2010 (2) TMI 1220 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessment order passed by the A.O. was beyond the limitation period prescribed under the Act.
2. Whether the A.O. had the power to extend the time limit for completing the special audit u/s 142(2A) suo motu.

Summary:

Issue 1: Limitation Period for Assessment Order
The assessee contended that the assessment order was beyond the limitation period prescribed under the Act and should be quashed. The search on the assessee's premises occurred on 07.10.2004, and the last date for completing the assessment u/s 153A was 31.12.2006. The A.O. issued a direction for a special audit u/s 142(2A) before the completion of the assessment on 12.12.2006, with the audit report due in 90 days (up to 12.03.2007). The A.O. extended this period suo motu on three occasions, ultimately passing the final assessment order on 03.08.2007. The Tribunal referred to the decision in the case of Bishan Swaroop Ram, which held that the A.O. did not have the power to extend the time limit suo motu before the amendment effective from 01.04.2008. Consequently, the assessment order was barred by limitation.

Issue 2: Power to Extend Time for Special Audit u/s 142(2A)
The Tribunal examined whether the A.O. had the power to extend the time for completing the special audit u/s 142(2A) suo motu. The provisions of Section 142(2A) and 142(2C) were analyzed, showing that the A.O. could grant a time limit for the audit report, controlled by the proviso to Section 142(2C), which allowed extensions only up to 180 days and required an application from the assessee. The amendment effective from 01.04.2008 allowed the A.O. to extend the period suo motu. Since the extensions in this case occurred before the amendment and without an application from the assessee, they were deemed without jurisdiction. Thus, the time period u/s 142(2A) was controlled by Section 142(2C), and the assessment was barred by limitation.

Conclusion:
The Tribunal held that the assessments for the relevant Assessment Years were barred by limitation, and therefore, the other grounds raised by the assessee and the revenue did not require consideration. The appeals of the assessee were allowed, and the appeals of the revenue were dismissed. This decision was pronounced in the open court on 05th Feb., 2010.