2019 (3) TMI 1469 - SC - Income Tax

Nature of amendment - prospective or retrospective - clarificatory amendment to remove ambiguity - Power of AO to extend time for the submission of the audit report directed u/s 142(2C) - Tribunal came to the conclusion that prior to the insertion of the expression suo motu with effect from 1 April 2008 in Section 142(2C) AO had no jurisdiction to extend time for the submission of the report of an auditor appointed under sub section (2A), of his own accord - also assessment which was made under Section 153A, in respect of the assessment years in question, was barred by limitation - Revenue adopted a contrary position, submitting that even before 1 April 2008, the jurisdiction of the assessing officer to extend time for the submission of the audit report was not confined to a situation in which the assessee had made an application for extension - HC dismissed revenue appeal - HELD THAT - No substance in the submission urged on behalf of the assessees that to adopt an interpretation which we have placed on the provisions of Section 142(2C) would enable the assessing officer to extend the period of limitation for making an assessment under Section 153B. Explanation (iii) to Section 153B(1), as it stood at the material time, provided for the exclusion of the period commencing from the date on which the assessing officer had directed the assessee to get his accounts audited under sub-section (2A) of Section 142 and ending on the day on which the assesee is required to furnish a report under that sub-section. The day on which the assessee is required to furnish a report of the audit under sub-section (2A) marks the culmination of the period of exclusion for the purpose of limitation. Where the assessing officer had extended the time, the period, commencing from the date on which the audit was ordered and ending with the date on which the assessee is required to furnish a report, would be excluded in computing the period of limitation for framing the assessment under Section 153B. The principle governing the exclusion of time remains the same. The act on which the exclusion culminates is the date which the assessing officer fixes originally, or on extension for submission of the report. The provisions of Section 142(2C) as they stood prior to the amendment which was enacted with effect from 1 April 2008 by the Finance Act, 2008 did not preclude the exercise of jurisdiction and authority by the assessing officer to extend time for the submission of the audit report directed under subsection (2A), without an application by the assessee. We hold and declare that the amendment was intended to remove an ambiguity and is clarificatory in nature. As a consequence of our decision, we specifically overrule the judgment of a Division Bench of the Delhi High Court in Commissioner of Income Tax v Bishan Swaroop Ram Kishan Agro Pvt. Ltd. 2011 (5) TMI 540 - DELHI HIGH COURT - Decided in favor of Revenue.

Issues Involved:
1. Interpretation of Section 142(2C) of the Income Tax Act, 1961, particularly regarding the assessing officer's jurisdiction to extend time for the submission of an audit report.
2. Whether the amendment to Section 142(2C) by the Finance Act, 2008, which introduced the term "suo motu," was clarificatory and retrospective in nature.

Detailed Analysis:

1. Interpretation of Section 142(2C) of the Income Tax Act, 1961:

The primary issue in this batch of appeals was the interpretation of Section 142(2C) of the Income Tax Act, 1961, particularly whether the assessing officer had the jurisdiction to extend the time for the submission of the audit report of the auditor appointed under Section 142(2A) without an application from the assessee, prior to the amendment effective from 1 April 2008. The assessees contended that the assessing officer could only extend the time upon an application made by the assessee for any good and sufficient reason. If no application was made, the assessing officer had no jurisdiction to extend the time.

The Revenue, on the other hand, argued that even before 1 April 2008, the assessing officer had the jurisdiction to extend the time for the submission of the audit report without an application from the assessee. The Revenue posited that the amendment introducing the term "suo motu" was clarificatory in nature and intended to remove an existing ambiguity.

The Court noted that Section 142(2A) allowed the assessing officer to direct an audit of the assessee's accounts, and Section 142(2C) required the audit report to be furnished within a specified period. The proviso to Section 142(2C) allowed the assessing officer to extend this period on an application made by the assessee for any good and sufficient reason, but the total period could not exceed 180 days.

The Court concluded that the assessing officer had the authority to extend the time for the submission of the audit report even without an application from the assessee. The proviso was intended to provide a remedy for the assessee to seek an extension if genuinely required, but this did not preclude the assessing officer from extending the time on their own accord, subject to the overall ceiling of 180 days.

2. Clarificatory and Retrospective Nature of the Amendment:

The Court examined whether the amendment to Section 142(2C) by the Finance Act, 2008, which introduced the term "suo motu," was clarificatory and retrospective. The assessees argued that the amendment was prospective and that prior to 1 April 2008, the assessing officer had no jurisdiction to extend the time without an application from the assessee.

The Court referred to Circular No. 1/2009 and the Notes on Clauses to the Finance Bill, 2008, which explained that the amendment was intended to rationalize the proviso to allow the assessing officer to extend the period for furnishing the audit report suo motu. The Court noted that the amendment was designed to remove an ambiguity and was clarificatory in nature.

The Court held that the amendment was clarificatory and retrospective, as it was intended to clarify the existing position and remove any ambiguity regarding the assessing officer's authority to extend the time for the submission of the audit report. The Court emphasized that procedural amendments are generally presumed to be retrospective unless there is a clear indication to the contrary.

Conclusion:

The Court concluded that the provisions of Section 142(2C) of the Income Tax Act, 1961, as they stood before the amendment effective from 1 April 2008, did not preclude the assessing officer from extending the time for the submission of the audit report without an application from the assessee. The amendment by the Finance Act, 2008, was clarificatory and intended to remove an ambiguity.

As a result, the Court overruled the judgment of the Delhi High Court in Commissioner of Income Tax v Bishan Swaroop Ram Kishan Agro Pvt. Ltd. and restored the relevant civil appeals to the file of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal for decisions on merits. There was no order as to costs.

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