Income Tax Appellate Tribunal - Mumbai
Mr. Shahrukh Khan vs Acit on 29 June, 2006
Equivalent citations: [2007]290ITR143(MUM), (2007)107TTJ(MUM)252
ORDER
Salil Kapoor, Judicial Member
1. This appeal filed by the assessee is directed against assessment order passed Under Section158BC r.w.s. 144 dated 23.01.1998.
2. The first ground of the assessee is that the block assessment order was passed beyond the time permitted by law and the same was time barred and hence illegal and invalid.
3. The brief facts, as stated and as borne from records are that a search had taken place at the residence cum office No. 702-A, 7th Floor, Amrit Bldg., Cater Road, Bandra (W), Mumbai on 18.12.1996 and continued till 19.12.1996. As per copy of F.No.45 (Authorisation warrant) filed by ld. CIT DR the search had taken place in lieu of the warrant of authorization dated 17.12.1996. Certain papers, files etc. were seized. Locker keys of locker No. 1719 of Hongkong Bank and No. 1415 of Grindlays Bank were also seized and Panchanama was drawn on 19.12.1996 (copy of the Panchanama is placed at DR's Paper book Page 1 & 2). It was mentioned in the panchanma that the search has been temporarily concluded.
4. Two warrants of authorization (as per copies filed by CIT DR) were issued on 23.12.1996 with regard to each of the said lockers for which the keys were seized on 19.12.1996. Locker No. 1719 of Hongkong Bank was searched on 23.12.1996 which was found to be empty and Panchanama was drawn on that date which mention that the search was finally concluded. The copy of the said Panchanama is at page 3 & 4 of the Revenue's paper book. Locker No. 1415 of Greendlays Bank was also searched on 23.12.1996 where jewellery worth Rs. 6.99 lakhs was found inventory was prepared and Valuation was done. Panchanama was drawn on 23.12.1996 and the same is placed in the paper book of the DR at page 5 & 6. It was mentioned in the said Panchanama that the search is finally concluded.
5. The jewellery found at locker No. 1415 was brought to said residence on 23.12.1996 and was placed in an Alimirah in the bedroom and P.O. was clamped which is at page 99 of the assessee's paper book. A Panchanama was prepared to the said effect on 23.12.1996 at residence which is placed at DR's paper book 7 & 8. A statement of the assessee Under Section 132(4) was recorded on 23.12.1996 and question was asked to the assessee to explain the source of jewellery. In reply to the said question the assessee had stated that most of the jewellery was gift from wife's parents and some jewellery have been purchased after 31.03.1996 and sought some time to produce the purchase bill. (Copy of said statement is at page 23 to 28 of DR's paper book). There is no mention of said statement in the Panchnama prepared at residence on 23.12.1996
6. On 10.01.1997 another statement of the assessee was recorded Under Section 131 and at that time no question was asked with regard to the jewellery.
7. On 30.01.1997 the search party again visited the residence-cum-office of the assessee and lifted the P.O. and released jewellery. Statement of the assessee was recorded, in which he stated that he has produced the purchase bills of jewellery of Rs. 1,50,000/- and the balance jewellery is gifts from friends and relatives and fans on various occasions and some of the jewellery belongs to his late mother. However, he requested the search party not to seize the jewellery and voluntarily offered Rs. 4 lakhs as income on account of jewellery over and above his earlier offer of Rs. 20 lakhs. The copy of the statement are at page 45 of the DR's paper book. Panchanama was drawn on 30th January 1997 and it was mentioned that the search was finally concluded. Copy of the said Panchanama is at page 9 & 10 of the paper book of ld. DR.
8. The assessment has been completed vide order dated 23.01.1998. The main plea of the assessee is that the time limitation for the purpose of Section 158BE starts form 23.12.1996 and the block assessment order could have been passed on or before 31.12.1997 as per the provisions of Section 158 BE(1)(a) i.e. within one year form the end of the month in which last of the authorization of search Under Section 132 was executed. Accordingly the block assessment order passed on 23.12.1998 was barred by the time limitation. Whereas the plea of the Revenue is that the time limitation will start form 30.01.1997 and the assessment order passed on 23.01.1998 is within the time provided Under Section158BE(1)(a).
9. The ld. Counsel for the assessee Shri Hiro Rai has raised various arguments in support of his claim that the assessment was barred by the time limitation.
