Case Law Details
Calcutta High Court held In the case of CIT vs. Shri Shyamal Sarkar that there is a presumption in law that all official and judicial acts were regularly performed. In this case, this presumption is supported by the fact that the assessee had paid the fees of the auditor. The defects in the proceeding related to absence of order for audit and the submission of the audit report are mere irregularities which shall not invalidate the whole proceeding.
Facts of the Case
In this case, ITAT held that the assessment is barred by limitation.
It is not in dispute that the assessment should have been completed on or before 31 August, 2001, which would be within a period of two years, as required under section 158BE (2)(b). It is also not in dispute that the period of two years shall correspondingly be extended by the time which was consumed in carrying out the special audit under Explanation (1) (ii) of section 158BE. In this case the audit commenced on 13th November 2000 and was concluded on 24th April, 2001. Thus 163 days were consumed in the audit. Therefore, the period of 163 days has to be excluded from the period of limitation. It is not also in dispute that the delay is of 150 days under Section 158BE2 (b). The issue related to exclusion of audit period from the period of limitation of assessment.
Contention of the Assessee
The learned counsel for the assessee contended that the audit is of no consequence because the order required under section 142(2A) of the Income Tax Act was never passed. Therefore, the period consumed by audit cannot be excluded. He also relied upon the views expressed by the Tribunal.
Held by ITAT
It is clear that the A.O. before exercising power u/s.142 (2A) should objectively consider the material available with him and reach a bona fide conclusion/opinion that special audit u/s.142(2A) is essential in view of complexity of accounts and in the interest of Revenue. But in this case, no such opinion formed by the AO. It is evident that even before the first day of assessment proceeding, the A.O. had formed opinion to get the accounts audited. Secondly, there is no order u/s. 142(2A) by the A.O. The A.O. has only forwarded the administrative approval of the C.I.T. vide his letter dated 20.09.2000 to the Auditor.
Also there is no time limit of audit in the letter written to auditor. As per clause (ii) of Explanation I of below Sec.158BE (2), what is to be excluded from the period of limitation is the time given to the Auditor to conduct the audit. If there would be no specific period given to the auditor for completing the audit, then no period can be excluded. As per clause (b) of Sec. 158BE(1), the assessment of the block period is to be completed within two years from the end of the month in which the last authorization for the search u/s. 132 was executed. Such period of limitation can be extended only if the conditions prescribed in various clauses of Explanation I below Sec. 158BE(2) are satisfied. It was contended by the Revenue that the conditions prescribed in clause (ii) of Explanation I below Sec. 158BE(2) are satisfied i.e. the accounts of the assessee were got audited u/s.142(2A). We have already examined this contention of the Revenue and we have noticed that there is no order for getting the accounts audited u/s. 142(2A) by the A.O.
The search has taken place at the assessee’s premises on 18.08.1999. The two years from the end of the month would complete on 31.08.2001. The assessment order is passed by the A.O. on 28.01.2002, which is clearly barred by limitation.
Held by High Court
It is not in dispute that the assessment should have been completed on or before 31 August, 2001, which would be within a period of two years, as required under section 158BE (2)(b). It is also not in dispute that the period of two years shall correspondingly be extended by the time which was consumed in carrying out the special audit under Explanation (1) (ii) of section 158BE.
The fact that the audit was made is ample proof of the fact that an order for audit was also passed without which the audit could not have taken place. There is a presumption in law that all official and judicial acts were regularly performed. The presumption is reinforced by the fact that it is an admitted position that the assessee had paid the fees of the auditor. The defect, if any, in the proceeding which culminated into the order for audit and the submission of the audit report are mere irregularities which shall not invalidate the proceeding. As per section 292B, “No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. ”
Accordingly, appeal of the revenue allowed.
