BHAVNESH SAINI, J.M.: These cross-appeals are directed against order of learned CIT(A)-I, Indore, dt. 31st March, 1997 for asst. yr. 1993-94. Learned counsel for assessee did not press ground Nos. 4, 5, 6, 8, 16, 18, 19 and 20 of appeal of assessee. same are dismissed. Learned counsel for assessee raised preliminary objection to passing o f assessment order on grounds that assessment order is time- barred under s. 153 of IT Act and that no opportunity was given at time of referring books of account for special audit under s. 142(2A) of IT Act therefore same is bad in law and would not extend time-limit for completion of assessment and that ex parte assessment order under s. 144 is bad in law n d invalid because books of accounts were impounded by Revenue Department and assessee submitted proper reply before AO at assessment stage therefore there is no failure on part of assessee to comply with statutory notices. He has further submitted that learned CIT(A) was not justified in upholding findings of AO. Learned counsel for assessee submitted that these issues are raised in ground Nos. 1, 2 and 3 in assessee s appeal and go to root of matter and may be decided before considering grounds on merit on which several lengthy grounds of appeals are taken in both cross-appeals. Learned representatives of both parties are heard on these issues on question of law as well as on remaining grounds on merits in both cross-appeals. We have heard learned representatives of both parties and gone through findings of authorities below and material available on record in light of provisions of s. 153 of IT Act as were applicable to asst. yr. 1993-94 under appeal. ground Nos. 1, 2 and 3 in assessee s appeal read as under: "1. That learned CIT(A) erred in holding that order passed by AO is within time by ignoring clear provisions of law and decision of jurisdictional High Court. order passed by AO being clearly out of date, same is illegal and non est. same therefore requires to be annulled. That on facts and in circumstances of case, clear provisions of law and decided case, learned AO erred in referring appellant s case for special audit without having regard to nature and complexity of accounts and without allowing proper opportunity of being heard to assessee. learned CIT(A) therefore erred in not holding that reference to special audit was illegal. assessment order so passed was therefore illegal and also out of date. said order therefore requires to be cancelled. That learned CIT(A) also erred in holding that order passed by learned AO under s. 144 was proper thereby clearly ignoring facts that delay in taking up assessment by AO was intentional and that there was no non-compliance on part of assessee, considering facts and circumstances of case. order passed under s. 144 therefore be treated to have been passed under s. 143(3)." facts of case as noted in impugned order are that assessee i s company and engaged in manufacturing and sale of cotton yarn in Pithampur, Distt. Dhar. Return was filed on 31st Dec., 1993 declaring nil income claiming set off of unabsorbed depreciation and investment allowance of earlier years. survey was conducted at business premises of assessee on 30th Dec., 1993 and certain books of accounts pertaining to asst. yrs. 1991-92 to 1994-95 were impounded by AO and these were directed to get audited under s. 142(2A) of Act. Since assessee during course of assessment proceedings did not furnish details required by AO from time-to- time, he has completed assessment under s. 144 on total income of Rs. 4,76,45,351. first ground of appeal before learned CIT(A) was to illegality of order passed by AO. notice under s. 142(2A) dt. 9th Oct., 1995 was served on assessee on 14th Oct., 1995 to get its accounts audited by 31st Oct., 1995. Extension of time was sought from time-to-time and granted till 15th March, 1996. assessee requested vide letter dt. 15th March, 1996 for further time of 2 months which was not granted to assessee. According to learned representative of assessee, assessment for this year in usual course would have expired on 31st March, 1996 and since no audit report was submitted, AO would have got further time from 14th Oct., 1995 to date of submission of audit report as per s. 153(3), Expln. (1) of sub-cl. (iii). In instant case no audit report was submitted and further extension beyond 15th March, 1996 was not granted. It is case of assessee that as per version of AO himself assessment should have been completed within 153 days from 12th March, 1996, i.e., by 12th Aug., 1996, however, since order has been passed on 16th Aug., 1996 after issuing detailed notices upto 14th Aug., 1996, it is beyond limitation period. It is submitted that as per proviso to s. 153(3), Expln. (1) time allowed in such case is only 60 days from date when time allowed for filing of audit report expired, i.e., on 15th March, 1996 or in any case when assessment became barred by limitation on 31st March, 1996. It is submitted that as per decision of Madhya Pradesh High Court in case of CIT