Facts of the Case

The appeals were filed by the Revenue challenging a common order passed by the Income Tax Appellate Tribunal (ITAT) dated 30.09.2020 concerning multiple assessment years.

The central issue arose from the extension of time granted for submission of the special audit report under Section 142(2A) of the Income Tax Act. The extension was granted not directly by the Assessing Officer (AO), but by a higher authority (Commissioner of Income Tax), based on recommendations.

The Tribunal ruled in favour of the assessee, leading to the present appeals before the Delhi High Court.

Issues Involved

  1. Whether the Assessing Officer had validly granted extension of time under the proviso to Section 142(2C).
  2. Whether the power to extend time under Section 142(2C) is administrative/procedural and can be exercised by a superior authority.
  3. Whether such extension could be validated under Section 292B as being in substance compliant with the Act.

Petitioner’s (Revenue) Arguments

  • The Revenue contended that the extension granted for submission of the audit report was valid and in accordance with the provisions of the Act.
  • It was argued that even if there were procedural irregularities, the same would be cured under Section 292B of the Act.
  • The Revenue also suggested that the power of extension could be treated as administrative in nature, thereby allowing intervention by higher authorities.

Respondent’s (Assessee) Arguments

  • The assessee argued that the statutory power to extend time is specifically vested in the Assessing Officer and cannot be exercised by any other authority.
  • It was contended that such power is not administrative but part of the assessment process involving civil consequences.
  • Therefore, any extension granted by the Commissioner instead of the Assessing Officer is invalid in law.

Court’s Findings / Order

  • The power to extend time under Section 142(2C) is vested exclusively in the Assessing Officer.
  • Such power is non-delegable, and cannot be exercised by the Commissioner of Income Tax.
  • The act of granting extension is part of assessment proceedings and entails civil consequences; hence, it is not merely administrative.
  • The Assessing Officer cannot abdicate his statutory function by merely recommending extension to a superior authority.
  • Section 292B cannot cure a fundamental defect arising from lack of jurisdiction.

Important Clarifications

  • Non-delegation Principle: Statutory discretion vested in a specific authority must be exercised only by that authority.
  • Nature of Power: Extension of time under Section 142(2C) is not administrative; it is part of judicial/assessment process.
  • Civil Consequences: Appointment of special auditor under Section 142(2A) affects rights of the assessee, making compliance with legal procedure mandatory.
  • Section 292B Limitation: Procedural defects can be cured, but jurisdictional errors cannot be validated.

Sections Involved

  • Section 142(2A): Special audit
  • Section 142(2C): Time limit for submission of audit report (including extension)
  • Section 292B: Return, etc., not to be invalid on technical grounds

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS11122023ITA4552022_182209.pdf

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