Income Tax Appellate Tribunal - Ahmedabad
Shri Gopal Dahyabhai Patel,, Ahmedabad vs Dcit, Central Circle-1(1),, Ahmedabad on 9 August, 2023
आयकर अपीलीय अधिकरण, अहमदाबाद नयायपीी
IN THE INCOME TAX APPELLATE TRIBUNAL,
'' C'' BENCH, AHMEDABAD
BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER
And
SHRI T.R SENTHIL KUMAR, JUDICIAL MEMBER
आयकर अपील सं./IT(SS)A Nos. 01 - 02/AHD/2022
धििाधरण वरध/Asstt. Years: (2014-2015 & 2015-2016)
Shri Gopal Dahyabhai Patel, D.C.I.T,
17/9/b, Vs. Central Circle-4(1),
Devendra Society, Ahmedabad.
Naranpura,
Ahmedabad.
PAN: APZPP0855N
(Applicant) (Respondent)
Assessee by : Shri P.B. Parmar, with
Shri Vijay Govani, A.Rs
Revenue by : Shri Kamlesh Makwana,CIT.D.R
सुिवाई की तारीख/Date of Hearing : 27/07/2023
घोरणा की तारीख /Date of Pronouncement: 09/08/2023
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned two appeals have been filed at the instance of the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad arising in the matter of assessment order passed under s. 143(3) ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 2 r.w.s. 153A of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2014-2015 & 2015-16.
First, we take up IT(SS)A No. 01/AHD/2022 for AY 2014-15, an appeal by the assessee.
2. The assessee has raised the following grounds of appeal:
1. The Ld. CIT (A) has erred on facts and in law in upholding the assessment order passed by the Assessing Officer u/s 143(3) r.w.s 153A(1) of the Income Tax Act, 1961 without providing copy(ies) of search warrant which is the necessary condition for valid assumption of jurisdiction u/s 153A of the Act.
2. The Ld. CIT (A) has erred on facts and in law in upholding the additions made by the Assessing Officer relying on the alleged incriminating material which was neither seized from a place covered by search in the case of appellant nor even alleged to be belonging to the appellant in contravention of the settled law on the scope of assessment u/s 153Aof the Income Tax Act, 1961.
3. The Ld. (A) has erred on facts and in law in upholding the inference drawn by the Assessing Officer that the loose paper found and seized from the Terrace of Crystal Arcade CG Road Ahmedabad represented the alleged unaccounted cash book of Venus Group, that the date of transactions were recorded in the coded form to disguise the relevant date of transactions, that the entries were recorded in such a way that two zero at end of each entry were omitted and that the word 'estimate' had been mentioned against the actual transactions.
4. The Ld. has erred on facts and in law in upholding the various u/s 69Aof the Income Tax Act, 1961 relying on the alleged cash book which was not even alleged to be belonging to the appellant especially in view of the AO own findings that the alleged cash book belonged to Venus group and also without identifying the corresponding asset or investment of expenditure pertaining/relating to the appellant.
5. The Ld. CIT (A) has erred on facts and in law in upholding the addition made by the Assessing Officer on account of alleged unexplained incon received as bonus amounting to Rs. 1,01,000/- without establishing as to who made the alleged payment and without any corroboration or confirmation from the alleged payer.
6. The Assessment Order deserves to be quashed since the same has been passed beyond the limitation prescribed under section 153B of the Act.
7. The appellant craves for liberty to add fresh ground(s) of appeal and also to amend, alter, modify any of the grounds of appeal.
3. The assessee in ground No. 1 has challenged the validity of the assessment framed u/s 143(3) r.w.s. 153A of the Act.
ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 3
4. The Ld. AR before us filed a paper book running from pages 1 to 202 and contended that search in the present case was concluded dated 10/03/2015, whereas assessment order has been framed dated 28/12/2017, after the time limit provided under the provision of section 153B(1) of the Act. As per the Ld. AR, the assessment should have been completed on or before 31/03/2017, i.e. two years from the end of the Financial Year in which the search was concluded. Accordingly, it was pointed out by the Ld. AR that the assessment in dispute is invalid and liable to be quashed.