vs. Dhariwal Sales Enterprises (1997) 137 CTR (MP) 365: (1996) 221 ITR 240 (MP), AO should have completed assessment immediately when he refused to grant further time for audit on 12th March, 1996 or in any case when time allowed by him for audit expired on 15th March, 1996. counsel for assessee has also challenged reference for special audit and reasons and circumstances for special audit according to him have been discussed elaborately by Allahabad High Court in Swadeshi Cotton Mills Co. Ltd. vs. CIT (1987) 63 CTR (All) 335: (1988) 171 ITR 634 (All). As per above decision satisfaction of AO to refer case for special audit should not be subjective satisfaction only, rather it should be passed on objective assessment considering nature of accounts. word complexity has also to be considered in its right perspective and to treat certain accounts as complex for purposes of special audit, there should be honest attempt to understand accounts of assessee by AO, who had failed in case of assessee. It is elaborated that accounts of assessee are subjected to statutory audit under Companies Act and it is case of textile mill whose method of accounting is very well known to Department and this was not first year of assessment of assessee company. Account books were already first year of assessment of assessee company. Account books were already available with AO from 30th Dec. 1993 to 9th Oct., 1995 date when notice under s. 142(1) was issued till 10th April, 1996. Hence it was rather surprising as to how AO had come to conclusion that there was complexity in accounts of assessee so as to give him objective satisfaction for said reference. Reference is also made to Tribunal Indore Bench, Indore, decision in case of Vijay Kumar Rajendrakumar & Co. in which Tribunal has held that previous notice has to be given to assessee for making reference to special audit and had relied on Supreme Court decision in C.B. Gautam vs. Union of India (1992) 108 CTR (SC) 304 r/w (1993) 110 CTR (SC) 179: (1993) 199 ITR 530 (SC). Further submissions in this regard were filed vide letter dt. 13th Jan., 1997 on 14th Jan., 1997 reiterating earlier stand that period of 150 days when added to 12th March, 1996 ends on 9th Aug., 1996 on which date period of limitation for passing assessment order had expired. For justifying his stand learned representative of assessee submits as under: "9. proviso to s. 153(3), Expln. (1) states that where immediately after exclusion of aforesaid time or period, period of limitation referred to in sub-ss. (1), (2) and (2A) available to AO for making order of assessment, reassessment or recomputation, as case may be, is less than 60 days and aforesaid period of limitation shall be deemed to be extended accordingly. As per proviso, in case where extended period given to assessee for getting its accounts audited, as excluded, had ended on say 20th of April, 1996 AO would in any case, get time of 60 days from usual period of limitation, ending 31st March, 1996, i.e., upto 30th May, 1996. In this case since excluded period of 150 days ended beyond 30th May, 1996, proviso is not applicable to this case. With regard to above submissions we also rely on Commentary on Income-tax Act by Sampath Ayanger, 9th Edition, Fourth Volume, p. 5604. While dealing with cl. (iii) of Expln. 1, author states that said Explanation provides for exclusion of period commencing from date on which AO directs [as per proviso to s. 142(2A) served], assessee to get his accounts audited under s. 142(2A) and ending with date on which assessee furnishes report of such audit under that section. These comments clearly support submission which we have made in para 8 above, i.e., exclusion of 150 days and same to be added on day assessee informs AO about its inability to get accounts audited. proviso to above Explanation inserted by Finance (No. 2) Act, 1991, has been discussed by same author on p. 5606. He states that said proviso has been inserted w.e.f. 27th Sept., 1991. It provides that where immediately after exclusion of time or period mentioned in cls. (i) to (v) of Expln. (1) to section, remaining period of limitation referred to in sub- ss. (1), (2) and (2A) for completing assessments or reassessments, etc. is less than 60 days, such remaining period shall be extended to 60 days and aforesaid period of limitation shall be extended accordingly. In this case also learned author agrees to what we have stated in paras 9 and 10 above. While we are on this issue we will like to refer to limitations prescribed for exclusion of time in case of assessment under s. 144B. In years in which these provisions of s. 144B were on statute book, AO was required to make reference to Dy. CIT where additions made by him exceeded Rs. 1,00,000. In such cases AO was required to serve draft order to assessee. assessee was required to file his objections against additions made in order within seven to fifteen days. On receipt of objections AO was required to forward draft order together with objections filed by assessee to Dy. CIT. period of 