TaxTMI 
TaxTMI 
2024 (1) TMI 1410
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.... Audit was allowed by the CIT whereas it was allowed by the Assessing Officer and further extended by the AO, from time to time within the limits available u/s 142(2C). 3. Whether on the facts and in law, ld. CIT(A) has erred in only considering the erroneous and suppressed facts put forward by the assessee and not getting it verified from the records of the Department or through remand. 4. Whether on facts and in law, Id. CIT (A) has erred in considering the technical issue leaving other substantial issue on which additions/disallowances have been made." 3. In Cross Objection 75/Del/2023, the assessee has raised following additional grounds: "1. That on the facts and circumstances of the case, the Ld. CIT-(A) has passed the order as per the provisions of tire Act and hence the appeal filed by the department is not maintainable. 2. That on the facts and circumstances of the case, ground no. 2 raised by the department is not correct and therefore liable to be quashed. Additional Ground No. 1- 3. That on the facts and circumstances of the case, that extension of time was granted by Pr. CIT in getting books audited u/s 142(....
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....essee Company and directed the Addl. CIT to appoint M/s Dhanesh Gupta & Co. as a Special Auditor u/s 142(2A) of the Income Tax Act. Copy of letter by Pr. CIT to Addl. CIT dated 26.12.2018 for appointment of special auditor is on record. 7. The Additional CIT then directed the Assessing Officer for the said approval received from Pr. CIT and appointment of special auditor. Copy of letter directing the Assessing Officer dated 26-12-2018 is on record. Further, the Assessing Officer has passed an order u/s 142(2A) dated 29.12.2018 of the Act for the appointment of Special Auditor. Copy of the order is on record. The same has been communicated to the special auditor by the Assessing Officer vide his letter dated 30.12.2018. Copy of the said letter is on record. 8. Thereafter, the special auditor has sought for an extension of period for furnishing the Special Audit report for a period of 90 days. The Assessing Officer upon request of the special auditor has extended the period for furnishing the special audit report for further 45 days. Copy of extension letter by AO to Special Auditor is on record. 9. After getting the Special Audit completed, the Special Auditor filed the cop....
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....ys were allowed by the AO. Based on above information/fact, the Id. CIT (A) reached to a finding of fact the period originally fixed and the period further extended in this case was 135 days (90 days + 45 days) and therefore the time limit to furnish the Special Audit Report in this case expired on 14.05.2019. However, the Audit Report was furnished on 28.05.2019 and therefore appears to be time barred. It was further pointed out by the Id. CIT (A) that the assessment order passed was time barred as the limitation period expired on 13.07.2019, however the order in the case of the appellant was passed on 26.07.2019. It is relevant to state that this conclusion of Id. CIT (A) is factual wrong as the same is based on erroneous and suppressed fact. In this case, the extension for time was allowed 3 times from the original time allowed in this case, The time limit in this case approved to conduct Special Audit and further extension granted from time to time, are tabulated as under: S. No. Description of proceedings Relevant date Remarks 01 Approval of Pr. CIT for Special Audit u/s 142(2A) of the Act 26.12.2018 02 Date of letter of the AO direct....
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.... days from 30.12.2018). However, the Special Audit Report was furnished to the AO on 28.05.2019 i.e. beyond the stipulated limit of 14.05.2019 and therefore the audit appears to be time barred and the order passed by the AO relying on such order may be considered as void. The findings of CIT (Appeal) in both the paras are factually incorrect in view of the report of the AO submitted before the Hon'ble Bench on 01.11.2023. The report encloses letters dated 13.05.2019 & 17.05.2019 vide which the time period for submitting the report of special audit was extended by 10 days each. In view of these extensions, the due date for submission of report by the auditor was 03.06.2019. The report was actually submitted on 28.05.2019 and due date for completion of assessment was 02.08.2019. Accordingly, the assessment order passed on 26.07.2019 was within time. A copy of the report received from AO and statement of facts is enclosed herewith. In view of the same it is submitted that the findings of CIT(Appeal) are factually incorrect. During the course of hearing, the AR has also referred to the findings of CIT(Appeal) in para 4.1.10 on page 27 of his order on the issue of 'Ext....
