TaxTMI 
TaxTMI 
2024 (8) TMI 1765
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....y be drawn in the fact of the present case as narrated above, is that the reference to special audit was made only to buy further time for completing the assessment, having been made at the fag end of the period for completion of assessment that too merely for obtaining further details and information and not because any complexity was noted in the accounts of the assessee. The reference to special audit, therefore we hold, is an invalid reference, contrary to law. 34. The assessment order passed therefore in the extended period, as a consequence of the invalid reference, we hold, is barred by limitation and hence void. 35. Since we have held the assessment order to be void on account of an invalid reference to special audit for the aforesaid reasons, the remaining arguments with respect to the same are not being dealt with by us. The additional ground of appeal raised by the assessee is, therefore, allowed. 36. Both the parties were heard only on the additional ground raised which has been allowed, by us and the assessment, order passed has been held to be void. The remaining grounds, relating to merits of the case, therefore, are rendered acade....
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....er the above mistakes which are apparent from record and admit the Miscellaneous Application u/s 254(2) of the Act and withdraw the impugned order and pass an appropriate order rectifying such mistake. Further, Revenue prays that the aforesaid submissions may kindly be considered and even if these are not acceptable, these may be rejected on merits by explicit findings. 6. The grounds of appeal before the Hon'ble ITAT are annexed as Annexure-B. 3. The various grounds as per Annexure B raised by the Revenue in the present Misc. Application read as under: "i) Whether on the facts and in the circumstances of the case, the order passed by the Hon'ble Income Tax Appellate Tribunal is vitiated being obtained fraudulently by the Assessee by suppressing the order of the Hon'ble jurisdictional High Court dated 01.06.2017 dismissing the Civil Writ Petition No. 12434 of 2017 wherein the challenge to the special audit report including the ground of limitation etc. was upheld? ii) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is right in law in holding the reference under Section 142(2A) of the ....
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.... by the Hon'ble High Court declining to interfere with the report of the special auditor? ix) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal misdirected itself in misconstruing the provisions of the Income Tax Act, 1961, due to suppression of facts by assessee, resulting into incorrect order which is contrary to the scheme of the statute and material on record ?. " 4. In support of the misc. application, the written submissions filed by the Revenue dt. 15/11/2022 read as under: "1. That the Applicant - Income Tax Department craves the indulgence of this Hon'ble Tribunal to file the Written Submissions for the fair and proper disposal of the Misc. Application filed under Sub-Section (2) of Section 254 of the Income Tax Act, 1961 read with Rule 35A of the Income Tax (Appellate Tribunal) Rules, 1963 for rectification of mistakes apparent from record in the order dated 26.10.2021 passed in ITA No. 1369/Chd/2019. The facts in brief are stated hereunder for ready reference and kind consideration: (a) The Assessee initially e-filed the return of income for the Assessment Year 2014-15 on 30.11.2....
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.... reply to the show cause notice issued under Section 142(2A) of the Income Tax Act, 1961 on 26.12.2016. The Assessee appeared before the Assessing Officer through Authorized Representative and discussed the reply. The Assessing Officer gave- the hearing and considered the reply of the Assessee and found the same to be without any substance and keeping in view the nature of accounts, complexity of accounts, volumes of account, multiplicity of transactions and interests of the Revenue, submitted the proposal to the Pr. Commissioner of Income Tax, Panchkula for approval of Special Audit under Section 142(2A) of the Income Tax Act, 1961 vide letter dated 26.12.2016. (g) The Pr. Commissioner of Income Tax, Panchkula granted the approval for special audit under Section 142(2A) of the Income Tax Act, 1961 on 29.12.2016 and appointed M/s Kansal Singla and Associates as special auditor. The intimation in this regard was also given to the Assessee on 29.12.2016 itself. (h) The special auditor, so appointed, consented for the same on 30.12.2016. The Assessee appeared before the special auditor and participated without any demur. The special auditor finalized the special audi....
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....sequence to the extended time available on account of the said reference, was time barred. As a consequence thereof, the reference has been held to be invalid and the Assessment framed as a consequence of invalid reference has also been held to be barred by limitation. 2. That this Hon'ble Tribunal could not have admitted the additional ground raised after expiry of the limitation period available for filing the appeal before the Tribunal nor could have admitted being administrative action for which no remedy of appeal is provided under the statute, for the said proposition of law the reliance is being placed on the judgment of the Hon'ble Apex Court in the case of Rajesh Kumar and Others Vs. The Commissioner of Income Tax and Others, reported as [2006] 287 ITR 91 (SC). 3. That the Hon'ble Tribunal in view of the aforesaid could not have adjudicated the additional ground of Appeal nor could have adjudicated upon the reference made to the Special Auditor under Section 142(2A) of the Income Tax Act, 1961 for more than one reason, i.e. firstly, the statute has not provided any remedy of Appeal in the hierarchy of Appeals; secondly, the first Appellate Aut....
