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TMI Blog2022 (7) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment to assess gets extinguished. This extinguishment also gives rise to a valuable right to the assessee. Once the right to make assessment extinguishes there is no question of extension of time when the assessment has become time barred. There are similar provisions under the Income Tax Act,1961 i.e., Section 139(2) where this Court in COMMISSIONER OF INCOME-TAX VERSUS AJANTA ELECTRICALS [ 1995 (5) TMI 1 - SUPREME COURT] has taken a view that the power of extension can be granted by an Income Tax officer even after the expiry of the prescribed period. Considering from the perspective of administrative law, the time limitations are restrains placed by the legislature to regulate exercise of administrative power. They are intended to enforce discipline in governance and could therefore be compelling guidelines or even mandatory prescriptions. The Court must therefore, examine the provisions in the context of balance between need for executive flexibility and the quest against arbitrariness. It is the duty of the Court to synthesize these competing claims keeping in mind the public interest of good governance. This Court has traditionally drawn a distinction between stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant post-facto extension, ratifying the assessment order passed beyond the period of six months. We may clarify here itself that it is nobody s case that the powers could be exercised by the Commissioner after one year (initial period of six months for Assessing Authority coupled with the power of the Commissioner to allow further six months). Statutory Position 3.1 For proper appreciation of the issue, it is necessary to refer to the relevant provisions of the Act. Section 41 prescribes the procedure for conducting the assessment proceeding. Section 41(2) empowers the Commissioner to direct that a tax audit be conducted in respect of certain dealer(s) as selected by him. Section 41(4) provides that after completion of the tax audit, the officer authorized to conduct such audit shall, within seven days from the date of completion of the audit, submit an Audit Visit Report hereinafter referred to as the AVR to the Assessing Authority, along with the relevant statement/documents. 3.2 Section 42, with which we are concerned in this case relates to audit assessment. Under Sub-section (1), the Assessing Authority may, when the tax audit conducted under Section 41 resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) Where the dealer to whom a notice is issued under sub-section (1), produces the books of account and other documents, the assessing authority may, after examining all the materials as available with him in the record and those produced by the dealer and after causing such other enquiry as he deems necessary, assess the tax due from that dealer accordingly. (5) Without prejudice to any penalty or interest that may have been levied under any provision of this Act, an amount equal to twice the amount of tax assessed under sub-section (3) or sub-section (4) shall be imposed by way of penalty in respect of any assessment completed under the said sub-sections. (6) Notwithstanding anything contained to the contrary in any provision under this Act, an assessment under this section shall be completed within a period of six months from the date for receipt of the Audit Visit Report: Provided that if, for any reason, the assessment is not completed within the time specified in this sub-section, the Commissioner may, on the merit of each such case, allow such further time not exceeding six months for completion of the assessment proceeding. (7) No order of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42(6). The extension was granted on 16.11.2007, that is three days after the initial period of six months. Thereafter, the Assessing Authority, proceeded further and passed the assessment order on 31.12.2007. We may note that the assessment order dated 31.12.2007 is in any event within a period of one year commencing from 14.05.2007. The assessment order found tax due amounting to Rs. 4,67,96,731/-. 4.2 It is this assessment order which was challenged before the High Court and the High Court allowed the Writ Petition on the sole ground that the extension of time was granted by the Commissioner over telephone. Disapproving this method of extending time, High Court held that the Commissioner was obliged to consider the request for extension on case-to-case basis depending on merit of each case which necessarily postulates the assigning of reasons. In view of these findings, the High Court allowed the Writ Petition, and the assessment order dated 31.12.2007 was quashed. The issue raised in these Special Leave Petitions was not argued before the High Court in this case. 4.3 The Review Petition was filed stating that the conclusion of the High Court that the extension granted tel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner in exercise of his powers under the Proviso to Section 42(6) granted post-facto extension by six months on 20.07.2013. The assessment order dated 15.05.2013 was challenged in the Writ Petition. The High Court considered the matter in detail and held that the Assessing Authority could not have presumed that the Commissioner would grant an extension and, therefore, could not have passed the assessment order in advance. Further, it was held that the Commissioner has to exercise the power after applying its mind to the