Income Tax Appellate Tribunal - Bangalore
T. Krishna Murthy , Bangalore vs Assessee on 11 January, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH : BANGALORE
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER
IT(SS)A No.78/Bang/2002
Assessment year : Block A.Y. 1987-88 to 1997-98
Late Shri T. Krishnamurthy, Vs. The Deputy Commissioner of
L/R by Smt. N. Shashikala, Income Tax (INV.),
No.54, Timber Yard Layout, Company Circle IV(1),
Mysore Road, Bangalore.
Bangalore.
PAN/GIR : K-1
APPELLANT RESPONDENT
IT(SS)A No.1/Bang/2010
Assessment year : Block period 01.04.1986 to 27.04.1997
Late Shri T. Krishnamurthy, Vs. The Deputy Commissioner of
L/R by Smt. N. Shashikala, Income Tax ,
No.54, Timber Yard Layout, Circle 2(1),
Mysore Road, Bangalore.
Bangalore.
PAN/GIR : K-1
APPELLANT RESPONDENT
IT(SS)A Nos.78/Bang/02 &
01 & 02/Bang/10
Page 2 of 8
IT(SS)A No.2/Bang/2010
Assessment year : Block period 01.04.1986 to 27.04.1997
The Deputy Commissioner of Vs. Late Shri T. Krishnamurthy,
Income Tax , L/R by Smt. N. Shashikala,
Circle 2(1), No.54, Timber Yard Layout,
Bangalore. Mysore Road,
Bangalore.
PAN/GIR : K-1
APPELLANT RESPONDENT
Assessee by : Shri A. Shankar, Advocate
Revenue by : Shri Smt. Archana Chowdhry, CIT-II(DR)
Date of hearing : 11.01.2012
Date of Pronouncement : 20.01.2012
ORDER
Per Bench The appeal in IT(SS)A No.78/Bang/2002 by the assessee is directed against the order dated 22.02.2002 of the CIT(Appeals)-II, Bangalore, while the cross appeals by the assessee and the department in IT(SS)A Nos. 1 & 2/Bang/2010 are directed against the order dated 12.10.2009 of the CIT(Appeals)-I, Bangalore.
2. The appeal by the assessee in IT(SS)A No.78/Bang/2002 was earlier disposed of by this Bench of the Tribunal vide order dated 08.03.2005, while disposing of the appeal on various issues raised by the IT(SS)A Nos.78/Bang/02 & 01 & 02/Bang/10 Page 3 of 8 assessee on the merits, the case was set aside to the Assessing Officer. However, no findings were given on the legal issue relating to the limitation. Against the said order of the Tribunal, the assessee preferred an appeal to the Hon'ble jurisdictional High Court in ITA No.2828/2005, wherein vide order dated 12.4.2010 a direction has been given to the I.T.A.T. to consider the question of limitation i.e., to consider whether the order of assessment was within time or not. To comply with the said direction of the Hon'ble jurisdictional High Court , the appeal in the case in IT(SS)A 78/Bang/2002 for the block A.Y. 1987-88 to 1997-98 was fixed.
3. During the course of hearing, the ld. counsel for the assessee at the very outset stated that the block assessment framed by the Assessing Officer was barred by limitation since the warrant of authorisation was issued on 13.02.1997 and panchanama was drawn on the said date. Therefore the assessment should have been framed on or before 28.02.1999, whereas in this case the assessment has been framed by the AO u/s. 158BC of the Income-tax Act, 1961 [hereinafter referred to as "the Act" in short"] on 26.04.1999, which was beyond the time limit prescribed, hence the assessment framed was void ab initio. Reliance was placed on the judgment of Hon'ble jurisdictional High Court in the case of C. Ramaiah Reddy v. ACIT [2011] 339 ITR 210.
4. In her rival submissions, the ld. CIT(DR) strongly supported the order of the authorities below and further submitted that the date of limitation should be taken from the last panchanama drawn as provided in Explanation 2(a) to section 158BE of the Act. It was further submitted that the last panchanama was drawn on 27.04.1999, therefore the assessment IT(SS)A Nos.78/Bang/02 & 01 & 02/Bang/10 Page 4 of 8 framed on 26.04.1999 was within time limit prescribed in section 158BE(1)(b) of the Act. She submitted that the ld. CIT(Appeals) was fully justified in holding that the assessment framed was within the time.
5. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is an admitted fact that the warrant of authorisation dated 13.02.1997 was issued and search commenced on the same day i.e., 13.02.1997 at 5.30 P.M. which was closed at 11.45 P.M. on the same day and panchanama was drawn, that search was temporarily concluded. Again search took placed on 27.02.1997 in continuation of earlier search dated 13.02.1997, that was also temporarily concluded. Thereafter, on 01.03.1997, the search again took place which was also temporarily concluded, finally the search was concluded on 27.04.1997 and final panchanama was drawn, copy of which is placed at page 11 of the assessee's paperbook filed on 20.12.2011. In the said panchanama at para 9, it is mentioned that warrant of authorisation dated 13.02.1997 was issued u/s. 132 of the Act, therefore it is clear that the search took place on the basis of warrant of authorisation dated 13.02.1997, apart from the aforesaid warrant of authorisation, no other warrant of authorisation was issued. Recently the Hon'ble jurisdictional High Court settled a similar controversy in the case of C. Ramaiah Reddy v. ACIT [2011] 339 ITR 210 wherein it has been held as under:
" Materials seized during an invalid search cannot be used in block assessment proceedings but can be used in other assessment proceedings under the Act.