5. On the other hand, the Ld. DR before us vehemently supported the order of the authorities below.
6. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the ITAT in the own case of the assessee for the A.Y. 2011-12 bearing IT(SS)A No.152/Ahd/2021 with CO No. 02/AHD/2022 has decided the issue in favour of the assessee by observing as under:
11. We have heard the rival contentions of both the parties and perused the materials available on record. The issue before us is limited to the extent whether the search was concluded as on 10th March 2015 being the date of search or as on 07th April 2015 being the date of revocation of prohibitory order under section 132(3) of the Act which was put on one of the bank lockers of the assessee. Accordingly, whether the time limit to pass the assessment order expire as on 31st March 2017 or as on 31st March 2018 as per the provisions of section 153B of the Act i.e. 2 year from the end of financial year in which last of authorization for search under section 132 of the Act was executed. At the outset, we note that issue on hand has been decided by this tribunal in case of key person of the assessee group namely Shri Ashok Sundardas Vasnwani in IT(SS) No 88/Ahd/2019 & others vide order dated 12/11/2020. The Tribunal in the above-mentioned appeal has considered the argument of both the learned AR and DR at length and various case laws referred by them vide paragraph No. 40 to 68 of said order and held that the search was concluded in the month of March 2015. The relevant finding of the coordinate bench of the Tribunal is extracted as under:
50. We have duly considered the rival contentions and gone through the record carefully. Section 153B has a direct bearing on the controversy. Therefore, we take note of the relevant part of this Section.
153B. (1) Notwithstanding anything contained in Section 153, the Assessing Officer shall make an order of assessment or reassessment,--
(a) in respect of each assessment year falling within six assessment years referred to in clause (b) of 81[sub-Section (1) of] ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 4 Section 153A, within a period of two years from the end of the financial year in which the last of the authorisations for search under Section 132 or for requisition under Section 132A was executed;
(b) in respect of the assessment year relevant to the previous year in which search is conducted under Section 132 or requisition is made under Section 132A, within a period of two years from the end of the financial year in which the last of the authorisations for search under Section 132 or for requisition under Section 132A was executed :
(2) The authorisation referred to in clause (a) and clause (b) of sub- Section (1) shall be deemed to have been executed,--
(a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued;
(b) in the case of requisition under Section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer.
51. A bare perusal of Section would reveal that it start with a non obsenate clause " - notwithstanding anything contained in Section 153......" An assessment order has to be passed within two years from the end of the FY in which the last of the authorization for and each under s.132 of the Act was executed or requisition under s.132A is executed. The expression " last of the authorization" has been explained in sub Section (2). The explanation of expression last of the authorization provided in sub Section (2) is identical in Explanation (2) of Section 158BE which read as under:
'Explanation 2.-For the removal of doubts, it is hereby declared that the authorisation referred to in sub-Section (1) shall be deemed to have been executed,-
(a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued ;
(b) in the case of requisition under Section 132A, on the actual receipt of the books of account or other documents or assets by the authorised officer.'
52. In the large number of judgments cited before us by the parties, this provisions under s.158BE Explanation (2) has been explained elaborately and the first judgment we would like to put in service is the judgment of the Hon'ble Karnataka High Court. The relevant discussion in that judgment is contained in para 73 to 75 which reads as under:
73. The second proviso to section 132(1) deals with the "deemed seizure".
When in the course of search, it is not possible to seize for the reasons set out in the aforesaid provisions. It is possible under four circumstances :
(a) where it is not possible or practicable to take physical possession any valuable article or thing ;
(b) remove it to a safe place due to its volume, weight ;
(c) other physical characteristics ; and
(d) due to being its dangers nature.
74. Therefore, the law recognizes such a situation and has provided a remedy to tackle such problems. The authorised officer has been given a ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 5 discretion for the reasons to be recorded in writing to pass a restraint order in respect of the articles, books and other material which he could not take physical possession of, i.e., by making an inventory and leaving it to the custody of the assessee and directing him not to part with the same without his permission.
