Income Tax Appellate Tribunal - Delhi
Kashyap Motors P. Ltd., vs Department Of Income Tax on 27 April, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F' : NEW DELHI
BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM
IT(SS) A.No.140/Del/2007
Block Period : 1.4.1989 to 22.12.1999
Shri Rajinder Kashyap, Vs. Asstt.Commissioner of Income Tax,
502, Sainik Farms, Khanpur, Circle-12(1),
New Delhi. New Delhi.
PAN No.AGSPK9659H.
(Appellant) (Respondent)
IT(SS) A.No.143/Del/2007
Block Period : 1.4.1989 to 22.12.1999
Dy.Commissioner of Vs. Shri Rajinder Kashyap,
Income Tax, 502, Sainik Farms, Khanpur,
Circle-5(1), New Delhi.
New Delhi. PAN No.AGSPK9659H.
(Appellant) (Respondent)
IT(SS) A.No.141/Del/2007
Block Period : 1.4.1989 to 22.12.1999
M/s Kashyap Motors Pvt.Ltd., Vs. Asstt.Commissioner of Income Tax,
20, Okhla Industrial Estate, Circle-12(1),
New Delhi. New Delhi.
PAN No.AAACK0836B.
(Appellant) (Respondent)
IT(SS) A.No.142/Del/2007
Block Period : 1.4.1989 to 22.12.1999
Dy.Commissioner of Vs. M/s Kashyap Motors Pvt.Ltd.,
Income Tax, 20, Okhla Industrial Estate,
Circle-5(1), New Delhi.
New Delhi. PAN No.AAACK0836B.
(Appellant) (Respondent)
Assessee by : Shri Ved Jain, Ms.Rano Jain and
Shri Venkatesh Chourasia, CAs.
Revenue by : Shri Ashok Kumar Pandey, CIT-DR.
2 IT(SS)-140 to 143/D/2007
ORDER
PER R.C.SHARMA, AM :
These are the cross appeals filed by the assessee and the revenue against the order dated 27.04.2007 of CIT(A)-XIII, New Delhi for the block period 01.04.1989 to 22.12.1999, in the matter of order passed u/s 158BC of the Act.
2. Rival contentions have been heard and record perused. Facts in brief are that the there was search and seizure operation u/s 132A in the case of M/s Kashyap Motors Private Limited on 22.12.1999 and subsequent dates. The assessee Shri Rajinder Kashyap Motors is the managing Director of the company M/s Kashyap Motors Pvt. Ltd. and key person of the Kashyap Motors group. The company is stated to be carrying service and repairs of BMW cars in India. The company also carries on promotional and after sales activities for BMW. While framing the assessment u/s 158BC, the Assessing Officer referred the matter for special audit u/s 142(2A) both in respect of Kashyap Motors Pvt.Ltd. and Shri Rajinder Kashyap.
3. The AO framed assessment u/s 158BC wherein additions were made on substantive and protective basis. Assessee approached to the CIT(A). Two legal grounds raised before the CIT(A) related to assessment being time barred firstly on the plea that panchnama mentioned in Explanation 2(a) to Section 158BE is a panchnama which is drawn on the conclusion of the search and where the panchnama does not reveal that the search was at all carried out on the date to which it relates, then it would not a panchnama relevant to a search and consequently, it would not be a panchnama of the type which finds mention in the said Explanation 2(a) to Section 158BE. It was contended that assessments so framed were time barred in view of panchnama drawn on subsequent dates without any search or seizure of any item and which were merely lifting of restraint order u/s 132(3). The validity of assessment was also challenged on the plea that suo-moto power of the AO to extend the time limit for special audit was effective only from 1.4.2008 in view of the amendment brought in by Finance Act, 3 IT(SS)-140 to 143/D/2007 2008 and which is fully supported by the memorandum explaining the provisions of Finance Bill 2008 and Circular No.1 of CBDT dated 27.3.2009, which clearly shows that the legislature as also the CBDT categorically were of the view that sub-section 2A, 2B, 2C & 2D of Section 142 deal with powers of the AO to order a special audit fixing the time limit within overall period of 180 days etc. and these provisions to be read together as a complete code in these matters. In these circumstances, it cannot be held that the provisions of Section 142(2A) had a stand alone position and was unfettered by sub-section 142(2C). Contention of learned AR was also that proviso to Section 142(2C) clearly shows that AO did have the power to extend as he thinks fit subject to maximum period of 180 days from the date on which direction u/s 142(2A) was issued. Since in both the cases the assessee has not made any application for the extension of period of special audit, therefore extension which has been done by the AO for extending the time limit for furnishing of special audit report, made on the request of the auditor could be taken only as suo-moto action of the AO. His further contention was that the memorandum extending the provisions of Finance Bill, 2008 as also Circular No.1 dated 27.3.2008 which explains the amendment to the provisions of Section 142(2C) shows that the term "suo-moto or" had been inserted only w.e.f. 1.4.2008. Accordingly, in