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....yed fraud with the Revenue as well as the Appellate Authorities including this Hon'ble Tribunal by suppressing / concealing the material information with regard to filing of the Civil Writ Petition bearing CWP No. 12434 of 2017 before the Hon'ble Jurisdictional High Court questioning the Special Audit Report inter-alia on the ground that the reference to Special Audit was only to extend the period of limitation. The Hon'ble High Court declined to interfere with the report of the Special Auditor, however, left it open to the Assessee to impugn the order, if adverse, and dismissed the Civil Writ Petition vide order dated 01.06.2017. The report of the Special Auditor has thus become final as no further challenge to the order of the Hon'ble High Court dated 01.06.2017 was laid before the Hon'ble Supreme Court. The ground of limitation for passing the Assessment Order under the guise of reference to special audit was also raised before the Hon'ble High Court and the said ground of limitation is deemed to have been rejected in the wake of dismissal of the Civil Writ Petition. The Assessee without disclosing the factum of dismissal of the Civil Writ Petition by the....
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....to interfere with the challenge to the Special Auditors Report, and the ground of limitation etc. The issue thus could not have been examined and examining the issue afresh would amount to sitting over the decision of the Hon'ble Jurisdictional High Court dated 01.06.2017 as a court of appeal, which is unconstitutional. 6. That it is well settled that "what cannot be done directly cannot be permitted to be done indirectly" as held by the Hon'ble Apex Court in the case titled as Delhi Administration Vs. Gurdip Singh Uban and Others, reported as 2000 (7) SCC 296. In the present case, since no appeal lies against the reference made under Section 142(2A) of the Income Tax Act, 1961, the question of adjudicating the same would not arise. Thus, the order passed by this Hon'ble Tribunal tantamounts to usurping the jurisdiction not conferred upon it. 7. That Chapter XXII of the Income Tax Act, 1961 deals with the Appeals, and Revisions, and Appeals to Tribunal. Section 252 of the Income Tax Act, 1961 empowers the Central Government to constitute an Appellate Tribunal to exercise the powers and discharging the functions conferred on the Appellate Tribunal by th....
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....cation of decision(s) of the Hon'ble jurisdictional High Court by this Hon'ble Tribunal is a rectifiable mistake within the mischief of Sub-Section (2) of Section 254 of the Income Tax. Act, 1961. The Hon'ble Supreme Court in the case titled as Assistant Commissioner of Income Tax vs. Saurashtra Kutch Stock Exchange Limited, reported as (2008) 219 CTR (SC) 90 held that that non-consideration of the decision of the Hon'ble jurisdictional High Court / Hon'ble Supreme Court would constitute a mistake apparent from record and rectifiable. 10. That even otherwise, the limitation to file an Appeal before this Hon'ble Tribunal lapsed in October, 2019. The Appeal was filed in Form No. 36 by the Assessee on 18.10.2019 without any challenge to the order of assessment being barred by limitation as a consequence of invalid reference to the special audit. The additional ground was raised through letter dated 07.12.2020 without there being any application for condonation of delay. Hence, the additional ground could not have been entertained. That thus, in view of the aforesaid, apparent mistakes have crept in, which cannot be allowed to perpetuate. The p....
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....ation etc. was upheld? (Ground No. 1) ii. Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal misdirected itself in misconstruing the provisions of the Income Tax Act, 1961, due to suppression of facts by assessee, resulting into incorrect order which is contrary to the scheme of the statute and material on record?(Ground No. 9) Through this ground of appeal the AO has challenged that the assessee has obtained the order of ITAT fraudulently by suppressing the order of Jurisdictional High Court alleging that ground of limitation has already been upheld in the writ petition. The relevant extract of the Miscellaneous Application is as under :- Para 4. With regard to the above, it is submitted that the assessee played fraud with the revenue as well as the Appellate Authorities by suppressing/ concealing the material information with regard to filing of the Civil Writ Petition bearing CWP No. 12434 of 2017 before the Hon'ble Jurisdictional High Court questioning the Special Audit Report inter-alis on the ground that the reference to special audit was only to extend the period of limitation. The Hon'b....
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....ves to be set aside by this Hon'ble court. 2) Whether in the facts & circumstances of the case, the Report of the special auditor is solely motivated by Revenue Collection through arbitrary proposed addition of Rs. 6994,96,81,598/- and is contrary to the provisions of the Act. On perusal of the above, it will be seen that the assessee has not challenged the period of limitation before the High Court as has been alleged by the AO. Even otherwise, the assessee could not have challenged the same before the High Court as the assessment order was not passed/was pending at the time of filing the writ petition. To substantiate this fact further, reference is made to the findings of the High Court in the writ petition which are as under :- 1. The petitioner has brought this petition under Article 226 of the Constitution of India seeking quashing of the special audit report dated 16.05.2017 (Annexure P- 13), which has been submitted by the Special Auditor, under Section 142(2A) of the Income Tax Act, 1961. 2. On a careful perusal, we find that assessment order for the Assessment year 2014-15 is yet to be passed by the Assessing Officer and it....
