No.- I. T. (SS) A. No. 21/Patna/2011

Aby T. Varkey (Judicial Member) And Waseem Ahmed (Accountant Member)

For the Appellant : Sanjeev Kumar Anwar, Advocate
For the Respondent : Archana Sinha, Senior Standing Counsel

ORDER

The order of the Bench was delivered by

1. This appeal by the assessee is arising out of the order of the Commissioner of Income-tax (Appeals)-1, Patna dated October 21, 2010 for the block assessment years 1997-98 to 2002-03 (up to 28-11-2002).

2. Ground No. 2 in the grounds of appeal is as under :
"For that the assessment under section 158BC is barred by limitation in view of the provisions of section 158BE. The block assessment order has been passed on July 18, 2005 which is beyond two years of the last of the authorisation even after excluding the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under section 142(2A) and ending on the day on which the assessee is required to furnish a report of such audit. Thus the block assessment under section 158BC is liable to be set aside and demand notice is liable to be quashed."

3. The brief facts in respect of the aforesaid ground of appeal turn around on the dates of events which are relevant to decide this issue is as under :

The learned counsel for the assessee Shri Sanjeev Kr. Anwar, advocate drew our attention to the aforesaid dates from pages 1 of the assessee's paper book and submitted that the search took place in the premises of the assessee on November 20, 2002 under section 132 of the Act. According to him, the last panchnama of the bank locker was drawn on December 3, 2002 and as per section 158BE of the Act, the normal limitation for passing the assessment order was on December 31, 2004. However, the Assessing Officer in his wisdom has made a reference for special audit under section 142(2A) of the Act, vide order dated November 22, 2004 which is placed at page 2 of the paper book. As per the said reference and direction passed by the Assessing Officer, the assessee was directed to furnish before him the special audit duly signed and certified by the auditor in the prescribed form within a period of 90 days from the date of the said direction (i.e.) vide order dated November 22, 2004). According to the learned counsel, the audit report ought to have been submitted of the special auditor on February 20, 2005 before the Assessing Officer. According to the learned counsel, the Assessing Officer did not pass any order on 21 to 24th of February, 2005. However, on February 25, 2002 he extended suo motu the period for submission of special audit for another 90 days i.e. up to April 21, 2005. According to the learned counsel, even if the special audit report was filed on April 20, 2005 then also the Assessing Officer should have passed the assessment order within 60 days from the date i.e., on June 20, 2005. It was pointed out by the counsel that the Assessing Officer did not had the power at that point of time as per law existing, to suo motu extend the period for submission of the special audit report, so according to the learned authorised representative the extension of period by Assessing Officer itself is illegal, so the consequent assessment order is not valid in the eyes of law. And since the Assessing Officer has passed the order only on July 18, 2005, therefore, according to the learned counsel, the assessment order passed under section 158BC of the Act is hit by the limitation and, therefore, the order is void in the eyes of law and, therefore, it has to be quashed.

4. On the other hand, the learned senior standing counsel for the Revenue, Smt. Archana Sinha pleaded that the assessee did not co-operate with the special auditor so the auditor was not able to complete the special audit by February 20, 2005 and there being holiday on February 24, 2005, the Assessing Officer passed the order on February 25, 2005. Therefore, the Assessing Officer's order in extending the time given for completion of special audit is well within the provisions of law. According to her, on February 25, 2005 the Assessing Officer has given 90 days to the special auditor to complete the special audit. Thus the special auditor had time up to May 24, 2005 to complete the special audit and, therefore, the Assessing Officer within 60 days from that date passed the assessment order under section 158BC of the Act on July 18, 2005 and so the assessment is well within the limitation sanctioned by law. Therefore, she does not want us to interfere with the order passed by the authorities below.

5. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the search against the assessee under section 132 of the Act took place on November 28, 2002 and the last panchnama was drawn on December 3, 2002. As per section 158BE of the Act, the normal limitation time for completion of assessment expires on December 31, 2004. The Assessing Officer made a reference under section 142(2A) of the Act directing the special audit and directed the special auditor to complete the audit within 90 days from the said date vide order dated November 22, 2004. According to the learned counsel, the said 90 days comes to an end on February 20, 2005 though there was a dispute with regard to as and when 90 days comes to an end from November 22, 2004, the learned authorised representative produced the calendar for the year 2005 and from the details given, we note that the audit report was called for vide order dated November 22, 2004 to be furnished before him within 90 days. From a perusal of the calendar for year 2005, we note the following details to count 90 days.

According to the learned counsel for the assessee, thus, 90 days expires on February 20, 2005, which is Sunday, so the audit report ought to have been submitted before February 20, 2005. The learned counsel for the assessee drew our attention to the calendar for the year 2005 to the fact that February 25, 2005 on which the Assessing Officer suo motu extended the period of special audit falls on Friday and the February 24, 2005 being Guru Ravidas Jayanti being a restricted holiday, the Assessing Officer ought to have passed the extension order before February 20, 2005, and so since the Assessing Officer has passed the order on February 25, 2005 the extension given to the special auditor suo motu by the Assessing Officer is not in accordance to law, and therefore, subsequent proceedings are vitiated in the eyes of law and, therefore, the impugned assessment is bad in law and need to be quashed.

