TaxTMI 
TaxTMI 
2011 (7) TMI 119
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....tice and appeared on various dates before the Assessing Authority through its Chartered Accountant and filed various replies supported with various voluminous documents and records to the queries made by the Assessing Authority. The period for making the assessment was due to expire on 31-3-2006. 3. By a communication of 10-3-2006, an order came to be passed under section 142(2A) of the Act by respondent No. 3 appointing M/s. Bansal Gupta & Associates, Chartered Accountants as Special Auditor with the prior approval of the CIT, Ghaziabad. No notice was issued to the petitioner while directing the special audit by M/s. Bansal Gupta & Associates. The petitioner complied with the said notice and appeared on various dates before the Assessing Authority through its Chartered Accountant. It may be necessary to mention that order dated 10-3-2006 was received by the petitioner on 21-3-2006. The petitioner through its Chartered Accountant on 29-6-2006 requested an extension of further ten days for submitting the report. The respondent No. 3 extended the time for M/s. Bansal Gupta & Associates to furnish their report by a further period of 30 days, i.e., up to 6-8-2006 instead of 10 days ....
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....n 21-3-2006 and as such the period for making assessment was less than 60 days; (ii) 120 days in terms of order dated 10-3-2006 expires on 18-7-2006; March 11 days April 30 days May 31 days June 30 days July 18 days (iii) time to furnish report extended by 30 days vide letter dated 7-7-2006 i.e., up to 17-8-2006; July 13 days August 17 days (iv) the direction under section 142(2A) of the Act lapsed on 17-8-2006; (v) the report of the special auditor was, therefore, required to be submitted on or before 17-8-2006; (vi) the report of the special auditor is dated 4-9-2006 and beyond time; (vii) the time which can be extended in terms of the proviso of section 153 in view of the fact that only 22 days were remaining at the time of the order under section 142(2A) would be 60 days i.e., up to 16-10-2006; The assessment order has, however, been passed on 31-10-2006 and as such the same is barred by time even if the order under section 142(2A) is held to be a valid order." 7. Learned counsel has relied on various authorities for the purpose of interpretation of the ....
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.... has to be excluded. (v) Under section 153 - Explanation I(iii), the period commencing from the date on which the direction was issued - 10-3-2006. (vi) Period commencing from the date of 10-3-2006 when Assessing Officer directed the audit ending with last date when assessee was required to furnish the report has to be excluded. 11 days from 10-3-2006 to 21-3-2006 120 days from 21-3-2006 131 days has to be initially excluded. + 30 days further time granted on the application of the assessee. Total 161 days. (vii) Even if the case of the assessee is accepted that suo motu power cannot be exercised by Assessing Officer for extending the time under section 142(2C), still period of 161 days from 10th March, 2006 has to be excluded from the limitation period which expires on 31st March, 2006. In computing the period of limitation of two years ending on 31st March, 2006, the period of 161 days commencing from 10th March, 2006 shall ....
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....o amend section 143 of the Income-tax Act, which relates to assessment. 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 furnishing of audit re....
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....h the direction under sub-section (2A) is received by the assessee." As earlier set out the proviso to sub-section (2C) was amended by Finance Act, 2008 with effect from 1-4-2008 by adding the words "suo motu or" before the words 'on an application made in this behalf'. 15. The other relevant provision is section 153, the relevant part of which reads as under : "153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of- (a) two years from the end of the assessment year in which the income was first assessable; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or sub-section (5) of section 139, whichever is later : (1A) and (1B)** ** ** (2) No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of one year from the end of the financial year in which the notice under section 148 was served : Provided that wh....
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....o limitation or period is prescribed for submitting the report. Under sub-section (2C) again no period is prescribed though the language used is the report to be submitted within such period as may be specified by the Assessing Officer. In other words, the period will be determined by the Assessing Officer. Then comes the proviso, which is the subject matter of controversy and of its interpretation. The proviso before its amendment, if read literally, sets out that the period can be extended on an application made by the assessee and for any good and sufficient reason, for such further period so that the period shall not exceed 180 days from the date on which the direction under sub-section (2A) is received by the assessee. If so read it must mean that after the initial period fixed by the Assessing Officer, time can only be extended if the assessee makes an application and not otherwise. If the assessee chooses not to make the application, then if the report is not ready within the period originally given by the Assessing Officer, then the period beyond that time will not be counted for the purposes of making the order of assessment under section 153(1). On the other hand, if s....