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....s been observed by the Hon'ble Court that it shall be open for the petitioner to impugn the same in accordance with law, which implies that the assessee is entitled to raise the issue in accordance with law before the ITAT. Since, the finding of the High Court is in favour of the assessee, there is no reason that the assessee would intentionally conceal/hide/deceive the ITAT or income tax authorities. The assessee under the bonafide belief has raised the issue of limitation before the CIT(A) in written arguments though the specific ground challenging the validity of assessment was not raised before CIT(A). Therefore, the assessee raised the issue of period of limitation by way of additional ground of appeal before ITAT. Mere omission to file the order of High Court which is in the favour of assessee himself cannot be treated as fraud. Secondly, without prejudice to the above, the AO cannot conclude that the facts have been fraudulently suppressed / concealed by the assessee until and unless he has the evidence to prove and substantiate the fraudulent act. The allegation has been wrongly levelled by the AO without any evidence to allege the fraud which is proved from th....
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.... serious implications and can tarnish the reputation of the taxpayer. Therefore, it is of paramount importance that any claim or allegation of fraud is backed by tangible evidence and not merely on conjectures or unfounded suspicions. An evidence-based approach ensures fairness, transparency, and upholds the principles of natural justice and taxpayers are protected from undue and baseless accusations. The assessee is a statutory body (100% state government company) and works in the most transparent manner, so there being no vested interest in concealing any fact from the authorities. Where the assessee in accordance with law has challenged the issue of validity of assessment before the ITAT, considering the fact that the same has not been adjudicated by the High Court and ITAT having been passed the speaking order, the AO is not correct in alleging that assessee has obtained the order of ITAT fraudulently. Also, considering the fact that ITAT has passed a very clear and speaking order, the miscellenous application filed on the issue is thus not maintainable. iii. Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribun....
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....to special audit is found to be invalid then the order of assessment is barred by limitation has been dealt by various courts and tribunals. For this reliance is placed on the following judicial pronouncements :- Shri Rajiv Kumar vs ACIT, Central Circle, Chandigarh I.T.A. No.l325/CHANDI/2010 dated 30.12.2022 where in it has been held as under :- The decision in the case of Hon'ble Supreme Court in Sahara India (Firm) in no way has restricted the right of an assessee to contest such an order of reference to the Special Auditor under section 142(2A) of the Act, rather, the Hon'ble Supreme Court in clear terms has recognized such right of the assessee to contest the validity of such an order. We may add here that though, the order directing for appointment of Special Auditor u/s 142(2A) of the Act passed by the AO is not appealable per se, however, since the very appointment of Special Auditor and subsequent proceedings and consequential aspects thereof are integral part of the final assessment order and the fact that such an appointment gives the AO the extended time period to frame the assessment, hence, is capable of being challenged in an appeal filed aga....
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....n be challenged in appeal and since the ground before us is challenged for assessment being barred by limitation, we are well within our rights to consider all material aspects which were considered while framing the assessment order u/s 143(3) of the Act. 18. Considering the facts of the case in totality, we have no hesitation to hold that the assessment order dated 25.06.2012 for the year under consideration is barred by limitation. Since the foundation is removed, the super structure i.e. the assessment order must fall. Unitech Limited (ITA 5180/del/2013) 44. Furthermore, the judgments relied upon by the revenue also do not lead lis to take different view of the matter. The first judgment relied upon is the case of Rajesh Kumar and Ors v CIT (supra). In this case the Hon'ble Court has held in para 34 that the order of assessment can be subject matter of an appeal; and not, a direction issued u/s 142 (2A) of the Act. In this appeal there is no challenge to the directions u/s 142(2 A) of the Act. The challenge is that order of assessment is barred by limitation which is a valid contention supported by the judgment of Hon'ble Supreme Court in the case of S....
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....tainable, especially when even before the date of order of the ITAT in the case of the assessee, the issue already stood adjudicated in favour of the assessee by the ITAT in the aforesaid judgments passed on 01.06.2019, 29.06.2018 and 04.10.2021 holding that the orders passed were time barred wherein the reference to special auditor was bad in law. Therefore, the assessee would not gain any advantage by concealing the factum of the order passed by the Hon'ble Court relegating the assessee to appellate authorities as these precedents on the issue were already in its favour and the fact is even admitted by ITAT in Para 8 of the order. It is pertinent to mention further that the AO has raised the issue of power of Tribunal to adjudicate the issue in the MA by placing reliance in the case of Rajesh Kumar & Others vs DCIT 287 ITR 91 (SC).In this regard we would like to state that the DR has raised the same issue during the course of hearing as well as can be seen from Para 6 of the Order and the Honorable Bench after discussing the issue has categorically given the finding in Para 9.1 of the order which is reiterated as under :- "It is therefore, evident from the a....
