Facts of the Case

The present appeals were filed by the Revenue challenging a common order dated 30.09.2020 passed by the Income Tax Appellate Tribunal (ITAT) concerning Assessment Years 2004-05 to 2008-09.

The core issue arose from the extension of time granted for submission of a special audit report under Section 142(2A) of the Income Tax Act, 1961. The extension was not granted directly by the Assessing Officer (AO), but by a superior authority (Commissioner of Income Tax), based on recommendations made by the AO.

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

Issues Involved

  1. Whether the Assessing Officer validly 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 action can be validated under Section 292B as being in substance compliant with the Act?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the extension of time for submission of the audit report was validly granted.
  • It argued that such extension is procedural/administrative in nature and hence can be exercised by a superior authority like the Commissioner.
  • Alternatively, it was argued that even if there was a defect, Section 292B cures such irregularities since the intent of the Act was fulfilled.

Respondent’s Arguments (Assessee)

  • The assessee argued that the power to extend time under Section 142(2C) is specifically vested in the Assessing Officer and cannot be delegated.
  • It was emphasized that the extension granted by the Commissioner was without jurisdiction and therefore invalid.
  • The assessee further contended that the process of special audit has civil consequences and is not merely administrative. 

Court’s Findings / Order

The Court held that the power to extend time under Section 142(2C) is vested exclusively in the Assessing Officer and cannot be exercised by any other authority.

  • Nature of Power:
    The power is not administrative but has civil consequences, and therefore must be exercised strictly in accordance with statutory provisions.
  • Invalid Extension:
    The Commissioner had no authority to extend the time, even if acting on the AO’s recommendation.
  • Section 292B Not Applicable:
    The defect was not a mere procedural irregularity but a jurisdictional error, hence not curable under Section 292B.
  • Final Decision:
    All questions of law were answered against the Revenue and in favour of the Assessee.

Important Clarifications

  • The decision reinforces that statutory discretion must be exercised only by the authority explicitly empowered under the Act.
  • Even administrative convenience cannot justify delegation where the statute does not permit it.
  • The Court emphasized that special audit under Section 142(2A) has civil consequences, thereby requiring strict compliance with legal procedure.
  • The distinction between administrative and quasi-judicial functions becomes irrelevant when civil consequences arise.

Sections Involved

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

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

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