* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WRIT PETITION (CIVIL) NO. 2974/2013
Reserved on : 6th November, 2017
Date of decision : 6th March, 2018
NOKIA INDIA PRIVATE LIMITED ..... Petitioner
Through Mr. Arvind Datar, Sr. Advocate with Mr.
Vikas Srivastava, Mr. Jatinder Pal Singh, Mr.
Sumit Mangal & Ms. Kanika Jain, Advocates.
Versus
ADDITIONAL COMMISSIONER OF INCOME TAX AND
ANOTHER ..... Respondents
Through Mr. N.P. Sahani & Mr. Rahul Chaudhary,
Sr. Standing Counsel.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MS. JUSTICE PRATHIBA M. SINGH
SANJIV KHANNA, J.:
Nokia India Private Limited has filed the afore-stated writ petition
praying for multifarious reliefs, albeit during the course of arguments
primarily one contention was raised and argued; assessment proceedings for
the Assessment Year 2009-10 have abated as time barred.
2. The petitioner is a company incorporated under the Companies Act,
1956 and engaged in manufacture and sale of telecommunication handsets.
3. For the Assessment Year 2009-10, the petitioner filed its return on
30th September, 2009, declaring total income of Rs.826.92 crores. The
W.P. (C) No. 2974-2013 Page 1 of 29
return was selected for scrutiny and notice dated 9th September, 2010 under
Section 143(2) of the Income Tax Act,1961 (,,Act, for short) was issued.
4. As per the petitioner, assessment proceedings had remained dormant
for nearly twenty eight months till notice dated 17th January, 2013 was
issued. Petitioner was required to produce books of accounts for the first
time on 28th February, 2013, barely a month before the expiry of time limit
for passing the assessment order on 31st March, 2013. Petitioner submits that
books of accounts and vouchers were voluminous (described as truck loads),
and accordingly, the Assessing Officer had asked the petitioner to furnish
books of account in a manner they could be easily examined. On 8th March,
2013, books were submitted in Systems Applications and Products (SAP)
format. Trial balance in soft and hard copies was also provided. Petitioner's
request to specify ledger accounts required to be produced was rejected by
the Assessing Officer with the direction to produce all accounts by 11th
March, 2013. Petitioner on 11th March, 2013 had submitted a soft copy of
the books of accounts in Excel sheet format, including trial balance and
more than 600 pages of general ledger accounts etc. In the proceedings held
on 14th March, 2013 numerous queries were raised and answered by the
petitioner.
5. On 21st March, 2013, ten days before expiry of time for completing
assessment, the Assessing Officer issued notice under Section 142(2A) of
the Act to show cause as to why accounts for the Assessment Year 2009-10
should not be audited by a special auditor. Notice was served on the
petitioner vide fax on Friday, 22nd March, 2013 at 12.41 p.m. and the
petitioner was required to submit its reply/objections by 12.30 p.m. on 25th
March, 2013. The petitioner protested, vide submissions on 25th March,
W.P. (C) No. 2974-2013 Page 2 of 29
2013, asserting that there was neither a failure to submit details nor incorrect
details were furnished. It was highlighted and stressed that adequate time
and opportunity had not been given to respond to the show cause notice.
6. The petitioner asserts that at 6 p.m. on 26th March, 2013, opportunity
notice was received by fax from the office of the Commissioner of Income
Tax, Delhi-V, the second respondent, on the proposal given by the
Assessing Officer for initiation of special audit. The petitioner was required
to respond by 11.30 a.m. on 28th March, 2013. The petitioner has alleged
that only five pages of the draft/proposed order of the Assessing Officer
were served on 26th March, 2013. Draft order of twenty two pages was
served on 28th March, 2013 at 10 a.m. By letter dated 28th March, 2013, the
petitioner informed the second respondent that due to paucity of time it was
not possible to submit detailed objections. Request for extension of time by
3 to 5 working days was made. The second respondent had thereupon
granted time to the petitioner to submit their response by 11 a.m. on 30th
March, 2013.
7. The petitioner, vide their letter dated 29th March, 2013, had reiterated
that due to paucity of time it was not possible to file a detailed reply to the
draft order. However, preliminary objections were raised against initiation
of special audit proceedings.
8. As per the respondents, notices under Section 142(1)/143(2) were
issued. Reference was made to the order sheets dated 21st December, 2012
and 4th January, 2013. Subsequently, after damaging and incriminating
material establishing tax evasion had come to light in the survey operations,
detailed questionnaire was issued on 17th January, 2013. Despite
opportunities, part details and only a few ledger accounts were furnished and
W.P. (C) No. 2974-2013 Page 3 of 29
full compliance was never made. Soft copy of the books of accounts
furnished in SAP format could not be accessed by using an accounting
software and had to be converted, and hence cannot be termed as production
of books of accounts. Authorized representatives of the petitioner had
expressed their inability to explain accounts in entirety and reconcile the
details furnished with the accounts. Given the said facts, the Assessing
Officer had drawn the proposal for special audit.