facts of the case before mechanically granting an extension. Importantly, the High Court found no difficulty in applying the decision of this Court in the case of Shreyans (supra) and held that the Commissioner should have exercised the power of extension before the original period of limitation expired on 31.03.2013. The third Special Leave Petition is against the order. Facts in the two cases of M/s Swastik Ingot (P) Ltd. 7. The AVR was made on 31.05.2013 and the same was received by the Assessee on 02.07.2013. Therefore, the assessment order was to be passed by 01.01.2014, however, the same was passed only on 31.03.2014. It is for this reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Shreyans Industries (supra). The most important question for consideration is whether the issue arising for consideration in these Special Leave Petitions are covered by the decision of this Court in Shreyans Industries (supra). It is therefore necessary for us to consider the ratio in Shreyans Industries (supra) and to see if it covers the issues arising in these batch of cases. 11. Decision in Shreyans Industries (supra) is by a Bench of three judges. The case arose out of proceedings under the Punjab General Sales Tax Act, 1948. The issue was whether the power to extend time is to be necessarily exercised before the normal expiry of the said period of three years ran out. 12. Before we proceed further to appreciate the ratio, it is necessary to refer to Section 11 of the Punjab General Sales Tax Act, 1948 which fell for consideration in Shreyans Industries (supra). The Provision is as under: - 11. Assessment of tax. (1) If the Assessing Authority is satisfied without requiring the presence of [dealer] or the production by him of any evidence that the returns furnished in respect of any period are correct and complete, [he shall pass an order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the power to pass a deferment order is to be exercised even after the expiry of the period of limitation which was answered in the negative. The reasons given in support of this conclusion are as follows: (STC pp. 15-16, para 8) 8. Deferment of assessment has the effect of enlarging the period of limitation which did not expire by the time the deferment order is contemplated to be passed. When once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Resort to deferment provisions does not retrieve the situation. There is no question of deferring assessment which had already become time-barred. The provision for exclusion of time in computing the period of limitation of deferment of assessment is meant to prevent further running of time against the Revenue if the limitation had not expired. (emphasis supplied) It was also observed that upon the lapse of the period of limitation prescribed, the right of the Department to assess an assessee gets extinguished and this extension confers a very valuable right on the assessee. 23. If one is to go by the aforesaid dicta, with w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, upon the lapse of period provided for the AO to make the assessment, the right of the department to assess gets extinguished. This extinguishment also gives rise to a valuable right to the assessee. Once the right to make assessment extinguishes there is no question of extension of time when the assessment has become time barred. This is the broad principle laid down in Shreyans Industries (supra) decided by the three Judges Bench. 15. Shri Rakesh Dwivedi, learned Senior Counsel advanced submissions on behalf of the Petitioner-State and has also filed written submissions. It is his case that the decision in Shreyans Industries (supra) cannot be made applicable to these batch of cases for the following reasons: (i) While all these cases arise under Section 42(6) of the Orissa Value Added Tax Act, 2004, the decision in Shreyans Industries (supra) concerns the interpretation of Section 11 of the Punjab General Sales Tax Act, 1948. (ii) Under the Punjab General Sales Tax Act, 1948 a very long period of 3 years from the date of filing of last return had been given for completing original assessment and a period of 5 years was given for making best judgment assessment, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equal strength and therefore refer the matter to a three Judge Bench where there will be a possibility to hear the parties on the applicability of Shreyans Industries. There is yet another reason. 17.1 There are certain alternative perspectives based on the interpretation, as well as on the principle of administrative law. 17.2 On interpretation, the following perspectives may be noted: (i) While sub-section (6) of Section 42 relates to the power of the Assessing Authority, Proviso to sub-section (6) relates to the power of the Commissioner. These are two distinct officers, exercising different powers. As we are to examine the power of the Commissioner, the scope and ambit of such power must be located within the proviso, which alone speaks of the power of the Commissioner. (ii) In the said Proviso, there is no limitation upon the commissioner to exercise such power before the original period of six months. By inferring such a limitation, Court could be supplying words to the Act by providing the commissioner may before the expiry of the initial period of six months allow such further time not exceeding six months for completion of the assessment proceedings. (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X
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