these circumstances, it would have to be held that the power to suo-moto extend the period for completion of special audit was available to the AO only w.e.f. 1.4.2008 and before such date, the extension could be made only on the request of the assessee on an application made in this behalf. It was also emphasized that if it is to be read otherwise, there was no reason for such amendment. Learned AR reiterated that the fact that term "suo-moto" has been inserted w.e.f. 1.4.2008 clearly shows that before 1.4.2008, the AO did not have the inherent powers to extend the time limit without an application from the assessee. Since in both the cases under consideration, the period was extended by the AO before 1.4.2008 without any application by the assessee for such extension of the period, the extension made by the AO was without jurisdiction and consequently such extension as made by the AO cannot be said to extend the limitation period for completion of assessment. However, the CIT(A) did not 4 IT(SS)-140 to 143/D/2007 accept both the contentions of the assessee with regard to panchnama and power of AO to suo-moto extend the time limit for completion of special audit and held that assessment was framed within the stipulated time. However, in respect of merits of the addition, after giving detailed finding, the CIT(A) has deleted the additions. Against these orders of CIT(A), both the assessee and Revenue are in appeal before us. The assessee is aggrieved for not canceling the assessment which was passed beyond the limitation, both on the plea of panchnama as well as suo-moto extension of time for special audit by the AO. The department is in appeal against the CIT(A)'s action for deleting the additions made on merits.
4. Rival contentions have been considered and record perused. From the record, we found that search and seizure operation u/s 132 was carried out on 22.12.1999. In case of Rajinder Kashyap relevant date of search, panchnama and order for reference to special audit was as under:-
Date of search 22.12.1999
Panchnamas i) 22.12.1999
ii) 14.01.2000
iii) 19.12.2000
Notice u/s 158BC 20.10.2000
Order for special audit u/s 142(2A) 18.02.2002
Period granted for audit 15.07.2002
Extended by A.O. (Suo Motto) 16.08.2002
Asstt. Order passed 27.06.2003
5. On the basis of search material, panchnama was prepared on 22.12.1999. There was no action from 22.12.1999 till 14.1.2000, when again some inventory was prepared after releasing some liquors. Furthermore, there was no action for more than 11 months and on 19.12.2000, foreign currency as inventorized on 22.12.1999 was taken away. Contention of learned AR was that mere drawing of panchnama after 22.12.1999 was to just prolong search and to buy time and there was no valid reason for the same. As per learned AR, only panchnama drawn on 22.12.1999 after completion of search was a valid panchnama and the time limit 5 IT(SS)-140 to 143/D/2007 for completion of assessment is to be reckoned from this panchnama dated 22.12.1999. For this purpose, reliance was placed on the decision of Hon'ble Jurisdictional High Court in the case of S.K.Katyal - 308 ITR 168 wherein it was held that panchnama drawn on the basis of search material found, inventorized and valued on 17.11.2000 was a valid panchnama, and the panchnama drawn subsequently which did not show that any search was conducted on that day and only depicting revocation of restraint order mentioned in panchnama dated 17.11.2000 was not a valid panchnama. It is only the panchnama dated 17.11.2000 which related to the conclusion of search was relevant for computing limitation u/s 158BE(1)(b). Accordingly, it was held that block assessment made on 30.1.2003 on the basis of panchnama subsequently drawn on 3.1.2001 was barred by limitation. Following was the precise observation of the Hon'ble High Court which reads as under:-
"A search is necessarily an invasion of privacy and such an invasion cannot be permitted to be prolonged on a pretext. There must be some cogent plausible reason for splitting the search and in not conducting it continuously till its conclusion. Viewed in this light, even if it were assumed for the sake of argument that a search took place on 3rd Jan., 2001 the same could not be regarded as legal on account of the unexplained gap of about a month and a half (from 17th Nov., 2000 to 3rd Jan., 2001). Judicial decisions clearly establish (i) a search is essentially an invasion of the privacy of the person whose properly or person is subjected to search; (ii) normally, a search must be continuous; (iii) if it cannot be continuous for some plausible reason, the hiatus in the search must be explained; (iv) if no cogent or plausible reason is shown for the hiatus in the search, the second or 'resumed' search would be illegal;
