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Issues:
1. Validity of the reference under section 142(2A) of the Income-tax Act. 2. Calculation of the period of limitation for completing the assessment under section 153 of the Act. 3. Authorization of the special audit ordered under section 142(2A). Issue 1: Validity of the reference under section 142(2A) of the Income-tax Act: The case involved references at the instance of the Revenue arising from decisions by the Income-tax Appellate Tribunal regarding assessment year 1984-85. The Tribunal questioned the legality of the reference under section 142(2A) made by the Assessing Officer, stating there was no pending proceeding at the time. However, the High Court disagreed, highlighting that the Assessing Officer was obligated to complete the assessment as proceedings were ongoing, and the reference under section 142(2A) was not without jurisdiction. The Court found that the Tribunal's conclusion on this aspect was incorrect. Issue 2: Calculation of the period of limitation for completing the assessment under section 153 of the Act: The Court addressed the argument related to the period of limitation under section 153 of the Act, starting from April 1, 1985. The Appellate Tribunal held that since the assessment was completed on September 23, 1987, it was barred by limitation. However, the Court analyzed the provisions of section 153 and Explanation 1(iii) to section 153(3) of the Act. It concluded that the period from the date of the reference under section 142(2A) to the submission of the audit report should be excluded, aligning with the statutory provisions. Therefore, the assessment completion date fell within the permissible timeframe, and the Tribunal's decision on the limitation issue was overturned. Issue 3: Authorization of the special audit ordered under section 142(2A): The question of whether the special audit ordered under section 142(2A) was unauthorized was also raised. The Court's analysis of the situation, particularly regarding the timeline and legal provisions, concluded that the special audit was authorized and conducted within the framework of the law. Therefore, the Court found in favor of the Revenue on this issue as well. In conclusion, the High Court ruled in favor of the Revenue and against the assessee on all the issues raised in the references. The Appellate Tribunal's decisions were overturned, emphasizing the legality of the reference under section 142(2A) and the calculation of the assessment completion period under section 153 of the Act. The Court directed the Tribunal to reconsider the appeals on their merits in light of the clarified legal positions provided in the judgment.
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