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.... auditor sought by Addl. CIT from Pr. CIT and not by the Ld. AO'. The Ld CIT (A) in para 4.1.20 (page 32) held that as the approval has been sought by Addl. CIT and approval has been accorded by PCIT to Addl. CIT, the order is liable to be held void ab-initio. In this regard, kind attention is drawn to page 29 of CIT (A) order where a copy of the letter sent to Pr CIT by Addl. CIT is enclosed. Evidently, a proposal was sent by the AO to Pr CIT for conduct of special audit, which was forwarded by the Addl. CIT. The assessment proceedings were pending with the assessing officer and the role of Addl. CIT is that of a supervisory authority. The Addl. CIT serves as a link between the approving authority, that is, the Pr. CIT and the Assessing Officer. The letter of Addl. CIT (on page 3 of the Paper Book submitted by the assessee) to the AO, conveying the approval of Pr. CIT on his proposal, confirms the genesis of the proposal to be from the AO. During the course of hearing, the AR also raised the issue of grant of approval for extension of period of special audit by Pr. CIT. It was alleged that the extension of period for audit granted by the AO was given after taking approval....
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....ions of Section 142(2C) of the Income Tax Act, 1961 is as under: "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." 18. In the present case, the extension of time period for furnishing the Special Audit Report u/s 142(2A) has been provided by the Assessing Officer on an application made by the Special Auditor. The letter of the Assessing Officer dated 28.03.2019 granting the extension of period by 45 days is as under: Office of the Assistant Commissioner of Income Tax, Circle-19(2) Room No. 221, Central Revenue Building, I.P. Estate, New Delhi-110002 Email: delhi.dcit19.2&incometax.gov.in Ph: 011-23370790 F.No. ACIT, Circle-19(2)/Patanjali/2018-19/1017 dated: 28.03.2019 To, M/s Dhanesh Gupta & Co. Chartered Ac....
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....e approval of the ld. PCIT who as per the statute do not have the power of granting extension for Special Audit. 21. The para is as under: "12. However, further considering the state of special audit for the Assessment Year 2016-17 and request made by the Special Auditor as well as interest of revenue, extension of further 10 days may be granted." 22. The ld. PCIT-07, Delhi has granted the extension saying "approved as proposed" vide order sheet dated 16.05.2019. 23. The said approval has been intimated to the assessee by the ACIT vide letter dated 17.05.2019. Legal Proposition: 24. The question arose was "whether the approval sought by the Assessing Officer from the ld. PCIT and granting extension by the AO after receiving of the approval from the ld. PCIT is legally tenable or not"? 25. On this issue, we are guided by the judgment of Hon'ble jurisdictional High Court in the case of Pr. CIT, Central Vs. Soul Space Projects Ltd. in ITA No. 526 of 2023 dated 11.12.2023. The Hon'ble High Court held that the initial exercise of the power has been explicated as one that is not administrative, the ld. PCIT could not have extended the time for Special Audi....
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.... extended for further 10 days vide this office letter dated 13.05.2019. In response to this the Special Auditor again vide letter dated 14.05.2019 requested for extension of audit period by balance 45 daystime(remaining 35 days after above extention). 10. the This is relevant to mention that other three special audits for assessment year 2010-11, 2011-12 and 2012-13 have been simultaneously conducted in the case of the assessee company and effective time taken by the special auditors in those cases were as under: 42 है. Effective Time Taken SI. NO. A.Yr. 1 2010-11 135 days 2 3 2011-12 2012-13 118 days 111 days Remarks This excludes the initial time which could not be used by the Special Auditors due to litigation -do- -do- Thus, it is found that Special Auditors have effectively taken. time in the range of 135 days to 111 days in completing the special audit in the case of the assessee company. 11 Now, in the case of Special Audit for the assessment year 2016- 17, we have already allowed 145 days (90+ 45+10), however, the Special Auditor has requested for comp....