2015 (5) TMI 11 - HC - Income Tax

Time barred assessment u/s 158BE(1)(b) - time taken for special audit under section 142(2A) - Held that - In this case the audit commenced on 13th November 2000 and was concluded on 24th April, 2001. Thus 163 days were consumed in the audit. Therefore, the period of 163 days has to be excluded from the period of limitation. It is not also in dispute that the delay is of 150 days under Section 158BE2 (b). If the period of audit comprising of 163 days is to be excluded, the natural consequence will be that the assessment was within time. - Decided in favour of revenue.

Summary

Issues:
Challenge to judgment dated 11th April, 2008 for block period 1990-1991 to 2000-2001; Assessment barred by limitation under section 158BE(1)(b) of Income Tax Act, 1961.

Analysis:
The appeal challenged the Tribunal's decision that the assessment made on 28.1.2002 was time-barred under section 158BE(1)(b) of the Income Tax Act, 1961, due to the period of limitation expiring on 31 August, 2001. The Tribunal held that the assessment was barred as no order for special audit under section 142(2A) was passed, leading to the assessment being annulled. However, the Court found that the audit was conducted from 13th November 2000 to 24th April 2001, consuming 163 days, which should be excluded from the limitation period as per Explanation (1)(ii) of section 158BE. Therefore, the assessment was within the time limit.

The respondent contended that since no order under section 142(2A) was passed, the audit period could not be excluded. However, the Court disagreed, stating that the audit's occurrence implied the existence of an audit order. Citing section 292B of the Income Tax Act, the Court emphasized that minor irregularities in the proceedings would not invalidate the audit process. The Court found the reasons given by the Tribunal unsustainable and set aside the order, ruling in favor of the revenue.

The Tribunal did not address other grounds raised by the assessee due to the limitation point being decided in their favor. As the Court reversed the limitation decision, the case was remanded to the Tribunal for a fair consideration of all other points raised by the assessee. The appeal was disposed of accordingly.