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TMI Blog2023 (1) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... r appointing Special Auditor u/s 142(2A) of the Act passed by the AO as bad in law. Since the extended period was taken by the AO under the guise of Special audit, hence the same cannot be counted for computing the period of limitation to pass the assessment order. As held by the Hon'ble Supreme Court in the case of Harsha Dhingra Vs. State of Haryana [ 2001 (9) TMI 1171 - SUPREME COURT] the subordinate Forums including this Tribunal is bound to apply law declared by the Hon'ble Supreme Court and is duty bound to apply such dictum to case which would arise in future. The original limitation to pass the assessment order expired on 31.12.2008 in these cases and the impugned assessment order passed thereafter on 21.08.2009 are therefore held to be barred by limitation, hence, the impugned assessment orders passed u/s 153A in respect of the quantum appeals are hereby quashed and the consequential additions made by virtue of such invalid assessment orders stand deleted. Appeal of assessee allowed. - I.T.A. No.1325/CHANDI/2010 I.T.A. No.274/CHANDI/2014, I.T.A. No.1326/CHANDI/2010, I.T.A. No.1421/CHANDI/2010, I.T.A. No.275/CHANDI/2014 - - - Dated:- 30-12-2022 - Shri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of National Thermal Power Co. vs. CIT (SC) 229 ITR 383 (1998) pleading that the legal additional ground can be taken for the first time even before the appellate authorities. He has further contended that the Hon'ble Delhi High Court in Consulting Engineering Services (India) Ltd. vs ITAT WP No. 7734/2017 dated. 01.09.2017 has reversed the decision of the Delhi Bench of the Tribunal and directed the Tribunal to admit the issue of expiry of limitation to pass assessment order since based on illegal appointment of Special Auditor. 4. The Ld. DR, on the other hand, objected to the aforesaid legal grounds and has further relied upon by the decision of Hon ble Supreme Court in the case of Sahara India (Firm) vs. CIT Anr., reported in (2008) 169 taxmann 0328. He has further submitted that as per law laid down by the Hon ble Supreme Court in the aforesaid case, the order passed under section 142(2A) by the Assessing Officer (in short the AO ) appointing the Special auditor cannot be challenged in appeal before this Tribunal. 5. We have heard the rival contentions on this issue and have gone through the material available on record. Admittedly, the issue raised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under : Time-limit for completion of assessment under section 153A . 153B.(1) . Explanation.-In computing the period of limitation for the purposes of this section,- (i ) . (ii ) the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section; or (iii ) to (vii) shall be excluded : Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this sub-section available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. (2) 8. The contention of the Ld. Counsel for the assessee in this case has been that the assessment order framed in this case is invalid being barred by limitation having been passed in the extended ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance of principles of natural justice would be implicit. The hon ble Supreme Court further held that since, the Deputy Commissioner passed order under section 142(2A) without giving an opportunity of hearing to assessee for auditing of books of account of assessee and refused to hear assessee s request for supply of reasons thereof, hence, action of Deputy Commissioner was vitiated in law. 12. The correctness of the above principles laid down by the hon ble Supreme Court in the case of Rajesh Kumar vs DCIT (supra) came for consideration before the larger bench of the Hon ble Supreme Court in the case of Sahara India (Firm) vs. CIT (Supra). The relevant/operating part of the decision of the Hon ble Supreme Court in the case of Sahara India (Firm) vs. CIT (Supra) is reproduced as under: 21. In the light of the aforenoted legal position, we are in respectful agreement with the decision of this Court in Rajesh Kumar (supra) that an order under Section 142 (2A) does entail civil consequences. At this juncture, it would be relevant to take note of the insertion of proviso to Section 142 (2D) with effect from 1st June, 2007. The proviso provides that the expenses of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, we have some reservations on the said view expressed in Rajesh Kumar's case (supra), but having held that when civil consequences ensue, no distinction between quasi judicial and administrative order survives, we deem it unnecessary to dilate on the scope of Section 136 of the Act. It is the civil consequence which obliterates the distinction between quasi judicial and administrative function. Moreover, with the growth of the administrative law, the old distinction between a judicial act and an administrative act has withered away. Therefore, it hardly needs reiteration that even a purely administrative order which entails civil consequences, must be consistent with the rules of natural justice. (Also see: Mrs. Maneka Gandhi Vs. Union of India Anr. and S.L. Kapoor Vs. Jagmohan Ors. . As already noted above, the expression civil consequences encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non pecuniary damages. Anything which affects a citizen in his civil life comes under its wide umbrella. Accordingly, we reject the argument and hold that since an order under Section 142 (2A) does entail civil conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised vide order sheet entry dated 16th February, 2006 but in the meanwhile, the impugned orders were passed on 14th March, 2006 itself. It is manifestly clear that when the impugned orders were made, the Assessing Officer had no occasion to have even a glimpse of the accounts maintained by the appellants. Therefore, in the light of the legal position noted above, we have no option but to hold that the impugned orders dated 14th March, 2006, are vitiated by the failure to observe the principle audi alteram partem. 