Holding

Section 142(2C) as it stood before the 2008 amendment did not preclude the assessing officer from extending the time for submission of the audit report suo motu, and the amendment was clarificatory in nature.

Summary

The Supreme Court examined whether, before the Finance Act 2008 amendment, an assessing officer could extend the time for filing a special audit report under s.142(2C) of the Income Tax Act without an application by the assessee. The Delhi High Court had held that such power did not exist, rendering the assessment barred by limitation. The Court analyzed the language of s.142(2C), the purpose of its proviso, and the legislative history of the amendment introducing the term “suo motu”. It concluded that the pre‑amendment provision did not preclude the officer’s suo motu extension of time and that the amendment was merely clarificatory, not prospective. Consequently, the Court overruled the High Court decision, restored the appeals to the appropriate forums, and allowed the appeals.

Issues considered

The scope of jurisdiction of the assessing officer to extend time for submission of audit report under s.142(2C) prior to the 2008 amendment
Whether the insertion of ‘suo motu’ in the amendment was clarificatory or prospective and its effect on the officer’s power
Whether an extension of time under s.142(2C) impacts the limitation period for assessment under s.153B
The interpretation of the phrase ‘and for any good and sufficient reason’ in the proviso of s.142(2C)

Legislation cited

Finance Act, 2008
Income Tax Act, 1961s. 142(2A), s. 142(2C), s. 144, s. 153A, s. 153B, s. 271

Subjects

Income TaxSection 142Special auditAssessing officer jurisdictionExtension of timeSuo motu powerLimitation periodStatutory interpretation

Judgment

[2019] 5 S.C.R. 25 25

THE COMMISSIONER OF INCOME TAX, NEW DELHI A
v.
RAM KISHAN DASS
(Civil Appeal No. 3211 of 2019)
MARCH 26, 2019 B
[DR. DHANANJAYA Y CHANDRACHUD AND
HEMANT GUPTA, JJ.]
Income Tax Act, 1961 – s. 142(2A) – Inquiry before
assessment – Special audit – Extension of time for submission of
C
the audit report of the auditor appointed under the provisions of
s. 142(2A) – Jurisdiction of the assessing officer – Order by the
tribunal that prior to the insertion of the expression ‘suo motu’ w.e.f.
01.04.2008 in s. 142(2C), the assessing officer had no jurisdiction
to extend time for the submission of the report of an auditor
appointed u/s.142(2A), of his own accord, and as a result, the D
assessment made u/s. 153A, in respect of the assessment years was
barred by limitation – Upheld by the High Court – On appeal, held:
Provisions of s. 142(2C), as they stood prior to the amendment did
not preclude the exercise of jurisdiction and authority by the
assessing officer to extend time for the submission of the audit
E
report directed under sub-section (2A), without an application by
the assessee – Amendment was intended to remove ambiguity and is
clarificatory in nature .
Allowing the appeals, the Court
HELD: 1.1 Sub-section (2A) of Section 142 of the Income F
Tax Act, 1961 empowers the assessing officer to direct the
assessee to get the accounts audited by an accountant, on the
formation of an opinion that the conditions specified in the
provision for recourse to the power are fulfilled. The power to
order an audit is vested with the assessing officer. As a
necessary incident of this power, sub-section (2C) imposes an G
obligation on the assessee to furnish the report to the assessing
officer within the period which is specified by the assessing
officer. The substantive part of sub-section (2C) places an
obligation on the assessee to comply with the time schedule which
H
25
26 SUPREME COURT REPORTS [2019] 5 S.C.R.

A is prescribed by the assessing officer. The overall ceiling of time
appears in the proviso to sub-section (2C), which mandates that
the aggregate of the time fixed and the extended period cannot
exceed 180 days, after which there can be no further extension
of time. [Para 15] [38-C-E]
B 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
C 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.
D 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
E 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
F 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
G 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
H
COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 27
KISHAN DASS

audit report. The exigencies of the situation may however A
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 B
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 C
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 D
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), E
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 F
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 G
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
H
28 SUPREME COURT REPORTS [2019] 5 S.C.R.