(v) by merely mentioning in the panchnama that a search has been temporarily suspended does not, ipso facto, continue the search. It would have to be seen as a fact as to whether the search continued or had concluded; (vi) merely because a panchnama is drawn up on a particular date, it does not mean that a search was conducted and/or concluded on that date; (vii) the panchnama must be a record of a search or seizure for it to qualify as the panchnama mentioned in Expln.2(a) to s.158BE. In the present appeal, no search whatsoever was conducted on 3rd Jan., 2001. Hence, the panchnama drawn up on 3rd Jan., 2001 cannot be regarded as a document evidencing the conclusion of a search. If that be so, 3rd Jan., 2001 cannot be 6 IT(SS)-140 to 143/D/2007 regarded as the date on which the warrant of authorization was executed. The Tribunal rightly held that the assessment made on 30th Jan., 2003 was beyond the prescribed time-limit."
6. Reliance was also placed on the decision of Hon'ble Jurisdictional High Court in the case of Sarb Consulate Marine Products (P) Ltd. - 294 ITR 444 wherein it was held that search and seizure operation stood concluded against the assessee on 6.11.1996, when some documents were seized and a panchnama was drawn. However, subsequent panchnama drawn on 14.9.1998 was drawn without any seizure but only revocation of restraint order u/s 132(3), accordingly limitation for completion of assessment started from 6.11.1996 and the assessment order passed on 30.9.1998 on the basis of panchnama dated 14.9.98 was barred by limitation. It was precisely observed by the Hon'ble High Court that second proviso to Section 132(1) clearly lays down that where it is not possible or practicable to take possession of any valuable or article or thing or remove it to a place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, then the authorized officer may serve on the owner or the person who is in possession of that article or thing and order restraining him from removing or parting or otherwise dealing with the said article or thing except with the permission of the authorized officer and such action shall be deemed to be a seizure of such valuable article or thing. On the other hand, Section 132(3) comes into operation when it is not possible to seize any article or thing for reasons other than those mentioned in the second proviso to sub-section (1) and by explanation added to Section 132(3), it is made clear that the serving of an order u/s 132(3) shall not be deemed to be a seizure of such valuable, article or thing. It was held that by merely resorting to restraint order u/s 132(3), the Revenue could not have extended the time limit for passing an assessment order.
7. Reliance was also placed on the decision of Hon'ble Delhi High Court in the case of Deepak Aggarwal - 308 ITR 116, wherein it was held that prohibitory order u/s 132(3) passed on 31.10.2000 was merely for continuing the search, possibly for the purpose of extending the limitation, the Tribunal was justified in 7 IT(SS)-140 to 143/D/2007 holding that search stood concluded on 31.10.2000 itself and not on 23.12.2000 and therefore the assessment order passed on 27.12.2002 was barred by limitation u/s 158BE.
8. In the instant case before us, there is no dispute with regard to the dates of search and various panchnamas prepared on 22.12.1999, 14.1.2000 and 19.12.2000. The examination of the panchnama placed on record clearly shows that on 22.12.1999, complete inventory of each item was prepared which is evident from the annexures annexed to the panchnama. There was no action from 22.12.1999 till 14.1.2000, when again some inventory was prepared after releasing some liquors. Further, there was no action for more than 11 months and it was only on 19.11.2000 that foreign currency as inventorized on 22.12.1999 was taken away and panchnama was drawn. The plain reading of the ratio laid down in the Hon'ble Jurisdictional High Court decisions as referred above clearly indicates that panchnama mentioned in Explanation 2(a) to Section 158BE is a panchnama which is drawn on the conclusion of the search. If the panchnama does not reveal that a search was at all carried out on the day to which it relates, then it would not be a panchnama related to a search and consequently, it would not be panchnama of the type which finds mention in the said Explanation 2(a) to Section 158BE. In the instant case before us, neither the panchnama dated 14.1.2000 nor dated 19.12.2000 shows that any search was conducted on that day and only depicting revocation of restraint order mentioned in panchnama dated 22.12.1999. Thus, it was the only panchnama dated 22.12.1999 which related to the conclusion of search and relevant for computing limitation u/s 158BE(1)(b). Hence, the assessment framed on 27.6.2003 was time barred.