28. The next crucial question is that keeping in view the fact that the time to frame fresh assessment for the relevant assessment year by ignoring the extended period of limitation in terms of explanation 1 (iii) to sub-section (3) of Section 153 of the Act is already over, what appropriate order should be passed. As noted above, the learned Additional Solicitor General had pleaded that if we were not inclined to agree with him, the interpretation of the provision by us may be given prospective effect, otherwise the interest of the revenue will be greatly prejudiced. 29. There is no denying the fact that the law on the subject was in a flux in the sense that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and being in nature of an enquiry before assessment, hence, is purely an administrative act giving rise to no civil consequence. The Hon ble Supreme Court, rejecting the aforesaid contention of the Revenue, held that when the civil consequence unsue, no distinction between quasi judicial and administrative order survives and that even a purely administrative order which entails civil consequence, must be consistent with the rules of natural justice. The Hon ble Supreme Court rejected the argument of the Revenue that the order appointing the special auditor u/s 142(2A) was merely an administrative order, rather, held that since an order under section 142A does entail civil consequence, the rule audi alteram partem, which means that let the other side be heard as well is required to be observed. Further, the Hon ble Supreme Court in Para 23 of the said decision has rejected the contention of the Revenue that since post decisional hearing in terms of sub Section 3 and Section 42 is contemplated, the requirement of natural justice is fully met. The Hon ble Supreme Court held that in the post decisional hearing, the opportunity of being heard is only in respect of the material g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity of hearing is to be given to be assessee before directing for special audit, the principle of natural justice have to be followed and that even without such specific provision, the opportunity of hearing is to be given to the assessee. However, with the insertion of proviso to sub section 142A, now the statute, itself, provides that the opportunity of hearing is to be given before directing for special audit. The legal proposition thus, laid down by the Hon ble Supreme Court in clear terms is that the assessee has the right to contest the order passed by the AO u/s. 142(2A) of the Act for appointment of Special Auditor and before issuing such order/direction the assessee has to be given opportunity of hearing and that the such an opportunity can be excluded only in case if the assessee has the right to contest the validity of such order in the post decisional hearing on full review of the original order on merit. The Hon ble Supreme Court after laying the aforesaid proposition of law, thereafter in Para 26 onwards proceeded to discuss the peculiar factual aspects of the case before them i.e. of the Sahara India (firm) in the light of the afore-noted legal position for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court had declined to stay the assessment proceedings in the said Sahara India Firm s case, the Supreme Court showed reluctance to quash the assessment order in the case before them and held that the law laid down by the Hon ble Supreme Court that the assessee has the right to challenge the validity of the order directing appointment of Special Auditor u/s 142(2A) will apply prospectively i.e. to future cases only. The Hon ble Supreme Court thus, applied the doctrine of prospective overruling which meant that the proposition of law laid down by the hon ble Supreme Court in the case of Sahara India ( Firm) would apply to future cases only, but not in the case before them i.e. of Sahar India( Firm). 14. We are conscious of the fact that we will be deviating from the facts of this case in further deliberating on prospective application of the law declared by Supreme court, but for the sake of clarity that the doctrine of prospective overruling had been applied by the hon ble Supreme court of India for the first time in the famous case I.C. Golak Nath vs. State of Punjab AIR 1967 SC 1643 (popularly known as Golk Nath Case), wherein, the hon ble Supreme Court held that the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 859), the question was of the validity of the Punjab Pre-emption Act, 1913. The Court while holding that the relevant provisions of the Act were ultra vires the Constitution gave a direction that the suits and appeals which were pending in various courts will be disposed of in accordance with the declaration made in the said decision, Where, however, the decrees had become final they were directed to be binding inter partes and it was held that the declaration granted by the Court with regard to the invalidity of the provisions of the Act would be of no avail to the parties to such decree. In Orissa Cement Ltd, v. State of Orissa, 1991 Supp 1 SCC 430: (AIR 1991 SC 1676), the question involved was about the validity of the royalty and related charges for mining leases. Although the Court held that the levy was invalid since its inception, the Court held that a finding regarding the invalidity of the levy need not automatically result in a direction for a refund of all collections thereof made earlier. The Court held that the declaration regarding the invalidity of a provision of the Act enabling levy and the determination of the relief to be granted were two different things a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of constitutional policy but also an extended facet of stare decisis and not judicial legislation. 