INCOME TAX ACT, 1961

Section 158BE Section 142(2A)

Search and seizure - Assessment - Limitation - Effect of order passed under section 142(2A)

AO passed orders under section 142(2A) twice in this case, namely, on 2-8-2006 and 14-2-2008. The corresponding clause (ii) of Explanation 1, AR submitted that such orders passed by the AO were invalid and the period given in the clause could not be excluded. This contention of assessee was based on the fact that the assessee had not maintained any regular books of account and hence, there could have been no question of ordering any audit under section 142(2A). When AO pased the first order under section 142(2A) on 2-8-2006, assessee filed a writ petition before the Bombay High Court. The matter was restored by the High Court to AO for passing a separate order after giving opportunity of hearing to the assessee. It became incumbent upon AO to either proceed with the assessment and finalize the same by 13-3-2008 (a period of 60 days from the date of the judgment, that is, 14-1-2008) without making any reference for the further special audit; or make a reference for the special audit under section 142(2A) by 13-3-2008. The AO issued notice under section 142(2A) on 11-2-2008 and passed an order making reference for special audit, after giving opportunity of hearing to the assessee, on 14-2-2008 itself, that was much prior to the limitation period. Assessee again approached the High Court contending, inter alia, that in the absence of any books of account maintained by assessee, there could have been no order of audit under section 142(2A). Revenue in its affidavit in reply, submitted before the Bombay High Court that maintenance of regular books of account was not a condition precedent for audit under section 142(2A). The expression 'accounts of the assessee' can only refer to the books of account of the assessee and not the other records available before the AO for examination or otherwise. Held: It was pursuant to such order of the High Court passed on 3-6-2008 that the AO got a period of 60 days for completing the assessment from 3-6-2008, even if one presumes that the audit report was submitted during the currency of proceedings before the High Court. As against that, the AO completed the assessment on 26-6-2008, which was well within the limitation period. Thus, it clearly emerges that case of assessee was eventually covered by clause (ii) of Explanation 1 to section 158BE read along with the proviso, being the date on which the Bombay High Court disposed of the assessee's writ petition on 3-6-2008. As the High Court in its interim judgment, dated 3-6-2008 categorically ordered that it was 'not inclined to stay the assessment proceedings', it evidently meant that the 2nd order under section 142(2A) was not invalidated by it. There remains no iota of doubt on this position, when one observed that the writ petition filed against the second order under section 142(2A) was eventually withdrawn by the assessee. The block assessment order passed by the AO on 26-6-2008 was within the limitation period as seen in the light of clause (ii) of Explanation 1 to section 158BE read with the proviso.

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