Income Tax Appellate Tribunal - Nagpur
Dhariwal Sales Enterprises vs Income-Tax Officer on 25 November, 1986
Equivalent citations: [1987]20ITD478(NAG)
ORDER
A.K. Das, Judicial Member
1. By this appeal the assessee challenges the order of the Commissioner (Appeals), Jabalpur, holding the assessment not time barred. It is opposed by the department.
2. For the assessment year 1978-79 the original assessment was made by the ITO on 24-9-1981. The said assessment was set aside by the Commissioner (Appeals). by his order dated 8-9-1982 for de novo assessment. By his order dated 30-3-1985 the ITO directed the assessee under Section 142(2A) of the Income-tax Act, 1961 ('the Act') to get the accounts audited and to furnish the report of the audit by 30-6-1985. On the assessee's request by its letter dated 21-6-1985 the ITO extended the date for submission of the audit report till 31-8-1985. By its letter dated 21-8-1985 the assessee informed the ITO that the chartered accountant appointed to hold the audit 'had shown his inability to finalise the audit report referred under Section 142(2A) as being very busy in tax audit'. This letter was delivered to the ITO on 22-8-1985. The ITO completed the assessment under Section 144 of the Act on 3-9-1985.
3. On appeal it was contended before the Commissioner (Appeals) that the assessment is barred by limitation. It was contended before him that 'the time which was available to be (sic) assessee for submission of the report was from 30-3-1985 to 22-8-1985 and, accordingly, the assessment has become barred by limitation as only the period of intimation by the appellant, i.e., up to 22-8-1985 has to be excluded . . .' It was alternatively argued that if the period to be excluded is counted up to 31-8-1985, then also the last date for making the assessment order was 1-9-1985 and this date being a holiday, the assessment was to be completed on 2-9-1985. As it was passed on 3-9-1985 it was contended to have been time barred by that date. The Commissioner (Appeals) did not accept this contention. He rejected this contention for the following reasons :
I am unable to agree with the submissions of the learned Counsel that the compliance of provisions of Section 142(2A) should be deemed to have been made on 22-8-1985 and therefore, the ITO had to pass an order on 23-8-1985 latest as the period ended with the compliance of the directions issued. The ITO had allowed time up to 31-8-1985. He has naturally, therefore, to wait till the expiry of that time.
Coming to the second alternative plea the complication has been caused by the fact that 31st of August and 1st of September were public holidays. Since the maximum period which can be allowed does not extend 180 days till these dates the only interpretation even in view of the General Clauses Act, 1897, is that the period should be taken to have been given up to 2nd of September for submission of audit report as 31st of August and 1st of September were admittedly holidays. The ITO therefore, had to wait for the submission of the audit report till 2nd of September and since the same was not filed till the expiry of 2nd of September he passed the order immediately on the following date, i.e., the 3rd of September, and therefore; in my opinion, the assessment is not barred by limitation.
Being aggrieved, the assessee preferred this appeal.
4. The contentions raised before the Commissioner (Appeals) were reiterated before us. The authorised representative for the assessee also placed reliance on Section 9 of the General Clauses Act, 1897, contending that 30th March was to be excluded in computing the period for obtaining the audit report. So he contended that even according to the alternative argument the assessment was time barred. These contentions were seriously opposed by the departmental representative who relied on the order of the Commissioner (Appeals).