9.1 The first argument raised by ld. Counsel is that the clamping of P.O. on 23.12.1996 was not valid as such the search was concluded on that day itself. The jewellery in one of the lockers was worth Rs. 6.99 lakhs and the total jewellery kept under PO, including the jewellery found at Rsidence was Rs. 8.67 lakhs. There was no justification for imposing PO for such small amount of jewellery keeping in view the status of the family and CBDT's instructions with regard to seizure of jewellery during search. For this proposition he relied on the decision of CIT v. Mrs. Sandhya P. Naik reported in 253 ITR 534 (Bom.). He further stated that decision of Special Bench in the case of the C. Ramaiah Reddy 87 ITD 439 (Bang.) (SB) is not binding on the Tribunal sitting at Mumbai. The Mumbai Benches had to follow the decision of Mrs. Sandhya P. Naik as the same being of the jurisdictional High Court. He further stated that the matter had gone in appeal before Hon'ble Bombay High Court in the case of Sandhya Naik and the matter was adjudicated in favour of the assessee. He stated that if the matter can be decided in appeal by the Bombay High Court then the Tribunal should also look into the legality of the PO in appeal filed under the statute. He also submitted that this aspect was never looked into by the SB in the case of C. Ramaiah Reddy.
9.2. The second argument raised by the ld. Counsel for the assessee is that no seizure was made on 30.01.1997 and as such the panchanama dated 30.1.1997 was invalid, hence the time for the purpose of limitation shall start from 23.12.1996. For this proposition he placed reliance in the case of Sarb Consolate Marine Products v. ACIT 97 ITD 333 (Del.) 9.3. The third argument of the ld. Counsel is that no search had taken place on 30.01.1997 and as such the search was completed on 23.12.1996 when the jewellery was listed and valued. The search was complete on 23.12.1996 as on 30.01.1997 only P.O. was lifted and jewellery was released. No search proceeding were undertaken as on 31.01.1997. For this proposition he mainly relied on the following case law:
i) DCIT v. Adolf Patric Pinto -IT(SS)A. No. 215/Mum/01
ii) Neena Wadhwa v. DCIT -128 Taxman 149 (Del.)
iii) M. Sivarama Krishmaiah -93 TTJ 1035 (Vish.) & Co. v. ACIT 9.4 The fourth arguments is that as per Section 158BE(1) the assessment order could be passed within one year form the end of the month in which the last of the authorization for search was executed. In this case the last of the authorizations was dated 23.12.1996 and the said authorization was executed on the same day at the Grindlays Bank and it was stated in the panchanama prepared that the search was finally concluded. He further stated that the explanation-2 of Section 158 BE also relates to the authorization referred in Sub-section (1). There were three authorization issued in the case of the assessee. The first authorization was issued on 17.12.1996 in respect of the residence-cum-office of the company and the second and third authorization were issued on 23.12.1996 with respect to the two lockers of the assessee. Both the authorizations dated 23.12.1996 were executed on the same day and the same is clear form the panchanamas prepared whereas the panchnama dated 30.01.1997 was with reference to first authorization i.e. dated 17.12.1996. As such it is clear from the facts of this case that last of the authorizations i.e. authorization dated 23.12.1996 was executed on that very day hence the time limitation for the purpose of Section 158BE(1) would start form 23.12.1996.
10. The learned CIT DR Girish Dave vehemently opposed the arguments of the ld. Counsel for the assessee and stated that the action of imposing P.O. Under Section 132(3) is an administrative action. It is the discretion of the Authorized Officer whether to seize any valuable or to impose the PO Under Section 132(3) which is an administrative action. Such administrative action of the Assessing Officer cannot be subject matter of appeal before the Tribunal and it is beyond the purview of the Tribunal to adjudicate on the validity of such PO. He relied on the decision of SB in the case of C. Ramaiah Reddy, supra, and also on the recent decision of Delhi High Court in the case of M.B. Lal v. CIT reported in 279 ITR 298 (Delhi). He stated that the decision of Spl. Bench is binding on the Tribunal. He further stated even if it is presumed that the action of the authorized office in passing the order Under Section 132(3) was wrong, even then it cannot limit the powers of the Assessing Officer who is completing the block assessment. According to him the powers of the Authorized officer conducting the search and powers of the Assessing Officer completing the assessment are separate and exclusive of each other. He further stated that the judgment of Sandhaya P. Naik case was duly considered by Special Bench in the case of C. Ramaiah Reddy. He further stated that the decision of Sandhya P. Naik was in the context that the Panchanama was prepared by the officer who was not the authorized officer.
