Facts of the Case

The appeals were filed by the Revenue before the Delhi High Court challenging a common order dated 30.09.2020 passed by the Income Tax Appellate Tribunal concerning Assessment Years 2004–05 to 2008–09.

The core issue arose from assessment proceedings where a special audit under Section 142(2A) of the Income Tax Act, 1961 was directed. Subsequently, the time for submission of the audit report was extended, allegedly not by the Assessing Officer (AO), but by a higher authority.

The Tribunal ruled in favour of the assessee. Aggrieved, the Revenue preferred appeals before the High Court.

Issues Involved

  1. Whether the Assessing Officer granted extension of time under the proviso to Section 142(2C) of the Income Tax Act.
  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, even if irregular, can be validated under Section 292B of the Income Tax Act.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the extension of time for submission of the audit report was valid.
  • It was argued that the power under Section 142(2C) is procedural/administrative in nature.
  • Therefore, such power could be exercised by a superior authority like the Commissioner of Income Tax.
  • Alternatively, even if there was any procedural defect, the same should be cured under Section 292B, as the action was in substance aligned with the intent of the Act.

Respondent’s Arguments (Assessee)

  • The assessee argued that the statutory power to extend time is specifically vested in the Assessing Officer.
  • Such power is discretionary and non-delegable.
  • The extension granted by any authority other than the AO is invalid.
  • The process of special audit under Section 142(2A) has civil consequences and is not merely administrative.
  • Therefore, strict compliance with statutory provisions is mandatory.

Court’s Findings / Order

  • The discretionary power to extend time under Section 142(2C) is vested solely in the Assessing Officer.
  • Such power cannot be exercised by any superior authority, including the Commissioner of Income Tax.
  • The Assessing Officer cannot abdicate his statutory function by merely recommending extension to another authority.
  • The power is not administrative in nature, as it entails civil consequences for the assessee.
  • Section 292B cannot cure a fundamental jurisdictional defect.

Accordingly, all questions of law were answered against the Revenue and in favour of the assessee, and the appeals were disposed of.

Important Clarification by the Court

  • The Court clarified that:
    • Powers involving discretion must be exercised only by the authority in whom the statute vests such power.
    • Even administrative convenience cannot justify delegation of non-delegable statutory powers.
    • Special audit directions under Section 142(2A) involve civil consequences, thereby requiring adherence to principles of natural justice.
    • The distinction between administrative and quasi-judicial functions diminishes when civil consequences arise.

Sections Involved

  • Section 142(2A) – Special Audit
  • Section 142(2C) – Extension of time for audit report
  • Section 292B – Return of income, etc., not to be invalid on technical grounds

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

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.