15. Reverting to the issue before us, the hon ble Supreme Court in the case of Sahara India (Firm) (supra) held that the legal position clarified by them will apply prospectively . That it would not be open to the appellants [Shara India (Firm)] to urge before the Appellate Authority that the extended period of limitation under Explanation 1 (iii) to Section 153 (3) of the Act was not available to the Assessing Officer because of an invalid order under Section 142 (2A) of the Act. Thus, a careful reading of the decision of the Hon ble Supreme Court in the case of Sahara India (Firm) (Supra) would reveal that the Hon ble Supreme Court categorically and in clear terms has held that the Assessing Officer is bound to afford an opportunity of hearing to the assessee before ordering appointment of Special Auditor u/s 142(2A) of the Act and that an assessee has right to contest the order asking appointment of Special Auditor under section 142(2A) of the Act and to urge that the extended period of limitation to pass assessment order was not available to the AO because of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident that on the same day the notice server was deputed to serve the notice, same day he reported that notice could not be served, same day it was served through affixture. In all notices, there are signatures of same income tax inspector, same notice server and same witness being Raju press man. Who is this Raju Pressman ? Why not the neighbors not taken as witness and instead some roving person was taken as witness whose identity is unknown. Rule 17 of Order V of CPC, 1908 mandates that for valid affixture, there has to be a witness who has to be an independent local person . In the present case, how is Raju a local person and the neighbors are not ? It is also an important fact that this was a case based on search conducted u/s 132 and the assessment of block period of AYs 2001-02 to 2007-08 was being conducted at the same time by the same AO. The assessment for AYs 2001-02 to 2005-06 was conducted and concluded at the same time. In those proceedings, there is no non compliance and all notices were always served and the assessment orders were passed in December 2008. But it is only qua the notices issued u/s 142(2A) for appointment of spl. auditor for AYs 2006-07 2007-08 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pgs 398 to 403) is totally unreasoned and non-speaking. The final order has to have its own reasons and it cannot stand on the legs of the SCN. g) When the AO directs special audit merely to get extension of time to frame assessment, the said assessment has been held to be barred by limitation. 17. It is pertinent to mention here that as per the provisions of section 142(2A) as in force during the relevant period, it was only the nature and complexity of the accounts, for which the matter could be referred by the AO to the special auditor. The Ld. DR, in this case, could not rebut the aforesaid contentions of the Ld. AR of the assessee that the AO even did not look to the accounts at all before forming the opinion that the same were complex. Even the assessee was not given opportunity to object to the said action, which was statutorily required, as discussed above. The service of notice was defective and rather, no service in the eyes of law. The case being based on search conducted u/s 132, the assessment of block period of AYs 2001-02 to 2007-08 was conducted simultaneously by the AO. In the assessment proceedings for AYs 2001-02 to 2005-06, there is no allegation of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be based on an objective criteria and not on the basis of an objective satisfaction .. . 21. Similarly the ratio laid down in the case of Unitech Ltd. Vs. Addl. CIT (74 Taxman 121) the Hon ble High Court of Delhi held that examining the impugned order in the present case, it is apparent that the order is non speaking order and gives no reasons for arriving at the conclusion that having regard to the nature and complexity of assessee's accounts and interest of the revenue, the AO was of the opinion that accounts are to be audited u/s 142(2A) of the Act. The order is silent as to on what basis and on what grounds, the accounts proposed to audit under section 142(2A) were considered complex and on what considerations it was arrived that it is in the interest of revenue to direct audit of accounts. Mere reference to a prior approval of CIT does not satisfy the precondition of a Speaking order containing reasons for invoking the provision of section 142(2A) of the Act. There is no reference to detailed replies furnished by the assessee during the proceedings. 22. Having regard to the above it is held that the impugned order reasons are clearly invisible and conspicuous ..... X X X X Extracts X X X X X X X X Extracts X X X X
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