2023 (1) TMI 1081 - AT - Income Tax

Special audit u/s. 142(2C) - Special Auditor s Report submitted by the Special Auditor beyond the due date prescribed u/s. 142(2A) - time limit for submission of Special Audit Report as required u/s. 142(2C) - HELD THAT - In the instant case the Ld. AO failed to pass such order in both the circumstances to extend the time limit. AO merely communicated the decision of the Ld. Pr. CIT (Central) Visakhapatnam on 6/6/2019 which is beyond the limitation period of the second extended time. Even assuming a moment that it is a valid extension we find that the extension as per the Limitation Act should have been granted before the expiry of the time limit permitted in the earlier extension ie. on 25/5/2019. We find force in the arguments of the Ld. AR that mere communication of extension by the Ld. AO instead of passing an order U/s. 142(2C) is not valid in law. The case law relied on by the Ld. AR the judgment of the Hon ble Supreme Court in the case of State of Punjab Ors vs. M/s. Shreyans Indus Ltd i 2016 (3) TMI 331 - SUPREME COURT is pertinent to mention here with respect to grant /order of extension of time limit should be given before the time for passing any order expires as prescribed under the Act or before the expiry of the original period of limitation prescribed in the original order. On this issue the Hon ble Apex Court observed that once the period of limitation expires the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore in our considered opinion the ratio laid down by the Hon ble Supreme Court squarely applies to the instant case also. In the instant case on hand the Ld. AO ought to have passed an order U/s. 142(2C) of the Act on or before 25/5/2019 ie. expiry of the first extension. Therefore in our considered opinion the ratio laid down by the Hon ble Supreme Court squarely applies to the instant case also. In the instant case on hand the Ld. AO ought to have pass an order U/s. 142(2C) of the Act on or before 25/5/2019 ie. expiry of the first extension. The case law relied on by the Ld. AR in ACIT Vs Soul Space projects Limited 2020 (6) TMI 696 - ITAT DELHI is relevant to the issue which was also considered by the Ld. CIT(A). We find that the Ld. CIT(A) has discussed the issue at length and rightly concluded the matter and therefore we are of the considered view that no interference is required in the order of the Ld. CIT(A) on this issue.

Summary

Issues Involved:
1. Extension of time limit for submission of special audit report under Section 142(2C) of the Income Tax Act.
2. Validity of notice issued under Section 153C of the Income Tax Act.
3. Quashing of assessment orders as barred by limitation.

Issue-wise Detailed Analysis:

1. Extension of Time Limit for Submission of Special Audit Report under Section 142(2C):
The core issue pertains to whether the Assessing Officer (AO) properly extended the time limit for the special audit report submission. The AO communicated the administrative permission from the Principal Commissioner of Income Tax (Pr. CIT) for extending the time limit but did not pass an order under Section 142(2C) of the Income Tax Act. The Tribunal found that the AO failed to apply his mind and merely conveyed the Pr. CIT's decision, which is not valid under the law. The Tribunal emphasized that the extension should be granted by the AO before the expiry of the original period of limitation. The Tribunal cited the Supreme Court's judgment in the case of State of Punjab & Ors vs. M/s. Shreyans Indus Ltd, which states that once the period of limitation expires, the right to make an assessment gets extinguished. Consequently, the Tribunal upheld the CIT(A)'s decision that the assessment order was void ab initio as it was based on an invalid extension of the audit report submission period.

2. Validity of Notice Issued under Section 153C:
The Tribunal addressed the issue of whether the notice issued under Section 153C was valid. The assessee argued that the AO did not clearly mention in the assessment order that the seized material belonged to the assessee. The Tribunal noted that the assessee's legal ground on this issue was not pressed during the hearing. As a result, the Tribunal dismissed the legal ground raised by the assessee regarding the invalidity of the notice under Section 153C.

3. Quashing of Assessment Orders as Barred by Limitation:
The Tribunal examined whether the assessment orders were barred by limitation. The CIT(A) had quashed the assessments completed by the AO under Section 143(3) read with Section 153C, citing that the assessments were completed beyond the due date. The Tribunal found that the CIT(A) had rightly concluded that the assessments were barred by limitation and void ab initio. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to pass a valid order extending the time limit for the special audit report submission, which rendered the subsequent assessments invalid.

Conclusion:
The Tribunal dismissed all the appeals filed by the Revenue, upholding the CIT(A)'s decisions on all grounds. The Tribunal confirmed that the extension of the special audit report submission period was not validly granted, the notice under Section 153C was not pressed by the assessee, and the assessments were barred by limitation. The Tribunal's decision was pronounced in the open Court on January 23, 2023.