9. On the aspect of opportunity, the respondents assert that the petitioner
was deliberately marking time, knowing that the last date for passing of the
assessment order was 31st March, 2013. Commissioner of Income Tax,
Delhi-V, though not mandated as per the provisions of the Act, had issued
opportunity notice to the petitioner to attend and explain vide letter dated
26th March, 2013. An attempt to serve the opportunity letter on the
authorized representative was made on 26th March, 2013 itself. However
service was refused on the ground that this was against the policy of the
Chartered Accountant firm. At 11.45 a.m. on 28th March, 2013, authorized
representative had appeared and confirmed having received the entire/full
copy of the draft order. Earlier on 26th March, 2013, a portion of the draft
order was furnished. Opportunity was granted to the petitioner to present
their case at 5 p.m. on 28th March, 2013 and again at 11 a.m. on 30th March,
2013 (30th March, 2013 and 31st March, 2013, though Saturday and Sunday,
in terms of the directions issued by the Central Board of Direct Taxes, all
income tax offices had remained open). On 30th March, 2013,
Commissioner of Income Tax, Delhi-V made repeated attempts to contact
two representatives of the Chartered Accountant firm appearing for the
petitioner, but they did not pick up their phones. Ultimately, partner of the
W.P. (C) No. 2974-2013 Page 4 of 29
firm was contacted and informed about the attempts made. Commissioner
of Income Tax, Delhi-V had also contacted the Advocate representing the
petitioner and informed that response was awaited. Thus, adequate and fair
opportunity was given, but the petitioner had acted with malevolent intent.
10. The respondents state that Commissioner of Income Tax, Delhi-V
after duly applying his mind on 30th March, 2013 had accorded approval to
the draft order along with the Terms of Reference for special audit.
Approval was dispatched to the office of the Assessing Officer after being
recorded in the dispatch register at serial No. 3712 and received in the office
of the Assessing Officer vide serial No.2681 in the receipt register. Copy of
the dispatch register and receipt register has been enclosed with the counter
affidavit. On the same day, i.e., 30th March, 2013, the Assessing Officer
passed the order under section 142(2A) of the Act. M/s T.R. Chadha and
Company was appointed as the Special Auditor to conduct audit.
11. As per the respondents, the order under Section 142(2A) dated 30 th
March, 2013 and the Terms of Reference were sent by speed post vide
receipt Nos. ED867855480IN, ED867855493IN and ED867855578IN
dated 31st March, 2013 between 1815 to 1819 hours to Price Water House
Cooper, DLF, Gurgaon; Nokia India, Greater Kailash, Delhi and Nokia
India, Gurgaon, respectively. The said order was transmitted twice by fax
on 31st March, 2013. Thirdly, service was affected at the office of the
petitioner company at industrial plot No. 243, Udyog Vihar, Phase-I,
Dundahera, Gurgaon through Atul Kumar and Sandip Dhanuka, Tax
Assistants, who submitted service report dated 31 st March, 2013, affirming
having been deputed to serve the order under Section 142(2A) of the Act for
the Assessment Year 2009-10. As per the said report, two persons, who
W.P. (C) No. 2974-2013 Page 5 of 29
were present at the reception of the said office, had initially refused to
accept the letter, but after talking to the senior officers on phone, they had
accepted the letter at 5.45 P.M.
12. The petitioners, however, vehemently deny having received the order
under Section 142(2A) of the Act by any of the aforesaid modes on or
before 31st March, 2013. It is stated that only 5 pages, i.e. covering letter of
two pages and Terms of Reference of three pages, were sent by two fax
messages on 30th March, 2013, and not the entire order of 22 pages under
Section 142(2A) of the Act. Reliance is placed on two fax message
confirmation reports submitted by the respondents, indicating that five pages
were transmitted. Similarly, postal receipt Nos. ED867855480IN and
ED867855493IN mention the weight of the envelopes as 20 grams and the
fee charged as Rs.17/-, which was payable for packets up to 50 grams.
Order under Section 142(2A) of 22 pages would have weighed much more
and was not enclosed in the said envelopes. Moreover, as the envelopes
were handed over to the postal authorities on 31 st March, 2013, it should be
reasonable to hold that service was affected on or after 1st April, 2013. The
Tax Assistants, as per the petitioner, had served a two page letter dated 30 th
March, 2013 enclosing Terms of Reference at the Gurgaon office of the
petitioner at 1738 hours on 31st March, 2013. Order under Section 142(2A)
was not served. Terms of Reference and order under Section 142(2A) are
distinct and separate and cannot be equated. As per the petitioner, they were
served with the order under Section 142(2A) only on 3rd April, 2013.
13. Petitioner's legal assertion is that the order under Section 142(2A)
should have been physically and actually served or delivered on or before
31st March, 2013. Reference was made to proviso to Section 142(2C)
W.P. (C) No. 2974-2013 Page 6 of 29
asserting that as per the proviso, audit report of the special auditor has to be
submitted within a maximum period of 180 days of the receipt by the
assessee of the direction under Section 142(2A) of the Act. On conjoint
reading of Sections 142(2A) and 142(2C), the date on which the Assessing
Officer directs the assessee to get his accounts audited under Section
142(2A) of the Act used in Clause (iii) of the Explanation 1 of Section 153
have to be interpreted as the date on which the order under Section 142(2C)
was received/served on the assessee. Reliance was placed on State of
Punjab versus Shreyans Industries Ltd., (2016) 4 SCC 769; Kumar
Jagdish Chandra Sinha versus Commissioner of Income Tax, West
Bengal, AIR 1996 SC 1895; State of Punjab versus Khemi Ram, AIR 1970
SC 214; K. Joseph Jacob versus Agricultural Income Tax Officer, [1991]
190 ITR 464 (Ker); Qualimax Electronics versus Union of India, (2010) 27
STT 231 (Delhi High Court) and Government Wood Works versus State of
Kerela (1988) 69 STC 62 (Kerela High Court). Service of directions under
Section 142(2A) on the Chartered Accountant or Terms of Reference on the
petitioner was immaterial and inconsequential as the order for special audit
under Section 142(2A) has the effect of extending the period of limitation,
and hence, the order itself should be communicated/delivered to the affected
party on or before expiry of the normal limitation period. Delivery / service
after the limitation period had expired cannot enlarge or extend the period of
the assessment. On expiry of the statutory time limit, valuable right had
accrued to the petitioner as an assessee and the right of the authorities to
make and cause assessment got extinguished. Once the right was
extinguished, it cannot get revived by a subsequent communication. Hence
the assessment proceedings for the Assessment Year 2009-10 have abated.