180 days starting from date of service of draft order to assessee and ending with date of which AO received directions from Dy. CIT was to be excluded. While commenting on this section on p. 5605, learned author writes that said cl. (iv) of Expln. (1) provides for period not exceeding 180 days to AO to complete assessment, in addition to normal period if action under s. 144B is taken by AO. period excluded is period between date on which AO forwards draft order to assessee and date on which directions are received from Dy. CIT. This means, that if AO served draft order on assessee say on 25th March, he will be allowed only 6 days (26th March to 31st March) to complete assessment proceedings on receipt of directions from Dy. CIT and nothing more. said period of six days in such case will not be extended even if, directions from Dy. CIT are received earlier to expiration of 180 days. From above it is more than clear that what is to be added is period taken in audit proceedings from date of notice to date on which audit report is received and nothing more. We now consider amended cl. (iii) of Expln. (1) to s. 153, which has been introduced by Finance (No. 2) Act, 1996 and effective from asst. yr. 1997-98. As per this amendment, situation where no audit report is submitted has been covered by substituting words date in which assessee furnished to words assessee is required to furnish . learned author on p. 5605 has commented on this amendment also. He states that cl. (iii) of Expln. (1) to s. 153 has been amended to exclude from period of limitation, period commencing from date on which AO directs assessee to get his accounts audited and ending with date on which assessee was required to furnish such report. Earlier said period ended with date on which assessee actually furnished audit report. This amendment takes effect from 1st April, 1997. What emerges from this amendment is that lacuna in respect of non- furnishing of report has been plugged, like in present case. But, it will be seen that said amendment has not been made retrospective but will be effective after 1st April, 1997. Therefore, in present case, AO should have completed assessment by 31st March, 1996 being usual time allowed under s. 153(1) and (2); since there was no provision in Act for extension of time in case where no audit report was submitted. Even if recourse is made to proviso to Expln. (1) to s. 153(3), AO would have got extended period of 60 days to remaining period of limitation. In this case since AO was informed that it was not possible to file audit report on 12th March, 1996 and since remaining period of limitation was of 19 days only, which was less than 60 days as per said proviso AO should have completed assessment within 60 days of such intimation dt. 12th March, 1996 i.e., by 11th May, 1996. From above submissions, as per clear provisions of law, decision of Tribunal, Indore Bench in case of Vijay Kumar Rajendrakumar & Co. and decision of Madhya Pradesh High Court in case of CIT vs. Dhariwal Sales Enterprises (1997) 137 CTR (MP) 365: (1996) 221 ITR 240 (MP) and thus looked from any angle, order passed by learned AO is out of date, illegal and bad in law. That as per decision of Tribunal Indore Bench in case of Vijay Kumar Rajendrakumar & Co. (supra) it was incumbant on AO to have allowed proper opportunity of being heard before issuing notice for referring matter for special audit under s. 142(2A). For this preposition Hon ble Tribunal relied on decision of Supreme Court in case of C.B. Gautam vs. Union of India (1993) 110 CTR (SC) 179: (1993) 199 ITR 530 (SC). This basic requirement having not been complied with by AO assessment should have been completed in ordinary course by 31st March, 1996. This was not done by him and therefore, for this reason also, order passed by AO is out of date, illegal and bad in law. Sec. 142(2A) requires that reference for special audit can be made only after having regard to nature and complexity of accounts of assessee and interest of Revenue. In this case, as submitted earlier, learned AO did not touch books and other papers illegally seized and illegally retained by him on 30th Dec., 1993 till 9th Oct., 1995. On that day, considering volume of papers seized by him and anyhow to gain time for completion of assessment, he just issued notice under s. 142(2A). Allahabad High Court in case of Swadeshi Cotton Mills Co. Ltd. vs. CIT (1987) 63 CTR (All) 335: (1988) 171 ITR 634 (All) has clearly held that case cannot be referred for special audit on subjective satisfaction of AO. In this case this is exactly what has happened. learned AO without even going through return of total income filed by assessee and other material available with him and also without applying his mind to facts of present case issued notice under s. 142(2A). There was therefore, neither satisfaction of AO nor was case made out by him of complexity in accounts of assessee. Further, not single notice under s. 142(1) was issued after filing of return on 31st Dec., 1993 till 10th April, 1996 but that