Delhi High Court
Commissioner Of Income Tax vs Bishan Saroop Ram Kishan Agro Pvt. ... on 27 May, 2011
Author: M. L. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ (1) ITA No.1775/2010
% Date of Decision: May 27, 2011
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(2) ITA No.1776/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(3) ITA No.1777/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(4) ITA No.1965/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
Page 1 of 23
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(5) ITA No.2032/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(6) ITA No.2033/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(7) ITA No.2034/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(8) ITA No.2035/2010
%
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
Page 2 of 23
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(9) ITA No.2036/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(10) ITA No.2037/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(11) ITA No.2038/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
Page 3 of 23
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha,
Advocates
(12) ITA No.2039/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha, Advocates
(13) ITA No.2046/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha, Advocates
(14) ITA No.2047/2010
%
COMMISSIONER OF INCOME TAX ... Appellant
Through: Mr. Prem Lata Bansal, Sr. Advocate
with Mr. Deepak Anad, Advocates
Versus
BISHAN SAROOP RAM KISHAN AGRO PVT. LTD. ... RESPONDENT
Through: Mr. K.P. Mall and Ms. Kavita Jha, Advocates
CORAM:
HON'BLE MR. JUSTICE A.K.SIKRI
HON'BLE MR. JUSTICE M.L.MEHTA
1. Whether the Reporters of local papers
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Page 4 of 23
may be allowed to see the judgment? Yes
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be Yes
reported in the Digest?
M.L.MEHTA, J. (Oral)
1. The above 14 appeals are directed against the common order of
the Income Tax Appellate Tribunal (for short, "the Tribunal") dated 18th
September 2009 whereby the appeals filed by the Assessee against
the order of CIT(A) were allowed and the cross appeals filed by the
Revenue were dismissed. The following questions of law arose in all
these appeals:
I. Whether the Ld. ITAT erred in law in holding that the
assessment order was barred by limitation?
II. Whether the amendment to the proviso to Section 142(2C)
of the Income Tax Act, 1961 with effect from 01.04.2008
was clarificatory and thus retrospective in nature?
2. The facts, as gathered from the impugned order, are that the
Assessee had filed its returns for different assessment years. There
was a search conducted by the Revenue on the Assessee on 7th
October 2004. The last panchnama was drawn on 6th December 2004.
A notice under Section 153A of the Income Tax Act (for short, "the
Act") was issued upon the Assessee on 16th May, 2005. The assessee
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filed return in response to this notice. On 12th December 2006, the
Assessing Officer ordered for conducting special audit as per the
provisions of Section 142 (2A) of the Act and gave 90 days time i.e. up
to 12th March 2007 to submit the report. The Auditor made a request to
the Assessing Officer for seeking extension of time for completion of
audit stating that the Assessee did not co-operate in the proceedings.
Consequently, Assessing Officer extended the time from 12th March,
2007 to 20th April, 2007. The Assessing Officer again extended the time
for completion of the special audit up to 20th May, 2007. The AO again,
for the third time, extended the time for completion of special audit up
to 5th June, 2007. The audit report under Section 142(2B) of the Act
came to be submitted by the Auditor on 4th June, 2007. The AO passed
the assessment order under Section 153A and 143(3) of the Act on 3rd
August, 2007.
3. These appeals against the different orders of the Assessing
Officer came to be disposed of by CIT(A) vide different orders. Some of
the issues on merits were decided by CIT(A) against the Revenue and
some against the Assessee. The issue regarding limitation of
finalization of assessment under Section 153A was decided against the
Revenue. The cross appeals field by the Assessee and the Revenue
against the order of CIT(A) were disposed of by the Tribunal vide
impugned order only on the issue of limitation. Since the issue of
limitation of finalization of assessment was decided against the
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revenue, the Tribunal did not choose to decide the other issues raised
on merits.
4. The Tribunal held that the AO could not have extended the time
for auditor‟s report on his own inasmuch as this power of the AO to
extend the time of audit report suo motu under Section 142(2C) came
to be inserted by way of an amendment with effect from 1st April,
2008. Consequently, he held the assessment made under Section 153A
of the Act in respect of the assessment years in question to be barred
by limitation. It is this impugned order that has been challenged by the
Revenue by way of these appeals.