W.P. (C) No. 2974-2013 Page 7 of 29
Communication of the Terms of Reference cannot be construed as
communication of the order under Section 142(2A). Reliance is placed on
Rajinder Nath versus Commissioner of Income Tax, Delhi, AIR 1979 SC
1933 and Arun Kumar Aggarwal versus State of M.P., AIR 2011 SC 3056.
14. The aforesaid contentions raised by the petitioner raise two distinct
aspects and issues. First, what was the "effective" date of the order under
Section 142(2A) directing special audit for exclusion under Clause (iii) of
Explanation 1 of Section 153 of the Act. In other words, whether the Act
requires and mandates that the order under Section 142(2A), even if passed
earlier, must be served on the assessee on or before the last date for passing
of the assessment order. Intertwined is the question of effect of service of
Terms of Reference within the limitation. Second dispute is factual as it
relates to the date when the order under section 142(2A) of the Act was
actually served.
15. On the factual aspect and controversy, we would accept the
contention of the petitioner that by the two fax messages transmitted on 31st
March, 2013 and by speed post receipts ED867855480IN and
ED867855493IN, the order under Section 142(2A) of 22 pages was not
transmitted or enclosed. However, order under Section 142(2A) of the Act
was enclosed in the post addressed to Nokia India, Gurgaon sent vide postal
receipt ED86785578IN on 31st March, 2013 at 1819 hours, weighing 60
grams.
16. On the question of service affected by hand through Tax Assistants
at the office of the petitioner at Dundahera, Gurgaon, there are conflicting
and opposing assertions whether the order under Section 142(2A) of the Act
was enclosed and served. We are inclined to accept, though with some
W.P. (C) No. 2974-2013 Page 8 of 29
reservation, that the Tax Assistants had served the order under Section
142(2A) of the Act. We would record our reasons. Guards had signed the
first page of the covering letter dated 30th March, 2013, the subject of which
reads - "Forwarding of Terms of Reference to special audit under Section
142(2A) of the Income Tax Act, 1961 for AY 2009-10-Reg". Petitioner
relies on the subject and submits that the order under Section 142(2A) of the
Act was not enclosed as this was not mentioned in the subject. However,
the first paragraph of the said letter records that the Assessing Officer was
forwarding therewith the directions to special audit under Section 142(2A)
for the assessment year 2009-10 as approved by the CIT, New Delhi-V. The
directions were enclosed as Annexure to the letter. The subject or heading of
the said letter dated 30th March, 2013 is not to be read in isolation and has to
be read with the contents, which refer to the order passed under Section
142(2A) of the Act. The report submitted by the two Tax Assistants dated
31st March, 2013 records that they had visited the office of the petitioner at
Dundahera in Gurgaon "to serve the order under Section 142(2A) of the IT
Act, 1961 for AY 2009-10". There is evidence in the form of postal receipts
ED867855578IN addressed to the petitioners Gurgaon office posted on 31st
March, 2013, weighing 60 grams. Thus, the Assessing Officer was aware
and conscious that the order under Section 142(2A) of the Act had to be
communicated and served on the petitioner. The petitioner also accepts that
on 1st April, 2013, the Special Auditor had visited the premises of the
petitioner and an employee of the petitioner had made a noting that the
petitioner company was aware of the appointment of the Special Auditor and
they would like to explore legal options and respond within seven days.
Reference was to the service affected on 31st March, 2013. Petitioner in the
W.P. (C) No. 2974-2013 Page 9 of 29
written replies dated 6th April, 2013 and 10th April, 2013, had not stated or
claimed that the order under section 142(2A) of the Act was not
communicated/served on them within the limitation period. No such
assertion was made by the petitioner in Writ Petition (C) No. 2798/2013,
which was withdrawn with liberty to file another Writ raising new
contentions. Petitioner does claim that they did not earlier understand and
appreciate the legal implications or effect of failure to serve the order under
Section 142(2A) of the Act. This assertion may be plausible and in light of
the contentions raised, we have examined the legal position whether the
assessment proceedings had abated. In view of legal findings recorded
below, our factual finding on the date of service would be somewhat
insignificant and superfluous.
17. We would, however, completely reject the argument of the petitioner
that the Assessing Officer had not received the approval from the office of
the Commissioner of Income Tax, Delhi-V on 30th March, 2013. The
contention of the petitioner with regard to interpolation and over-writing of
the date in the receipt register is far-fetched and has to be rejected. The
receipt register records receipt of several communications and letters
received by the Assessing Officer. Petitioner unequivocally accepts service
of Terms of Reference for special audit on 31st March, 2013 with the
covering letter dated 30th March, 2013. Fax of five pages on two occasions
consisting of the covering letter and Terms of Reference is also accepted.
