2018 (3) TMI 802 - HC - Income Tax

Special audit under Section 142(2A) - service of notice - whether the assessment proceedings would have abated if the order under Section 142(2A) was passed on 30th March, 2013 and was received or served on or after 1st April, 2013? - Held that - Khemi Ram (1969 (10) TMI 75 - SUPREME COURT) holds that communication would be effective when it was dispatched, no matter when it was actually received. Once an order was dispatched and goes out of the control of the authority, there was no chance whatsoever of the authority changing its mind or modifying the order. The judgment also observed that the communication could be actual or constructive. The said observations are relevant as the petitioner in the present case does accept having received Terms of Reference on or before 31st March, 2013. In view of our findings recorded above, we would record that the order itself under Section 142(2A) was dispatched on 31st March, 2013. A communication takes place when the order is dispatched or sent out and is made known or public. Communication in this context can be actual or even constructive. Service of the letter dated 30th March, 2013 with the Terms of Reference would be effective communication in the light of the aforesaid discussion even if it is presumed that the order under Section 142(2A) was not enclosed with the letter. Further, order under Section 142(2A) of the Act was certainly dispatched and sent by speed post vide postal receipt ED86785578IN on 31st March, 2013 at 1819 hours, i.e. within the prescribed period. In view of the aforesaid discussion and after examining the entire issue from factual as well as legal position, we have come to the conclusion that the writ petition has no merit. Assessment proceedings have not abated Accordingly, the writ petition is dismissed,

Issues Involved:

1. Whether the assessment proceedings for the Assessment Year 2009-10 were abated as time-barred.
2. Whether the order under Section 142(2A) directing special audit was effectively communicated within the statutory period.
3. Whether the petitioner was given adequate opportunity to respond to the show cause notice for special audit.
4. Whether the Assessing Officer received the necessary approval for the special audit within the statutory period.
5. Whether the order under Section 142(2A) was served on the petitioner within the limitation period.
6. Whether the initiation of special audit just before the limitation period was a ruse to extend time for assessment.

Issue-wise Detailed Analysis:

1. Abatement of Assessment Proceedings:
The petitioner argued that the assessment proceedings for the Assessment Year 2009-10 had abated as the time limit for completing the assessment expired on 31st March 2013. However, the court held that the assessment proceedings had not abated. The court concluded that the order under Section 142(2A) was effectively communicated within the statutory period, and thus, the assessment period was extended.

2. Effective Communication of Order under Section 142(2A):
The court examined whether the order under Section 142(2A) was effectively communicated within the statutory period. The court accepted the petitioner’s contention that the order was not transmitted by the two fax messages and speed post receipts ED867855480IN and ED867855493IN. However, it was found that the order was enclosed in the post addressed to Nokia India, Gurgaon, sent vide postal receipt ED86785578IN on 31st March 2013. The court also considered the service affected by hand through Tax Assistants and concluded that the order was communicated effectively when it was sent out before 31st March 2013.

3. Adequate Opportunity to Respond:
The petitioner contended that they were not given adequate time and opportunity to respond to the show cause notice for special audit. The court noted that the petitioner had the opportunity to reply and make oral submissions, despite the time constraints. The court found that the petitioner was aware of the tight schedule and had made it difficult for the authorities by not fully complying with the requests. Therefore, the court held that the petitioner was given reasonable opportunity.

4. Approval for Special Audit:
The petitioner questioned whether the Assessing Officer received the necessary approval for the special audit within the statutory period. The court rejected the argument that the Assessing Officer did not receive the approval on 30th March 2013. The court found that the approval was duly recorded and dispatched to the Assessing Officer’s office, which was confirmed by the dispatch and receipt registers.

5. Service of Order within Limitation Period:
The petitioner argued that the order under Section 142(2A) should have been physically served on or before 31st March 2013. The court held that the order was effectively communicated when it was dispatched and went out of the control of the authority. The court referred to various judgments, including Khemi Ram vs. State of Punjab, to support the view that communication is effective when the order is sent out, not necessarily when it is received. The court concluded that the order was dispatched within the prescribed period.

6. Timing of Special Audit Initiation:
The petitioner asserted that the initiation of special audit just before the limitation period was a ruse to extend the time for assessment. The court noted that the proposal for special audit was initiated about ten days before the limitation period expired. The court acknowledged the petitioner’s concerns but found that a case for special audit was made out based on the issues and details involved. The court emphasized that the petitioner also contributed to the delay by not fully complying with the requests.

Conclusion:
The court dismissed the writ petition, concluding that the assessment proceedings had not abated, the order under Section 142(2A) was effectively communicated within the statutory period, and the petitioner was given reasonable opportunity to respond. The court also found that the necessary approval for the special audit was obtained within the statutory period and that the initiation of the special audit was justified.

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