COMMISSIONER OF INCOME TAX COCHIN Vs. POPULAR AUTOMOBILES

JUDGEMENT

(1.) This is an appeal filed by the Revenue challenging the order of the Tribunal confirming the first appellate authority's order which declared the assessment as time-barred under Section 153 of the IT Act and hence invalid. In this case the income returned by the Assessee was Rs. 76,84,450 whereas the income assessed by the AO after getting the accounts audited by the auditor appointed by the Department was Rs. 6,02,07,350 and so much so the tax dispute is above the limit that entitles the Department to file the appeal under instruction issued by the CBDT. We have heard the senior counsel Sri P.K.R. Menon appearing for the Appellant Revenue and Sri P. Balakrishnan, advocate appearing for the Respondent Assessee.

(2.) The facts leading to the controversy are the following. The return filed by the Assessee for the asst. yr. 1995-96 was processed under Section 143(1)(a) of the Act and intimation was forwarded to the Assessee. Thereafter, assessment was taken as a scrutiny assessment and notice was issued to the Assessee under Section 143(2) of the Act. The developments subsequent to service of intimation under Section 143(1)(a) with corresponding dates are given hereunder, which are relevant for deciding the issue.

(3.) The contention raised by the Assessee that found acceptance with the first appellate authority and the Tribunal is that assessment to be valid should have been completed within two years from the end of the previous year as required under Section 153(1)(a) and the extension of time available under Clause (iii) of Expln. 1 to Section 153(3) as amended by Finance (No. 2) Act of 1996 is only the time granted by the AO to the Assessee to furnish audited accounts under Section 142(2A) which is from the date the AO appointed the auditor till the last date granted to the Assessee to furnish the audit report. In fact, prior to the amendment by Finance (No. 2) Act of 1996, Clause (iii) of Expln. 1 to Section 153(3) specifies the period of extension of time available for assessment as from the date of direction for auditing issued by the AO till the actual date on which the Assessee furnished the audit report. This was however amended by Finance (No. 2) Act, 1996 by restricting extension of time only upto the date the Assessee was required or granted time to furnish the audit report. In other words, after the amendment, the extended period of limitation will not be available if the Assessee furnishes the audit report beyond the date granted by the officer for furnishing it. There is a controversy as to whether the amended provisions introduced with effect from the Finance (No. 2) Act of 1996 w.e.f. 1st April, 1996 is applicable for the asst. yr. 1995-96 which is the year of assessment involved in this case. However, we do not propose to consider this issue because, going by the meaning we assign to Sections 142(2A) and (2C), we feel the assessment is not time-barred even if the amended provisions are applied for considering the validity of assessment for the year 1995-96. The provisions of Sections 142(2A) and (2C), the scope and meaning of which will decide the issue, are extracted hereunder for easy reference.