In Principal CIT v. Jindal Dyechem Industries Pvt. Ltd, the Delhi High Court held that the Assessing Officer (AO), under section 142(2C) of the Income Tax Act, has no power to extend time for submission of Special Audit Report beyond 180 Days.
The AO directed the assessee to complete special audit by February 2006. However, the assessee sought for extensions and the report was submitted on July 2006, with a delay of about 5 months and assessment was finally completed on 14th September 2006.
Assessee challenged the order on ground that it is barred by limitation since it ought to have been made on 6th September.
The department contended that the when there was failure by the Assessee to submit the audit report within the stipulated time, the Assessee should not be allowed to take advantage of its own lapse and claim that the assessment order was barred by limitation.
Rejecting the above arguments, the division bench comprising of Justice S. Muralidhar and Justice Chander Shekhar observed that the assessment in the preset case is barred by limitation. “The language of the statute is plain. Section 142 (2A) of the Act anticipates timely submission of the report of the Special Auditor. The Auditor who is to conduct special audit in terms of Section 142 (2) of the Act is not an auditor of the choice of the Assessee. The auditor is nominated by the Revenue and his work is not controlled by the Assessee. Where the special audit report is unable to be furnished within the time stipulated by the AO, extension of time can be granted by the AO on an application made by the Assessee. The extension has to be for good and sufficient reasons.”
Concurring with the findings of the lower authorities, the bench said that “Section 142 (2C) of the Act was inserted to provide that the AO may “suo motu‟ extend the period provided that the aggregate period originally fixed and extended period would not exceed 180 days from the date on which a direction was first issued to the Assessee for submission of report of the Special Auditor. It is an admitted position that in the present case all the extensions granted, except the last one, were on the application of the Assessee.”
Read the full text of the Order below.