5. There is no dispute with regard to the dates. The only issue is
with regard to interpretation of provisions of Section 142(2A), (2C) and
153B(1) Explanation (ii). For better understanding these Sections are
reproduced hereinbelow:
142. Enquiry before assessment.-(1) For the
purpose of making an assessment under this Act, the
Assessing Officer may serve on any person who has
made a return under Section 115WD or Section 139
or in whose case the time allowed under sub-section
(1) of section 139 for furnishing the return has
expired a notice requiring him, on a date to be
therein specified,-
xxx
[(2A) If, at any stage of the proceedings before him,
the [Assessing Officer], having regard to the nature
and complexity of the accounts of the assessee and
the interests of the revenue, is of the opinion that it
is necessary so to do, he may, with the previous
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approval of the [Chief Commissioner or
Commissioner] direct the assessee to get the
accounts audited by an accountant, as defined in the
Explanation below sub-section (2) of section 288,
nominated by the [Chief Commissioner or
Commissioner] in this behalf and to furnish a report
of such audit in the prescribed form duly signed and
verified by such accountant and setting forth such
particulars as may be prescribed and such other
particulars as the [Assessing Officer] may require;
[Provided that the Assessing Officer shall not direct
the assessee to get the accounts so audited unless
the assessee has been given a reasonable
opportunity of being heard.]
[(2B) The provisions of sub-section (2A) shall have
effect notwithstanding that the accounts of the
assessee have been audited under any other law for
the time being in force or otherwise.]
[(2C) Every report under sub-section (2A) shall be
furnished by the assessee to the [Assessing Officer]
within such period as may be specified by the
[Assessing Officer]:
Provided that the Assessing Officer may, Suo motu,
or on an application made in this behalf by the
assessee and for any good and sufficient reason,
extend the said period by such further period or
periods as he thinks fit; so, however, that the
aggregate of the period originally fixed and the
period or periods so extended shall not, in any case,
exceed one hundred and eighty days from the date
on which the direction under sub-section (2A)is
received by the assessee.
153B. (1) Notwithstanding anything contained in
section 153, the Assessing Officer shall make an
order of assessment or reassessment,--
(a) in respect of each assessment year falling within six
assessment years referred to in clause (b) of 73[sub-
section (1) of] section 153A, within a period of two
years from the end of the financial year in which the
last of the authorisations for search under section
132 or for requisition under section 132A was
executed;
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(b) in respect of the assessment year relevant to the
previous year in which search is conducted under
section 132 or requisition is made under section
132A, within a period of two years from the end of
the financial year in which the last of the
authorisations for search under section 132 or for
requisition under section 132A was executed :
[Provided that in case of other person referred to in
section 153C, the period of limitation for making the
assessment or reassessment shall be the period as
referred to in clause (a) or clause (b) of this sub-
section or one year from the end of the financial year
in which books of account or documents or assets
seized or requisitioned are handed over under
section 153C to the Assessing Officer having
jurisdiction over such other person, whichever is
later:]
[Provided further that in the case where the last
of the authorisations for search under section 132 or
for requisition under section 132A was executed
during the financial year commencing on the 1st day
of April, 2004 or any subsequent financial year,--
(i)the provisions of clause (a) or clause (b) of this
sub-section shall have effect as if for the words "two
years" the words "twenty-one months" had been
substituted;
(ii)the period of limitation for making the assessment
or reassessment in case of other person referred to
in section 153C, shall be the period of twenty-one
months from the end of the financial year in which
the last of the authorisations for search under section
132 or for requisition under section 132A was
executed or nine months from the end of the
financial year in which books of account or
documents or assets seized or requisitioned are
handed over under section 153C to the Assessing
Officer having jurisdiction over such other person,
whichever is later:]
Provided also that in case where the last of the
authorisations for search under section 132 or for
requisition under section 132A was executed during
the financial year commencing on the 1st day of
April, 2005 or any subsequent financial year and
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during the course of the proceedings for the
assessment or reassessment of total income, a
reference under sub-section (1) of section 92CA--
(i) was made before the 1st day of June, 2007 but
an order under sub-section (3) of section 92CA has
not been made before such date; or
(ii) is made on or after the 1st day of June, 2007,
the period of limitation for making the assessment or
reassessment in case of such other person shall,
notwithstanding anything contained in clause (ii) of
the second proviso, be the period of thirty-three
months from the end of the financial year in which
the last of the authorisations for search under section
132 or for requisition under section 132A was
executed or twenty-one months from the end of the
financial year in which books of account or
documents or assets seized or requisitioned are
handed over under section 153C to the Assessing
Officer having jurisdiction over such other person,
whichever is later.]
