2016 (2) TMI 154 - AT - Income Tax

Validity of assessment u/s 153 - extension of period of limitation - whether the extended period of limitation as provided under Explanation 1(iii) of Section 153 is available to the Assessing Officer for completion of assessment u/s 143(3) or not? - Held that - A notice u/s 148 or reasons recorded by the A.O prior to re-opening of assessment cannot be challenged separately. But an assessment order can be challenged in an Appeal before the Ld. CIT(A) or the ITAT on the ground that the re-opening itself is bad in law as the notice is illegal or not served or that there is no material based on which reasons were recorded etc. Every facet of an assessment can be challenged in appeal to deny once liability to be charged to tax or to challeng the quantum of tax demanded. In the case of hand the legality of the orders passed u/s 142(2A) or u/s 142(2C) can be challenged to demonstrate that the order of assessment has been passed beyond the period of limitation. Thus we reject this contention of the Ld. CIT. DR. Extension of time framed by the A.O for submission of audit report u/s 142 (2C) of the Act vide order dated 28th June 2004 is bad in law. Consequently the Assessing Officer would not get extension of time for completion of assessment in terms of Explanation 1 (iii) to Section 153 for the purpose of computation of limits. Hence the assessments are barred by limitation as per the table given at Para 7 of the order. The Assessment for the A.Y 1996-97 was to be complete on or before 31/3/2004 and the assessment order for the Assessment Year 1997-98 to 2000-01 had to be completed on or before 22/9/2004 and the assessment for the A. Y 2001-02 had to be completes on or before 23/8/2004 but all these assessments were completed on 27/9/2004 which is beyond the period of limitation specific in the Act. Hence they are bad in law. - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdiction and Limitation of the Assessment Order
2. Validity of Special Audit Proceedings under Section 142(2A)
3. Validity of Extensions for Audit under Section 142(2C)
4. Alleged Bias and Violation of Natural Justice

Detailed Analysis:

1. Jurisdiction and Limitation of the Assessment Order:
The assessee contested that the assessment orders were without jurisdiction and barred by limitation. The original returns and dates of assessment were provided, showing that notices under Section 148 were issued beyond the permissible period for some assessment years. The Tribunal examined whether the extended period of limitation under Explanation 1(iii) of Section 153 was applicable. It was concluded that the extensions granted by the Assessing Officer (AO) were not in accordance with the law, as they were made "suo motu" without an application from the assessee. Consequently, the assessments were barred by limitation and hence invalid.

2. Validity of Special Audit Proceedings under Section 142(2A):
The assessee argued that the special audit proceedings were invalid as they were initiated without giving the assessee an opportunity to be heard, violating principles of natural justice. The Tribunal agreed, noting that the AO did not follow due process, making the initiation of the special audit proceedings invalid.

3. Validity of Extensions for Audit under Section 142(2C):
The primary contention was that the extensions granted by the AO for the completion of the special audit were "suo motu" and thus invalid. The Tribunal referenced the judgment in CIT Vs. Bishan Saroop Ram Kishan Agro (P.) Ltd., which held that prior to the amendment in 2008, the AO did not have the power to extend the audit period without an application from the assessee. The Tribunal found that the assessee had not requested an extension, making the AO's extensions invalid. Consequently, the assessments completed after the extended period were barred by limitation.

4. Alleged Bias and Violation of Natural Justice:
The assessee claimed that the CIT(A)'s order was biased and violated principles of natural justice. While the Tribunal acknowledged these claims, the primary focus was on the procedural validity of the extensions and special audit proceedings. Given the findings on the invalidity of the extensions and the barred limitation, the Tribunal did not need to delve deeply into the bias claims.

Conclusion:
The Tribunal concluded that the assessment orders for all six assessment years were barred by limitation due to invalid extensions granted "suo motu" by the AO. Consequently, the assessments were held to be bad in law. The appeals by the assessee were allowed, and the assessments were set aside. The Tribunal did not address other arguments and legal issues raised by both parties, deeming them academic given the primary finding on limitation.