Invalid special audit extension under the Income-tax Act rendered the belated assessment time-barred and void ab initio.

The special audit extension under section 142(2C) of the Income-tax Act was invalid because the Assessing Officer did not pass a proper order within time, and a post-expiry communication after Principal Commissioner approval could not replace the statutory exercise of power. On that basis, the assessment had to be completed within the prescribed period. The belated assessment was therefore treated as barred by limitation and void ab initio, so the Revenue's challenge failed.

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Issues: Whether the assessment was rendered void ab initio and barred by limitation because the extension of time for submission of the special audit report was not granted by the Assessing Officer by a valid order under section 142(2C) of the Income-tax Act, 1961.

Analysis: The issue turned on the statutory scheme governing special audit. The original direction for special audit was issued under section 142(2A) of the Income-tax Act, 1961, and the proviso to section 142(2C) required the Assessing Officer to extend the time for furnishing the report. The extension in the present case was not granted by the Assessing Officer through a proper order; instead, it was merely communicated after approval of the Principal Commissioner and in any event after the relevant period had expired. The Tribunal held that such communication could not substitute for the statutory exercise of power by the competent authority. Since the extension was invalid, the assessment ought to have been completed within the period prescribed by law, and the belated assessment was therefore hit by limitation.

Conclusion: The assessment was held to be void ab initio and barred by limitation, and the Revenue's challenge failed.

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