Explanation.--In computing the period of limitation
for the purposes of this section,--
(i) the period during which the assessment proceeding
is stayed by an order or injunction of any court; or
(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
xxxxx
(2) The authorization referred to in clause (a) and
clause (b) of sub-section (1) shall be deemed to have
been executed.-
(a) in the case of search, on the conclusion of
search as recorded in the last panchnama, drawn in
relation to any person in whose case the warrant of
authorization has been issued;
(b) in the case of requisition under Section 132A, on
the actual receipt of the books of account or other
documents or assets by the Authorized Officer.]
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6. Section 142 provides the procedure for the enquiry that is
required before making assessment. Sub-section (2A) provides for
conducting special audit during the proceedings of assessment. This
sub section provides that if at any stage of the proceedings, the
Assessing Officer was of the opinion, having regard to the nature and
complexity of the accounts of the Assessee and in the interest of
revenue so to do, he may direct the Assessee to get the accounts
audited by the Accountant in the manner prescribed therein. Sub
section (2C) provides that every audit report under sub section (2A) is
to be furnished by the Assessee to the Assessing Officer within such
period as may be specified by the Assessing Officer. It was submitted
by the learned counsel for the Assessee that the assessment order
passed under Section 153A on 3rd August, 2007 was barred by
limitation insofar as the order of special audit was made by the
Assessing Officer on 12th December 2006 and the special audit was to
be conducted on or before 12th March, 2007. He submitted that the
Assessing Officer did not have inherent power to extend time under
sub Sections (2A) or (2C) of Section 142 of the Act and the time could
only be extended at the request of the Assessee and consequently the
limitation as per Explanation (ii) to Section 153B(1) for the purpose of
computing assessment expired on 11th May, 2007. He also submitted
that the power to suo motu extend the period for special audit under
Section 142(2A) has been provided in the proviso to section 142(2C) by
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the Finance Act, 2008 with effect from 1st April, 2008 and the same
being prospective in nature, the AO was not empowered to extend the
time for audit report of his own. The learned counsel also placed
reliance upon the Memorandum explaining the provisions of finance
bill, 2008 and also the circular No.1 issued by CBDT dated 27 th March,
2009. The said Memorandum and Circular shall be referred to a litter
later.
7. This was not in dispute that the word „suo motu‟ came to be
inserted by way of an amendment with effect from 1st April, 2008.
However, it was contended by learned counsel for the Revenue that
the Assessing Officer had the power to extend the time of audit report
under Section 142(2C) of the Act since the word "and" appearing
before the words "for any good and sufficient reasons" was to be read
as „or‟. In other words, the submissions of the learned counsel was that
the Assessing Officer suo motu had the power to direct the assessee to
get audit report and also to extend the time for submission of audit
report. Learned counsel relied upon cases of Jagjit Sugar Mills Co.
Ltd.vs. CIT, 210 ITR 468 (Punjab & Haryana); CIT v Puthuthotam
Estates Ltd. 127 ITR 481 (Madras), P.V. Devassy v. CIT [1972] 84
ITR 502 (Kerala) and CIT v Gangaram Chapolia, 103 ITR 613
(Orissa).