A 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
B 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
C 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]
D 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
E assessment under Section 153B. Explanation (iii) as it stood at
the material time, provided for the exclusion of the period com-
mencing 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 fur-
F nish 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 exclu-
sion 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
G 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
H submission of the report. [Para 24] [43-F-H; 44-A-B]
COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 29
KISHAN DASS

1.7 The issue as to whether the amendment which has been A
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
B
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 C
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] D
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. E
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, F
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. G
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:
H
30 SUPREME COURT REPORTS [2019] 5 S.C.R.

A [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)
B – referred to.
Case Law Reference
[2008] 6 SCR 427 referred to Para 12
[1969] 1 SCR 219 referred to Para 20
C [2008] 12 SCR 179 referred to Para 21
[2014] 12 SCR 1037 referred to Para 21
[2004] 5 Suppl. SCR 272 relied on Para 25
[2005] 5 Suppl. SCR 302 relied on Para 25
D (1994) 74 Taxman 8 (P&H) approved Para 25
(2011) 333 ITR 308 approved Para 25
[2011] 203 Taxman 326 (Delhi) disapproved Para 26

E
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3211 of
2019.
From the Judgment and Order dated 27.05.2011 of the High Court
of Delhi at New Delhi in ITA No. 237 of 2011
F With
Civil Appeal Nos. 3214, 3212, 3213, 3228, 3230, 3215, 3229, 3216,
3219, 3220, 3217, 3221, 3218, 3222, 3223, 3225, 3226, 3224, 3227, 3231,
3232 and 3233 of 2019.
Civil Appeal Nos. 4334, 4599, 5305 and 7076 of 2017.
G
Civil Appeal No. 2951 of 2012.
V. Giri, Sr. Adv., Arijit Prasad, A. K. Srivastava, T. M. Singh,
Pranay Ranjan, Ms. Kirti Dua, Mrs. Anil Katiyar, V. Balaji, M. S. M.
Asaithanbi, Atul Sharma, C. Kannan, Rakesh K. Sharma, Advs. for the
Appellant.
H
COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 31
KISHAN DASS

Ajay Vohra, Sr. Adv., Ms. Kavita Jha, Vaibhav Kulkari, Udit A
Naresh, Rr-ex-parte, Ms. Shashi Kapila, Vikas Mehta, Parvesh, Siddharth
Kapila, Ved Jain, Ms. Kislaya Parashar, Subodh S. Patil, Salil Kapoor,
Sumit Lalchandani, Ms. Soumya Singh, Praveen Swarup, Advs. for the
Respondent.
The Judgment of the Court was delivered by B
DR DHANANJAYA Y CHANDRACHUD, J. 1. Leave
granted in the Special Leave Petitions.
2.This batch of appeals involves the interpretation of a cluster of
provisions of the Income Tax Act 19611, particularly Section 142(2C). A
C
Division Bench of the Delhi High Court by its judgment dated 27 May
2011 dismissed a batch of appeals filed by the Revenue against an order
dated 18 September 2009 of the Income Tax Appellate Tribunal2. The
Tribunal came to the conclusion that prior to the insertion of the
expression “suo motu” with effect from 1 April 2008 in Section 142(2C),
the assessing officer had no jurisdiction to extend time for the D
submission of the report of an auditor appointed under sub section (2A),
of his own accord. As a consequence, it was held that the assessment
which was made under Section 153A, in respect of the assessment years
in question, was barred by limitation.
3. In the present batch of cases, the submission of the assessees E
is that the assessing officer had no jurisdiction or authority under Section
142 (2C), as it stood prior to 1 April 2008, to extend time for the
submission of the audit report of the auditor appointed under the
provisions of sub section (2A). In essence, the submission is that the
assessing officer was authorized to extend time (not exceeding 180 days)
F
from the date on which a direction under sub section (2A) was received
by the assessee, only on an application made by the assessee and for
any good and sufficient reason. If the assessee made no application, the
assessing officer would have no jurisdiction – according to the
assessees – to extend time.
4. The Revenue adopted a contrary position, submitting that even G
before 1 April 2008, the jurisdiction of the assessing officer to extend
time for the submission of the audit report was not confined to a
situation in which the assessee had made an application for extension.
1
“IT Act 1961"
2
“Tribunal” H
32 SUPREME COURT REPORTS [2019] 5 S.C.R.