6. The learned senior standing counsel for the Revenue tried her best to suggest that because of the non-co-operative attitude of the assessee the special auditor could not complete the special audit, therefore, the Assessing Officer had no other alternative but to extend the period for another 90 days and that the Assessing Officer has power to extend the time limit suo motu and for the said proposition she relied on the order of the hon'ble Punjab and Haryana High Court decision in the case of Jagatjit Sugar Mills Co. Ltd. v. CIT [1994] 210 ITR 468 (P&H) and therefore, according to her, the assessment order is valid in the eyes of law.

7. We note that the settled position of law on the limitation question that has been poised before us is that whether the Assessing Officer has the power to suo motu extend the time limit, when the fact remains that the said power was conferred to the Assessing Officer to suo motu extend the time limit was granted by Parliament by insertion of the word "suo motu" with effect from April 1, 2008. According to us, the power of the Assessing Officer to suo motu extend the time for special auditor was conferred by Parliament vide insertion of word "suo motu" in section 142(2A) of the Act with effect from April 1, 2008, so the Assessing Officer was not empowered to "suo motu" extend the time before that. For the said proposition of law, we rely on the hon'ble Delhi High Court judgment in CIT v. Bishan Saroop Ram Kishan Agro Pvt. Ltd. (I. T. A. No. 1775 of 2010 dated May 27, 2011) wherein the hon'ble Delhi High Court clearly spelt out the law that the Assessing Officer does not have the power to suo motu extend the time limit and the hon'ble High Court after considering the order of the hon'ble High Court of Punjab and Haryana in Jagatjit Sugar Mills Co. Ltd. (supra), which has been relied on by the learned senior advocate for the Revenue has held as under :

"The word 'and' appearing before the words 'for any good and sufficient reasons' in the proviso to sub-section (2C) by any stretch of interpretation could not be read as 'or'. The fact that the words 'suo motu' have been added by way of an amendment with effect from April 1, 2008 would show the legislative intention in the proviso as existed before the amendment which is that the Assessing Officer prior to the amendment had no power to extend the period of furnishing audit report of his own.

It was to rationalise the said proviso that the word 'suo motu' came to be added by way of amendment with effect from April 1, 2008. As per clause 27.3 of the Circular dated March 27, 2009 while the Assessing Officer shall 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 of a period of 180 days from the date on which the directions under section 142(2A) of the Act for the audit was received by the assessee. It is an admitted fact that in the present case, the assessee had not made any application for extension of period of audit report. Therefore the extension which was granted by the Assessing Officer on the request of the auditor could be taken to be a suo motu action of the Assessing Officer which power, as noted above, was not available with the Assessing Officer prior to the amendment with effect from April 1, 2008. Not only this the 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 April 1, 2008 and it is from this date onwards that the Assessing Officer shall have power to extend the period of furnishing of special audit report suo motu.

In the light of the interpretation of the proviso as is existed before or after the amendment and the legislative intent behind the amendment as gathered from the memorandum and the circular noted above, we are not persuaded to agree with the interpretation as given by the Punjab and Haryana High Court in the case of Jagatjit Sugar Mills Co. Ltd. (supra). Further in view of our above discussion, it comes to be concluded that the Tribunal was correct in holding that the assessment order was barred by limitation. That being so, we answer question No.11 in the affirmative in favour of the assessee and against the Revenue.

21. In view of the foregoing discussion that the amendment whereby the words 'suo motu' were inserted in sub-section (2C) of section 142 of the Act was to be applicable with effect from April 1, 2008 only, the amendment cannot be said to be clarificatory or retrospective in nature. The amendment was prospective and was to be applicable with effect from April 1, 2008 only. Accordingly we answer question No. 2 against the Revenue."

8. In the facts and circumstances of the case, and the law prevailing during the time, when the Assessing Officer passed the impugned order, we note that the Assessing Officer did not have the suo motu power to extend the time limit for special audit without the assessee applying for the same, and since the assessee has not applied before the Assessing Officer for extension of time for submission of the special audit report and the Assessing Officer does not have the power to suo motu extend the time limit then as per the provisions of law existing at that time, the limitation period for passing of assessment order runs from February 20, 2005 i.e., 60 days from February 20, 2005 and so the Assessing Officer ought to have passed the assessment order before April 21, 2005. Therefore we find force in the submission of the learned counsel for the assessee that since the Assessing Officer has passed the impugned assessment order only on July 18, 2005, the assessment order is barred by limitation and so we have no other alternative but to quash the same. Thus, the appeal of the assessee is allowed. Since the legal issue in respect of the limitation raised by ground No. 2 has been allowed, the other grounds pertaining to the merit has become academic and are not being adjudicated.

9. In the result, appeal of the assessee is allowed.

The order pronounced in the open court on April 13, 2017.