18. Two more aspects are highlighted and can be dealt with immediately.
Affidavit of Mr. Vikram Gera, Senior Vice-President, M/s T.R. Chadha and
Company, though sworn and dated 5th May, 2013, was on the stamp paper
purchased on 7th May, 2013 at 1.44 p.m. Secondly, the Assessing Officer
W.P. (C) No. 2974-2013 Page 10 of 29
has interpolated the letter dated 2nd April, 2013 available in the assessment
records and added words "I am also enclosing a copy of the draft order for
special audit under Section 142(2A) of the Income Tax Act, 1961, as
approved by the Commissioner of Income Tax, Delhi-V, again". These
words were missing in the letter dated 2nd April, 2013 sent by fax by the
Assessing Officer to the petitioner.
19. It is correct that the affidavit of Mr. Vikram Gera, Senior Vice-
President of M/s T.R. Chadha and Company was dated and verified on 5 th
May, 2013, but it is printed on the stamp paper purchased on 7th May, 2013.
Explanation of the respondents is that the affidavit was typed earlier and
subsequently printed on the stamp paper. The stand of the respondents
appears plausible and apparently was a mistake. The respondents should
have been careful and corrected the date. This would not be a ground to
reject the affidavit of Mr. Vikram Gera as false and untrue.
20. The second lapse made by the respondent is more serious. It relates to
interpolation or rather additions made to the letter dated 2nd April, 2013.
This letter, on official records and also enclosed as Annexure A-9 to the
Writ petition, has the words "I am enclosing a copy of the draft order for
special audit under Section 142(2A) of the Income Tax Act, 1961, as
approved by the Commissioner of Income Tax, Delhi-5, again", which are
missing in the copy filed by the petitioner as Annexure B-8 with the
rejoinder affidavit. It is obvious that there are two separate letters of the
Assessing Officer, both bearing the date 2nd April, 2013, but with material
and significant addition of words in one which is the copy available on
official records. This is objectionable. Any such fault by an assessee would
have resulted in severe reprimand, if not penal action. As per the petitioner,
W.P. (C) No. 2974-2013 Page 11 of 29
addition was made subsequently when issue of non service of order under
Section 142(2A) was raised with plea of abatement. Noticeably, letter dated
2nd April, 2013 written by the Assessing Officer to the petitioner has not
been placed on record by the respondents along with their affidavit.
21. What is equally disturbing and a matter of concern is that the direction
for special audit, which has the effect of extension of time for completion of
the assessment proceedings, was initiated about ten days before the last date
for passing of the assessment order vide show cause notice dated 21st
March, 2013. The order for special audit under Section 142(2A) was passed
on 30th March, 2013, whereas the time for passing of the assessment order
was to expire on 31st March, 2013. Directions for special audit when issued
just before the limitation period, invariably supports and impels accusations
and doubts whether the direction was a mere ruse for extension of time. In
the facts of the present case, the petitioner asserts that the Commissioner had
no option and was bound to accord approval for special audit, for the
Assessing Officer could not have passed the assessment order on or before
31st March, 2013, given the issues involved and the details which had to be
examined and adjudicated. Proposal for special audit was initiated right at
the end, about 10 days before the limitation period for passing of the
assessment order was to expire. This is an aspect for the respondents to
introspect.
22. On the issue of reasonable or sufficient opportunity, the question
cannot be answered by applying a strait-jacket test and would depend upon
factual situation of each case. The yard-stick to judge any grievance
whether reasonable opportunity was afforded or denied would be primarily a
question of fact. If the view taken by the authority on opportunity is a
W.P. (C) No. 2974-2013 Page 12 of 29
reasonable one, a Writ Court would decline striking down the order on the
precept that greater latitude or more time would have been appropriate. The
authority or tribunal conducting the proceedings been in sessio is the master,
and has the authority to control the proceedings. They are entitled to fix
dates, grant time and opportunity in the facts of a case and totality of the
circumstances, while drawing inference from conduct of the party. Unless a
wrong, denial of justice and prejudice caused is perceptible, Writ Court
would not accept such pleas. [See, Jagjit Singh versus State of Haryana,
(2006) 11 SCC 1, Paras. 14 to 20].
23. Having examined the facts including the observation above, we are
not inclined to accept the submission of lack and absence of fair, adequate
and reasonable opportunity, though there was delay and the proposal for
special audit was initiated about 10 days before the limitation period for
passing of the order. The petitioner had the opportunity to reply and make
oral submissions. Notwithstanding the time constraint, the petitioner could
have responded and made written and oral submission, whether or not there
were holidays or weekends. The petitioner was conscious and aware of the
tight time schedule, and had made it difficult and did try to obstruct. To this
extent the petitioner is also to be blamed. Having considered the contents of
the order sheets, queries raised and issues relating to accounts, which have
been fairly elaborately explained and elucidated in the order and counter
affidavit, we are satisfied that a case for special audit was made out. To be
fair to the respondents, we deem it appropriate to record that the petitioner
did not in the oral arguments before us specifically question and challenge
the order under Section 142(2A) on merits, though plea in this regard is
somewhat raised in the written submissions.
W.P. (C) No. 2974-2013 Page 13 of 29
24. We will now examine the legal position and answer whether the
assessment proceedings would have abated if the order under Section
142(2A) was passed on 30th March, 2013 and was received or served on or
after 1st April, 2013. To decide this controversy, we must reproduce Sections
142(2A), 142(2C) and clause (iii) of Explanation to Section 153 of the Act
and they read:-
"Section 142(2A) of the Act
"142 (2A) If, at any stage of the proceedings before him,
the Assessing Officer, having regard to the nature and
complexity of the accounts, volume of the accounts,
doubts about the correctness of the accounts, multiplicity
of transactions in the accounts or specialized nature of
business activity of the assessee, and the interest of the
revenue, is of the opinion that it is necessary so to do, he
may, with the previous approval of the Chief
Commissioner or Commissioner, direct the assessee to
get the accounts audited by an accountant, as defined in
the Explanation below sub-section (2) of Section 288,
nominated by the Chief Commissioner or Commissioner
in this behalf and to furnish a report of such audit in the
prescribed form duly signed and verified by such
accountant and setting forth such particulars as may be
prescribed and such other particulars as the Assessing
Officer may require:
Provided that the Assessing Officer shall not direct the
assessee to get the accounts so audited unless the
assessee has been given a reasonable opportunity of
being heard.