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....to admit additional ground of appeal alleging that the additional ground has been admitted after the expiry of period of limitation u/s 253 of the Income Tax Act without any application for condonation of delay. In this regard we would like to refer to the judgement of VMT Spinning Co. Ltd. Vs. CIT (Punjab & Haryana High Court) IT Appeal No. 445 of 2015 in which the various provisions of Income Tax Act and Income Tax Rules governing the powers of Tribunal are discussed as under :- The Appeals to the Tribunal are preferred under section 254(1) of the Act which provides that after hearing the contesting parties the Tribunal may pass such orders that it thinks fit. Section 254(1) of the Act, reads as under - "254. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit." In the afore- quoted provision the usage of the words "pass such orders thereon as it thinks fit" gives very wide powers to the Tribunal and according to us such powers are not limited to adjudicate upon only the issues arising from the order appealed from. Any interpretation to the contrary would go....
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.... assessment proceedings before the taxing authorities is to assess correctly the lax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non- taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 6. In the case of Jute Corporation of India Ltd. v. CIT this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in decid....
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....Act, can consider questions of law arising from the assessment proceedings, which had not been raised earlier. The view that the Tribunal would be confined to decide only the issues arising out of the appeal before the Commissioner was a view, which was considered to be too narrow and thus, the Tribunal was held to have powers to allow or not to allow a new ground to be raised before it for adjudication. It further held that where the Tribunal was only required to consider a question of law arising from the facts, which were already on record in the assessment proceedings, such question of law should be allowed to be raised to correctly assess the tax liability of an assessee. In view of the above, the AO has erred in alleging that the Hon'ble Income Tax Appellate Tribunal cannot adjudicate the issue in Appeal which issue was not adjudicated by the Commissioner of Income Tax (Appeals) being not appealable. The observations in paragraph 6 that the Appellate Assistant Commissioner must be satisfied that the ground raised could not have been raised earlier for good reasons, are obviously in respect of cases where some factual aspect is also involved and not where only a p....
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....ITR 351, wherein it was held as under - "In view of the above decisions, it is quite clear that the Appellate Tribunal has jurisdiction to permit additional grounds to be raised before it even though these may not arise from the order of the Appellant Assistant Commissioner, so long as these grounds are in respect of the subject-matter of the entire tax proceedings." In view of the aforesaid provisions of Income Tax Act, Income Tax Rules and judicial pronouncements, the observations of the AO in the MA are contrary to the judgment of the Supreme Court in National Thermal Power Co. Ltd.'s case (supra). In fact the Full Bench of the Bombay High Court in Godavari Sugar Mills Ltd.'s case (supra) dealing with rule 11 observed as under - "19. In this connection a reference may also be made to the Income Tax (Appellate Tribunal) Rules, 1963 which have been framed under section 255(5) of the Income Tax Act, 1961. Under rule 11 of the Appellate Tribunal Rules the appellant shall not, except by leave of the Tribunal urge or be beard in support of any ground not set forth in the memorandum of appeal but the Tribunal in deciding an appeal shall not be confine....
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....ional Ground of appeal on application filed by the "applicant" on 07.12.2020 after considering various objections of the department for non- admittance of the additional ground of appeal which are as under :- 7. To this the Ld. Counsel for the assessee countered by placing before us 'various decisions of the Tribunal and High Courts holding to the contrary. The submissions in writing to this effect were also filed along with the copies of the case laws relied upon by the Ld. Counsel for the assessee. 8. We have heard both the parties. We have also gone through the various case laws relied upon by them. We find that the decision of the Hon'ble Apex Court in the case of Rajesh Kumar (supra), relied upon by the Ld. DR to support her contention that the reference to special audit is not appealable, has been considered in various decisions of the Tribunal and High Courts where the Revenue had identically opposed the adjudication of this issue. We find that taking note of the said decision this argument of the Revenue has been dismissed by the IT AT, holding that though order directing special audit is otherwise not appealable but while challenging the assessmen....