75. Similarly, in circumstances not covered under those provisions, it is open for him to pass a prohibitory order under sub-section (3) not amounting to seizure which order will be in force for a period of 60 days after securing the possession of the materials, articles, etc., in the aforesaid manner. Action under section 132(3) of the Income-tax Act can be resorted to only if there is any practical difficulty in seizing the item which is liable to be seized. When there is no such practical difficulty the officer is left with no other alternative but to seize the item, if he is of the view that it represented undisclosed income. Power under section 132(1)(iii) of the Income-tax Act thus cannot be exercised, so as to circumvent the provisions of section 132(1)(iii) read with section 132(1)(v) of the Income-tax Act. It is open for the authorised officer to visit the place for the purpose of investigation securing further particulars. Under the scheme, the law provides for such procedure. But not when he visits the premises for further investigation for the materials already secured. It does not amount to search as the materials to be looked into and investigated is already known and is the subject-matter of a prohibitory order or a restraint order. Though it is not seizure or deemed seizure, it amounts to deemed possession. What is in your possession is to be looked into to find out, is there any incriminating material. It does not amount to search as understood under section 132 of the Act. It is only because of paucity of time he has gone back and wants to come back and look into the matter leisurely. There is no provision in the Criminal Procedure Code or in the Income-tax Act or the rules for postponing the search for a long period. Then, the concept of search as understood either under the provisions of the Criminal Procedure Code or the Act which are made applicable expressly, would lose its meaning. If such a course is attracted, it is open to an authorised officer to keep the authorisation in his pocket like a season ticket and go on visiting the premises according to his whims and fancies. It seriously affects the valuable right of the assessee conferred under the Constitution. To keep the affected parties in a suspended animation about the probable continuation of search would be agonising. It is invading the right and freedom of the petitioners for a period more than required or necessary. The orders which are passed under section 132(3) may have a very far-reaching effect on the business of an assessee. The order of restraint may adversely affect the business and, therefore, adequate safeguards are sought to be provided in the Act by the insertion of the provisions of sub-section (8A) in section 132. In order that the restraint order must not be continued indefinitely, sub-
section (8A) of section 132 provides that the restraint order can be continued only if, before the expiry of 60 days, and for reasons to be recorded, the Commissioner grants an extension. The provisions of sub- section (8A) cannot be bypassed or rendered nugatory by revoking an order under section 132(3) and, thereafter, pass another order on the same date. In the nature of things, the search is to be done expeditiously and the undisclosed income is to be unearthed and proceeding has to be initiated against such person and the tax legitimately due to the Government is to be recovered. There cannot be any laxity on the part of ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 6 the authorised officer in this regard. Any other interpretation would run counter to the scheme of search provision under the Act. Therefore, by passing a restraint order, the time limit available for framing of the order cannot be extended. Once an order under section 132(3) has been passed, then the limitation period commences and such order cannot be continued unless and until the provisions of section 132(8A) are satisfied.
53. Though Hon'ble Court has explained the scope of expression " execution of last of authorization" but we are of the view that Hon'ble Court thereafter took cognizance of Explanation (2) inserted by Finance Act, 1997 and we deem it appropriate to take note of the discussion made by the Hon'ble Court from paragraph nos. 78 to 82 which reads as under:
78. The law expressly provides for more than one authorisation. A search authorisation could specify only one building/place/vessel/vehicle/aircraft.
This is clear from the use of the building, etc., in the singular sense. Section 132(1) uses building/place/vessel/vehicle/aircraft in singular sense. Further, clause (a) in Form 45 uses the word, "to enter and search, the said building/place/vessel/vehicle/aircraft. When there are multiple places to search and such places are far off, it is impractical to have a single authorisation. Different persons will be carrying out search and each one of them is required to be authorised through the search authorisation. In other words, search authorisation should authorise a particular official for executing the search. Therefore, when there are different places to be searched, separate search authorisation should be drawn with reference to each place of search. The said authorisations may be issued on different dates in which case, the last of such authorisations is to be looked into for the purpose of limitation. However, it is possible that there may be more than one authorisation on the same day. Then the question is which is the last of such authorisations for the purpose of limitation. When all the authorisations are executed there will be one panchnama in respect of each such authorisation. The authorisations may be executed on different dates also. Then the doubt would arise regarding which authorisation to be looked into for the purpose of limitation as all of them are last authorisation. It is for removal of that doubts that the Explanation is inserted. For the purpose of computing the limitation, it is the one year from the end of the month in which the last of the authorisations was executed. If there are more than one authorisation issued on the same day, then the last panchnama drawn in relation to the warrant of authorisation issued on the same day. As the period commences from the end of the month of the execution of the authorisation, the law has provided for the authorised officer to visit the premises for the purpose of inspection regarding the material which is the subject-matter of prohibitory order or the restraint order, even after search. However, the said exercise has to be done expeditiously, as the period of limitation starts from the date of search was concluded as evidenced by the panchnama, as otherwise the very object with which these provisions was introduced would be defeated.
79. Circular No. 772, dated 23rd December, 1998, issued by Central Board of Direct Taxes explains this position as under ([1999] 235 ITR (St.) 35) :
"According to section 158BE, limitation of 2 years has to be counted from the end of the month in which last of the authorisations was executed. Use of the word 'authorisations' implies issue of more than one authorisation. Supposingly two authorisations are issued one after the ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 7 other and the last authorisation is executed first while the authorisation issued earlier is executed later on. In such case, limitation should be counted from the date of issue of the execution of the last authorisation, though it is executed earlier and not from the execution of the earlier authorisation which is executed later. This anomalous situation is intended to be removed by insertion of Explanation 2 below section 158BE with effect from July 1, 1995, by the Finance (No. 2) Act, 1998. This Explanation reads as follows :
'Explanation 2.-For the removal of doubts, it is hereby declared that the authorisation referred to in sub-section (1) shall be deemed to have been executed,-
(a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued ;
(b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the authorised officer.' According to this Explanation, limitation is to be counted with reference to the last panchnama drawn on execution of a warrant of authorisation as referred to in section 158BE. The main attribute of the panchnama is stated to be that it should record the conclusion of search."