too after usual limitation period for completion of assessment was over. For all these reasons and as per decisions of various High Courts on this issue in addition to that of Allahabad High Court mentioned above and clear requirement of s. 142(2A), learned AO in garb of seeking protection of extended time allowable under s. 142(2A) issued said notice for special audit, which was patently illegal. Thus, order passed by AO is illegal, bad in law and out of date." learned CIT(A) considering submissions of assessee rejected appeal of assessee on these issues. findings of learned CIT(A) in paras 6 and 7.7 are reproduced as under: "6. matter was discussed with AO who was apprised of decision of Hon ble Madhya Pradesh High Court CIT vs. Dhariwal Sales Enterprises (1997) 137 CTR (MP) 365: (1996) 221 ITR 240 (MP). According to his calculation there is no dispute that date of letter of reference for audit was 9th Oct., 1995 which was served on appellant on 14th Oct., 1995 requiring appellant to file audit report by 31st Oct., 1995 and further time was also extended as per request of appellant upto 15th March, 1996. In meanwhile letter of refusal was filed on 12th March, 1996 and as per interpretation of Hon ble Madhya Pradesh High Court decision period to be excluded would be 14th Oct., 1995 to 12th March, 1996, i.e., in all 150 days, normal time-barring date was 31st March, 1996 and thus period excluded for 150 days must start from 1st April, 1996 and with this calculation time-barring date would be 150 days later than 1st April, 1996 which is 28th Aug., 1996 and since assessment order had been passed and served on appellant on 16th Aug., 1996 order is not nullity or barred by limitation. interpretation of appellant that proviso to s. 142(2A) deals with received by assessee and not referral, therefore, from that reckoning order passed by AO was well before limitation period. I have perused copies of correspondence and it is seen that order authorizing reference under s. 142(2A) of Act was served on appellant on 14th Oct., 1995. Therefore, there is no merit in explanation tendered by learned representative that assessment order has been passed by AO beyond prescribed period. If there was any delay at all it was on account of appellant itself who had been requesting for extension of time and liberally granted by AO therefore, there should not have been any grudge on this count. complexity of appellant cannot be ignored in delayed taking up assessment though within time allowed by statute. Thus, decisions relied on by learned representative are not on all force to facts of case and this ground is rejected. It may be pointed out here that objection taken by appellant that there were no complexity in accounts necessitating special audit under s. 142(2A) and without allowing opportunity of being heard, before reference for special audit it was administrative matter and special audit has been authorized by concerned authority, is without any merit and I decline to interfere in above administrative matter. Next point is against completing assessment order under s. 144 of Act. It is contended that appellant had been making proper compliance in respect of all requirements and last notice issued between 7th Aug., 1996 and 14th Aug., 1996 required lot of compliance and details could be furnished on 16th Aug., 1996. It is rather impossible for AO to go through voluminous papers and get order typed and served on appellant running into about 100 pages. Therefore, natural justice had been denied to appellant insofar as assessment order under s. 144 was concerned for non-compliance of directions issued under s. 142(2A) of Act. If there was any non-compliance it was explainable as all books of accounts were impounded by AO and necessary information could have been gathered from those impounded books of accounts. above argument of learned representative falls flat because appellant had requested for extension of time upto 15th March, 1996 for submitting audit report but in mean time it had filed refusal letter on 15th March, 1996. Therefore, knowing fully well that as per reference for getting audit done under s. 142(2A) details will have to be submitted, appellant deliberately had not submitted details and on unexplainable grounds AO had no alternative but to adhere to time schedule. It is none of business of appellant to have questioned availability of time with AO and staff members who had put in extra labour for completing assessment. If there are limitation matters one has to put in extra effort and AO realizing this had finalised assessment. This ground of appeal is rejected." Learned counsel for assessee reiterated submissions made before authorities below. He has submitted that no opportunity was given to assessee while making reference for special audit under s. 142(2A) and that there is no approval of CIT/Chief CIT to proposed action of AO. reference under s. 142(2A) is therefore invalid and bad in law. He has relied upon decision of Supreme Court in case of Rajesh Kumar & Ors. vs. Dy. CIT & Ors. (2006) 206 CTR (SC) 175: (2006) 287 ITR 91 (SC) in which it was held (headnote); "Assessment Special audit of accounts Nature of direction for special audit Not administrative Is of quasi judicial nature Notice to assessee to be given IT Act, 1961, ss. 136, 142(2A), (3) and 158BC." Learned counsel for assessee further submitted that no audit report was filed because auditor refused to audit accounts which were impounded by Department. He has submitted that Expln. 