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....ts that the case law relied upon by the department in MA has been discussed by ITAT in detail and additional ground of appeal has been admitted after due consideration, therefore, the application filed by the department in this case is liable to be dismissed because an issue which has adjudicated upon after detailed discussion cannot be called a mistake apparent from record. With regard to the issue of admission of additional ground after the expiry of period of limitation, it is submitted that the rule 11 makes it amply clear that the tribunal has the power to adjudicate on any ground of appeal without mentioning any time limit which means that the GOA can be admitted at any time till the disposal of appeal. The provisions of the Income Tax Act and judicial pronouncements referred above make it ply clear that the powers of Tribunal are very wide and Tribunal can even admit additional ground of appeal taken orally during the course of hearing even though not applied for in writing. Reference is drawn to VMT Spinning Co. Ltd. Vs. CIT (Punjab & Haryana High Court) IT Appeal No. 445 of 2015 wherein HC directs tribunal to accept additional ground even if raised by way of oral ....
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.... department be dismissed. To sum up :- ● The period of limitation has never been challenged by the assessee before the High Court. ●The High Court has not decided the issue of validity of assessment as is evident from copy of order of High Court& substantial questions of law raised in the writ petition. ● The High Court has observed in Para 2 of the order that that the assessment order is yet to be passed therefore it shall be open for the petitioner to take all the pleas before the AO and in Para 4 of the High Court Judgement, the High Court has held that it shall be open for the petitioner to impugn the adverse order in accordance with law. ● The order of High Court in fact is in favour of the assessee. Thus, there is no reason that the assessee would intentionally conceal/hide/deceive the ITAT or income tax authorities. ● The assessee raised the issue of period of limitation by way of additional ground of appeal before ITAT. ● The AO cannot conclude that the facts have been fraudulently suppressed / concealed by the assessee until and unless he has the evidence to prove and substan....
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....rge or be heard in support of any ground not set forth in the memorandum of appeal which has duly been done by the assessee by filing an application requesting for admission of additional evidence vide letter dated 07.12.2020. ● The Tribunal gave opportunity both to the assessee and the DR before admitting the additional ground of appeal. The same can be verified from Para 5 & Para 6 of the order of the Tribunal. ● The Tribunal has passed a very clear and a speaSing order admitting additional ground of appeal after according due opportunity of being heard to both the parties. The additional ground has been admitted after detailed discussion about the power of ITAT to admit the additional ground as well as the power of Tribunal to adjudicate the issue regarding validity of Assessment with reference to Special Audit after referring the judgement of Supreme Court in case of Rajesh Kumar. ● Considering the facts that the case law relied upon by the department in MA has been discussed by ITAT in detail and additional ground of appeal has been admitted after due consideration, therefore, the application filed by the department in this case is ....
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....ound of appeal without the application for condonation of delay. ● There is no requirement to file the application of condonation of delay as there is no time limit prescribed in the Act to raise the additional ground of appeal. So where the period of limitation has not expired, there was no lapse on the part of the assessee in not filing the application of condonation of delay. ● The argument of the Assessing Officer on the issue is devoid of any merit and is baseless. ● Thus, the allegation of the AO questioning the powers of Tribunal to admit additional ground of appeal after the expiry of period of limitation in Miscellaneous Application is not viable as it is neither a mistake apparent on record nor there is any period of limitation before which the assessee has to file an application for additional evidence. The only course of action available to the department is to file an appeal before High Court which has already been done in this case. In view of the aforesaid submissions, we pray that the MA filed by the department be dismissed. 6. In order to appreciate the rival contentions, it would be appropriate to refer to t....
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....CIT 287 ITR 91 (SC). 7. To this the Ld.Counsel for the assessee countered by placing before us various decisions of the Tribunal and High Courts holding to the contrary. The submissions in writing to this effect were also filed alongwith the copies of the case laws relied upon by the Ld.Counsel for the assessee. 8. We have heard both the parties. We have also gone through the various case laws relied upon by them. We find that the decision of the Hon'ble Apex Court in the case of Rajesh Kumar(supra), relied upon by the Ld.DR to support her content ion that the reference to special audit is not appealable, has been considered in various decisions of the Tribunal and High Courts where the Revenue had identically opposed the adjudication of this issue. We find that taking note of the said decision this argument of the Revenue has been dismissed by the ITAT, holding that though order directing special audit is otherwise not appealable but while challenging the assessment order as being barred by limitation, the validity of the order directing special audit u/s 142(2A) can be challenged, albeit for this limited purpose alone. It has been held that for coming to a c....
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....integral to the process and ultimate completion of the amount can be challenged in appeal and since the ground before us is challenged for assessment being barred by limitation, we are well within our rights to consider all material aspects which were considered while framing the assessment order u/s 143(3) of the Act." 9. Further, the Hon'ble Delhi High Court in the case of Consulting Engineering Service s Private Limited Vs. ITAT & Another in WP(C)7734/2017 dated 01.09.2017, has categorically held that it is well within the jurisdiction of the ITAT to entertain the grounds relating to validity of reference to special audit, after noting that the observation t o the contrary by the Apex Court in the case of Sahara India ( supra) was specific to those cases. The relevant findings are as under : " 4. The Petitioner challenges an interim order dated 8th August, 2017 passed by the Income Tax Appellate Tribunal ('ITAT') in Petitioner's appeal being ITA No.1443/Del/2014 for the Assessment Year ('AY') 2008-2009. By the said impugned order, the ITAT has declined to permit the Petitioner to raise additional ground '22' which reads as under:....