A Consequently, the incorporation of a provision for a suo motu exercise
of power by the assessing officer, with effect from 1 April 2008 by the
Finance Act, 20083, was only intended to remove an ambiguity and was
clarificatory in nature.
5. Section 142(2A) as it stood at the material time, provided as
B follows:
“(2A) – If, at any stage of the proceedings before him, the
Assessing Officer, having regard to the nature and complexity of
the accounts of the assessee and the interests of the revenue, is
of the opinion that it is necessary so to do, he may, with the
C previous approval of the Chief Commissioner of 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
D forth such particulars as may 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.”
E Sub section (2C) of Section 142 was in the following terms:
“(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:

F Provided that the Assessing Officer may, 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
G which the direction under sub-section (2A) is received by the
assessee.”
3
“Finance Act”

H
COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 33
KISHAN DASS [DR DHANANJAYA Y CHANDRACHUD, J.]

6. Consequent to the Finance Act, sub section (2C) was amended A
to read as follows:
“(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 B
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 C
the date on which the direction under sub-section (2A) is received
by the assessee.”
7. Section 153B prescribes time limits for the completion of
assessments under Section 153A. Explanation (ii), as it stood at the
material time, provided that in computing the period of limitation for the D
purposes of the Section, “the period commencing from the day on which
the Assessing Officer directs the assessee to get his accounts audited
under sub-section (2A) of Section 142 and ending on the day on which
the assesse is required to furnish a report of such audit under that
sub-section” shall be excluded. While issuing a direction under sub
section (2A) of Section 142, the assessing officer was vested with the E
authority to require the assessee to furnish a report of the audit in the
prescribed form, signed and verified by the accountant, and setting forth
such particulars as may be prescribed and as may be required by him.
The substantive part of sub section (2C) mandates that the report under
sub section (2A) shall be furnished by the assessee to the assessing F
officer within the period that is specified by the assessing officer under
the proviso, as it stood prior to its amendment by the Finance Act. The
assessing officer was further empowered, on an application made by
the assessee and for any good and sufficient reason, to extend the
period further, subject to the stipulation that it shall not exceed an
aggregate of 180 days from the date on which the direction under sub G
section (2A) has been received by the assessee.

H
34 SUPREME COURT REPORTS [2019] 5 S.C.R.

A 8. The crucial words which fall for interpretation are “On an
application made in this behalf by the assessee and for any good and
sufficient reason…”
9. Simply stated, the contention of the assessees is that the above
words indicate that the assessing officer may extend the period, which
B has been specified under the substantive part of sub section (2C), only
on an application made by the assessee and for good and sufficient
reason. Contrariwise, according to the Revenue, the assessing officer,
who issues a direction to the assessee under sub section (2A) to get his
accounts audited, is vested with the authority to specify the period for
the submission of the report, and within the overall limit of 180 days it is
C open to the assessing officer to extend the time which has been fixed in
the first instance. The Revenue posits that the authority conferred upon
the assessing officer to extend time, on an application made by the as-
sessee, does not take away the authority of the assessing officer, who
has prescribed the time for the submission of the report in the first in-
D stance, to extend time without an application for extension being made
by the assessee, subject to the overall ceiling of 180 days. In the submis-
sion of the Revenue, the expression “and for any good and sufficient
reason” must be construed logically to mean “or for any good and suffi-
cient reason”.
E 10. The submission which has been urged on behalf of the
assessees is sought to be buttressed by adverting to the legislative intent
behind the insertion of the term “suo motu” in the provisions of Section
142(2C) by the Finance Act. Circular No 1/2009 dated 27 March 2009
contains the following explanation for the amendments made to Section
142(2C):
F
“27. Granting of power to the Assessing Officer to extend
the time for completion of special audit under sub-section
(2A) of section 142
27.1 Sub-sections (2A) to (2D) of section 142 deal with power of
G Assessing Officer to order a special audit. Such power is
required to be exercised by the Assessing Officer having regard
to the nature and complexity of the accounts of the assessee and
the interest of the revenue.

H
COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 35
KISHAN DASS [DR DHANANJAYA Y CHANDRACHUD, J.]