9. With regard to the computation of period for completion of assessment in case matter is referred by AO for special audit, learned AR has relied on the order of the Coordinate Bench in the case of Bishan Saroop Ram Kishan Agro Pvt.Ltd., order dated 18.9.2009, in respect of ITA No.3413, 3414, 3459, 3415, 3416, 3068 and 3670/Del/2008 for the AY 1999-2000 to 2005-06 and Sunder Exports - 126 8 IT(SS)-140 to 143/D/2007 TTJ (Del) 853, in support of the proposition that as per Circular No.1 dated 27.3.2009 and amendment made by the Finance Act, 2008 in Section 142(2C) effective from 1.4.2008, granting of suo-moto powers to the AO to extend the time for completion of special audit under sub-section 2(a) of Section 142, was effective w.e.f. 1.4.2008. It was contended by learned AR that assessment order passed u/s 153BC on 27.6.2003 was barred by limitation insofar as the order for special audit was passed on 18.2.2007 according to which special audit was to be completed on 15.7.2002. It was contended that in view of the Amendment brought out in Section 142(2A) by Finance Act 2008 and which was also clarified by CBDT Circular No.1 dated 27.3.2009, the AO has inherent power to suo-moto extend the limitation time only w.e.f. 1.4.2008, and prior to it, AO has no power to suo-moto extend the limitation period. From the record, we found that in this case, the AO has passed order for special audit u/s 142(2A) in the case of Rajinder Kashyap on 18.2.2002. As per the order, the date of furnishing of audit report u/s 142(2A) was 15.7.2002. Thus, the time allowed for special audit was 148 days. However, AO passed order u/s 142(2C) on 5.7.2002 suo-moto extending the time for furnishing of special audit report to 16.8.2002. From the said order passed u/s 142(2C), it is clear that the AO has passed the said order on the request of the auditor and extended the time for furnishing of audit report from 15.7.2002 to 16.8.2002 whereas as per the provisions of section 142(2C) as prevailing during the relevant point of time, the AO could extend the time limit on an application made by the assessee and not otherwise. In this case, the assessee had not applied for extension of time for furnishing report u/s 142(2A) of the IT Act, 1961 and the extension was made on the request of the auditor, hence such extension of period for furnishing of audit report was bad in law. In this regard, learned AR placed on record the order of the Tribunal in the case of Bishan Saroop Ram Kishan Agro Pvt.Ltd. (supra) as well as order of the Tribunal in the case of Ram Kishan Dass, order dated 6.11.2009 in ITA No.148, 149 & 150/Del/2009, wherein exactly similar issue has been dealt with extensively. After dealing with the relevant provisions of Section 142(2A), 142(2C), amendment brought in by Finance Act, 2008 in the proviso to Section 142(2C), Circular No.1 dated 27.3.2009 and the 9 IT(SS)-140 to 143/D/2007 explanatory notes to the provisions of Finance Act, 2008, the Tribunal held that as per the memorandum explaining the provisions of Finance Bill, 2008 as also Circular No.1 dated 27.3.2009 which explains the amendment to the proviso to Section 142(2C) clearly shows that the term "suo-moto or" had been inserted w.e.f. 1.4.2008. After the amendment w.e.f. 1.4.2008, the power to suo-moto extend the period for completion of special audit report was available to the AO only w.e.f. 1.4.2008 and before this date the extension could be made only at the request of the assessee on an application made in this behalf by the assessee. It was elaborately discussed that the term "suo-moto" has been inserted w.e.f. 1.4.2008 shows that before 1.4.2008, the AO did not have the inherent powers to extend the time limit without an application from the assessee. It was further discussed that even such extension cannot be controlled in view of the term "for any good and sufficient reason". Since in the instant case before us, extension was before 1.4.2008 and it is only not disputed that assessee has not made any application for extension of the period given for special audit vide order dated 18.2.2002, extension vide order dated 16.8.2002 was without jurisdiction and consequently, such extension as made by the AO vide order dated 16.8.2002, cannot be said to extend the limitation for completion of assessment. Following was the precise observation and conclusion of the Tribunal in its order dated 18.9.2009:-
"5. We have considered the facts of the case and the rival submissions. From the submission of both the sides, the questions that come up for consideration are:
(i) does the A.O. have the powers to grant any specified time as the direction of the A.O. for completing special audit u/s 142(2A), and
(ii) whether the time period u/s 142(2A) is controlled by the provisions of Section 142(2C)?
