2000 (8) TMI 248 - AT - Income Tax

Summary

Issues:
1. Barred by limitation - Block assessment order completion date.
2. Validity of appointment of auditor under section 142(2A).
3. Approval from CIT under section 158BG.

Issue 1: Barred by limitation - Block assessment order completion date:
The appeal was filed against the block assessment order passed on 29th April, 1998, covering the previous years 1986-87 to 1996-97. The contention was that the order was barred by limitation as it could have been completed only up to 27th April, 1998. The AO extended the time for submission of the audit report until 29th April, 1998. The Tribunal held that the order passed on 29th April, 1998, was not barred by limitation as the time was extended to that date, considering the complexity of the accounts and the availability of time for the AO.

Issue 2: Validity of appointment of auditor under section 142(2A):
The assessee raised objections to the appointment of the auditor under section 142(2A), arguing that the AO did not refer to any complexity of the accounts and the CIT's sanction was mechanical. The Tribunal examined the records and found that the appointment was not done mechanically. The appointment was made due to the complexity of the accounts, as evidenced by the voluminous audit report. Precedents were cited to support the validity of the appointment based on the complexity of accounts.

Issue 3: Approval from CIT under section 158BG:
The assessee contended that the order passed by the AO was bad in law as the CIT could not have given previous approval without proper consideration. The Departmental Representative referred to a Special Bench decision in favor of the Revenue on this issue. The Tribunal held that based on the Special Bench decision, the contention of the assessee had no merit regarding the approval of the CIT under section 158BG.

In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the block assessment order due to the failure to confront the assessee with the special audit report and the lack of opportunity for the assessee to be heard within two days from receiving the report. The matter was directed to be restored to the AO for a fresh decision after providing the necessary opportunity for the assessee to be heard in accordance with the law.