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....t order is challenged, then the different aspects which are integral to the process and ultimate completion of amount can be challenged in Appeal. For example a notice u/s 148 or reasons recorded by the A.0 prior to re-opening of assessment cannot be challenged separately. But an assessment order can be challenged in an Appeal before the Ld. CIT(A) or the ITAT on the ground that the re-opening itself is bad in law, as the notice is illegal or not served or that there is no material based on which reasons were recorded etc. Every facet of an assessment can be challenged in appeal to deny once liability to be charged to tax or to challenge the quantum of tax demanded. In the case of hand, the legality of the orders passed u/s 142(2A) or u/s 142(2C) can be challenged to demonstrate that the order of assessment has been passed beyond the period of limitation. Thus, we reject this contention of the Ld. CIT. DR." 7. A similar view was taken by the ITAT in Unitech Ltd. v. Additional Commissioner of Income-tax, Range- [2016] 74 taxmann.com 121 (Delhi- Trib.). The order of the ITAT on the same lines was upheld by this Court in Principal Commissioner of Income-tax v. Nilkanth Concas....
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....owed and the impugned order dated 8th August, 2017 passed by the ITAT is set aside. The petitioner is permitted to urge the additional ground no.22 before the ITAT, which would decide the Petitioner's appeal including the above additional ground, in accordance with law, while passing the final order." 9.1 It is, therefore, evident from the above that the validity of reference u/s 142(2A) of the Act is appealable when it has been so challenged for the purpose that the assessment order so passed, in consequence to the extended time available on account of the said reference, was time barred. In the present case the additional ground raised before us is to this effect only that the assessment order was barred by limitation, on account of the reference to special audit being illegal . The object ion of the Ld.DR therefore to the admission of the additional grounds raised by the assessee, are dismissed. 10. Further considering that the additional ground raised before us challenges the validity of the assessment order passed on account of it being barred by limitation, the said additional ground is a legal ground and considering the decision of the Hon'ble Apex ....
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....nd setting forth such particulars as may be prescribed and such other particulars as the Assessing] Officer may require." 15. The Hon'ble Apex Court has interpreted the said provision in two decisions, repeatedly emphasizing therein that the AO's opinion has to be based on fulfillment of the twin conditions of the(i)nature and complexity of accounts, and (ii) the interest of Revenue, and has interpreted the term "complexity" to mean state of being intricate or complex. It went on to hold that what is complex depends on each persons understanding and what is complex for one may be simple for another. It was held therefore, that the opinion of the AO must be based on objective criteria and not just a subjective satisfaction. That the reference cannot be made merely for shifting his responsibility of scrutinizing the accounts to a special auditor. In the case of Sahara India(Firm) vs CIT 300 ITR 403(SC) the Apex Court analyzed and interpreted the provisions of sect ion 142(2A) to the above effect as under: "A bare perusal of the provisions of sub-s. (2A) of the Act would show that the opinion of the AO that it is necessary to get the accounts of assessee audi....
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....is not turned into an empty ritual. Needless to emphasise that before granting approval, the Chief CIT or the CIT, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the AO. The approval must reflect the application of mind to the facts of the case." 16. In the case of Rajesh Kumar & Ors vs DCIT & ors 287 ITR 91(SC), the sect ion was interpreted likewise as under: "Interpretation and application of s. 142(2A) of the Act, thus, falls for our consideration. 10. We may at the outset notice that the following are the relevant factors for invoking s. 142(2A) of the Act : (i) The nature of accounts (ii) Complexity of accounts and (iii) Interest of the Revenue. The formation of opinion of the AO must be on the premise that while exercising his power regard must be had to the factors enumerated therein. The use of the word 'and' shows that it is conjunctive and not disjunctive. All the aforementioned factors are conjunctively required to be read. The formation of opinion indisputably must be based on objective consideration. 11. The expression....
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....n with year wise bifurcation of expenses and recoveries on Industrial area activity. (3) Why company from Industrial area activity should not be computed in a manner adopted in earlier Asst years. (4) Detailed of unclaimed refunds and why same be not disallowed. (5) Why profit on sale of shares may not be treated as business income. (6) Details of how inventory determined as on 31/3/14 vis-a-vis previous year . (7) How POCM method appealable to assessee on meets criteria under POCM. (8) Bais of ascertaining revenue from operations. (9) Show cause why not an amount of Rs. 1050.40 cr be added back to the returned income as same has been reduced in revised return. Adjourned to 20/12/16 at A.M. Sd/- 19. On the said date the assessee filed reply and the order sheet entry notes "case adjourned to 23/12/16" . But another entry on the same date subsequently records issuance of show cause not ice to the assessee u/s 142(2A) of the Act . On 26/12/2016 the assessee files reply to the show cause not ice which, the order sheet entry notes as "discussed with the counsel " and thereafter on 29/12/2016 the special aud....