1(iii) of s. 153 has been amended w.e.f. 1st April, 1997 which is also clarified by CBDT in its Circular No. 2486 (copy filed). He therefore submitted that since assessment year in appeal is 1993-94 therefore, amended, Explanation is not applicable to this case. He has submitted that assessee filed application before AO on 12th March, 1996 intimating that special auditor refused to audit accounts therefore, AO should have passed assessment order within 60 days from 12th March, 1996, however AO has passed order on 16th Aug., 1996 therefore same is barred b y time as provided under s. 153 of IT Act. He has relied upon order of Tribunal, Indore Bench in case of Dy. CIT vs. Laxmi Trading Co. 2 ITJ 266 (Ind) in which it was held (headnote): "Assessment Under s. 153 of IT Act, 1961 Whether assessment barred by limitation of time is valid under law? Held No, direction for audit was issued on 11th March, 1997 and last date for submission of audit report was 12th April, 1997, therefore, assessment should have been completed within 60 days of such last date for submission of report as extended by s. 153(3), i.e., 11th June, 1997 which was beyond time allowed under Act and, therefore, same has been correctly annulled by CIT(A)." Learned counsel for assessee further submitted that there was no need to g e t accounts audited from special auditor because accounts of assessee were not of complex in nature. He has relied upon certain decisions, list of which is filed on record. Learned counsel for assessee further submitted that since books of accounts were already impounded by Department and assessee filed reply time-to-time before AO therefore, ex parte assessment order under s. 144 was not justified. On other hand, learned Departmental Representative relied upon orders of authorities below and submitted that CIT, Bhopal, gave approval under s. 142(2A) vide letter dt. 10th Nov., 1994 (copy filed). Learned Departmental Representative further submitted that AO applied his mind and was of view that accounts of assessee are of complex in nature which require to be audited by special auditor in interest of revenue, therefore, AO proposed to take action under s. 142(2A) which was approved by CIT, Bhopal. Learned Departmental Representative relied upon decision of Allahabad High Court in case of Ghaziabad Urban Co-operative Bank Ltd. vs. Union of India & Ors. (2006) 287 ITR 473 (All) in which it was held "that books of accounts examined and found to be complex. Appointment of special auditor under s. 142(2A) justified". Learned Departmental Representative further submitted that no opportunity is provided to be given to assessee before making reference to special auditor under s. 142(2A) before amendment of Act. Learned Departmental Representative further submitted that according to s. 153(3) r/w Expln. 1 period during which direction to get accounts audited was extended will be excluded for purpose of counting limitation, therefore, AO was entitled to pass order upto 2nd Sept., 1996 while assessment is passed on 16th Aug., 1996, therefore, assessment order was passed within time. Learned Departmental Representative submitted that assessee did not file proper details before AO therefore ex parte assessment order was correctly made. We have considered rival submissions and material on record. Sec. 153 of IT Act as was applicable to assessment year in appeal reads as under: "Time-limit for completion of assessment and reassessments (1) No order of assessment shall be made under s. 143 or s. 144 at any time after expiry of (a) two years from end of assessment year in which income was first assessable; or (b) one year from end of financial year in which return or revised return relating to assessment year commencing on 1st day of April, 1988, or any earlier assessment year, is filed under sub-s. (4) or sub-s. (5) of s. 139, whichever is later. (2) No order of assessment, reassessment or recomputation shall be made under s. 147 after expiry of two years from end of financial year in which notice under s. 148 was served: Provided that where notice under s. 148 was served on or before 31st day of March, 1987, such assessment, reassessment or recomputation may be made at any time upto 31st day of March, 1990. (2A) Notwithstanding anything contained in sub-ss. (1) and (2), in relation to assessment year commencing on 1st day of April, 1971, and any subsequent assessment year, order of fresh assessment under s. 146 or in pursuance of order under s. 250, s. 254, s. 263 or s. 264, setting aside or cancelling assessment, may be made at any time before