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....rating the condition at one place in the provision the legislature also intended the condition to be applied at some other place in that provision." In B. Premanand v. Mohan Koilkal [2011] 4 SCC 266, the Supreme Court, inter alia, held as under :- "9. It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g., the mischief rule, purposive interpretation, etc., can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible result or if read literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule, vide Swedish Match AB versus SEBI. 10. As held in Prakash Nath Khanna v. CIT the language employed in a statute is the determinative factor of the legislative intent. The legislature is presumed to have made no mistake. The presumption is that it intended to say what it has said. Assuming there is a defect or an omission in the words use....
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....st be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income-tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred." 22. Insofar as the taxing provisions are concerned and its interpretation, we may make a reference to the judgment of K.M. Sharma v. ITO [2002] 254 ITR 772/122 Taxman 426. The Supreme Court observed as under :- "...The taxing provision imposing a liability is governed by the normal presumption that it is not retrospective and the settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the authorities to affect the finality of tax assessments or to open up liabilities, which have become barred by lapse of time..." ....
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.... which interest has to be calculated as provided in sub-section (8) in a manner which makes it workable and thereby prevent the clear intention of sub-section (8) being defeated. Now, how is that best done? As we have earlier said sub-section (6) deals with a case in which tax has been paid and therefore, it says that interest would be calculated 'from the 1st day of January in the financial year in which the tax was paid'. This obviously cannot literally be applied to a case where no tax has been paid. If however the portion of sub-section (6) which we have quoted above is read as 'from the 1st day of January in the financial year in which the tax ought to have been paid', the provision becomes workable. It would not be doing too much violence to the words used to read them in this way. The tax ought to have been paid on one or other of the dates earlier mentioned. The intention was that interest should be charged from January 1, of the financial year in which the tax ought to have been paid. Those who paid the tax but a smaller amount and those who did not pay tax at all would then be put in the same position substantially which is obviously fair and was clearly intended." 25.....
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....tter, the Court held that the assessment decided on September 3, 1985, was beyond the period of limitation. 28. As we have noted earlier a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Section 142(2A) read with section 142(2C) is the power in the Assessing Officer to call for the special audit and to call for a report within such period as may be specified. Sub-section (2C) does not prescribe a period. The proviso on the other hand enables an assessee to apply for additional time for submitting the report. Extending the period under the proviso is purely in the discretion of the Assessing Officer. If the Assessing Officer decides to extend the period at the instance of the assessee, then the total period shall not exceed 180 days. 29. In the light of the judicial pronouncements and how a proviso should be interpreted,....
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....as been granted, then the power to extend beyond that period no longer subsists. How does one then reconcile the power of the Assessing Officer under sub-section (2A) or sub-section (2C) with the proviso. The proviso, read literally, would mean that the Assessing Officer has been conferred power to extend the period of submitting the report only if the assessee applies and not beyond a total period of 180 days. If the Assessing Officer had already provided for period of 180 days or more, then the proviso cannot be resorted to. The language of sub-section (2C) by itself shows that there is nothing to limit the power of the Assessing Officer in fixing the period to submit the report. 31. The amendment has introduced the words 'suo motu' in the proviso to sub-section (2C) of section 142 of the Act. In other words, it appears that before the proviso was inserted, there was only power in the Assessing Officer to consider an application of an assessee for extending the period to submit the report and a limitation on that period. After the amendment there is also a limitation on the power of the Assessing Officer in fixing the period for submitting a report. 32. The Punjab and Harya....
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....ded insofar as an assessee is concerned, the same limitation shall also be read into sub-section (2C) when the Assessing Officer fixes the period for submitting the report. 35. The other way the proviso to sub-section (2C) could be interpreted is, that before the amendment to the proviso, under sub-section (2A) and subsection (2C) of section 142, there was no limitation, but by virtue of the proviso, even the power of the Assessing Officer is limited to 180 days, which will be the maximum period to be excluded for computation under section 153 of the Act. The language of sub-section (2C) is 'within such period as may be specified by the Assessing Officer'. As noted earlier, de hors the period it could be 180 days or 200 days depending upon the reasonability of the time required. To that extent, invocation of the proviso at the instance of an assessee is for extending the period for submitting the report, but a limitation on the Assessing Officer to extend the period but not beyond the period of 180 days. The power, therefore, of the Assessing Officer to extend time is not located in the proviso but in sub-section (2C). Furnishing a report would be on the day ordered or on an ext....