5. On anxious and careful consideration of the materials on record, facts and circumstances of the case, we are unable to agree with the Commissioner (Appeals) for the following reasons :
By its letter dated 21-8-1985 delivered to the ITO on 22-8-1985 the assessee had clearly stated that the nominated auditor expressed his inability to finalise his audit. So the ITO had no reason to wait till 31-8-1985 as observed by the Commissioner (Appeals). Similarly, the ITO could not have been under any misapprehension that the audit report could be submitted by the assessee till the expiry of 2nd September after reopening of the office. It is admitted by both sides that 31st August and 1st September were public holidays. The Commissioner (Appeals) is of course so correct in observing that the assessee's intimation that the auditor expressed his inability to complete the audit is not strictly 'compliance' of the ITO's direction to get the accounts audited and to file the audit report. But by no stretch of imagination the failure to obtain the audit report for either default on the part of the assessee or on the part of the auditor can be ruled out in the ordinary circumstances. It is admitted that under Section 153(2A) of the Act the last date for making the assessment was 31-3-1985. The extension of time in making this assessment is available to the department under Clause (iii) of Explanation 1 to Section 153. It runs as follows :
Explanation 1 : In computing the period of limitation for the purposes of this section--
(i) and (ii) ** ** **
(iii) the period commencing from the date on which the Income-tax Officer directs the assessee to get his accounts audited under subsection (2A) of Section 142 and ending with the date on which the assessee furnishes a report of such audit under that sub-section, or ** ** ** shall be excluded.
So under this clause of Explanation 1 the department is entitled to exclusion of the period from the date of the ITO's order to the date of submission of the audit report. If it is contended that submission of audit report under this Clause (iii) cannot be equated with final declaration of the assessee expressing his inability to produce the audit report, then this clause cannot be applied at all and the department will be deprived of such a period in cases where the assessee fails to submit the audit report and the department would be helpless. In our opinion the period up to which the department should be entitled to exclusion of time must be taken as the date on which the assessee finally expressed his inability to furnish the audit report if this is within the period of time given to the assessee for filing the audit report. Otherwise unscrupulous assessees would take advantage of this Clause (iii) in Explanation 1 by seeking time beyond the last date for making the assessment and thereafter not submitting the audit report. In our opinion that was not the intention of the Legislature and 'date on which the assessee furnishes the report of such auditor' in Clause (iii) of Explanation 1 must be interpreted to include the date on which the assessee finally expresses his inability to furnish the audit report. As such, in our opinion in the instant case, the department is entitled to exclusion of time from 30-3-1985 to 22-8-1985 under Clause (iii) of Explanation 1 to Section 153. In our opinion after the ITO receives the letter dated 21-8-1985 he could not be under any misconception that there was any further scope of filing the audit report by the assessee or that he should wait up to 31-8-1985. We find from the penultimate paragraph of the Commissioner (Appeals)'s order that the ITO enquired as to whether there was default on the assessee's part in not complying with the direction under Section 142(2A) or not. In our opinion the assessment proceeding was not the proper proceeding for this purpose. The proper proceeding to enquire about this reason was a proceeding under Section 271B of the Act wherein penalty could be imposed on the assessee for failure without reasonable cause to get the accounts audited. So, in our opinion for this enquiry also the ITO could not have kept the assessment pending. For all the reasons stated above we are of the opinion that the last date for completing the assessment was 23-8-1985 and the assessment made on 3-9-1985 is clearly time barred.
6. In our opinion the alternative argument of the authorised representative for the assessee is also to prevail. Of course we do not agree with him that under Section 9 of the General Clauses Act, 30th August should be excluded from the period to be computed under Clause (iii) of Explanation 1 to Section 153. Under Clause (iii) of Explanation 1 to Section 153 the period from 30-3-1985 to 31-8-1985 (both days inclusive), i.e., 155 days are to be excluded. So the ITO was to complete the assessment by 2-9-1985. But admittedly the assessment was made on 3rd September. The contention of the departmental representative that the ITO could not complete the assessment on one day, i.e., 2nd September because of the volume of the accounts cannot be accepted because the law has to be followed strictly in case of limitation if there is no provision for relaxation. In our opinion the ITO could validly complete the assessment by 2nd September only. As this was not admittedly done the assessment as made by the ITO on 3-9-1985 is time barred. So even according to the alternative argument of the authorised representative for the assessee the assessment is time barred. As such, the finding of the Commissioner (Appeals) cannot be sustained.
7. As a result, the appeal is allowed. The impugned order is set aside and the assessment made by the ITO is cancelled.