expiry of two years from end of financial year in which order under s. 146 cancelling assessment is passed by AO or order under s. 250 or s. 254 is received by Chief CIT or CIT or, as case may be, order under s. 263 or s. 264 is passed by Chief CIT or CIT. (3) provisions of sub-ss. (1) and (2) shall not apply to following classes of assessments, reassessments and recomputations which may subject to provisions of sub-s. (2A). be completed at any time (i) where fresh assessment is made under s. 146; (ii) where assessment, reassessment or recomputation is made on assessee or any person in consequence or to give effect to any finding or direction contained in order under s. 250, 254, 260, 262, 263 or 264 (or in order of any Court in proceeding otherwise than by way of appeal or reference under this Act). (iii) where, in case of firm, assessment is made on partner of firm in consequence of assessment made on firm under s. 147. Explanation 1 In computing period of limitation for purposes of this section (i) time taken in reopening whole or any part of proceedings or in giving opportunity to assessee to be reheard under proviso to s. 129, or (ii) period during which assessment proceeding is stayed by order or injunction of any Court, or (iii) period commencing from date on which AO directs assessee to get his accounts audited under sub-s. (2A) of s. 142 and ending with date on which assessee furnishes report of such audit under that sub- section, or (iv) [Omitted by Direct Tax Law (Amendment) Act, 1987, w.e.f. 1st April, 1989]. (iva) period (not exceeding sixty days) commencing from date on which AO received declaration under sub-s. (1) of s. 158A and ending with date on which order under sub-s. (3) of that section is made by him, or (v) in case where application made before Income-tax Settlement Commission under s. 245C is rejected by it or is not allowed to be proceeded with by it, period commencing from date on which such application is made and ending with date on which order under sub-s. (1) of s. 245D is received by CIT under sub-s. (2) of that section, shall be excluded: Provided that where immediately after exclusion of aforesaid time or period, period of limitation referred to in sub-ss. (1), (2) and (2A) available to AO for making order of assessment, reassessment or recomputation, as case may be, is less than sixty days, such remaining period shall be extended to sixty days and aforesaid period of limitation shall be deemed to be extended accordingly. Explanation 2 Where, by order referred to in cl. (ii) of sub-s. (3), any income is excluded from total income of assessee for assessment year shall, for purposes of s. 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order. Explanation 3 Where, by order referred to in cl. (ii) of sub-s. (3), any income is excluded from total income of one person and held to be income of another person, then, assessment of such income on such other person shall, for purposes of s. 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order, provided such other person was given opportunity of being heard before said order was passed." Sec. 142(2A) reads as under: "(2A) If, at any stage of proceedings before him, AO, having regard to nature and complexity of accounts of assessee and interests of Revenue, is of opinion that it is necessary so to do, he may, with previous approval of Chief CIT or CIT, direct assessee to get accounts audited by accountant, as defined in Explanation below sub-s. (2) of s. 288, nominated by Chief CIT or CIT in this behalf and to furnish report of such audit in prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as AO may require." Explanation 1(iii) to s. 153 as is amended w.e.f. 1st April, 1997 reads as under: "The period commencing from date on which AO directs assessee to get his accounts audited under sub-s. (2A) of s. 142 and ending with last date on which assessee is required to furnish report of such audit under that sub-section." Learned counsel for assessee submitted that above provision is applicable from 1st April, 1997 even as per CBDT circular. Copy of same is filed which reads as under: "(2486) Amendment of time-limit of completion of assessments and reassessments [the Finance (No. 2) Act, 1996] Under existing provisions of IT Act, time-limit for making order of assessment is two years from end of assessment year in which income was first assessable. However, in certain circumstances time is extended, or certain periods are excluded from period of limitation. In cases where special audit is ordered, AO is of opinion that, having regard to nature and complexity of accounts of assessee and interests of Revenue, it is necessary so to do, he may, with previous approval of Chief CIT or CIT, direct assessee to get accounts audited by accountant nominated by Chief CIT or CIT in this behalf. assessee is required to furnish report of such audit in prescribed form duly signed and verified by prescribed accountant. In such cases, period commencing from date on which AO directs assessee to get his accounts