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8. In Jagjit Sugar Mills Co. Ltd (supra), the Hon‟ble High Court of
Punjab and Haryana had treated the word "and" appearing between
the words "application made by the assessee" and "for any good and
sufficient reasons" under Section 142 (2C) as "or" and had held that
period for submission of report by the Special Auditor is extendable by
the Assessing Officer, even without an application in this regard by the
assessee.
9. In case of CIT v Puthuthotam Estates Ltd. (supra) it was held
that, "The circumstances under which the word "and" may be
construed as "or" and vice versa should be somewhat rare. Otherwise
if the two are taken to be interchangeable terms, then it would result
in Parliament throwing into the statute the two expressions
indiscriminately and leave them to the courts to sort out the meaning.
In ordinary usage "and" is conjunctive and "or" is disjunctive".
10. In the case of P.V. Devassy v. CIT (supra), it was held as under:
"An assessee is required to file the return within the
time allowed and in the manner prescribed in order
that the Income Tax Officer may complete the
assessment within the period specified in the Income
Tax Act. If the return is not filed in time or, if filed in
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time, it does not contain all the particulars required, it
will not be possible for the Income Tax Officer to
complete the assessment within the period specified
in the Act. In other words, the object of the legislature
in insisting upon the assessee filing the return within
the time and in the manner prescribed is to enable
the Income Tax Officer to complete the assessment
within a period of four years as specified in the Act
and that object will be frustrated unless the assessee
files the return within the time allowed and in the
manner prescribed. To carry out the object of the
legislature, it is necessary to attach a sanction for the
failure to fulfill any of the two conditions. If the object
is clear, we do not think the use of the conjunctive
word "and" in the sub section is conclusive. The word
"and" has generally a cumulative sense, and is thus
the antithesis of disjunctive "or"; but occasionally it is
permissible to read "and" as "or" if the context so
requires. In Ishwar Singh Bindra v. State of U.P.,
it is observed:
"And has generally a cumulative sense, requiring the
fulfillment of all the conditions that it joins together
and herein it is the antithesis of or. Sometimes,
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however, even in such a connection, it is, by force of
a context, reads as or. Sometimes to carry out the
intention of the legislature it is found necessary to
read the conjunctions „or‟ and „and‟ one for the
other."
In Maxwell on the Interpretation of Statutes, 12th
edition, at page 232, it is observed, "In ordinary
usage, „and‟ is conjunctive and „or‟ disjunctive. But to
carry out the intention of the legislature it may be
necessary to read „and‟ in place of the conjunction
„or‟ and vice versa."
11. In the case of CIT vs. Gangaram Chapolia (supra), it was held
as under:
"(ii) The conjunctive "and" in the second clause of
section 271(1)(a) should be construed as "or".
Therefore, even if the return of the assessee had
been filed in the manner prescribed, as it was not
filed within the time allowed under section 139(1),
and as such one of the two conditions prescribed in
section 271(1)(a) had not been fulfilled, the assessee
would be liable to penalty."
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12. It is a cardinal principle for interpreting a fiscal statute that, a
taxing statute has to be construed very strictly and has to be read
without amending or altering the provisions. The intention of the
legislature in a taxation statute is to be gathered from the language of
the provisions particularly where the language is plain and
unambiguous.
13. The Supreme Court in the case of Mathuram Aggarwal v State
of Madhya Pradesh, 8 SCC 667[1999] held that,
"In a taxing Act it is not possible to assume any
intention or governing purpose of the statute more
than what is stated in the plain language. It is not the
economic results sought to be obtained by making
the provision which is relevant in interpreting a fiscal
statute. Equally impermissible is an interpretation
which does not follow from the plain, unambiguous
language of the statute. Words cannot be added to
or substituted so as to give a meaning of the statute
which will serve the spirit and intention of the
legislature. The statute should clearly and
unambiguously convey the three components of the
tax law, i.e., the subject of the tax, the person who is
liable to pay the tax and the rate at which the tax is
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to be paid\. If there is any ambiguity regarding any of
these ingredients in a taxation statute then there is
no tax in law. Then it is for the legislature to do the
needful in the matter."
