1986 (11) TMI 145 - AT - Income Tax

Summary

Issues:
Assessment time-barred under section 142(2A) of the Income-tax Act, 1961. Interpretation of the period for obtaining audit report. Application of General Clauses Act, 1897 in computing the assessment period.

Analysis:
The appeal challenges the order of the Commissioner (Appeals) regarding the assessment year 1978-79, questioning the time bar of the assessment. The original assessment was set aside for de novo assessment. The ITO directed the audit report under section 142(2A) to be submitted by 30-6-1985, extended to 31-8-1985 upon the assessee's request. The audit report was not submitted by the deadline, and the assessment was completed on 3-9-1985.

The Commissioner (Appeals) rejected the time-bar contention, citing the exclusion of holidays and the necessity to wait for the audit report. The ITAT disagreed, emphasizing the assessee's clear communication of the auditor's inability to finalize the audit, indicating no need to wait till 31-8-1985. The ITAT highlighted the legislative intent to exclude the period until the assessee expresses inability to furnish the report within the given time.

Regarding the General Clauses Act, the ITAT analyzed the exclusion period under Explanation 1 to section 153, concluding that the department is entitled to exclusion until the assessee's final expression of inability to furnish the audit report within the specified time. The ITAT emphasized that the assessment proceeding was not suitable for enquiring about non-compliance with audit directions, suggesting a penalty under section 271B instead.

The ITAT also addressed the alternative argument under section 9 of the General Clauses Act, determining the assessment completion deadline as 2-9-1985. As the assessment was made on 3-9-1985, it was deemed time-barred. Consequently, the ITAT allowed the appeal, setting aside the impugned order and canceling the assessment made by the ITO.

In conclusion, the ITAT held the assessment to be time-barred under section 142(2A) of the Income-tax Act, emphasizing the importance of timely communication and adherence to statutory provisions. The interpretation of exclusion periods and the application of relevant clauses were pivotal in determining the assessment's validity, ultimately leading to the cancellation of the assessment.