audited under s. 142(2A) and ending with date on which assessee furnishes report of such audit is excluded while reckoning period of limitation for completion of assessment. As per existing provisions, special audit report is to be submitted within time allowed by AO subject to maximum of 180 days. It has been experience of Department that in few cases where special audit is ordered, assessees do not co-operate with accountant as result of which report is not prepared and, therefore, not furnished. In such cases normal time-limit of two years is operative and AO does not get any additional time for purpose of making assessment because time taken for furnishing audit report is excluded only if report of such audit is furnished. In order to overcome this problem, Finance (No. 2) Act, 1996, provides that period commencing from date on which AO directs assessee to get his accounts audited and ending on date on which report of such audit was required to be furnished, shall be excluded from period of limitation. amendment will take effect from 1st April, 1997, and will, accordingly, apply in relation to asst. yr. 1997-98 and subsequent years. (s. 44)" (Source: Excerpts from Department Circular No. 762, dt. 18th Feb., 1998.) Hon ble Madhya Pradesh High Court in case of CIT vs. Dhariwal Sales Enterprises (supra) has held as under: "The assessee firm s original assessment for asst. yr. 1978-79 was completed on 29th Sept., 1981. On appeal by assessee CIT(A) directed ITO to do assessment de novo. ITO while making assessment de novo invoking s. 142(2A) directed assessee on 30th March, 1985, to get its accounts audited and submit report by 30th June, 1985. This was extended upto 31st Aug., 1985, on assessee s request. But on 21st Aug., 1985, assessee informed ITO that chartered accountant had expressed his inability to finalise audit and therefore, report could not be submitted. Then, assessment was completed by ITO on 3rd Sept., 1985. On appeal before CIT(A), assessee contended that assessment was barred by limitation. CIT(A) negatived assessee s claim but Tribunal accepting same, cancelled assessment order. On reference: Held, that ITO has maximum period specified for obtaining report o f audit upto 180 days under s. 142(2C) as provided in proviso to sub-section. That period stood automatically curtailed when ITO was informed that report was not likely to be received and ITO could have legitimately taken period spent for obtaining copy of report upto time when intimation was given by assessee. assessee s letter regarding non-availability of audit report was received by ITO on 22nd Aug., 1985. Therefore, on that date ITO should have completed assessment. Instead of that he completed assessment on 3rd Sept., 1985. Therefore, assessment was barred by limitation." Learned Departmental Representative produced record before us showing that CIT, Bhopal, approved action of AO under s. 142(2A) vide letter dt. 10th Nov., 1994 therefore, submission of learned counsel for assessee is rejected that there is no approval of CIT as required under s. 142(2A). Learned counsel for assessee also did not produce any material before us to show that accounts of assessee were not of complex in nature. No material is produced before us that AO had not applied his mind before taking action under s. 142(2A) of IT Act. Therefore, contention of learned counsel for assessee is rejected. record further shows that AO issued notice under s. 142(2A) to assessee for audit of accounts by special auditor on 9th Oct., 1995 and directed assessee to get accounts audited from M/s S.S. Deshpande & Co., special auditor and to obtain and furnish said report before him by 31st Oct., 1995. record further revealed that assessee has been making request time-to-time for extension of period of obtaining audit report and AO extended same period and lastly vide order dt. 14th Dec., 1995 extended time to get accounts audited positively by 15th March, 1996 and directed that no further extension of time will be granted. Learned Departmental Representative admitted before us that assessee intimated AO vide letter dt. 12th March, 1996 that special auditor appointed by him intimated that it was not possible for them to start audit in month of March, 1996. Accordingly, audit work will be starting only in month of May, 1996. Learned Departmental Representative submitted that AO did not extend further period for obtaining audit report on receipt of letter dt. 12th March, 1996. It is admitted fact that previous year ended on 31st March, 1993. original time-limit for completion of assessment was upto 31st March, 1996. Learned Departmental Representative referred to brief written submissions of Addl. CIT, Range 5, Indore, dt. 7th Dec., 2004 and submitted that 155 days have to be added, i.e., from 10th Oct., 1995 to 12th March, 1996 after 31st March, 1996 and assessment could be framed upto 2nd Sept., 1996. AO however passed order on 16th Aug., 1996 therefore it was passed within limitation. It is admitted fact that notice under s. 142(2A) for special