IT(SS)A Nos.78/Bang/02 & 01 & 02/Bang/10 Page 5 of 8 The income-tax authorities have power to make a prohibitory order under section 132(3) but the reasons for doing so have to be recorded in writing and are justiciable.
Section 158BE of the Act prescribes the time limit for completion of block assessment. According to the section, the period of limitation is within one year from the end of the month in which the last of the authorisation for search under section 132 was executed. A doubt may arise regarding the commencement of the day from which limitation is to be computed. In order to remove the doubt an Explanation was added by the Finance (No.2) Act, 1998, with retrospective effect from July 1, 1995. The expression used is "last panchnama" and not "last of the panchnama". Therefore, there cannot be a plurality of panchnamas in respect of the authorisation. This intention could be gathered from the word "last of the authorisation" used in the main section. The word used is "panchnama" and not "panchnamas". The panchnama that is mentioned in Explanation 2(a) to section 158BE is a panchnama which documents the conclusion of a search. The starting point of limitation is the "end of the month" in which the last of the authorisations is executed as recorded in the last panchnama.
The authorised officer has been given a discretion for 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 them in the custody of the assessee and directing him not to part with them without his permission. 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.
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, the limitation period commences. The period of limitation starts on the date on which the last of authorisations has been executed and not when the authorised officer states that the search is finally concluded. Making a prohibitory order under section 132(3) does not extend the starting point of limitation."
IT(SS)A Nos.78/Bang/02 & 01 & 02/Bang/10 Page 6 of 8
6. In the present case, the search u/s. 132 of the Act took place on 13.02.1997 on the basis of warrant of authorisation dated 13.02.1997 and panchanama was drawn. The Authorised Officer in view of discretionary powers given to him, passed prohibitory orders on different dates and the search was suspended from 13.02.1997 to 27.02.1997, from 27.02.1997 to 01.03.1997 and ultimately from 01.03.1997 to 27.04.1997 i.e., the date on which the search was concluded. Various panchanamas were drawn on 13.02.1997, 27.02.1997, 01.03.1997 and 27.04.1997. But the date on which the last of authorisation has been executed was 13.02.1997, therefore, by keeping in view the ratio laid down by the Hon'ble jurisdictional High Court in the case of C. Ramaiah Reddy. v. ACIT (supra), the said date i.e., 13.02.1997 is to be taken into consideration to determine the period of limitation and not the date i.e., 27.04.1997 i.e., the date on which search was finally concluded. In the present case, although the Authorised Officer made prohibitory orders u/s. 132(3) of the Act on various dates, but those were not sufficient to extend the period of limitation. In view of the above discussion, we are of the opinion that in the present case, the period of limitation started on 13.02.1997 i.e., the date on which the last of the authorisation had been executed and as per the provisions contained in section 158BE(1)(b) of the Act, the order u/s. 158BC in the instant case should have been passed on or before 28.02.1999, however the order has been passed by the Assessing Officer on 26.04.1999, therefore the assessment order passed by the AO was beyond the time prescribed u/s. 158BE(1)(b) of the Act. We, therefore, considering the IT(SS)A Nos.78/Bang/02 & 01 & 02/Bang/10 Page 7 of 8 totality of the facts and keeping in view the ratio laid down by the Hon'ble jurisdictional High Court in the case of C. Ramaiah Reddy v. ACIT [2011] 339 ITR 210 (Karn) (supra), are of the view that the assessment order passed by the AO was beyond the time limit prescribed in section 158BE(1)(b) of the Act to pass such order. Accordingly, the said block assessment order dated 26.04.1999 being barred by limitation is quashed.
7. The other cross appeals i.e. in IT(SS)A Nos. 1 & 2/Bang/2010 by the department and the assessee are on merits and are outcome of the directions given to the AO by the ITAT "B" Bench, Bangalore vide order dated 08.03.2005 to decide the various issues on merit which were restored to his file. Since we have quashed the original block assessment order dated 26.04.1999, so these cross appeals in IT(SS)A Nos. 1 & 2/Bang/2010 become infructuous, so these are dismissed as infructuous.
8. In the result, the appeal of the assessee in IT(SS)A No.78/Bang/2002 is allowed as discussed above, while the appeal by the assessee in IT(SS)A No. 1/Bang/2010 and the department in IT(SS)A No. 2/Bang/2010 are dismissed as infructuous.
Pronounced in the open court on this 20th day of January, 2012.
Sd/- Sd/-
( GEORGE GEORGE K. ) ( N.K. SAINI )
Judicial Member Accountant Member
Bangalore,
Dated, the 20th January, 2012.
Ds/-
IT(SS)A Nos.78/Bang/02 &
01 & 02/Bang/10
Page 8 of 8
Copy to:
1. Assessee
2. Revenue
3. CIT
4. CIT(A)
5. DR, ITAT, Bangalore.
6. Guard file (1+1)
By order
Assistant Registrar
ITAT, Bangalore.