80. The law does not contemplate the authorised officer to set out in any of the panchnama that he has finally concluded the search. If for any reason the authorised officer wants to search the premises again, it could be done by obtaining a fresh authorisation. There is no prohibition in respect of the same premises. It is open to the empowered authority to issue authorisation but when the authorisation is issued once, the authorised officer cannot go on visiting the premises under the guise of search. Therefore, it is clear once in pursuance of an authorisation issued the search commences, it comes to an end with the drawing of a panchnama. When the authorised officer enters the premises, normally, the panchnama is written when he comes out of the premises after completing the job entrusted to him. Even if after such search he visits the premises again, for investigation or inspection of the subject-matter of restraint order or prohibitory order, if a panchnama is written, that would not be the panchnama which has to be looked into for the purpose of computing the period of limitation. But, such a panchnama would only record what transpires on a re-visit to the premises and the incriminating material seized would become part of the search conducted in pursuance of the authorisation and would become the subject-matter of block assessment proceedings. But, such a panchnama would not extend the period of limitation. It is because the limitation is prescribed under the statute. If proceedings are not initiated within the time prescribed, the remedy is lost. The assessee would acquire a valuable right. Such a right cannot be at the mercy of the officials, who do not discharge their duties in accordance with law. The procedure prescribed under section 132 of the Act is elaborate and exhaustive. The said substantive provision expressly provides for search and seizure. In the entire provision there is no indication of that search once commenced can be postponed. What can be postponed is only seizure of the articles. Therefore, once search commences it has to come to an end with the search party leaving the premises whether any seizure is made or not. The limitation for ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 8 completion of block assessment is expressly provided under section 158BE which clearly declares that it is the execution of the last of authorisation which is to be taken into consideration. The word "seizure" is conspicuously missing in the said section. The same cannot be read into the section for the purpose of limitation. Then it amounts to rewriting the section by the court, which is impermissible in law.
81. The aforesaid Circular No. 772, dated December 23, 1998 (see [1999] 235 ITR (St.) 35) refers to this dilemma faced by the Department.
"127. Execution of last of the authorisation or requisition The word 'execute' is defined in Black's Law Dictionary, fifth edition, page 509 as follows :
'to complete ; to make ; to sign ; to perform ; to do ; to carry out according to its terms ; to follow up ; to fulfil the command or purpose of ; to perform all necessary formalities ; to make and sign a contract ; to sign and deliver a notes.' The word 'execution' is defined at page 510 of the said Law Dictionary as follows :
'Carry out some act or course of conduct to its completion. Northwest Steel Rolling Mills v. Commissioner of Internal Revenue, C.C.A. Wash., 110 F.2d 286, 290 : completion of an act : putting into force : completion fulfilment : perfecting of anything or carrying it into operation and effect. "Execution" a process in action to carry into effect the directions in a decree or judgment--Foust v. Foust, 47 Cal. 2d 121, 302 p.2d 11, 13.' In the light of the above definition of the words 'execute' and 'execution', one may argue that until and unless the final act is performed, the warrant of authorisation should not be treated as executed and the mere initiation of the search followed by an interregnum consequent upon restraint order or for any other reason may not be treated as 'execution' of the warrant. But this interpretation would be hypertechnical and it needs detailed discussion as is done in the following paras.
The question arises as to whether execution of a warrant of authorisation or requisition refers to the conclusion of the proceedings under section 132 and/or 132A or it refers only to the execution of the warrant even though as a result of such execution the proceedings under section 132 or 132A are yet to he completed. The latter situation will include a case in which a restraint order under section 132(3) is passed. In such a case, it can be said that though the warrant of authorisation has been executed, proceedings under section 132(3) are pending. Since the word 'execute', also means 'to complete', one has to wait for conclusion of the proceedings under section 132(3) for the purpose of computation of limitation under section 158BE(1) and the period of one year has to be computed from the end of the month in which the proceeding under section 132(3) are concluded. If there are more than one warrant limitation will be counted from the execution of the last one.