XXX
W.P. (C) No. 2974-2013 Page 14 of 29
Section 142(2C) of the Act
"(2C) Every report under sub-section (2A) shall be
furnished by the assessee to the Assessing Officer within
such period as may be specified by the Assessing
Officer:
Provided that the Assessing Officer may suo motu, or on
an application made in this behalf by the assessee and for
any good and sufficient reason, extend the said period by
such further period or periods as he thinks fit; so,
however, that the aggregate of the period originally fixed
and the period or periods so extended shall not, in any
case, exceed one hundred and eighty days from the date
on which the direction under sub-section (2A) is
received by the assessee."
XXX
Clause (iii) to Explanation 1 to Section 153 of the Act
"(iii) the period commencing from the date on which
the Assessing Officer directs the assessee to get his
accounts audited under sub-section (2A) of Section 142
and
(a) ending with the last date on which the assessee is
required to furnish a report of such audit under that sub-
section; or
(b) Where such direction is challenged before a court,
ending with the date on which the order setting aside
such direction is received by the Commissioner, or"
W.P. (C) No. 2974-2013 Page 15 of 29
25. As noticed above, in the present case limitation period for passing of
the assessment order was to end on 31st March, 2013. Clause (iii) to
Explanation 1 to Section 153 states that the period commencing from the
date the Assessing Officer directs the assessee to get his accounts audited
under sub-section (2A) of Section 142, ending with the last date on which
the assessee is required to furnish a report of the special audit; or when such
directions are successfully challenged in the Court the date on which the
order setting aside such direction is received by the Commissioner, would be
excluded. In other words, in case we uphold the order of special audit, the
time period from the date when the order was passed on 30 th March, 2013
till the special audit is completed and report is submitted, would be
excluded. Sub-section (2C) to Section 142 states that report will be
furnished by the assessee to the Assessing Officer within such period as may
be specified by the Assessing Officer. The proviso states that the Assessing
Officer on his own or on an application by the assessee, and for good and
sufficient reason, can extend the period for special audit for further period or
periods, but the aggregate of such periods cannot exceed 180 days from the
date on which direction "under sub-section (2A) is received by the
assessee".
26. The petitioner had emphasised on the aforesaid words "direction
under sub-section (2A) is received by the assessee". It was accordingly
submitted that receipt of the order under Section 142(2A) by the assessee
was mandatory and a must for an effective and valid order under section
142(2A) of the Act. The date of passing of the order, therefore, was not of
consequence but date of communication and service on the assessee as a
W.P. (C) No. 2974-2013 Page 16 of 29
corollary was of consequence. We have already note the argument raised by
the petitioner in some detail earlier. Elaborating, reference was made to
Section 142(2A) of the Act asserting that the Section does not use the words
"make" or "made" or even the word "issue". Thus, mere passing of an order
under Section 142(2A) was irrelevant and the exclusion under clause (iii) to
Explanation 1 of Section 153 would only be applicable if the order was
served on the assessee within the period of limitation for passing of the
assessment order.
27. For the reasons elucidated, we do not find any merit in the said
contention raised and the interpretation placed by the petitioner. Section
142(2A) of the Act empowers the Assessing Officer to pass an order
directing special audit. Clause (iii) to Explanation 1 to Section 153 refers to
the period commencing from the date when the Assessing Officer directs the
assessee to get his accounts audited under sub-section (2A) to Section 142
ending with the date on which the assessee is required to furnish report of
such audit, and states that this period is to be excluded. The starting point is
the date on which the Assessing Officer directs the assessee to get his
accounts audited and not the date on which the said order is received by the
assessee. The period of exclusion under clause (iii) to Explanation 1 of
Section 153 ends on the last date on which the assessee is required to furnish
his report of special audit. This is the end point and not the beginning.
28. Proviso to sub-section (2C) to Section 142 serves a different purpose
and stipulates the outer time limit within which the special audit must be
completed. It postulates and states that the Assessing Officer cannot grant
extension for a period exceeding 180 days. This period would commence
W.P. (C) No. 2974-2013 Page 17 of 29
not on the date when the order is passed, but from the date on which
direction under sub-section (2A) to Section 142 is received by the assessee.
The reason is obvious. There could be some time gap between the date of
passing of the order for special audit and the date when the order is
communicated to the assessee. Time period stipulated by the Assessing
Officer for completion of special audit would commence only from the date
when the assessee is communicated and receives the order and not the date
of the order. Outer time limit of 180 days specified in the proviso has been
fixed with reference to the date on which direction under sub-section (2A) to
Section 142 is received by the assessee and not from the date of the passing
of the order.
29. We would now refer to the case law dealing with the question of
passing of the order and service of the order and whether non service or
failure to serve the order under Section 142(2A) of the Act within the
limitation period for passing of the order is fatal and would make the order
passed null and void.