27.2 Sub-section (2C) of the said section specifies the period A
within which the audit reports is to be furnished. The proviso to
said sub-section empowers the Assessing Officer to extend this
period of furnishing of audit report. Further, it is also provided
that the aggregate of the originally fixed period and the period(s)
so extended shall not exceed 180 days from the date of issuance
B
of direction of special audit. Further, such extension can be made
only when an application is made in this behalf by the assessee
and there are good and sufficient reasons for such extension.
27.3 With a view to rationalise the said proviso so as to also allow
the Assessing Officer to extend this period of furnishing of audit
report suo motu, the said proviso has been amended. Hence, while C
the Assessing Officer shall continue to have power to grant
extension on an application made in this behalf by the assessee
and when there are good and sufficient reasons for such
extension, he can also grant such extension on his own.
27.4 Applicability – This amendment has been made applicable D
with effect from 1-4-2008. Hence, from this date and onwards,
the Assessing Officer shall also have power to extend the period
of furnishing of audit report suo motu.”
11. The Notes on clauses to the Finance Bill, 2008 contain the
following explanation: E

“Clause 28 seeks to amend section 142 of the Income-tax Act,
which relates to enquiry before assessment.
Sub-sections (2A) to (2D) of the said section deal with power of
Assessing Officer to order special audit, where the nature and F
complexity of the accounts requires such audit, to seek the
assistance of a chartered accountant.
Sub-section (2C) of the said section specifies the period within
which the audit report is to be furnished. The Proviso to the said
sub-section provides that the Assessing Officer may extend the
G
said period of furnishing of audit report, on an application made in
this behalf, by the assessee and for any good and sufficient
reason.

H
36 SUPREME COURT REPORTS [2019] 5 S.C.R.

A It is proposed to amend the said proviso so as to provide 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.
B This amendment will take effect from 1st April, 2008.”
The Memorandum accompanying the Finance Act similarly
provides:
“Granting of power to the Assessing Officer to extend the
time for completion of special audit under sub-section (2A)
C of section 142
Sub-sections (2A) to (2D) of section 142 deal with power of
Assessing Officer to order a special audit. Such power is
required to be exercised by the Assessing Officer having regard
to the nature and complexity of the accounts of the assessee and
D the interest of the revenue.
Sub-section (2C) of the said section specifies the period within
which the audit report is to be furnished. The proviso to said
sub-section empowers the Assessing Officer to extend this
period of furnishing of audit report. Further, it is also provided
E that the aggregate of the originally fixed period and the period(s)
so extended shall not exceed 180 days from the date of issuance
of direction of special audit. Further, such extension can be made
only when an application is made in this behalf by the assessee
and there are good and sufficient reasons for such extension.
F It is proposed to amend the said proviso so as to also allow the
Assessing Officer to extend this period of furnishing of audit
report suo motu. Hence, while the Assessing Officer shall
continue to have power to grant extension on an application made
in this behalf by the assessee and when there are good and
sufficient reasons for such extension, he can also grant such
G
extension on his own.
The amendment will take effect from 1st April, 2008.”
12. In the context of the above background, it has been submitted
that the purpose of the amendment was to “also allow the assessing
H
COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 37
KISHAN DASS [DR DHANANJAYA Y CHANDRACHUD, J.]