For a better appreciation of the issue, it would be worthwhile to extract the relevant provisions as under:
"The provisions of Section 142(2A) is as follows:
"(2A) If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief 10 IT(SS)-140 to 143/D/2007 Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-
section (2) of section 288, nominated by the Chief Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require:
Provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard."
"The provisions of Section 142(2C) read as follows: "(2C) Every report under sub-section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer:
Provided that 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."
"The Provisions of Explanation (ii) to Section 153B read as follows: Explanation.--In computing the period of limitation for the purposes of this section,--
(i) x x x x x x x x x.
(ii) the period commencing from the day on which the Assessing Officer directs the assessee to his accounts audited under sub-
section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section; or
(iii) x x x x x x x x x shall be excluded:
"The proviso to Exp.(ii) of Section 153B reads as follows:
Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this sub-section available to the Assessing Officer for making an order 11 IT(SS)-140 to 143/D/2007 of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly."
"A perusal of the memorandum Explanation of the provisions in the Finance Bill 2008 regarding the amendment to the proviso to Section 142(2C) reads as follows:
"Granting of power to the Assessing Officer to extend the time for completion of special audit under sub-section of section 142.
Sub-section (2A) to (2D) of section 142 deal with the 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 (2l) 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 report suo motu. Hence, while the Assessing Officer shall continue to have power to grant extension on an application made in this behalf by the assessee and when there are good and sufficient reasons for such extension, he can also grant such extension on his own.
The amendment will take effect from Ist April, 2008.
{Cause 28}."
"Circular No.1 dated 27.03.2009 Para 27 to 27.4 reads as follows:
"Direct Tax Circular No. 1dated 27 March, 2009.
Explanatory Notes to the Provisions of the Finance Act, 2008.
1. Introduction 12 IT(SS)-140 to 143/D/2007 The Finance Act, 2008 (hereafter referred to as "the Act") as passed by the Parliament, received the assent of the President on the 10th day of May, 2008 and has been enacted as Act No. 18 of 2008. This circular explains the substance of the provisions of the Act relating to direct taxes.
27. Granting of power to the assessing officer to extend the time for completion of special audit under sub-section (2A) of section 142. Sub-section (2A) to (2D) of section 142deal with the 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 specified the period within which the audit report is to be furnished. The provision 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 reasons for such extension.
With a view to rationalize the said proviso so as to also allow the Assessing Officer to extend this period of furnishing of audit report suo motu, the said proviso has been amended. Hence, while the Assessing Officer shall continue to have power to grant extension on an application made in this behalf by the assessee and there are good and sufficient reasons for such extension, he can also grant such extension on his own.
Applicability has been made applicable with effect from Ist April, 2008. Hence, from this date and onwards, the Assessing Officer shall also power to extend the period of furnishing of audit report suo motu."