30. We begin by referring to the decision relied upon by the petitioner in
Shreyansh Industries (supra) which dealt with interpretation of sub section
10 to section 11 of the Punjab General Sales Tax Act, 1948. Statutory period
of completion of assessment of the dealers who had filed regular returns as
prescribed was 3 years from the last date prescribed for furnishing the
return. Referring to sub section 10 to section 11, Revenue had argued that
the Commissioner could extend the time limit without any upper limit
notwithstanding this period of 3 years subject to the condition of the reasons
being recorded in writing. Stand being that time period was not prescribed
W.P. (C) No. 2974-2013 Page 18 of 29
and fixed to exercise power under Section 11(10) of the said Act. In that
context, it was held that subsection 10 to section 11 would apply when the
assessment had not already become barred by time and not after the
limitation period to pass an order had expired. After 3 years a valuable right
had accrued to the assessee. Reliance placed by the Revenue on Section 148
of the Code of Civil Procedure for enlargement of time when original period
had expired, and on Section 139(2) of the Act, it was held, was
misconceived. This decision has no relevance in the facts of the present
case, as the issue and question under consideration which is to be answered,
is the legal effect of the order under section 142(2A), which would have the
effect of extending time for completion of assessment, when passed within
the limitation period and is served subsequently. The question is whether as
per the provisions of the Act service of the order within the original
limitation period was mandatory requirement under the Act. Legal effect of
passing of the order and its service was not examined and answered in
Shreyansh Industries (supra).
31. Second decision in Kumar Jagdish Chandra Sinha (supra) interprets
Section 153 (1) of the Act. The petitioner relies upon paragraph 15 of the
judgment which refers to the expression 'communication' and states that the
same should be understood as explained in Khemi Ram (supra).
32. Khemi Ram (supra) rather than supporting the petitioner, supports the
case of the respondents that the expression "communication" need not be
interpreted as actual receipt and can be meaningfully understood as dispatch,
i.e., when the order is sent out and goes out of control of the authority. The
W.P. (C) No. 2974-2013 Page 19 of 29
principle being that the authority should not have chance of changing its
mind or modifying the order. It was lucidly explained and held:-
"17. The question then is whether communicating the
order means its actual receipt by the concerned
government servant. The order of suspension in question
was published in the Gazette though that was after the
date when the respondent was to retire. But the point is
whether it was communicated to him before that date.
The ordinary meaning of the word "communicate" is to
impart, confer or transmit information. (Cf. Shorter
Oxford English Dictionary, Vol. 1, p. 352). As already
stated, telegrams, dated July 31, and August 2, 1958,
were despatched to the respondent at the address given
by him where communications by Government should
be despatched. Both the telegrams transmitted or
imparted information to the respondent that he was
suspended from service with effect from August 2, 1958.
It may be that he actually received them in or about the
middle of August 1958, after the date of his retirement.
But how can it be said that the information about his
having been suspended was not imparted or transmitted
to him on July 31 and August 2, 1958 i.e. before August
4, 1958, when he would have retired? It will be seen that
in all the decisions cited before us it was the
communication of the impugned order which was held
to be essential and not its actual receipt by the officer
concerned and such communication was held to be
necessary because till the order is issued and actually
sent out to the person concerned the authority making
such order would be in a position to change its mind and
modify it if it thought fit. But once such an order is sent
out, it goes out of the control of such an authority, and
therefore, there would be no chance whatsoever of its
changing its mind or modifying it. In our view, once an
order is issued and it is sent out to the concerned
government servant, it must be held to have been
communicated to him, no matter when he actually
W.P. (C) No. 2974-2013 Page 20 of 29
received it. We find it difficult to persuade ourselves to
accept the view that it is only from the date of the actual
receipt by him that the order becomes effective. If that
be the true meaning of communication, it would be
possible for a government servant to effectively thwart
an order by avoiding receipt of it by one method or the
other till after the date of his retirement even though
such an order is passed and despatched to him before
such date. An officer against whom action is sought to
be taken, thus, may go away from the address given by
him for service of such orders or may deliberately give a
wrong address and thus prevent or delay its receipt and
be able to defeat its service on him. Such a meaning of
the word "communication" ought not to be given unless
the provision in question expressly so provides. Actual
knowledge by him of an order where it is one of
dismissal, may, perhaps, become necessary because of
the consequences which the decision in The State of
Punjab v. Amar Singh contemplates. But such
consequences would not occur in the case of an officer
who has proceeded on leave and against whom an order
of suspension is passed because in his case there is no
question of his doing any act or passing any order and
such act or order being challenged as invalid."
In the aforesaid decision, the Supreme Court had examined the
question whether an order of suspension passed against a Government
servant takes effect when it was made or when it was actually served and
received. The question had arisen in the context of Rule 3.26(d) of the
Punjab Civil Services Rules, as they then were, which had mandated that the
disciplinary enquiry would lapse on retirement of the State employee unless
an order of suspension was passed and would have the effect of not
permitting the concerned Government servant to retire. In the said case,
order of suspension against Khemi Ram was dispatched on 31 st July, 1958,
W.P. (C) No. 2974-2013 Page 21 of 29
but was served after his retirement on 4 th August, 1958. The single Judge
and Division Bench of the Punjab and Haryana High Court had held that the
Government employee had retired from service rendering the enquiry and
the ultimate dismissal invalid for the order of suspension was served post 4th
August, 1958. In this case, reference was made to decision of the Supreme
Court in Bachhittar Singh versus The State of Punjab, [1962] 3 Supp. SCR
713 and State of Punjab versus Sodhi Sukhdev Singh, [1961] 2 SCR 371 to
argue that an uncommunicated order on the file was inconsequential.
