Extension for conducting special audit u/s 142(2A) cannot be granted by CIT, only the A.O. can grant such extension – Assessment concluded after such extended limitation period shall be considered as void ab initio

FACTS
During assessment proceedings, the A.O. arrived at the conclusion that it was necessary to conduct a special audit u/s 142(2A) of the books of accounts of the assessee. The assessee raised objections to the proposed special audit and the A.O., after rejecting the objections and with the approval of the CIT, ordered a special audit in accordance with the provisions of section 142(2A). Thereafter, the Special Auditor requested for extension of time period and the A.O. forwarded this request to the CIT. The CIT granted extension of time. The assessments were completed after limitation period on account of the extension granted for special audit.

The assessment orders were challenged before the CIT(A) which provided relief to the assessee on merits. The orders of the CIT(A) were challenged by the Revenue before the Tribunal and the assessee filed cross-objections raising the issue of limitation in completing the assessment.

Before the Tribunal, the assessee argued that as per the proviso to section 142(2A) it was only the A.O. who had the power to extend the time period for conducting the audit; hence, the extension granted by the CIT was legally invalid. It was argued that the exercise of the statutory power of an authority at the discretion of another authority vitiates the proceedings.

On the other hand, the Department contended that the A.O. had applied his mind and was satisfied that the matter required extension; however, the extension application was forwarded only for the administrative approval of the CIT; even otherwise, since the CIT was the approving authority for special audit, therefore his involvement for extension of time as per the proviso was inherent. The Revenue argued that since on a substantial basis the requirement of the proviso to section 142(2A) was met, just on account of administrative approval of the CIT for sanctioning the extension, it should not vitiate the extension of time for the special audit.

HELD
The issue before the Tribunal was whether or not the action of the CIT in granting an extension for a further period u/s 142(2A) was legally valid.

The Tribunal held that the proviso to section 142(2A) clearly provides that the A.O. shall extend the said time period if the conditions as mentioned in the said proviso are satisfied. While the initial direction is to be given with the approval of the CCIT / CIT, however, for extension it is only the A.O. who has to take a decision for extension, the sole power to extend vests only with him.

There was no need for the higher authorities to be involved in the issue of extension. It may be an administrative phenomenon to inform the CIT about the extension, but statutorily that power is vested with the A.O.

The Tribunal held that the statutory powers vested with one specified authority cannot be exercised by another authority unless and until the statute provides for the same. The statute has accorded implementation of various provisions to specified authorities which cannot be interchanged. A power which has been given to a specified authority has to be discharged only by him and substitution of that authority by any other officer, even of higher rank, cannot legalise the said order / action.

Accordingly, it was held that the extension given by the CIT was beyond the powers vested as per the statute and therefore the assessment completed after the due date was void ab initio.