A contrary view is as much possible if one were to consider the spirit of the scheme which envisages expeditious disposal of the search cases and it would be reasonable to interpret that execution of warrant is not tantamount to completion of proceedings under section 132 or 132A the period during which the proceedings under section 132(3) remained pending has to be excluded for the purpose of counting limitation of one or two years under section 158BE. Otherwise, it may lead to absurd results ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 9 as it may take several years before restraint under section 132(3) is lifted and it may thus extend the period of one or two years by all those years during which proceedings under section 132(3) remained pending it may be agreed against this view that section 132(8A) takes care that there is no extension of proceedings under section 132(3) and that the view cannot be taken without doing violence to the language of the Act."
82. Therefore, the Explanation added to remove a doubt cannot be construed as a provision providing a longer period of limitation than the one prescribed in the main section. When under the scheme of the section there is no indication of a second search on the basis of the same authorisation issued under the said provision, the legislative intention is clear and plain and the interpretation to be placed by the courts should be in harmony with such an intention. Therefore, one authorisation is to be issued in respect of one premises in pursuance of which there can be only one search and such a search is concluded, when the searching party comes out of the premises, which is evidenced by drawing up a panchnama. When there are multiple places to search and when multiple authorisations are issued, on different dates or on the same date or in respect of the same premises more than one authorisation is issued on different dates, the last panchnama drawn in proof of conclusion of search in respect of the authorisation is to be taken into consideration for the purpose of limitation for block assessment.
Conclusions (1) The Tribunal has got powers to look into all aspects of search and a valid search is sine qua non for initiating block assessment. (2) Materials seized during an invalid search cannot be used in block assessment proceeding but can be used in other assessment proceedings under the Act.
(3) The power to put prohibitory order under section 132(3) is under law but the reasons for doing so has to be recorded in writing and are justiciable.
(4) The period of limitation starts on the date on which the last of authorisation has been executed and not when the authorised officer states that the search is finally concluded. Putting a prohibitory order under section 132(3) does not elongate the starting point of limitation.
54. The Revenue challenged this order before the Hon'ble Supreme Court SLP was admitted but ultimately Civil Appeal was dismissed. The next judgment which has been put in service by both the parties is the judgment of Hon'ble Delhi High court in the case of PCIT vs. PPC Business & Products Pvt. Ltd. In this case, two places were searched one authorization was for the search to be undertaken Pithampura, Delhi and other premise Ashok Vihar, Delhi. In the authorization both the premises were shown to be in possession of the assessee and his brother both being the Directors of the entity including JHM. In respect of the authorization of the search of Ashok Vihar premise of first panchnama dated 22ndMarch, 2007 and the warrant was in the case of assessee's brother i.e. Mr. Sanjay Jain. The search was closed on 22ndMarch, 2007 as temporarily concluded. Second panchnama in relation to authorization of Ashok Vihar premises was prepared on 15thMay 2007 when prohibitory order was lifted. One Neena Jain was the person who has made ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 10 acknowledgement of having received the second panchnama dated 15thMay, 2007 but according to the assessee, the jwellery belonging to Neena Jain at Ashok Vihar premise was valued on 21stMarch, 2007 when the alleged search was temporarily concluded. The case of the assessee was that search was concluded on 22ndMarch, 2007 when panchnama was prepared and restrain order was passed. The case of the Revenue, on the other hand, was that limitation for passing the assessment order is to be seen from the date when prohibitory order was lifted and second panchnama was drawn. The ITAT has held that assessment orders were time barred. Hon'ble Delhi High Court considered the judgment of Hon'ble Karnataka High Court in the case of C. Ramy Reddi also considered the Explanation (2a) to Section 158BE and observed that this Explanation (2a) is pare materia with sub-Section (2a) of Section 153B. The Hon'ble Court put reliance upon the judgment of C. Ramya Reddi and upheld the order of the ITAT.
55. The much reliance placed by the learned CITDR on the judgment of the Hon'ble Supreme Court in the case of VLS Finance Ltd. We deem it appropriate to take note of the following observations of the Hon'ble Supreme Court from this judgment on which emphasizes was put by the learned CITDR.
"27. We may point out that the appellants never challenged subsequent visits and searches of their premises by the respondents on the ground that in the absence of a fresh authorisation those searches were illegal, null and void. Notwithstanding the same, it was argued that at least for the purpose of limitation the subsequent searches could not be taken into consideration, as according to the learned counsel, the legal position was that the authorisation dated 19th June, 1998, was executed on 22nd June, 1998 and the search came to an end with that when the search party left the premises on 23rd June, 1998 after making seizure of certain documents etc and issuing restraint order under Section 132(3) of the Act in respect of certain items which they allegedly could not seize due to impracticability on that day. Some judgments of various High Courts are relied upon to support this proposition. It was also argued that there was no concept of 'revalidation of authorisation' provided under the Act, which has been applied by the High Court in the impugned judgment, which according to the learned counsel for the appellants, amounts to legislating a new concept which is contrary to law."
