Assessing Officer can suo moto extend time period for special audit retrospectively: SC

Surabhi Mumbai | Updated on March 29, 2019

The Supreme Court has held that the Assessing Officer can suo moto extend the time period for a special audit retrospectively, even before the amendment in the Finance Act of 2008.

The judgment, which lays to rest a long controversy, relates to Section 142 (2C) of the Income Tax Act, which deals with special audit and empowers the AO to direct the assessee to get the accounts audited by an accountant in some cases due to complexity and to protect the department’s interests. The amendment empowers the AO to extend the deadline for the audit report either suo moto or on an application from the assessee but within a-180 day period from the direction of the special audit.

“We have come to the conclusion that the provisions of Section 142(2C) ..., as they stood prior to the amendment which was enacted with effect from April 1, 2008 by the Finance Act, 2008 did not preclude the exercise of jurisdiction and authority by the AO to extend time for the submission of the audit report directed under subsection (2A), without an application by the assessee,” held the Supreme Court in a recent judgment, adding that the amendment was intended to remove an ambiguity and is clarificatory in nature.

Dismissing a batch of appeals by assessees who had contended that the AO had no jurisdiction or authority under Section 142 (2C) before April 1, 2008, to extend time for the submission of the audit report without an application, the Supreme Court overruled the judgment of a Division Bench of the Delhi High Court in Commissioner of Income Tax against Bishan Swaroop Ram Kishan Agro of May 2011.

Tax experts said the move ends the almost decade long controversy over the issue and provides much more clarity and favours the stand of the Income Tax Department.

Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP, said, “The Supreme Court has clarified that the amendment made in the Finance Act 2008 in proviso to Section 142(2C) on the power of AO to grant extension of time to submit the audit report suo moto, when the application has not been submitted by the assessee is clarificatory in nature and has retrospective application. This decision has put this controversy to rest now. The earlier Delhi High Court decision on this subject wherein the power has to be held to be prospective has been reversed.”

Published on March 29, 2019

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