Reference was also made to Sardar Pratap Singh versus State of Punjab,
(1966) ILLJ 458 SC wherein two Judges of the Supreme Court had held that
an order of suspension would be effective, the moment it was issued.
However, three other Judges in Sardar Pratap Singh (Supra) had not
expressed any view on the said aspect. Thus, Khemi Ram (Supra) holds that
communication would be effective when it was dispatched, no matter when
it was actually received. Once an order was dispatched and goes out of the
control of the authority, there was no chance whatsoever of the authority
changing its mind or modifying the order. The judgment also observed that
the communication could be actual or constructive. The said observations
are relevant as the petitioner in the present case does accept having received
,,Terms of Reference on or before 31st March, 2013. In view of our findings
recorded above, we would record that the order itself under Section 142(2A)
was dispatched on 31st March, 2013.
33. The order under Section 142(2A) was communicated when it was sent
out before 31st March, 2013, as elucidated in Khemi Ram (supra)
W.P. (C) No. 2974-2013 Page 22 of 29
34. The aforesaid judgments of the Supreme Court were referred to and
examined by a Division Bench of this Court in Qualimax Electronics
Private Limited (supra) and it was held as under:-
"32. Of course, the is the danger that to prevent an
assessee from seeking a settlement of his case, the
adjudicating authority may quickly pass the adjudication
order the moment he gets an inkling that the assessee is
about to approach the Settlement Commission. There is
also the danger that the adjudicating authority may back
date an order. Adjudicating authorities are not supposed
to behave in this manner and are presumed to function
within the boundaries of law but, these things can
happen. Would not a literal construction of the
provisions then come in aid of such errant officers and
run counter to the legitimate hopes of assesses who want
to come clean, pay their taxes and have their cases
settled by the Settlement Commission? The answer to
this would lie in construing the date of adjudication to be
the date on which the adjudicating authority loses
his locus poenitentia, or opportunity to tear off, destroy
or alter the adjudication order. In other words, when the
order goes out of his control. And, that happens when
the order is signed and the one-way process of sending it
to the assessee is put in motion either directly or
indirectly through some other agency.
33. Thus, the date of receipt of the order-in-original is
not a relevant circumstance. What is of prime
importance is the date on which the order-in-original
was despatched from the office of the adjudicating
authority (in this case, the Commissioner of Central
Excise & Customs, Ghaziabad). As we have seen, the
order-in-original dated 24.12.2009 had left the office of
the said Commissioner on 31.12.2009 and was beyond
his reach and control. Consequently, the adjudication
becomes effective and complete on that date, i.e,
31.12.2009 That being so, the necessary pre-condition of
W.P. (C) No. 2974-2013 Page 23 of 29
a case pending adjudication on the date of the settlement
application is not satisfied. As such, the Settlement
Commission had no jurisdiction to entertain the plea of
settlement. Because, it is only a "case" as defined in
section 31(c) which could be the subject matter of
settlement. Section 31(c) defines "case" to mean any
proceeding for the levy, assessment and collection of
excise duty, "pending before an adjudicating authority
on the date on which an application under sub-section
(1) of section 32E is made". Once, the order leaves the
hands of the adjudicating authority in the sense
explained above, the ,,case can no longer be said to be
pending before him. Conversely, the proceeding would
be regarded as pending before an adjudicating authority
till the order does not go out of his control. In the present
case, this happened on 31.12.2009 Thus, on 08.01.2010,
when the settlement applications were filed by the
petitioners, the matter before the adjudicating authority
had already been adjudicated."
In the said case, the petitioners therein had challenged the order
passed by the Customs and Central Excise Settlement Commission holding
that the settlement applications were not maintainable as the cases had been
adjudicated prior to filing of the settlement applications. Order-in-original
dated 24th December, 2009 passed by the adjudicating authority was
received by the petitioners on 8th January, 2010. The applications for
settlement were filed on 8th January, 2010. The ratio of this judgment in
Qualimax Electronics Private Limited (supra) again does not support the
case of the petitioner.
35. In Qualimax Electronics Private Limited (supra), reference was
made to the judgment of the Supreme Court in Collector of Central Excise,
Madras versus M.M. Rubber and Company, Tamil Nadu, 1992 Supp (1)
W.P. (C) No. 2974-2013 Page 24 of 29
SCC 471, which decision had drawn distinction between commencement of
limitation period for filing of an appeal against an order, and when an order
comes into force or becomes operative. In the former case, period of
limitation for filing of an appeal would normally commence when the order
passed was received, published and notified. In the latter case, the order
becomes operative and effective from the date it was signed and the
authority ceases to have any locus poenitentiae to tear off, modify or alter
the order.
36. M.M. Rubber and Company (supra) had clarified on two different
principles of law relating to limitation. First principle relates to exercise of
power or an act, affecting the rights of the parties within period of limitation
prescribed. Order or decision of authority comes into force or becomes
operative or becomes an effective order or decision on and from the date
when it is signed. This happens when the order is made or passed; that is to
say when the order is made public or notified in some form or is sent out by
the authority so as to have left his hands. Thereafter, the Authority cannot
tear or draft a different order. Date of communication of the order to the
parties whose rights are affected is not the relevant date for purpose of
deciding whether or not the order was passed within the prescribed time.
37. Second principle relates to computation of period of limitation for a
party affected by the order or decision, who invokes remedy by way of
appeal, revision etc. The rule is that period of limitation for invoking the
remedy starts from the date the order is communicated to the party or the
date when it is pronounced or published, whereby the party affected has a
reasonable opportunity of knowing of the passing of the order or its content.
