2009 (9) TMI 685 - AT - Income Tax

Assessing Officer's Time Limit for Special Audit Controlled by Section 142(2C)

The Tribunal held that the Assessing Officer's discretion in granting time for completing a special audit under section 142(2A) is controlled by section ... Inquiry before assessment Issues Involved:1. Whether the Assessing Officer has the powers to grant any specified time for completing a special audit u/s 142(2A).2. Whether the time period u/s 142(2A) is controlled by the provisions of section 142(2C).Summary:Issue 1: Powers of the Assessing Officer to Grant Time for Special Audit u/s 142(2A)The Tribunal examined whether the Assessing Officer (AO) has the authority to specify any period for completing a special audit u/s 142(2A). The Tribunal noted that section 142(2A) allows the AO to direct an audit if the accounts are complex, with the prior approval of the Chief Commissioner or Commissioner. However, no specific time limit is mentioned in section 142(2A) for completing the audit. The Tribunal concluded that the AO's discretion in granting time is controlled by section 142(2C), which specifies that the audit report must be furnished within a period determined by the AO, subject to a maximum of 180 days from the date of the audit direction.Issue 2: Control of Time Period u/s 142(2A) by Section 142(2C)The Tribunal further analyzed whether the time period u/s 142(2A) is governed by section 142(2C). It was observed that section 142(2C) allows the AO to extend the audit period, either suo motu or upon the assessee's request, but this extension is limited to a total of 180 days. The Tribunal referred to the Finance Act, 2008, and Circular No. 1, dated 27-3-2009, which clarified that the AO's power to extend the audit period suo motu was effective from 1-4-2008. Before this date, extensions could only be granted upon the assessee's request. Since the extensions in the present case were made before 1-4-2008 without any application from the assessee, the Tribunal held that these extensions were without jurisdiction and invalid.Conclusion:The Tribunal concluded that the assessment orders were barred by limitation as the valid period for completing the special audit was from 12-12-2006 to 12-3-2007. Consequently, the appeals filed by the assessee were allowed, and the appeals filed by the revenue were dismissed.