56. The learned counsel for the assessee submitted that in this case Hon'ble Supreme Court has not interpreted the scope of Section 153B(2) or scope of Explanation (2) to Section 158BE though attention of the Hon'ble Supreme Court was drawn by the Addl. Solicitor General from the Explanation (2) of Section 158BE but in paragraph no.29, Hon'ble Supreme Court had specifically observed that without going into legal niecety. Thus according to the learned counsel for the assessee, it is the judgment on the facts of that case. This aspect has been considered by the Hon'ble Delhi High Court in the case of CIT vs. S. K. Katiyal. In this case also, an identical issue came up before the Hon'ble Delhi High Court and Hon'ble Court has considered the judgement of Bombay High Court in the case of Sandhya P. Naik, Kerala High Court in Dr. C. Balakrishnan Nair &hon'ble Karnataka High Court in , C. Ramaiah Reddy, while dealing with its earlier decision in the case of VLS Finance. The Hon'ble Court made following observations:
"30. The decision in VLS Finance (supra) also rests on a factual basis which is different from that of the present appeal. First of all, VLS Finance (supra) is a decision rendered in a writ petition under article 226 of the Constitution of India. In exercise of its writ jurisdiction a High Court decides cases on the basis of affidavits. It is open to the High Court to ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 11 arrive at conclusions of fact (as well as of law) based upon the affidavits.
The present case is an appeal from the order of the Tribunal, which is the final fact finding authority under the Income Tax regime. The facts, as determined by the Tribunal, unless they are held to be perverse, form the basis of the substantial questions of law which are to be determined by High Court's in appeals under Section 260A of the said Act. It ought to be remembered that the Tribunal was of the view that the search and seizure, in the present case, was completed on 17.11.2000. The Tribunal also held that the panchnama of 03.01.2001 was ―merely a release orderǁ. Secondly, in VLS Finance (supra), the search and seizure operations commenced on 22.06.1998 and continued till 05.08.1998. As many as 16 panchnamas were drawn upon in respect of the visits made to the assessee's premises. There was a mass of documents which were searched and seized from time to time. The court found that the search concluded on 05.08.1998 and not on 22.06.1998. The court also found that the search was also not unduly prolonged. The court held:-
"Consequently, we are of the opinion that the respondents did not complete the search on 22-6-1998, as alleged by the petitioners, nor did they unduly prolong it. The search concluded on 5-8-1998, and so in terms of Explanation 2 to Section 158BE of the Act the period of limitation would begin from the end of August, 1998, that is, 31-8-1998 onwards..." (p. 297)
31. The factual basis of the decision in VLS Finance (supra) is entirely different to that of the present case. On law, there is nothing in VLS Finance (supra) which contradicts what we have explained above. If the search concluded on 5-8-1998, as held by the court, and the panchnama of that date was the last of the string of 16 panchnamas, obviously this would be the date on which the search was concluded and the date on which the warrant of authorization for search was executed. But, in the present appeal, no search whatsoever was conducted on 03.01.2001. Hence, the panchnama drawn up on 3-1-2001 cannot be regarded as a document evidencing the conclusion of a search. If that be so, 3-1-2001 cannot be regarded as the date on which the warrant of authorization was executed. Moreover, while in VLS Finance (supra), the court held that the search was not unduly prolonged, in the present case the gap between 17-11-2000 and 3-1-2001 is unexplained."
57. In other words, the Hon'ble Delhi High Court did not accept the contention of VLS Finance and dismissed its writ petition. The decision of Hon'ble Delhi High Court was taken up to the Hon'le Supreme Court and Hon'ble Supreme Court affirmed the Delhi High Court. The Hon'ble Delhi High Court while dealing with this point was of the view that proposition in VLS Finance based on its facts is altogether different.