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....ffect of all the heads of revenue, expenditure, inventories, fixed assets etc., have been accounted for in the said assessment year. It is stated as under: The books of the accounts of the Corporation were being maintained under "Cash System of Accounting" and all the cost of the Project & other expenditure incurred thereon were accounted for in one control account i.e. infrastructure and Industrial Area Development Expenses Recoverable" and recoveries from the allottees were netted in said control account. Said control account reflects excess of developmental expenditure over recoveries and is disclosed in the financial statements under "Other Current Assets". A sum of Rs.5671.59 Crore (net of recoveries] was parked in the control account as at 31 st March, 2013. After review of the control account i.e. "Infrastructure and Industrial Area Development Exp. Recoverable", it has been bifurcated into various functional heads of accounting e.g. - Inventories in the form of unsold land/plots -Cost of the land acquired for existing projects as well as future projects. -Developmental expenditure of the site e.g. Road construction, electrification cost, public....
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.... not be computed in a manner adopted in earlier Assessment Year(s). 4. Detail of how inventory determined as on 31.03.2014 viz-a-viz 31.03.2013. We submit that the Corporation was following cash system of accounting for maintaining its accounts till F.Y. 2012-13, therefore, no inventory was recognized in the books of accounts till 31.03.2013. However,, the Corporation changed its system of accounting from cash basis to accrual basis w.e.f. 01.04.2013 i.e. F.Y. 2013-14 and accordingly, inventory has been determined and accounted for in the books of accounts on the basis of "Percentage of Completion Method" (POCM) read with Guidance Note on "Accounting for Real Estate Transactions" issued by Institute of Chartered Accountants of India (ICAI). Closing stock of land/work in progress is valued at lower of cost (Weighted Average Method) or net realizable value. Cost includes acquisition cost, enhancement compensation cost, annuity cost and internal and external development expenditure etc. incurred and other directly identified attributable expenses pertaining to projects. 5. How POCM is applicable to Assessee i.e. how meets criteria under POCM. ....
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....state Developers (Revised 2012)". Revenue is computed based on the "Percentage of Completion Method (POCM)" when following conditions are satisfied: All critical approvals such as environmental clearances, approvals of plan and design, title to land or other development right have been obtained. - The stage of completion of the project has reached reasonable level. A reasonable level of development is achieved if expenditure incurred on construction and development cost (excluding cost of land cost) is not less than 25% of the estimated construction and development cost and - At least 25% of the saleable project area is secured by the agreement or the allotment letter and - At lease 10% of the total revenue as per agreement/allotment letter are realized in respect of these cases. In case of sale/auction of sites of non-industrial area/infrastructure activity, the revenue is recognized when al the significant risks and rewards are transferred and also when all the requisite approvals are obtained by the Corporation as required under the agreement. Interest on non-industrial area projects is accounted for on accrual basis. 7. Show cause why n....
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....tion agrees to pay the tax in Assessment Year 2014-15 as the same can be done u/s 154/155 while giving appeal effect to the orders of ITAT for years in appeal. The above explanation has been considered and examined and is discussed as under: Regarding explanation No. 1&2, i) You have explained that cumulative effect of all head of revenue, expenditure, inventories, fixed assets etc. have been accounted for A.Y.2014- 15. But no explanation was given as to how cumulative calculations were made ii) You have shown a sum of Rs.5671.59 crore was parked in the control account as on 31.03.2016, further for determination of this amount various heads/details of expenditure and recovery upto 31.03.2013 has been shown as under: Details of Expenditure upto 31.03.2013 Table S. No. Particulars Amounts 1. Land Cost (including Enhanced Compensation 1,11,66,13,67,007.00 2. IA Development Expenditure 23,52,39,15,541.00 3. Development works(old) 7,77,90,292.00 4. Village development 7,46,08,195.00 5. Development Udyog Kund 2,92,68,338.00 6. Details of fixed assets 11,95,92,404.00 7. Deposit w....
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....3, no tenable reply regarding the reason of change of method of accounting by HSIIDC has been provided. Regarding explanation No. 4, you have replied that valuation of closing stock/work in progress is valued at lower of cost or net relizable value. No detailed calculation/working has been given in support of amounts shown and where shown it is not substantive. For example the work in progress, the explanation of the same was not provided. Regarding explanation No. 5, As the corporation was established in 1967 and it is developing Indl. Estates and IMTs throughout the State and the activities have been computed in accordance with the guidance note, then why the same method was not applied in the earlier years. You have also not explained treatment of books of previous years under POCM. Regarding explanation No. 6, revenue from operations is not verifiable as the projects passes from various stages and no specific information/no detailed working in this regard is provided. Regarding explanation No. 7, you have replied that the corporation revised its return by reducing income of Rs. 1050.40 Cr. because tax has already been levied by the department....