W.P. (C) No. 2974-2013 Page 25 of 29
Communication in the second sense is different from communication in the
first sense i.e. the first principle. Communication in the second sense must
be satisfied before the decision is said to be conclusive or binding. This
principle is not dependent upon provisions of a particular statute but under
the general law.
38. Pertinently, in M.M. Rubber and Company (supra) it was observed
that knowledge of the party affected by the decision may be either actual or
constructive. Knowledge of the party effected by the decision either actual
or constructive, is the essential element which must be satisfied. This is a
salutary and just principle.
39. We often overlook the aforesaid distinction when we examine the
question as to whether an order has been passed within the period of
limitation and apply decision with first and second principle
interchangeably, which is impermissible and wrong. It is in this context we
would also like to refer to the decision of the Supreme Court in
Commissioner of Income-tax Vs. Major Tikka Khushawant Singh, (1995)
212 ITR 650 (SC) which referred to the earlier decision in the case of R.K.
Upadhyay Vs. Shanabhai P. Patel, (1987) 166 ITR 163 and rejected the
plea of the assessee and upheld the contention of the revenue that the date of
issue of notice would determine, if it was within the period of limitation and
would give jurisdiction to the assessing officer to proceed and not the date
on which notice was served. It was observed that issue of notice within the
statutory period gives jurisdiction but re-assessment cannot be made till
notice was served.
W.P. (C) No. 2974-2013 Page 26 of 29
40. In Bacchittar Singh (supra) and other cases it has been held that
decision was written out, signed and dated, it would be nothing but a
decision which the officer intends to pass and not final. An order on the file
till communicated, would not be an order passed or made. Communication
of the order would be complete when made public or notified in some form
or sent out by the authority so as to have left from his hands as explained in
M.M. Rubber and Company (supra).
41. In K. Joseph Jacob versus Agricultural Income Tax Officer and
Another, [1991] 190 ITR 464 (Ker) dealt with Section 35(2) of the Kerala
Agricultural Income Tax Act, 1950, which had stipulated that no order of
assessment, etc. shall be made after expiry of five years at the end of the
year in which the agricultural income was first assessable. It was observed
that communication was made on the date of communication and not on the
date when the communication was received. Further, the order or assessment
came into force, when it was communicated because the party must be put to
notice of that order. First observation relates and states the first principle and
the second observation states the second principle. We would have some
reservations in accepting the ratio expressed by the single Judge in K.
Joseph Jacob (supra) in the light of the decisions of the Supreme Court in
Major Tikka Khuswant Singh and R.K. Upadhyay (supra).
42. Government Wood Works versus State of Kerala, [1988] 69 STC 62
(Kerala High Court) relates to Kerala General Sales Tax Act, 1963. In the
said case, order under Section 35 of the aforesaid Act was made on 3rd
September, 1984, but communicated on 28th September, 1984 with an order
of remit to the assessing authority, i.e., after period of limitation of four
W.P. (C) No. 2974-2013 Page 27 of 29
years, which were prescribed. It was observed that mere signing of the order
on the file was not enough unless it was in some way pronounced or
published or party affected has some means of knowing it. To make an
order complete and effective, it should be issued so as to beyond the control
of the authority from possible change or modification therein. This, it was
observed, should be done within the prescribed period though actual service
of the order may be beyond that period. In this case, the Authority/Revenue
had failed to produce evidence and material that the order was sent out
within the prescribed period. To this extent, therefore, decision of Kerala
High Court in Government Wood Works (supra) would not support the
petitioners for in the present case order under Section 142(2A) was
communicated, i.e. it was "sent out" and dispatched within the prescribed
period of limitation.
43. In the aforesaid situation and to meet the argument, that ,,Terms of
Reference were communicated and received by the petitioner alongwith
letter dated 30th March, 2013 on 31st March, 2013, reference was made to
Rajinder Nath and Others (Supra). This decision draws a distinction
between ,,finding and ,,direction in the context of Section 153(3)(ii) of the
Act, which removes bar of limitation period for making of assessment under
Section 143 or 144 or 147 of the Act. Bar of limitation is removed when
there is a direction issued by the statutory authority in the nature of an order
requiring positive compliance and not by on mere "finding". Petitioner
relies on the said decision to urge and submit that ,,Terms of Reference
must be distinguished and cannot be equated with service of the order under
Section 142(2A) of the Act. Rajinder Nath and Others (supra) examines
W.P. (C) No. 2974-2013 Page 28 of 29
and interprets a different provision. The said findings have no relevance
when we examine the question as to the effective date when the order is
passed. A communication takes place when the order is dispatched or "sent
out" and is made known or public. Communication in this context can be
actual or even constructive. Service of the letter dated 30th March, 2013 with
the ,,Terms of Reference would be effective communication in the light of
the aforesaid discussion even if it is presumed that the order under Section
142(2A) was not enclosed with the letter. Further, order under Section
142(2A) of the Act was certainly dispatched and sent by speed post vide
postal receipt ED86785578IN on 31st March, 2013 at 1819 hours, i.e. within
the prescribed period.
44. In view of the aforesaid discussion and after examining the entire
issue from factual as well as legal position, we have come to the conclusion
that the writ petition has no merit. Assessment proceedings have not abated
Accordingly, the writ petition is dismissed, with no order as to costs.
(SANJIV KHANNA)
JUDGE
(PRATHIBA M. SINGH)
JUDGE
MARCH 6th , 2018
VKR/ssn
W.P. (C) No. 2974-2013 Page 29 of 29
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