Rajendra C. Singh v.
JCIT
A.Y. : 1-4-1987 to 15-11-1997
Dated : 27-9-2007
A search was conducted at the assessee’s premises and after
completion thereof, the AO issued notice u/s.158BC to the assessee. In
response thereto, the assessee filed block return offering undisclosed income.
In the meanwhile, the Assistant Director, in the appraisal report recommended
an audit u/s. 142(2A). The AO requested the Commissioner to approve the said
proposal.
Accordingly, by a letter dated 5-5-1999, the assessee was
directed to get the accounts audited within 60 days from the receipt of the
letter. Before expiry of such period, the assessee applied for extension of
period of audit by two months, which was also granted. On 26-8-1999, the
assessee asked for a further extension of two months which was also granted on
the same date.
During the assessment proceedings, the AO was of the view
that in normal circumstances, the block assessment should have been completed
by 30-11-1999, however, considering the Explanation to S. 158BE, the period
got extended up to 31-5-2000 and hence he passed an assessment order on
31-5-2000.
On appeal before the CIT(A), the assessee argued that
assessment order was barred by time and also contended that the AO had passed
the order only on the basis of the appraisal report of the Assistant Director
and that he had not applied his mind to the proceedings carried out before him
as contemplated in S. 142(2A). It was further submitted that the AO had not
passed an order directing the audit, but merely had endorsed the
recommendation of the Assistant Director, who was not competent authority to
direct the audit.
The CIT(A) rejected the assessee’s claims and upheld the
order of the AO. On appeal before the Tribunal it was held :
(1) Reading of S. 142(2A) makes it clear that the
recommendation should come from the AO. The AO has to form an opinion having
regard to the nature and complexity of the accounts and also keeping in mind
the interests of the Revenue, that a special audit is required. If he forms
such an opinion, he has to seek prior approval of the Chief Commissioner or
the Commissioner to get the accounts audited.
(2) In the instant case, the initiation was done by the
Assistant Director and the AO had only requested the Commissioner to accept
the proposal of the Assistant Director.
(3) Therefore, in the above-mentioned case, since
recourse to S. 142(2A) was not valid, the finding of the Commissioner
(Appeals) that the assessment order was passed within time, is devoid of
merit. The order should have been passed by the AO on or before 30-11-1999,
as he himself had held that in the normal circumstances that was the last
date of passing the order. Therefore, the order of the AO was beyond time
contemplated u/s.158BE and accordingly, the appeal of the assessee was
allowed.