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....ions covered By the guidance note issued by ICAI on Accounting for real estate transact ions which recommended PCOM method. It was also explained as to how its activities fell under the said guidance note. To this the AO noted that why this method was not adopted in earlier years also. 27. On being asked to explain basis of ascertaining revenue from operations, due reply explaining the same was filed. To this the AO notes simply that it is not verifiable since assessee passes through various stages and no specific information/no detailed working has been provided by the assessee. 28. To the query as to why Rs. 1050 crores has been reduced from the income of the assessee in the revised return filed . the assessee explained in detail that the department had already collected taxes on the same in earlier years when it had rejected its cash basis of accounting and taxed income on accrual basis. To this the AO notes that the assessee has filed appeal against the said additions made by the department and therefore by reversing the income in the impugned year it was taking a contradictory stand. 29. After so stating the AO notes that considering the facts and ci....
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....w. 34. The assessment order passed therefore in the extended period, as a consequence of the invalid reference, we hold, is barred by limitation and hence void. 35. Since we have held the assessment order to be void on account of an invalid reference to special audit for the aforesaid reasons, the remaining arguments with respect to the same are not being dealt with by us. 7. We have heard the rival contentions and carefully pursued the misc. application filed by the Revenue as well as written submissions filed by both the parties. Having carefully gone through the misc. application filed by the Revenue, the written submissions filed by both the parties, the order so passed by the Coordinate Bench and the decision of the Hon'ble Punjab and Haryana High Court, we are of the considered view that there is no mistake apparent from the record and the present misc. application filed by the Revenue u/s 254(2) is misconceived and doesn't call for any action as far as the order passed by the Coordinate Bench dated 26/10/2021 in ITA No. 1369/Chd/2019 and the reasoning for arriving at such a conclusion is as discussed in the succeeding paragraphs. 8. The case w....
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....at the assessment order for A.Y 2014-15 is yet to be passed by the Assessing officer and it shall be open for the petitioner to take all the pleas before the Assessing officer at the time of framing the assessment. In view of the same, it was held that there was no ground to interfere in the report of the Special Auditor submitted under Section 142(2A) of the Income Tax Act, 1961. At the same time, liberty was given to the assessee corporation that in case, any adverse order is passed against the assessee, it shall be open for the assessee to impugn the same in accordance with law. We therefore find that the writ petition was filed by the assessee corporation during the pendency of the assessment proceedings, and in order to avoid causing any prejudice to the Revenue, it was held by the Hon'ble High Court that let the assessment proceedings be completed by the Assessing officer and at the same, the assessee was allowed to raise all the pleas as available under law both during the course of assessment proceedings and even subsequently, during the appellate proceedings, should any adverse view is taken against the assessee. The Hon'ble Punjab and Haryana Court has therefore n....
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....bunal is vitiated being obtained fraudulently by the Assessee by suppressing the order of the Hon'ble jurisdictional High Court dated 01.06.2017 dismissing the Civil Writ Petition No. 12434 of 2017 wherein the challenge to the special audit report including the ground of limitation etc. was upheld? The order so passed by the Tribunal cannot be held to be vitiated as no findings on merits of the special audit report including the ground of limitation has been given by the Hon'ble High Court in view of the alternate remedy available to the assessee under law. ii) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is right in law in holding the reference under Section 142(2A) of the Income Tax Act, 1961 as appealable before the Appellate Authorities ignoring the scheme of the fiscal statute wherein the legislature consciously has not provided any Appeal and Appellate Tribunal, being a creature of statute with powers conferred by the statute is statutorily obligated to pass an order within the confines of statute ? Should the Revenue is aggrieved with the said findings of the Coordinate Bench, the app....
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.... Coordinate Bench. vi) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal is right in adjudicating the issue in Appeal which issue was not adjudicated by the Commissioner of Income Tax (Appeals) being not appealable? Should the Revenue is aggrieved with the said findings of the Coordinate Bench, the appropriate action lies in filing appeal before the Hon'ble High Court and the said ground cannot be decided within the limited domain of section 254(2) as the same will amount to review of the decision already taken by the Coordinate Bench. vii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal is right in holding that the reference to special audit is an integral part of process ignoring the scheme of the statute and the title of Section 142 of the Income Tax Act, 1961 i.e., enquiry before assessment? Should the Revenue is aggrieved with the said findings of the Coordinate Bench, the appropriate action lies in filing appeal before the Hon'ble High Court and the said ground cannot be decided within the limited domain of s....