14. In the case of Nasiruddin and others v Sita Ram Agarwal 2
SCC 577 (2003), it is held:
"37. The court‟s jurisdiction to interpret a statute
can be invoked when the same is ambiguous. It is
well known that in a given case the court can iron out
the fabric, but is cannot change the texture of the
fabric. It cannot enlarge the scope of legislation or
intention when the language of provision is plain and
unambiguous. It cannot add or subtract words to a
statute or read something into it which is not there. It
cannot re-write or recast legislation. It is also
necessary to determine that there exists a
presumption that the legislature has not used any
superfluous words. It is well settled that the real
intention of the legislation must be gathered from
the language used. It may be true that use of the
expression "shall" or may" is not decisive for arriving
a finding as to whether statute is directory or
mandatory. But the intention of the legislature must
be found out from the scheme of the Act. It is also
equally well settled that when negative words are
used, the courts will presume that the intention of
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the legislature was that the provisions should be
mandatory in character."
15. With these principles of interpretation, we may note that the
provisions as existing in sub section (2C) of the Act before 1st April,
2008 did not empower the Assessing Officer to suo motu extend the
time for submission of audit report under sub section (2A). This is also
clear from the fact that the Memorandum explaining the provisions of
granting power to the Assessing Officer to extend time for completion
of special audit under sub section (2A) of Section 142 mentions about
the reasons in the said Memo which reads as under:
"Granting of power to the Assessing Officer to extend
the time for completion of special audit under sub-
section (2A) of section 142
Sub-sections (2A) to (2D) of section 142 deal with
power of Assessing Officer to order a special audit.
Such power is required to be exercised by the
Assessing Officer having regard to the nature and
complexity of the accounts of the assessee and the
interest of the Revenue.
Sub-section (2C) of the said section specifies the
period within which the audit report is to be
furnished. The proviso to said sub-section empowers
the Assessing Officer to extend this period of
furnishing of audit report. Further, it is also provided
that the aggregate of the originally fixed period and
the period(s) so extended shall not exceed 180 days
from the date of issuance of direction of special
audit. Further, such extension can be made only
when an application is made in this behalf by the
assessee and there are good and sufficient reason
for such extension.
It is proposed to amend the said proviso so as to also
allow the Assessing Officer to extend this period of
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
furnishing of audit report suo motu. Hence, while the
Assessing Officer shall continue to have power to
grant extension on an application made in this behalf
by the assessee and when there are good and
sufficient reasons for such extension, he can also
grant such extension on his own.
The amendment will take effect from 1st April, 2008.
16. Further, the circular No.1. of CBDT dated 27th March, 2009 has
also clarified on the issue of applicability of the aforesaid amendment
in sub section (2C) with effect from 1st April, 2008. The said circular
reads as under:-
"Direct Tax Circular No.1 dated 27th March, 2009
Explanatory Notes to the Provisions of the Finance
Act, 2008.
1. Introduction:
1.1 The Finance Act, 2008 (hereafter referred to as
the Act) as passed by the Parliament, received the
assent of the President on the 10th day of May, 2008
and has been enacted as act No.18 of 2008. This
circular explains the substance of the provisions of
the Act relating to direct taxes.
27. Granting of power of the Assessing Officer to
extend the time for completion of special audit under
sub-section (2A) of section 142.
27.1 Sub-sections (2A) to (2D) of section 142 with
power of Assessing Officer to order a special audit.
Such power if required to be exercised by the
Assessing Officer having regard to the nature and
complexity of the accounts of the assessee and the
interest of the revenue.
27.2 Sub-sections (2C) of the said section specifies
the period within which the audit report is to be
furnished. The proviso to said sub-section empowers
the Assessing Officer to extend this period of
furnishing of audit report. Further, it is also provided
that the aggregate of the originally fixed period and
the period(s) so extended shall not exceed 180 days
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
from the date of issuance of direction of specific
audit. Further, such extension can be made only
when an application is made in this behalf by the
assessee and there are good and sufficient reasons
for such extension.