58. The next decision which was relied upon by the learned counsel for the assessee is the third member decision in the case of Nandlal M. Gandhi vs. ACIT 115 ITD 1. The facts in this case are that a search and seizure operation was carried out under s.132 of the Act at the residential premises of the assessee on 28th July, 1997 and continued till 02:30 a.m. on 29th July, 1997. During the said search, certain incriminating materials which inter alia included jwellery and shares, were found and the search party prepared an inventory in respect of search material as per para 5 of the panchnama only books of accounts and documents as per Annexure 'A' were seized and no seizure was affected in respect of other materials found during the course of search including jewellery and shares. In para ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 12 8 of the panchnama, it was stated that the search was temporarily concluded for the day to be commended subsequently. However, prohibitory order was issued under s.132(3) in respect of jewellery and shares found from the cupboard kept in the bed room of assessee's son Shri Bakul N. Gandhi. The prohibitory order issued under s.132(3) of the Act in respect of jewellery therefore lifted on 1st August, 1997 at 04:00 p.m. while prohibitory order in respect of share certificates was lifted on 08th September, 1997. On 08th September, 1997, another panchnama was prepared wherein it was stated the search is finally concluded and no other comments/remarks were recorded therein. The dispute arose whether it is to be construed that search was concluded on 28th July 1997 or it was concluded on 08th September, 1997. The period of two years from the end of the month in which warrant of authorization of search was executed was required to be computed. The bench who heard the matter had divided in its opinion. The hon'ble Judicial Member has assigned four reasons for concluding that the subsequent panchnama is not a valid panchnama for computing the limitation because there is no search carried out in September 1997 but the panchnama is prepared and this panchnama cannot be treated as a panchnama for the purpose of Section 158BE read with Explanation (2). The hon'ble Accountant Member did not concur with and treated the second panchnama valid for computing the limitation. The dispute referred to the third member for his opinion and the question formulated 602 the third member was;
"Whether in the facts and circumstances of the case, the order under s.158BC made by the AO is time barred within the meaning of Section 158BE of the Act.?"
59. The third member has taken into consideration the judgment of Hon'ble Bombay High Court in the case of Sandhya P. Naik and Hon'ble Kerala High Court in case of Dr. C Balakrishnan Nair. The Hon'ble third member concur with the Judicial Member and held that issue in dispute is covered by the decision of hon'ble Bombay High Court in the case of Sandhya P. Naik and it is to be construed that the search was concluded on 29th July 1997 and not from the date when panchnama was prepared while revoking the prohibitory order. The hon'ble Bombay High Court in the case of Sandhya P. Naik while explaining the scope of Section 132(3) has observed that passing restraint order under Section 132(3), the time limit available for assessment cannot be extended. The other decisions referred by the learned counsel for the assessee are also to this effect, in the case of PPC Business hon'ble Delhi High Court has categorically observed that when nothing was recovered while revoking the prohibitory order there cannot give rise to second panchnama. The Hon'ble Court in paragraph 26 of the judgment recorded that when nothing new for being seized was found then there would be no occasion to draw up a panchnama at all. It has been demonstrated before us that in the case of Ashok Sundardas Vasvani nothing was recovered when prohibitory order was lifted.
60. The relevant extract of the judgment of Hon'ble Kerala High court in the case of Dr. C Balakrishnan Nair v CIT reported in 237 ITR 70 reads as under:
10. From Ext.P3 second Panchanama dated 10-11-1995 seven items, books of account and other valuable articles were seized. These articles which were available on 27-10-1995 were put in an almirah, according to the 2nd respondent, and sealed since scrutiny could not be completed during the search and investigation and prohibitory order under Section 132 was served on the petitioners. Sub-Section (3) of Section 132 empowers the authorised officer to pass an order on the owner that he shall not remove, part with or otherwise deal with articles and books of ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 13 account, etc., except with the previous permission of the officer. But this can be served only if it is not practicable to seize any such books of account, other documents, etc. It is not stated as to why the books of account, documents, etc., was not practicable to be seized on 27-10-1995.
The 2nd respondent had collected the listed documents from the premises and has put them in the almirah and sealed it. In the absence of any satisfactory explanation as to why the books of account, pass book and the documents were not practicable to be seized on 27-10-1995 itself, it is a case of contravention of sub-Section (3) of Section 132. The number of documents, pass book and the jewellery found and ultimately seized were few in number and the statement that the scrutiny could not be completed, nor practicable to seize, is impossible to accept on the face of it. It is in this context the allegation made against the second respondent that he carried away certain documents in his bag unauthorisedly on 27-10-1995 and brought them back on 10-11-1995 assumes significance. However, the action of the search party headed by the second respondent in collecting the documents and various items from different parts of the premises and again putting them in the almirah in the bed room of the first floor of the residential premises is unreasonable and no provision is relied on for such a cause of action. Rule 112(4C) of the Income-tax Rules, 1962 empowers the authorised officer to serve an order on the owner that he shall not remove, part with or otherwise deal with it except with the previous permission only in cases where it is not practicable to seize the article or thing or any books of account or document. Therefore, the action of the second respondent and his members in dumping the documents, etc., seized in the almirah cannot be supported, but violates the mandatory requirement.
