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TMI Blog2024 (1) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... after receiving of the approval from the ld. PCIT is legally tenable or not? - We are guided by the judgment of Soul Space Projects Ltd. [ 2023 (12) TMI 740 - DELHI HIGH COURT] held that the initial exercise of the power has been explicated as one that is not administrative, the ld. PCIT could not have extended the time for Special Audit based on recommendation of the Assessing Officer. The enunciation of the legal principle does not derogate the observation that since the discretionary power was vested with the Assessing Officer which is non-delegable, it could not have been exercised by the Pr. CIT irrespective of the nature of the power. Thus we hold that the extension given for getting the special audit done u/s 142(2A) suffers from multiple infirmities and therefore, the assessment order is held to be void ab-initio. - Dr. B.R.R. Kumar, Accountant Member And Sh. Yogesh Kumar US, Judicial Member For the Assessee : Sh. S. S. Nagar, CA. For the Revenue : Ms. Sapna Bhatia, CIT-DR. ORDER Per Dr. B.R.R. Kumar, Accountant Member: The present appeal and Cross Objection have been filed by the Revenue and the assessee against the order of ld. CIT(A)24, New Delhi dated 08.10.2021. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, respectively. Ground No. 3 of the Cross Objection 3. That on the facts and circumstances of the case, that extension of time was granted by Pr. CIT in getting books audited u/s 142(2A) was illegal thus vitiating the proceedings thereof and hence order passed u/s 143(3) is bad in law and need to be quashed. Facts of the case: 5. Apropos the ground before us, that the assessee is a Limited Company, engaged in the business of trading and manufacturing of Fast Moving Consumer Goods (FMCG). The assessee had filed its return of income on 29.11.2016 declaring total income at Rs. 645,44,60,180/-. The case of the assessee was selected for scrutiny assessment. During the course of assessment proceeding, the Assessing Officer having doubts about the correctness of accounts maintained by the assessee, issued a show cause notice dated 05-12-2018 to the assessee to explain, keeping in view the nature and complexity of accounts, why special Audit u/s. 142(2A) of the Act, should not be conducted and accordingly a Show cause notice dated 05-122018 was issued to the assessee. 6. After consideration of the submissions of the assessee, the Assessing Officer vide letter dated 20.12.2018 has requeste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be void ab-initio. 12. Aggrieved, the Revenue filed appeal before us. Arguments of the ld. DR: 13. The ld. CIT DR argued eloquently referring to the provisions of Section 142(2A) and Section 142(2C) of the Income Tax Act, 1961 and argued that the due procedure has been followed while approving the Special Audit and granting extensions for completion of the Special Audit. Giving the sequence of proceedings, the ld. CIT DR argued that due procedure has been followed for the time limits as was allowed by the Principal CIT within the time limit available u/s 144(2C) of the Act. 14. For the sake of completeness, the arguments of the ld. CIT (DR) in writing which have been reproduced hereunder: On detailed analysis of the appellate order, it is noticed that the assessee has raised 19 grounds of appeal, out of which the Id. CIT (A) only dealt with ground Nos. 1 and 3 only, which are basically based upon technical issues. The Id. CIT (A) has not dealt with any other issues on merits. The Id. CIT (A) has relied upon the order passed by the Id. CIT(A)-7, vide his order dated 23.09.2020 in this case for the A.Y. 2010-11. It is pertinent to mention here that the Id. CIT (A) has arrived to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject: Written submission in the above case- regarding As directed on the last day of hearing by the Hon ble Bench, a written submission is being made as under. In this case, after special audit u/s 142(2A), assessment was completed on the total income of Rs. 882.25 crore under normal provisions and at Rs. 1023.09 crore under 115JB of the Income-tax Act, 1961. The CIT(Appeal) has deleted the addition by holding the assessment to be time barred in view of the facts as mentioned in para 4.2.18 and 4.2.19. 4.2.18 It is further noticed that the provisions of sections 142(2C) uses the word shall and not may and therefore the AO was obliged to furnish the audit report latest by 30.02.2019. The extension for another 45 days was granted only on 28.03.2019 after expiry of 8 days of the original days of 90 days. The aforesaid action of the AO appears to be patently wrong as the extension, if any, has to be granted before expiry of the original period and not 7 days beyond that. 4.2.19 Without prejudice to the above and even assuming that such action of the AO can be condoned, still the aggregate period of 135 days (original + extended) for completion of Special Audit in the case of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ospective, explained the reason for amendment envisaging a pre amendment situation where the auditor for genuine reasons was unable to comply with time schedule and the assessee had sole and unrestricted power to determine whether an extension should be sought. The Hon ble Apex Court held that the Legislature could not have intended this consequence. The amendment introducing Suo motu extension by the AO was intended to cover such situations where the auditor is not able to complete the audit in time and no intimation is received from the assessee. Facts of the present case mirror such a situation. The same is evident from a letter of the auditor (on pages 45-46 of the Paper Book submitted by the assessee), where the auditor has highlighted the non cooperative attitude of the assessee and submission of documents at the last moment hampering the timely completion of audit. No attempt has been made by the assessee to inform the AO for extension of time considering the fact that voluminous documents were submitted by it to the Auditor just 2 days before the deadline. Another argument relied upon by the assessee and upheld by the CIT (Appeal) is that the Approval for appointment of spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be noted that all internal correspondences submitted by the AR with regard to extension of time have originated from the AO and the satisfaction of the AO is inherent within them. It is also submitted that, no prejudice has been caused to the assessee by such correspondence. In view of discussion above, it is humbly requested that the matter may be remanded to the file of CIT (A) to decide the case of merits. Sd/- (Sapna Bhatia) CIT(DR)-4, ITAT, New Delhi 15. On the other hand, the ld. AR reiterated the arguments taken up before the ld. CIT (A) which have been mentioned at page no. 24 25 of the order of the ld. CIT(A). The ld. AR has also relied on the letter dated 28.03.2019 of the ACIT, letter dated 21.12.2018 of the Addl. CIT and letter dated 24.12.2018 of the Pr. CIT which are being reproduced in this order in the subsequent paragraphs. Examination of the facts, law and the decision: 16. In terms of proviso of Sec. 142(2C), the extension of further time period the Special Audit Report u/s 142(2A) can be done by the Assessing Officer suo-moto or on an application made in this behalf by the assessee. 17. Relevant provisions of Section 142(2C) of the Income Tax Act, 1961 is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax, Circle-19(2), New Delhi 19. The central argument of the ld. AR was that the extension has not been granted in terms of provisions of Sec. 142(2C) and therefore the extension so granted is beyond jurisdiction and is time barred owing to the fact that the Assessing Officer suo moto has not extended the time nor has he acted upon the application of the assessee for the same. To buttress this fact, the ld. AR brought to our notice that the extension as approved by the ld. PCIT. 20. From the above, it can be found that the extension has not been granted in terms of provisions of Section 142(2C) of the Income Tax Act, 1961 but time for extension has been sought by the ACIT through range head Addl. CIT from PCIT. The ld. PCIT approved the proposal of the AO and only after that the approval has been granted by the ACIT vide letter dated 17.05.2019. The para 12 of the letter of the Assessing Officer is not an administrative intimation but it sought the approval of the ld. PCIT who as per the statute do not have the power of granting extension for Special Audit. 21. The para is as under: 12. However, further considering the state of special audit for the Assessment Year 2016-17 and requ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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