2011 (7) TMI 119 - HC - Income Tax

Scrutiny - Time barred - No notice was issued to the petitioner while directing the special audit by M/s. Bansal Gupta & Associates - The assessment order has, however, been passed on 31-10-2006 and as such the same is barred by time even if the order under section 142(2A) is held to be a valid order - It is set out that during the course of the audit, the assessing auditors by various letters dated 10-4-2006, 18-4-2006 and subsequent letters informed, that the petitioners were not co-operating to provide the requisite details and in view of this, the period for submitting the audit was extended - Even if the case of the assessee is accepted that suo motu power cannot be exercised by Assessing Officer for extending the time under section 142(2C), still period of 161 days from 10th March, 2006 has to be excluded from the limitation period which expires on 31st March, 2006 - If the language of the enactment is clear and unambiguous, it would not be proper for the Courts to add any words thereto and evolve some legislative intent, not found in the statute - The amendment, therefore, is purely clarificatory and/or intended to limit the period for submitting a report even when the Assessing Officer suo motu extends the period - Decided against the revenue

Issues Involved:
1. Whether the assessment order for the assessment year 2003-04 was barred by time under section 153 of the Income-tax Act, 1961.
2. Whether the special audit report under section 142(2A) was valid and within the prescribed time limits.
3. Whether the Assessing Officer had the power to extend the period for submitting the special audit report suo motu before the amendment of section 142(2C) by the Finance Act, 2008.
4. Whether the petitioner had an alternative statutory remedy and whether the High Court should exercise its extraordinary jurisdiction.

Issue-wise Detailed Analysis:

1. Whether the assessment order for the assessment year 2003-04 was barred by time under section 153 of the Income-tax Act, 1961:

The petitioner argued that the assessment order was barred by time as it was made beyond the period prescribed under section 153 of the Act. According to the petitioner, the limitation should be computed considering the direction under section 142(2A) received on 21-3-2006, and the period for making the assessment was less than 60 days. The petitioner contended that the assessment order passed on 31-10-2006 was beyond the permissible period, even after considering the extensions granted for the special audit report. The respondents, however, argued that the period of 161 days should be excluded from the limitation period, and the remaining period should be extended to 60 days, making the assessment order within time.

2. Whether the special audit report under section 142(2A) was valid and within the prescribed time limits:

The petitioner claimed that the special audit report was time-barred, incomplete, and not in accordance with the directions issued at the time of appointment of the Special Auditor. The petitioner received the order for the special audit on 21-3-2006, and the initial period of 120 days expired on 18-7-2006. The time to furnish the report was extended by 30 days up to 17-8-2006, and further extensions were granted suo motu by the Assessing Officer. The special audit report was submitted on 4-9-2006. The respondents argued that the extensions were granted due to the petitioner's non-cooperation and that the total period allowed for the special audit was 180 days, making the report valid.

3. Whether the Assessing Officer had the power to extend the period for submitting the special audit report suo motu before the amendment of section 142(2C) by the Finance Act, 2008:

The petitioner argued that before the amendment, the Assessing Officer could not extend the period for submitting the special audit report suo motu and could only do so on an application made by the assessee. The respondents contended that the Assessing Officer had the power to extend the period even before the amendment, as the amendment was clarificatory and intended to limit the period for submitting the report to 180 days. The court referred to various judicial pronouncements and principles of statutory interpretation, concluding that the Assessing Officer had the power to extend the period for submitting the report, and the amendment was clarificatory.

4. Whether the petitioner had an alternative statutory remedy and whether the High Court should exercise its extraordinary jurisdiction:

The respondents raised a preliminary objection that the petitioner had an alternative remedy by way of an appeal under the Act and that the petition was not maintainable. The court had previously noted this objection and held that the question raised was a pure question of law, allowing the petition to proceed. The court ultimately found no merit in the petition and dismissed it, indicating that the petitioner should have exhausted the alternative statutory remedy.

Conclusion:

The court concluded that the assessment order was within the permissible time limits after excluding the period for the special audit and extending the remaining period to 60 days. The special audit report was valid and within the prescribed time limits. The Assessing Officer had the power to extend the period for submitting the special audit report, even before the amendment of section 142(2C) by the Finance Act, 2008. The petitioner had an alternative statutory remedy, and the High Court should not interfere in the exercise of its extraordinary jurisdiction. The petition was dismissed.

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