27.3. With a view to rationalize the said proviso so as
to also allow the Assessing Officer to extend this
period of furnishing of audit report suo motu, the said
proviso has been amended. Hence, while the
Assessing Officer shall continue to have power to
grant extension on an application made in this behalf
by the assessee and when there are good and
sufficient reasons for such extension, he can also
grant such extension on his own.
27.4 Applicability - This amendment has been made
applicable with effect from 1-4-2008. Hence, from
this date and onwards, the Assessing Officer shall
also have power to extend the period of furnishing of
audit report suo motu". (Emphasis supplied)
17. The Memo explaining the provisions of Finance Bill, 2008 and
also Circular No.1 dated 27th March, 2009 of CBDT as reproduced
hereinabove would clearly bring out that sub section (2A) to (2D) of
Section 142 deal with the powers of the Assessing Officer to order for
special audit and the same was to be exercised by him having regard
to the nature and complexity of the account of the assessee and the
interest of the revenue.
18. The word "and" appearing before the words "for any good and
sufficient reasons" in the proviso to sub section (2C) by any stretch of
interpretation could not be read as "or". The fact that the words "suo
motu" have been added by way of an amendment with effect from
01.04.2008 would show the legislative intention in the proviso as
existed before the amendment which is that the Assessing Officer prior
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
to amendment had no power to extend the period of furnishing audit
report of his own.
19. It was to rationalize the said proviso that the word " suo motu"
came to be added by way of amendment with effect from 1st April
2008. As per Clause 27.3 of the Circular dated 27th March, 2009 while
the Assessing Officer shall continue to have the power to grant
extension on an application made in this behalf by the Assessee, he
could also grant extension of his own when there are good and
sufficient reasons for such extension. Thus, it is noticed that sub
section (2C) before the amendment did not empower the Assessing
Officer to extend the time for submissions of special audit report under
sub Section (2A). Further, the power of extension of time for
submission of special audit report is also subject to limitation of a
period of 180 days from the date on which the directions under section
142(2A) of the Act for the audit was received by the Assessee. It is an
admitted fact that in the present case, the assessee had not made any
application for extension of period of audit report. Therefore, the
extension which was granted by the Assessing Officer on the request
of the Auditor could be taken to be a suo motu action of the Assessing
Officer which power, as noted above, was not available with the
Assessing Officer prior to the amendment with effect from 1 st April,
2008. Not only this, said power of extension was also further controlled
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
in the words, "for any good and sufficient reasons". This would mean
that the Assessing Officer was supposed to record reasons for granting
extension on his own. Clause 27.4 of the Circular also clarifies that this
amendment has been made applicable with effect from 1 st April, 2008
and it is from this date onwards that the Assessing Officer shall have
power to extend the period of furnishing of special audit report suo
motu.
20. In the light of interpretation of the proviso as is existed before or
after the amendment and the legislative intent behind the amendment
as gathered from the memorandum and the circular noted above, we
are not persuaded to agree with the interpretation as given by the
Punjab and Haryana High Court in the case of Jagjit Sugar Mills
Company Limited (supra). Further in view of our above discussion, it
comes to be concluded that the Tribunal was correct in holding that
the Assessment Order was barred by limitation. That being so, we
answer Question No.1 in affirmative in favour of the Assessee and
against the revenue.
21. In view of foregoing discussion that the amendment whereby the
word „suo motu‟ were inserted in sub section (2C) of Section 142 of the
Act was to be applicable with effect from 1st April, 2008 only, the
amendment cannot be said to be clarificatory or retrospective in
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
nature. The amendment was prospective and was to be applicable with
effect from 1st April, 2008 only. Accordingly, we answer Question No.2
against the revenue.
22 In view of foregoing reasons, all the above appeals merit
dismissal and are hereby dismissed.
M.L.MEHTA
(JUDGE)
A.K.SIKRI
(JUDGE)
May 27, 2011
rd
ITAs No.1775/ 2010, 1776/2010, 1777/2010, 1965/2010, 2032/2010, 2033/2010, 2034/2010, 2035/2010,
2036/2010, 2037/2010, 2038/2010, 2039/2010, 2046/2010 & 2047/2010