audit was issued by AO to assessee to furnish report by 31st Oct., 1995. However, time to file special audit report was extended on various dates and ultimately it was directed to file special audit report by 15th March, 1996. assessee intimated AO on 12th March, 1996 that special auditor intimated assessee that it was not possible to start work of audit in March, 1996. assessee therefore requested AO to extend period further, however AO did not extend period. books of accounts were impounded by Department and were not in control of assessee. special auditor was also not in control of assessee because he was appointed by AO on approval of CIT, Bhopal. There is thus no fault of assessee in not filing special audit report on 12th March, 1996. special audit report under s. 142(2A) could be filed within 180 days on date on which direction under s. 142(2A) is received by assessee which date would expire on 11th April, 1996. Sub-cl. (iii) of Expln. 1 to s. 153 as was applicable to asst. yr. 1993-94 under appeal as reproduced above would not be applicable in this case because assessee could not get audit report and as such did not furnish any such report and thus period during which time was extended by AO for special audit would not be available to AO to get extension of period of 150 or 155 days as argued by learned Departmental Representative. assessee intimated AO on 12th March, 1996 that no audit report could be filed because of inability shown by special auditor to file report in March, 1996. In order to overcome this difficulty, s. 153, Expln. 1(iii) was amended accordingly w.e.f. 1st April, 1997 to meet out such situation where audit report is not filed and language of sub-cl. (iii) of Expln. 1 to s. 153 was extended and amended to cases upto last date on which assessee is required to. furnish report of auditor. Such amendment in Expln. 1(iii) is also reproduced above which is not retrospective in nature and is not applicable to assessment year under appeal, i.e., 1993-94. CBDT Circular No. 762, dt. 18th Feb., 1998 explaining above amendment is also reproduced above and would not support findings of authorities below as well as arguments of learned Departmental Representative seeking extension of 155 days as noted above. decision of Hon ble Madhya Pradesh High Court in case of Dhariwal Sales Enterprises (supra) is therefore directly applicable to this case in favour of assessee and against Revenue. Learned counsel for assessee relied upon decision of Tribunal, Indore Bench, in case of Laxmi Trading Co. (supra) and according to said decision at most period of 60 days is allowable to AO from time when AO was intimated that special audit report would not be filed in case. Even if last date given by AO for filing audit report, i.e., 15th March, 1996 is taken and 60 days are added to this date (instead of 12th March, 1996 on day when AO was intimated that no special audit report would be filed by special auditor), last date along with extended period would come to end on 14th May, 1996. However, assessment order is of 16th Aug., 1996 and as such, same is passed beyond period of limitation. reliance of learned CIT(A) on decision of Hon ble Madhya Pradesh High Court in favour of Revenue as referred to above is clearly misplaced because it is in favour of assessee and no time of 150 or 155 days could be extended in this case. arguments of learned Departmental Representative have thus no force and are accordingly rejected because assessment order passed on 16th Aug., 1996 is clearly barred by limitation. It is also admitted fact that no notice under s. 142(2A) as per decision of Hon ble Supreme Court in case of Rajesh Kumar & Ors. (supra) was given to assessee therefore extended period as per s. 142(2A) would not be available to Revenue in continuation of Expln. 1(iii) of s. 153. As discussed above at most if 60 days benefit is given to Revenue as per proviso to Expln. 1 as mentioned above, period is to be counted from 12th March, 1996 and by adding 60 days, limitation would expire on 11th May, 1996. Even if end of month is taken, i.e., 31st May, 1996, by which assessment order shall have to be passed, still order passed on 16th Aug., 1996 is clearly barred by limitation. In view of above discussion and by examining issue from every possible angle, we have no hesitation in holding that assessment order passed by AO on 16th Aug., 1996 is clearly time-barred as per s. 153 of IT Act. Thus, AO is also not justified in passing ex parte assessment order. ground Nos. 1, 2 and 3 in appeal of assessee are accordingly allowed. ground Nos. 1, 2 and 3 in appeal of assessee are accordingly allowed. In view of above finding on ground Nos. 1, 2 and 3.in appeal of assessee, we set aside orders of authorities below and quash same. In view of above findings on question of law, we do not find it necessary to decide remaining grounds on merits in both cross-appeals. As result, appeal of assessee is partly allowed and Departmental appeal is dismissed. *** MAYA SPINNERS LTD. v. DEPUTY COMMISSIONER OF INCOME TAX