Case Law Details
Rosy Blue (India) Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Conclusion: Since AO had taken recourse to the provisions of section 142(2A) only with a view to extend the period of limitation by virtue of clause (iv) of Explanation 1 to section 153(9) for completion of assessment, without the conditions being satisfied in section 142(2A), therefore, the assessment framed by AO under section 143(3) was barred by limitation and invalid.
Held: The issue raised in assesse’s appeal was against the order of CIT(A) upholding the exercise of jurisdiction under section 142(2A) by AO by directing Special Audit without demonstrating the complexity in the books of accounts and holding that the assessment was not barred by limitation. It was held that to exercise power by AO under section 142(2A), prior approval had to be taken from CIT which was a statutory safeguard provided in the Act against any unreasonable or arbitrary exercise of power by AO which had to be granted by CIT after following due process and after due application of mind. Thus, approval by CIT should be granted after examining due process and after due application of mind to the proposal submitted by AO but, in the instant case, it appeared not to be so. Assessee filed objection to the show cause notice and AO after considering reply of assessee framed proposal containing 16 issues in the draft order proposed under section 142(2A) and thereafter same was sent to CIT through Addl. CIT and approval was accorded on the same day by CIT. But, exercise of jurisdiction under section 142(2A) was exercised in a mechanical, routine and and so was the approval granted by CIT as all the formalities were done on the same day. Therefore, assessment framed could not be sustained as the same suffered from legal infirmities of improper exercise of jurisdiction on part of tax authorities under section 142(2A). The assessment should have been framed on or before 31-12-2010, whereas, as a matter of fact, assessment was framed on 12-8-2011 by taking recourse to the provision of clause (iv) of Explanation 1 to section 153(9). Therefore, in view of all this, assessment framed by AO was quashed as being barred by limitation.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross appeals are arising out of the order of the Commissioner of Income Tax (Appeals)]-50, Mumbai, [in short CIT(A)], in Appeal No. CIT(A)-50/IT-222/2011-12 dated 12.09.2011. The assessment was framed by the Dy. Commissioner of Income Tax, Mumbai (in short DCIT/ITO/ AO) for the A.Y. 2008-09 vide order dated 12.08.2011 under section 143(3) of the Income-tax Act, 1961 (hereinafter „the Act’).
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