Commissioner of Income-Tax and another vs B.J.N. Hotels Ltd.

S. Sujatha J. - These appeals are filed by the Revenue under section 260A of the Income-tax Act, 1961 (the "Act" for short) challenging the orders passed by the Income-tax Appellate Tribunal, Bangalore Bench "A" (the ''Tribunal" for short) for the assessment yeas 2001-02 to 2005-06.

Facts in brief are :

The assessee is engaged in the business of running a hotel. On December 17, 2004, a search was conducted by the Departmental authorities under section 132 of the Act. Proceedings under section 153A of the Act were initiated by issuing the required notice, requesting the assessee to file a return of income for the relevant assessment years. In response, the assessee filed return of income declaring loss. Proceedings by order dated July 31, 2006, initiated under section 142(2A) of the Act, appointing a special auditor came to be dropped as no opportunity was provided to the assessee. Subsequently, notice was issued on November 30, 2006 under section 142(2A) of the Act, proposing to send the books of accounts of the assessee for special audit. The assessee objected to the same as there was no complexity in the accounts. However, the Assessing Officer being of the opinion that the accounts were complex in nature and to safeguard the interest of the Revenue, obtained the prior permission of the Commissioner on December 18, 2006 and directed the assessee to get the accounts audited, due date for submission of special audit report was on February 28, 2007. Assessments were concluded under section 153A read with section 143(3) of the Act, by order dated April 27, 2007 and the orders were served on the assessee on April 30, 2007.

Being aggrieved by the said assessment orders, the appellant carried the matters in appeals. The Appellate Commissioner allowed the appeals in part.

Being aggrieved, the assessee as well as the Revenue preferred appeals before the Tribunal. The Tribunal held that the assessment orders passed are barred by time and on the other grounds urged, findings are given in favour of the assessee.

Being aggrieved by the said common order of the Tribunal, the Revenue is before this court.

Though the matter was admitted on several substantial questions of law raised by the appellants in the memorandum of appeals, at the time of hearing the matters, we have refrained the substantial questions of law as under:

"1. Whether the Tribunal was correct in law in holding that the time for furnishing the special audit report could not have been extended beyond January 27, 2007 being 180 days from July 31, 2006 being the date of the first direction and the order of assessment ought to have been made by March 26, 2007 and consequently the assessment order passed on April 27, 2007 is barred by limitation on the facts and circumstance of the case ?

Whether the Tribunal is correct in law in holding that the Assessing Officer does not have the power to unilaterally withdraw the direction for audit under section 142(2A) of the Income-tax Act as the original direction was made with the approval of the commissioner of Income-tax on the facts and circumstance of the case ?

Whether the Tribunal was correct in law in holding that the assessment order passed on April 27, 2007 is barred by limitation as successive direction under section 142(2A) is not permissible and the second direction given to obtain the audit report before February 28, 2007 is to elongate the assessment proceedings and also contrary to section 142(2C) of the Act on the facts and circumstance of the case ?

Whether the assessment order is barred by limitation as it was made beyond the period of limitation on the fact and circumstances of the case ?"

Heard the learned counsel Sri K. V. Aravind appearing for the Revenue as well as Sri A. Shankar, learned counsel appearing for the assessee.

Firstly, we are considering the substantial question of law No. 4, relating to the limitation since it goes to the root of the matter. The undisputed facts are that the assessment orders were required to be issued on or before March 26, 2007, the period prescribed under law considering sixty days from January 27, 2007, due date for special auditor report as specified under section 142(2C) of the Act. The assessment orders are dated April 27, 2007. Taking the second reference of the Commissioner of Income-tax, dated December 18, 2006 for special audit report, due date for submission of special audit report being February 28, 2007, the assessment orders would have been issued on or before April 29, 2007. The copies of the assessment orders were served on the assessee on April 30, 2007.

However, learned counsel appearing for the Revenue would contend that the Assessing Officer passed the orders on April 27, 2007 and the same was dispatched to the assessee. On our direction to produce the original records, the same are placed before us. We have noticed certain over writings in the order sheet as regards date of passing of the order by the Assessing Officer and moreover, a particular page of the order sheet is maintained on a rough sheet (in an unusual manner) different from other pages of the order sheet. Besides this flaw in the records, learned counsel for the Revenue is neither able to point out from the records that the assessment orders were dispatched on April 27, 2007 nor produced the dispatch register to establish that the orders are complete and effective, i.e., it is issued, so as to be beyond the control of the authority concerned within the period of limitation i.e., April 29, 2007. Admittedly, the assessment orders were served on the assessee on April 30, 2007. Hence, we are of the considered opinion that the assessment orders passed are barred by limitation.

An identical issue was before this court in I.T. A. No. 832 of 2008 (dated October 14, 2014) in the case of Maharaja Shopping Complex v. Deputy CIT. This court following the judgment of the Kerala High Court in the case of Government Wood Works v. State of Kerala [1988] 69 STC 62 (Ker) has held that in the absence of dispatch date made available to the court from the records, to prove that the order is issued within the prescribed period, order passed by the Assessing Officer is barred by limitation. The said judgment squarely applies to the facts of the present case.

In the result, substantial question of law No. 4 is answered in favour of the assessee and against the Revenue. In view of the above, it is not necessary for us to examine the other questions.

Accordingly, appeals are dismissed.