officer to extend the period for furnishing of an audit report, suo motu”. A
The amendment to Section 142(2C) preserves the jurisdiction of the
assessing officer to grant an extension on an application made by the
assessee and for any good and sufficient reasons. In addition, the
amendment allows the assessing officer to extend the period suo motu.
The amendment having taken effect from 1 April 2008, it has been urged
B
on behalf of the assessees that this power was not vested in the
assessing officer prior to that date. Moreover, learned counsel
appearing on behalf of the assessee urged that:
(i) The consequence of the exercise of the jurisdiction to extend
time for submission of the audit report under the proviso to sub
section (2C) is the extension of the period of limitation for the C
completion of an assessment under Explanation (ii) to Section
153B. This is indicative of the fact that the provision for
extension is not procedural in nature;
(ii) The consequence of the failure of the assessee to comply with
the direction of submitting the audit report by the date D
prescribed by the assessing officer is that under Section
144(1)(b), the assessing officer is empowered to frame a
best judgment assessment;
(iii) The expression in Explanation (ii) to Section 153B “ending on
the date on which the assesse is required to furnish a report of E
such audit” signifies the end of the period of exclusion of time
for the framing of an assessment under Section 153B;
(iv) Section 142(2C) must consequently be interpreted in the
context of the provisions of Sections 153B and 144; and
F
(v) The expression ‘and’ in the substantive part of Section 142(2A)
has been held to be conjunctive by the decision of this Court in
Sahara India (Firm), Lucknow v Commissioner of Income
Tax, Central-I 4. The expression ‘and’ in the proviso to
sub-section 2C must be given the same meaning.
G
13. On the other hand, it has been submitted on behalf of the
Revenue that:
(i) In construing the proviso to Section 142(2C), it is primarily the
language of the statutory provision which must be construed;
4
(2008) 14 SCC 151 H
38 SUPREME COURT REPORTS [2019] 5 S.C.R.

A (ii) The amendment to sub section (2C) was necessitated by
reason of the ambiguity in the provision as it stood prior to 1
April 2008;
(iii) The legislature having stepped in to remove an ambiguity, the
amendment brought about by the Finance Act must necessarily
B be regarded as clarificatory in nature; and
(iv) The amendment is purely procedural and must be
retrospective in character.
14. The rival submissions now fall for consideration.

C 15. Sub-section (2A) of Section 142 empowers the assessing
officer to direct the assessee to get the accounts audited by an
accountant, on the formation of an opinion that the conditions specified
in the provision for recourse to the power are fulfilled. The power to
order an audit is vested with the assessing officer. As a necessary
incident of this power, sub-section (2C) imposes an obligation on the
D assessee to furnish the report to the assessing officer within the period
which is specified by the assessing officer. The substantive part of
sub-section (2C) places an obligation on the assessee to comply with the
time schedule which is prescribed by the assessing officer. The overall
ceiling of time appears in the proviso to sub-section (2C), which
E mandates that the aggregate of the time fixed and the extended period
cannot exceed 180 days, after which there can be no further extension
of time.
16. The submission of the assessee would have this Court
interpret the proviso to mean that the assessing officer can extend the
F period which was originally fixed only on the request of the assessee.
Besides leading to absurd consequences, such a construction of the
proviso is patently contrary to its language, purpose and intendment.
17. 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
G
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
H
COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 39
KISHAN DASS [DR DHANANJAYA Y CHANDRACHUD, J.]

reason” requirement is intended to ensure that an extension of time can- A
not 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. The discretion is intimated to the Assessing
officer.
18. In determining whether the power to extend time vests in the B
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. C
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 D
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 E
may however require an extension of time for genuine reasons or, as the
statute calls it, “for any good and sufficient reason”.
19. There are two ways of looking at the situation. Firstly, 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 F
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 G
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
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40 SUPREME COURT REPORTS [2019] 5 S.C.R.

A 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
B
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
C 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
D
section 2C.
20. 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, it is well settled that the expression “and” can in a given
E context be read as “or” (see in this context Ishwar Singh Bindra v
State of UP5). This submission was opposed on behalf of the assessees
by urging that in the context of sub-section (2A), it has been held by this
Court in Sahara India (Firm), Lucknow v CIT (supra) that the word
“and” is used in the conjunctive sense. Undoubtedly the expression “and”
F in sub-section (2A) has been held to the conjunctive, while delineating
the circumstances on the basis of which an opinion can be arrived at by
the assessing officer. This would not necessarily furnish an index to how
the expression “and” in the proviso to sub-section (2C) should be
construed. The interpretation of the expression must be based on the
context in which it is used. In the proviso to sub-section (2C), the
G expression “and” is used in connection with the grant of an extension of
time and not in the context of the formation of an opinion for ordering a
special audit. The power is of a procedural nature.

5
(1969) 1 SCR 219 = AIR 1968 SC 1450
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COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 41
KISHAN DASS [DR DHANANJAYA Y CHANDRACHUD, J.]