61. Likewise, the Hon'ble Bombay High Court in the case of CIT v. Sandhya P. Naik [2002] 124 Taxman 384 (Bom.)has observed that where a search party seized and removed from the premises of the assessee 5,729 gms. of gold ornaments, cash of Rs. 1,69,000 and books of account weighing nearly 500 kgs, then argument of the department that 45 kg. of silver ornaments had to be placed under PO due to their weight was not found tenable by the Tribunal and confirmed by the High Court as no impracticability was visualized in nonseizure of 45 kg. of silver ornaments.
62. Now coming to the case on hand, we find that on the revocation of the prohibitory orders, the search team has seized only 277 pages which was very much possible to seize them during the search proceedings which were concluded on 13thMarch 2015. The search team has to justify in the order passed under Section 132(3) of the Act that books/documents/valuables are not practicable to seize along with the reasons other than those mentioned in second proviso to Section 132(1).
63. A situation also arises where the authorised officers impose PO considering that the goods found in the search are not practicable to seize. On the subsequent visit, PO is revoked leading to inference that they consider that goods are now practicable to seize. But the authorised officer has not brought anythingon record describing in the Panchnama or in the revocation order how it has become practicable to seize the documents.
64. In fact we are of the view that the conditions imposed under Section 132(3) of the Act for passing the prohibitory orders were not complied with. Accordingly, these orders passed under Section 132(3) of the Act have no validity in the eyes of law.
ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 14
65. Once the prohibitory orders in the case on hand has been held as invalid then the search concluded in the month of March 2015 shall be taken as the base for calculating the period of passing the assessment order as provided under Section 153B of the Act. In other words the time limit in the case on hand expires for passing the order as on 31 March 2017. Therefore, in the present case the orders have been framed beyond the time prescribed under the provisions of law.
12. Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside/stayed or overruled by the Higher Judicial Authorities. Thus, respectfully following the order of the tribunal in the group case of the assessee as discussed above, we hold that the search was concluded as on 10th March 2015 and accordingly, the time limit to complete the assessment under section 143(3) r.w.s. 153A of the Act expire as on 31st March 2017. Hence, the order passed as on 28th December 2017 is invalid due to limitation of time and we hereby quash the same.
13. Since, we have decided the technical ground and quashed the assessment being invalid due to limitation of time as discussed above, we are not inclined to decide the issues on other technical ground raised by the assessee in the captioned CO as well the issues raised by the Revenue on merit in IT(SS)A No. 152/Ahd/2021. Accordingly, we dismiss the grounds of other objection raised by the assessee and the issues raised by the Revenue on merit as infructuous.
14. In the result, the CO of the assessee is partly allowed whereas the appeal of the Revenue is dismissed as infructuous.
6.1 Before us, no material has been placed on record by the Revenue to demonstrate anything contrary to the decision as discussed above. Likewise, before us, the Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the case cited above nor has placed any contrary binding decision in his support. Thus, respectfully following the above finding, we hereby allow the ground of appeal of the assessee.
6.2 As the assessee succeeds on the technical ground, we refrain ourselves from giving any finding on the grounds raised on merits. As such the grounds raised on merit by the assessee become infructuous and therefore, we dismissed the same.
6.3 In the result, appeal of the assessee is partly allowed.
ITA nos.01-02/AHD/2022 A.Y. 2014-15 & 2015-16 15 Coming to IT(SS)A No. 02/Ahd/2022 for AY 2015-16, an appeal by the assessee.
7. At the outset, we note that the issues raised by the assessee in its grounds of appeal for the A.Y 2015-16 are identical to the issues raised by the assessee in IT(SS)A No. 01/AHD/2022 for the assessment year 2014-15. Therefore, the findings given in IT(SS)A No. 01/AHD/2022 shall also be applicable for the year under consideration i.e. AY 2015-16. The appeal of the assessee for the assessment 2014-15 has been decided by us vide paragraph No. 6 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2014-15 shall also be applied for the year under consideration i.e. AY 2015-16. Hence, the grounds of appeal filed by the assessee are hereby partly allowed.
7.1 In the result, the appeal of the assessee is partly allowed.
8. In the combined results, both the appeals of the assessee are partly allowed.
Order pronounced in the Court on 09/08/2023 at Ahmedabad.
Sd/- Sd/-
(T.R SENTHIL KUMAR) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
(True Copy)
Ahmedabad; Dated 09/08/2023
Manish