Tribunal sets aside CIT(A)'s order due to limitation issue, deems assessment invalid.

The Tribunal allowed the appeal, setting aside the CIT(A)'s order, as the assessment for the year 2003-04 was deemed barred by limitation. The special audit ordered by the AO was found to be unjustified, rendering the extended period inapplicable. Consequently, the assessment order was held invalid, and all grounds of appeal raised by the assessee were accepted. The issue of disallowance of expenses, though raised, was secondary to the limitation issue in the Tribunal's decision.

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Issues Involved:
Assessment order validity challenged on grounds of limitation and disallowance of expenses.

Analysis:
1. Assessment Barred by Limitation:
The appeal challenged the legal validity of the assessment order for the assessment year 2003-04 on the basis that it was barred by limitation. The AO initiated proceedings under section 153A of the IT Act following a search conducted in the assessee's case. The AO directed the assessee to get the accounts audited under section 142(2A), which extended the time for passing the assessment order. The AO passed the assessment order on 29/9/2006, claiming it was within the extended period. The assessee contended that the special audit was not justified, and therefore, the extended period was not applicable, rendering the assessment order barred by limitation. The Tribunal noted that the AO could order special audit under section 142(2A) only in cases of complexity, which was not present here. The AO had not considered the accounts before ordering the special audit, and the Tribunal held that the special audit was not legally valid. Citing relevant case law, the Tribunal concluded that the assessment order was indeed barred by limitation, following its decisions in the assessee's previous cases. Consequently, the order of the CIT(A) was set aside, and all grounds of appeal raised by the assessee were allowed.

2. Disallowance of Expenses:
Apart from the issue of limitation, the appeal also challenged the merit of disallowance of various expenses made by the AO. However, the Tribunal's decision primarily focused on the issue of limitation, as the assessment order was deemed barred by limitation due to the invalidity of the special audit and the lack of complexity in the accounts. The Tribunal's ruling on the limitation issue rendered the discussion on the disallowance of expenses secondary in this judgment.

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(A) and holding that the assessment for the assessment year 2003-04 was indeed barred by limitation due to the invalid special audit and lack of complexity in the accounts.

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