Power of AO to prescribe Time Limit for Filing Auditor’s Report includes Power to Extend Time limit: Supreme Court [Read Judgment]

Duty - Finance Act - Supreme Court - Taxscan

A two-judge bench of the Supreme Court has held that the Assessing Officer who prescribes time limit for filing auditor’s report under Section 142(2A) of the Income Tax Act is also entitled to extend time limit even if extension is not sought for by assessee:

An assessment under section 153A was passed against the assessee. Subsequently, there was a difference of opinion between the assessee and the AO regarding the interpretation of Section 142(2C).

On appeal, the ITAT held that before the insertion of the expression suo motu in the provisions of Section 142(2C) w.e.f. 01.04.2008, the AO was not vested with jurisdiction to extend the time limit for submission of a report furnished by an auditor appointed u/s 142(2A). Hence, the Tribunal held that the assessment order passed u/s 153A was barred by limitation. On further appeal, the High Court dismissed the appeals filed by the Revenue against such order.

When the matter travelled to the Apex Court, the bench comprising Justice Dr Dhananjaya Y Chandrachud and Justice Hemant Gupta held that the proviso to subsection (2C) creates a remedy for an assessee to apply for extension where, for a good and sufficient reason, the audit report could not be submitted.

“Otherwise, the assessee may face a penalty under Section 271 apart from being subjected to a best judgment assessment under Section 144. By extending time at the behest of the assessee, the AO allows the original order calling for an audit report to be duly implemented. The creation of a remedy under the proviso in favour of the assessee cannot be construed to detract from the authority which vests in the AO, who has specified the time limit for the submission of an audit report in the first instance, to extend time without an application by the assessee. To hold otherwise and to construe the proviso to sub-section (2C) as foreclosing the authority of the AO to extend time without a request by the assessee, would lead to an absurd consequence.”

While concluding, the bench held that “the provisions of Section 142(2C) of the Income Tax Act 1961, as they stood prior to the amendment which was enacted with effect from 1 April 2008 by the Finance Act, 2008 did not preclude the exercise of jurisdiction and authority by the assessing officer to extend time for the submission of the audit report directed under subsection (2A), without an application by the assessee. We hold and declare that the amendment was intended to remove an ambiguity and is clarificatory in nature. As a consequence of our decision, we specifically overrule the judgment of a Division Bench of the Delhi High Court in Commissioner of Income Tax v Bishan Swaroop Ram Kishan Agro Pvt. Ltd.15 dated 27 May 2011.”

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