5.1 The dates as mentioned are not disputed. A perusal of the provisions of Section 142(2A) shows that at any stage of the proceedings before the A.O. if the A.O. is of the view that there is complexity in the accounts of the assessee, then, in the interest of justice, he may with the prior approval of the Chief Commission or the Commissioner, direct that the assessee's accounts are to be audited by an accountant as specified under the Act. The direction for conducting special audit is subject to the assessee having been given reasonable opportunity of being heard. The reading of the provisions of Section 142(2A) categorically shows that no time limit is specified for the completion of the special audit. A reading of the 13 IT(SS)-140 to 143/D/2007 provisions of Section 142(2C) shows that the report u/s 142(2A) is to be furnished within the specified period, which is to be determined by the A.O. Thus, it is noticed that Section 142(2C) specifies the time limit and such time limit is given at the discretion of the A.O. This discretion of the A.O. in granting the time limit is controlled by the proviso to Section 142(2C). The provision specifies that the A.O. can give any period in his discretion subject to a maximum of 180 days from the date on which the direction u/s 142(2A) is received by the assessee. This is because the opening words of Section 142(2C) specify that it applies to every report under sub-section (2A). A perusal of the circular No.01 dated 27.03.2009 as also the memorandum explaining to the provisions in the Finance Bill, 2008, clearly shows that the legislature as also the CBDT categorically were of the view that sub-section (2A) (2B), (2C) and (2D) of Section 142 deal with the powers of the A.O. to order a special audit fix the time limit with overall period of 180 days etc. and these provisions to be read together as complete code in these matters. In these circumstances, it cannot be held that the provisions of Section 142(2A) had a stand-alone position and was unfettered by section 142(2C).
5.2 Further, a perusal of the proviso to Section 142(2C) shows that the A.O. did have the powers to extend the period by further period or periods as he thinks fit subject to the maximum limitation of a period of 180 days from the date on which the direction u/s 142(2A) was received by the assessee. On the facts of the present case, it is noticed that the assessee has not made any application for the extension of the period of special audit. Therefore extension which has been done vide letter dated 07.03.2007, 17.04.2007 and 17.05.2007 made on the request of the auditor could duly be taken as the suo motu action of the A.O. A perusal of the memorandum explaining the provisions of Finance bill 2008 as also the Circular No.01 dated 27.03.2008 which explains the amendment to the proviso to Section 142(2C) shows that the term "suo motu, or" had been inserted w.e.f. 01.04.2008. In these circumstances, it would have to be held that the power to suo motu extend the period for completion of the special audit was available to the A.O. only w.e.f. 01.04.2008 and before such date, the extension can be made only at the request of the assessee on an application made in this behalf by the assessee. If it is to be read otherwise, there was no reason for such amendment. The fact that the term "suo moto" has been inserted with effect from 01.04.2008 shows that before 01.04.2008, the A.O. did not have the inherent powers to extend the time limit without an application from the assessee. Further, even such extension would be controlled in view of the term "for any good & sufficient reason". Here as the period in the present case is before 01.04.2008 and as it is noticed that the assessee has not made any 14 IT(SS)-140 to 143/D/2007 application for the extension of the period given vide order for special order dated 12.12.2006, the extensions made by the A.O. vide his order dated 07.03.2007, 17.04.2007 and 17.05.2007 are without jurisdiction and consequently such extensions as made vide those letters / orders cannot be said to extend the limitation. The exclusion as provided in the Exp. (ii) to Section 153B would have to be read to be 90 days being a period between 12.12.2006 to 12.03.2007. Consequently, it would have to be held that the time period u/s 142(2A) is controlled by the provisions of Section 142(2C) and the exclusion provided in explanation (ii) to Section 158B was for the period form 12.12.2006 to 12.03.2007 and consequently the claim of the assessee that the assessment is barred by limitation, would have to be upheld and we do so.
5.3 As this issue has been raised in Ground No.2(iii) of all the appeals filed by the assessee and in view of our finding as above, the said ground is held in favour of the assessee. In the circumstances, the other grounds as raised in the appeals of the assessee do not require our consideration and consequently they are not being adjudicated upon.
5.4 As the assessments have been held to be barred by limitation, the issues as raised by the revenue in its appeals also do not survive for consideration and consequently, the same are also not adjudicated upon and consequently they are treated as dismissed.
