The Commissioner of Income Tax, New Delhi vs Ram Kishan Dass

1.2 The proviso was intended to deal with a situation where an assessee, for valid reasons, may not be able to furnish the audit report within the period that was fixed by the assessing officer. The enactment of the proviso was necessary to give a remedy to an assessee who, for genuine reasons, is unable to comply with the direction issued in the first instance by the assessing officer. Hence, the proviso stipulates that for good and sufficient reason, the assessing officer may extend time on an application submitted by the assessee. The “good and sufficient reason” requirement is intended to ensure that an extension of time cannot be demanded by the assessee as a matter of right. Indeed, the use of the expression ‘may’ indicates that whether or not time should be extended is discretionary. [Para 17] [38-G-H; 39-A-B]

1.3 In determining whether the power to extend time vests in the assessing officer in a situation where the assessee has not made an application for extension, it is well to remember that under the substantive part of sub-section (2C), the assessing officer can fix time for the submission of the audit report. Subject to an overall limit of 180 days, the assessing officer is fully clothed with the authority to determine the time within which the audit report should be submitted. For instance, the assessing officer may in a given case consider the grant of 90 days as adequate for the completion of the exercise. Though the assessing officer has the power, in the first instance, to fix an even longer period subject to the overall ceiling of time, she may fix a particular period within the limit. To then postulate that while the assessing officer could in the first instance have fixed a longer time limit but, having fixed a limit of time, is precluded from extending time thereafter would be an absurd course of interpretation. The assessing officer while fixing time in the first instance will do so on an estimate of the reasonable time which is likely to be taken in completing the exercise and submitting an audit report. The exigencies of the situation may however require an extension of time for genuine reasons or, as the statute calls it, “for any good and sufficient reason”. [Para 18] [39-B-E]

1.4 The proviso to sub-section (2C) creates a remedy for an assessee to apply for extension where, for a good and sufficient reason, the audit report could not be submitted. Otherwise, the assessee may face a penalty under Section 271 apart from being subjected to a best judgment assessment under Section 144. By extending time at the behest of the assessee, the assessing officer allows the original order calling for an audit report to be duly implemented. The creation of a remedy under the proviso in favour of the assessee cannot be construed to detract from the authority which vests in the assessing officer, who has specified the time limit for the submission of an audit report in the first instance, to extend time without an application by the assessee. To hold otherwise, and to construe the proviso to sub-section (2C) as foreclosing the authority of the assessing officer to extend time without a request by the assessee, would lead to an absurd consequence. The assessee would then be in control of whether or not to seek an extension of time, where the audit report has not been finalized. Even if the auditor, for genuine reasons (not bearing on the default of the assessee), was unable to comply with the time schedule, having regard to the nature or complexity of the accounts, the assessee would then have a sole and unrestricted power to determine whether an extension should be sought. Not seeking an extension would in effect defeat the underlying purpose and object of directing the assessee to obtain a report of an auditor under sub-section (2A). The legislature could not have intended this consequence. An interpretation which would defeat the purpose underlying sub-section (2A) must be avoided. The assessing officer who has fixed the time in the first instance must necessarily, as an incident of the authority to fix time, be entitled to extend time without an application by the assessee. While extending time, the assessing officer will be subject to the overall ceiling of time fixed under the proviso to sub section 2C. Secondly, the alternate construction of the proviso is that the expression “and for any good and sufficient reason” should be read to mean “or for any good and sufficient reason”, as a matter of statutory interpretation. [Para 19, 20] [39-F-H; 40-A-E]

1.5 The Notes on Clauses as well as the Memorandum to the Finance Act do not indicate a contrary hypothesis. The reason for the introduction of the amendment arose because of the element of ambiguity inherent in the erstwhile position as it stood before 1 April 2008. The ambiguity was precisely on the question as to whether the assessing officer was precluded from granting an extension of time of his own accord merely because the assessee was permitted to apply for an extension. Since the purpose of the amendment was to remove this ambiguity, by the Finance Act, Parliament essentially clarified the position as it existed prior to the amendment. Moreover, there exists a presumption of retrospective application in regard to amendments which are of a procedural nature. [Para 22, 23] [42-D-G] Interpretation of Statutes by Maxwell 11 th Edn, Sweet and Maxwell (1962) p 217 - referred to.

1.6 It cannot be said that to adopt an interpretation which is placed on the provisions of Section 142(2C) would enable the assessing officer to extend the period of limitation for making an assessment under Section 153B. Explanation (iii) as it stood at the material time, provided for the exclusion of the period commencing from the date on which the assessing officer had directed the assessee to get his accounts audited under sub-section (2A) and ending on the day on which the assesee is required to furnish a report under that sub-section. The day on which the assessee is required to furnish a report of the audit under sub-section (2A) marks the culmination of the period of exclusion for the purpose of limitation. Where the assessing officer had extended the time, the period, commencing from the date on which the audit was ordered and ending with the date on which the assessee is required to furnish a report, would be excluded in computing the period of limitation for framing the assessment u/s.153B. The principle governing the exclusion of time remains the same. The act on which the exclusion culminates is the date which the assessing officer fixes originally, or on extension for submission of the report. [Para 24] [43-F-H; 44-A-B]

1.7 The issue as to whether the amendment which has been brought about by the legislature is intended to be clarificatory or to remove an ambiguity in the law must depend upon the context. The Court would have due regard to the general scope and purview of the statute; the remedy sought to be applied; the former state of the law; and what power that the legislature contemplated. Interpretation is a matter of determining the path on the basis of statutory context and legislative history. [Para 25] [44-B-C, E]

1.8 The provisions of Section 142(2C), as they stood prior to the amendment which was enacted with effect from 1.04.2008 by the Finance Act, 2008 did not preclude the exercise of jurisdiction and authority by the assessing officer to extend time for the submission of the audit report directed under sub-section (2A), without an application by the assessee. The amendment was intended to remove an ambiguity and is clarificatory in nature. [Para 26] [44-G; 45-A-B]

Zile Singh v State of Haryana (2004) 8 SCC 1 : [2004]

5 Suppl. SCR 272 ; Sedco Forex International Drill Inc.v Commissioner of Income Tax [2005] 279 ITR 310 (SC) ; (2005) 12 SCC 717 : [2005] 5 Suppl. SCR 302 – relied on.

Jagatjit Sugar Mills Co Ltd v Commissioner of Income Tax (1994) 74 Taxman 8 (Pun.&Har.): [1994] 210 ITR 468; Commissioner of Income Tax, Cochin v Popular Automobiles (2011) 333 ITR 308; Ghaziabad

Development Authority v Commissioner of Income Tax, Ghaziabad (UP) (2011) 12 Taxman.com 334

(Allahabad): 2011 SCC On Line All 1151 – approved. Commissioner of Income Tax v Bishan Swaroop Ram Kishan Agro Pvt. Ltd. [2011] 203 Taxman 326 (Delhi) : 2011 SCC Online Del 2463 – disapproved.

Sahara India (Firm), Lucknow v Commissioner of Income Tax, Central-I (2008) 14 SCC 151 : [2008] 6 SCR 427 ; Ishwar Singh Bindra v State of UP [1969] 1 SCR 219 ; Commissioner of Income Tax-1, Ahmedabad v Gold Coin Health Food Pvt Ltd 2008 (9) SCC 622: [2008] 12 SCR 179 ; Commissioner of Income Tax (Central-I) v Vatika Township (P) Ltd. [2014] 31 ITR

466 (SC) ; 2015 1 SCC 1 : [2014] 12 SCR 1037 – referred to.

Principles of Statutory Interpretation 11th Edn (2008) – referred to.