) and directed to the AO to convey the extension of 60 days for the purpose of furnishing the special audit u/s 142(2A). Therefore, it is clear that the extension of period u/s 142(2C) was granted by the AO after applying his mind, not by the Ld. CIT, Central-II and the Ld. CIT, Central-II has only directed to [sic ] the AO to convey the extension of [the] period to the Special Auditors. The above referred letters are also enclosed herewith for ready reference. Yours faithfully, s/d (Parbodh Kumar) Asstt. Commissioner of Income Tax, Central Circle-15, New Delhi. 18.1 A perusal of this document would show that the AO made a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after: 24. If an assessee files a return the same is not presumed to be incorrect. When the assessing officer, however, intends to pass an order of assessment, he may take recourse to such steps including the one of asking the assessee to disclose documents which are in his power or possession. He may also ask third parties to produce documents. Section 136 of the Act by reason of a legal fiction makes an assessment proceeding, a judicial proceeding. The assessment proceeding, therefore, is a part of judicial process. When a statutory power is exercised by the assessing authority in exercise of its judicial function which is detrimental to the assessee, the same is not and cannot be administrative in nature. It stricto sensu is also not quasi judicial. By way of example, although it may not be very apposite, we may state that orders passed under Order XII of the Code of Civil Procedure by a court cannot be held to be administrative in nature. They are judicial orders and subject to the order which may be passed by higher courts in regard thereto. Indisputably, the prejudice of the assessee, if an order is passed under Section 142(2A) of the Act, is apparent on the face of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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