21. The learned counsel for the assessees sought to urge that the A
legislative history surrounding the amendment to the proviso to
sub-section (2C) by the Finance Act would indicate that the amendment
was intended to be prospective with effect from 1 April 2008 and, that
prior to this date, the assessing officer had no jurisdiction to grant an
extension of time, save on the application by the assessee. Circular
B
1/2009 dated 27 March 2009 indicates that the amendment was brought
about “with a view to rationalize the said proviso”. Learned counsel
argued that the expression in Circular 1/2009 that the amendment was
to also allow the assessing officer to extend the period for furnishing of
the audit report suo motu, indicates that such a power did not exist prior
to the amendment. The submission cannot be accepted. The mere fact C
that the amendment has been made with effect from 1 April 2008 does
not detract from it being clarificatory in nature or that it was designed to
obviate an ambiguity. In Justice GP Singh’s Principles of Statutory
Interpretation 6 the issue of whether a statutory provision is
retrospective has been analysed thus:
D
“”The presumption against retrospective operation is not
applicable to declaratory statutes. As stated in Craies and
approved by the Supreme Court: ‘For modern purposes a
declaratory Act may be defined as an Act to remove doubts
existing as to the common law, or the meaning or effect of any
statute. Such Acts are usually held to be retrospective. The usual E
reason for passing a declaratory Act is to set aside what
Parliament deems to have been a judicial error, whether in the
statement of the common law or in the interpretation of statutes.
Usually, if not invariably, such an Act contains a preamble, and
also the word “declared” as well as the word “enacted”.’ But the F
use of the words ‘it is declared’ is not conclusive that the Act is
declaratory for these words may, at times, be used to introduce
new rules of law and the Act in the latter case will only be
amending the law and will not necessarily be retrospective. In
determining, therefore, the nature of the Act, regard must be had
to the substance rather than to the form. If a new Act is ‘to G
explain’ an earlier Act, it would be without object unless
construed retrospective. An explanatory Act is generally
passed to supply an obvious omission or to clear up doubts
6
11th Edition (2008)
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42 SUPREME COURT REPORTS [2019] 5 S.C.R.

A as to the meaning of the previous Act. It is well settled that if
a statute is curative or merely declaratory of the previous law
retrospective operation is generally intended. The language ‘shall
be deemed always to have meant’ or ‘shall be deemed never to
have included’ is declaratory, and is in plain terms
retrospective. In the absence of clear words indicating that the
B
amending Act is declaratory, it would not be so construed when
the amended provision was clear and unambiguous. An amending
Act may be purely clarificatory to clear a meaning of a provision
of the principal Act which was already implicit. A clarificatory
amendment of this nature will have retrospective effect ….”
C (emphasis supplied)
The above extract was cited by this Court in Commissioner of
Income Tax-1, Ahmedabad v Gold Coin Health Food Pvt Ltd7. A
Constitution Bench of this Court also cited the above extract with
approval in Commissioner of Income Tax (Central – I) v Vatika
D Township (P) Ltd.8.
22. 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
E 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, we are clearly of the view that by the Finance Act,
F Parliament essentially clarified the position as it existed prior to the
amendment.
23. Moreover, there exists a presumption of retrospective
application in regard to amendments which are of a procedural nature.
This position was stated in Maxwell on The Interpretation of
G Statutes9:
“The general principle, however, seems to be that alterations in
procedure are retrospective, unless there be some good reason
against it.”
7
2008 (9)SCC 622
8
[2014] 31 ITR 466 (SC); 2015 1 SCC 1
H 9
11th Edition, Sweet and Maxwell (1962) at pg 217
COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 43
KISHAN DASS [DR DHANANJAYA Y CHANDRACHUD, J.]

In Commissioner of Income Tax (Central – I) v Vatika A
Township (P) Ltd. (supra),this Court held thus:
“30. We would also like to point out, for the sake of completeness,
that where a benefit is conferred by a legislation, the rule against
a retrospective construction is different. If a legislation confers
a benefit on some persons but without inflicting a B
corresponding detriment on some other person or on the
public generally, and where to confer such benefit appears
to have been the legislators’ object, then the presumption
would be that such a legislation, giving it a purposive
construction, would warrant it to be given a retrospective
effect. This exactly is the justification to treat procedural C
provisions as retrospective…
31… Thus, the rule against retrospective operation is a
fundamental rule of law that no statute shall be construed to have
a retrospective operation unless such a construction appears very
clearly in the terms of the Act, or arises by necessary and distinct D
implication. Dogmatically framed, the rule is no more than a
presumption, and thus could be displaced by outweighing factors.”
(emphasis supplied)
24. We find no substance in the submission urged on behalf of the E
assessees that to adopt an interpretation which we have 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) to Section 153B(1), 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 F
accounts audited under sub-section (2A) of Section 142 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 G
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

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44 SUPREME COURT REPORTS [2019] 5 S.C.R.