6. In the result, the appeals of the assessee are allowed and the appeals of the revenue are dismissed."
10. Similarly, in the case of Kashyap Motors Pvt.Ltd., search was conducted on 22.12.1999 and the block assessment order was framed on 23.1.2004. Order was passed after four years and one month. As per the panchnama/last panchnama where seizure was effective from 24.3.2001, accordingly limitation for completion of assessment expires on 26.3.2003, whereas order was passed on 23.1.2004. there was no valid extension u/s 132(3). From the record, after verification of the panchnama, we found that last valid panchnama was drawn on 24.3.2001 and not on 11.7.2001 where no search was made and only restraint order passed u/s 132(3) was lifted. In view of valid panchnama dated 24.3.2001, the order of assessment should have been passed latest by 26.8.2003. Since the order has been passed on 23.1.2004, the same is barred by limitation. In view of the decision of Hon'ble Jurisdictional High Court in the case of S.K.Katyal (supra), Sarb Consulate Marine Products (P) Ltd. (supra) and Deepak Aggarwal (supra), as discussed hereinabove, 15 IT(SS)-140 to 143/D/2007 the assessment order in the instant case was barred by limitation. The second objection of the learned AR was with respect to suo-moto extension of time for special audit u/s 142(2A). Contention of assessee before the CIT(A) was that the assessment order was barred by limitation as the time period for the purpose of limitation is to be computed with respect to the power originally allowed for carrying out the special audit u/s 142(2A) and not the period suo-moto extended by the AO. With respect of decision of Punjab & Haryana High Court in case of Jagjit Sugar Mills Co. Ltd. 210 ITR 468, as relied on by ld. CIT(A), it was contended by ld. AR that the decision was rendered on 14th September 1993, thereafter an amendment was brought in the proviso to sec. 142(2A) by Finance Act 2008, therefore the position of law was elaborately amended and clarified according to which before 1.4.2008 i.e. before amendment, the AO does not have the power to extend the time period suo-moto and limitation has to be computed with reference to the original period granted for special audit.
11. In view of the detailed discussion made hereinabove by referring to the order of the Tribunal in the case of Bishan Saroop Ram Kishan Agro Pvt.Ltd., the issue is now covered in favour of assessee in view of the amendment carried out to Section 142(2A) and the CBDT Circular No.1 dated 27.3.2009. These amendments and Circular were elaborately considered in the case of Bishan Saroop Ram Kishan Agro Pvt.Ltd. by the Delhi Tribunal in its order dated 18.9.2009, wherein it was held that before 1.4.2008 i.e. before amendment, the AO does not have the power to extend the time period suo-moto and limitation has to be computed with reference to the original period granted for special audit. The facts of these cases are identical to the facts discussed by the Tribunal in the above orders. Accordingly, we hold that assessment order passed by the AO in both the cases are barred by limitation on both the counts.
12. As the facts and circumstances both in the case of Rajinder Kashyap and M/s Kashyap Motors Pvt.Ltd. are in pari-materia with the cases discussed above, respectfully following the proposition of law as laid down by the Hon'ble Jurisdictional High Court with respect to limitation for passing of assessment 16 IT(SS)-140 to 143/D/2007 order on the basis of panchnama and the orders of Tribunal with regard to AO's power to suo-moto extension of time limit for furnishing the special audit report, we hold that assessment orders in both these cases are barred by limitation and therefore, the same are cancelled.
13. With respect to merits of the additions made by the AO and which has been deleted by the CIT(A), it was contended by the learned AR that the CIT(A) has deleted the additions after recording detailed findings which are as per material on record. As an alternate he also contended that if the issue on legal ground is decided by the Tribunal in favour of the assessee there is no need to go on the merits of the additions. For this purpose, reliance was placed on the ITAT Special Bench order in the case of Rahul Kumar Bajaj - 69 ITD 1, wherein it was held that the Tribunal having decided the preliminary issue, i.e. validity of reopening of assessment in favour of the assessee, had committed a patent mistake in deciding the subsidiary issue on merits, therefore the later part of the order needs to be rectified and paras dealing with the subsidiary issues are required to be deleted.
14. As the legal issue with regard to limitation period for passing the assessment order has already been decided in favour of the assessee, we are not going on merit of the addition which has been deleted by the CIT(A) after recording detailed findings as per material on records.
15. In the result, the appeals filed by the assessee are allowed and the appeals of the Revenue are disposed off in terms indicated hereinabove.
Decision pronounced in the open Court on August, 2010.
(A.D.JAIN) (R.C.SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : .08.2010.
VK.
17 IT(SS)-140 to 143/D/2007
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
Deputy Registrar