2007 (9) TMI 534 - AT - Income Tax

Summary

Issues involved: The judgment involves the legality of a block assessment order u/s 158BE of the Income-tax Act, 1961, and the validity of the audit conducted u/s 142(2A) in the case of the assessee.

Block Assessment Order: The block assessment order for the period from April 1, 1987, to November 15, 1997, was challenged by the assessee on the grounds of time limitation and legality. The Assessing Officer conducted an audit u/s 142(2A) based on a recommendation from the ADI. The assessee contended that the assessment order was beyond the prescribed time limit and that the audit was improper as the Assessing Officer did not apply his mind. The Commissioner of Income-tax (Appeals) upheld the assessment order, stating that the special audit was conducted in accordance with the law. The Tribunal, after considering the relevant sections and submissions, held that the assessment order was passed beyond the time limit specified u/s 158BE, as the initiation for the audit did not come from the Assessing Officer as required by section 142(2A).

Audit u/s 142(2A): The audit under section 142(2A) was a crucial aspect of the case. The initiation for the audit came from the ADI, and the Assessing Officer merely endorsed the recommendation without applying his mind. The Tribunal observed that as per the provisions of section 142(2A), the recommendation for a special audit should originate from the Assessing Officer based on the nature and complexity of the accounts. In this case, the ADI initiated the audit, and the Assessing Officer's role was limited to forwarding the recommendation. Therefore, the Tribunal concluded that the audit conducted in this manner lacked legal sanctity, and the assessment order based on this audit was deemed to be beyond the prescribed time limit.

Conclusion: The Tribunal allowed the appeal by the assessee on the jurisdictional ground, stating that the assessment order was passed beyond the time limit specified under section 158BE. Since the assessment order was deemed invalid due to the improper audit process, it was unnecessary to address the other grounds raised by the assessee on merit. The judgment was pronounced on September 27, 2007, by the Appellate Tribunal ITAT Mumbai.