A the period of limitation for framing the assessment under Section 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.
25. The issue as to whether the amendment which has been
B 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 (i) the general scope and purview of the
statute; (ii) the remedy sought to be applied; (iii) the former state of the
law; and (iv) what power that the legislature contemplated (See Zile
Singh v State of Haryana 10 ). The decision in Sedco Forex
C International Drill Inc. v Commissioner of Income Tax11 on which
learned counsel for the assesses relied involved a substitution of the
Explanation to Section 9(1)(ii) of the IT Act, 1961 with effect from
1 April 2000. A two Judge Bench of this Court held that given the
legislative history of Section 9(1)(ii), it can only be assumed that it was
D deliberately introduced with effect from 1 April 2000 and was therefore
intended to be prospective. This was also so construed by the CBDT,
and in the explanatory notes to the provisions of the Finance Act, 1999.
As we have indicated, interpretation is a matter of determining the path
on the basis of statutory context and legislative history. In taking the
view that we have, we have also taken note of the fact that the same
E view was adopted by several High Courts. Among them are (i) the Punjab
and Haryana High Court in Jagatjit Sugar Mills Co Ltd v
Commissioner of Income Tax 12 ; (ii) the Kerala High Court in
Commissioner of Income Tax, Cochin v Popular
Automobiles 13;and (iii) the Allahabad High Court in Ghaziabad
F Development Authority v Commissioner of Income Tax,
Ghaziabad (UP)14.The decision of the Kerala High Court in Popular
Automobiles (supra) is the subject matter of Civil Appeal No 2951 of
2012 in these proceedings.
26. For the reasons we have adduced, we have come to the
G conclusion that the provisions of Section 142(2C) of the Income Tax Act
10
(2004) 8 SCC 1
11
[2005] 279 ITR 310 (SC); (2005) 12 SCC 717
12
(1994) 74 Taxman 8 (Pun.&Har.); [1994] 210 ITR 468
13
(2011) 333 ITR 308
14
(2011) 12 Taxman.com 334 (Allahabad); 2011 SCC On Line All 1151
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COMMISSIONER OF INCOME TAX, NEW DELHI v. RAM 45
KISHAN DASS [DR DHANANJAYA Y CHANDRACHUD, J.]

1961, as they stood prior to the amendment which was enacted with A
effect from 1 April 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. We hold and declare that
the amendment was intended to remove an ambiguity and is clarificatory
B
in nature. As a consequence of our decision, we specifically overrule
the judgment of a Division Bench of the Delhi High Court in
Commissioner of Income Tax v Bishan Swaroop Ram Kishan Agro
Pvt. Ltd.15 dated 27 May 2011.
27. Accordingly, Civil Appeals @ SLP (C) Nos 6082, 7573,
8761 and C.A. No. 2951 of 2012 are restored to the file of the C
Commissioner of Income Tax (Appeals) for decision on merits. Civil
Appeals @ SLP(C) Nos 2808, 2811, 36496, 6680, 36495, 11869, 12026,
12027, 10191, 10190, 9720, 8512, 2810, 7660, 9463, 16130, 27681 of
2012; Civil Appeal Nos 4599, 4334, 7076 of 2017; Civil Appeals @ SLP(C)
Nos 17500, 10248, 10247 of 2017 and C.A. No. 5305 of 2017 are D
restored to the file of the Income Tax Appellate Tribunal for decision on
merits.
28. There shall be no order as to costs.

E
Nidhi Jain Appeals allowed.

F

G

15
[2011] 203 TAXMAN 326 (Delhi) - ITA No.1775/2010 - 2011 SCC Online Del 2463

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