11. Shri Dave stated that in the absence of seizure, it cannot be held that the panchanama prepared on 30.01.1997 was invalid. There is no condition that there must be a seizure in order to draw a valid panchanama. The panchanama is summary of all the proceedings undertaken during the search and there is no condition that there has to be a seizure. Shri Dave stated that when the jewellery was brought to the residence form the locker on 23.12.1996 and PO was clamped it was mentioned in the panchanama that the search was temporarily concluded. At that time the statement of the assessee was also recorded and question was asked regarding the source of jewellery. In reply to the said question the assessee stated he needs sometime to produce the copies of bills of jewellery purchased. It was in this background that the PO was clamped and time was given to the assessee to produce the evidence with regard to purchase of jewellery. The assessee had himself asked for time which was given by the authorized officer and as such the PO order Under Section 132(3) cannot be held as unjustified. Moreover there was no inordinate delay as the PO was lifted on 31.01.1997 and as such it cannot be held that the PO was clamped in order to prolong the search. The action of the authorized officer on 30.01.1997 was extension of search continued from 18.12.1996 and 23.12.1996. The assessee was again asked the question about the jewellery on 30.01.1997 and in reply to question No. 4 he admitted that he could only explain the part of jewellery and requested not to seize the jewellery and agreed to surrender Rs. 4 lakhs. It was at the instance of the Assessee that the jewellery was released on 30.01.1997 and now it is not open to him to say that the authorized officer did something incorrect by releasing the jewellery which could have been seized.
12. The ld. CIT DR Shri Dave stated that for the purpose of Section 158BE what is required to be seen is that when was the last of the authorization was executed. He stated that the term "execute" means when the job assigned is accomplished or completed. For this proposition he relied on the law Lexicon and on the case of Jaya S. Shetty v. ACIT reported in 69 ITD 336 (Mumbai). He further stated that actions carried on by authorized officer Under Section 132(1) is single, continuous and homogenous process with various stages and for this proposition he relied on the decision of State of Maharashtra v. Narayan Champalal Bajaj and Anr. 201 ITR 315.
13. Shri Girish Dave drew our attention to the three authorisation warrants issued in this case. The authorisation warrants dated 17.12.1996 in respect of residence of the assessee was used on 18.12.1996, 23.12.1996 and 30.01.1997, whereas the authorisation warrants dated 23.12.1996 in respect of two bank lockers and were used only on 23.12.1996. He stated that this very fact makes it clear that authorisation warrant dated 17.12.1996 was last executed on 30.01.1997. Hence, limitation would start from 30.01.1997. Shri Dave stated as per Section 158BE(1), the limitation shall start from the end of the month in which last of the authorisations was executed. He stated that what is required to be looked into is not the last authorisation but last of the authorisations, which means that all the authorisations issued are to be treated as common kitty and the last date of execution of any of the authorisations should be taken as a starting point for the purpose of limitation for completion of assessment. He stated that Explanation 2 of Section 158BE refers to the last panchanama drawn and the last panchanama in this case was drawn on 30.01.1997.
14. Shri Dave further stated that the decision in the case of Neena wadhwa, supra, is prior to the decision of Special Bench in the case of C. Ramaiah Reddy and as such the same should not be relied upon. He stated that in the case of the assessee the P.O. prohibitory order was passed at the instance of the assessee as he needed time to produce evidence in support of his claim of purchase of jewellery after 31.03.1996.
15. During rebuttal the ld. Counsel for the assessee Shri Hiro Rai contended that it is wrongly stated by the Revenue that the P.O. was imposed at the instance of the assessee. In fact the PO was clamped earlier and said statement was recorded later. He drew our attention to the panchanama dated 23.12.1997 drawn at the residence of the assessee (page 7 & 8 of DR's paper book) and stated that the column No. 6 of the Panchanama which refers to the statement recorded during the search, is blank. It does not state that any statement was recorded upto the time of preparing the said panchanama. Whereas the column No. 9 refers to an order Under Section 132(3). He further stated that the said panchanama mentions that proceedings were closed on 23.12.1996 at 9 PM. Whereas statement was recorded after 9 PM as it is clear form the statement that only first three pages were signed on 23.12.1996 and the balance three pages were signed on 24.12.1996 which clearly shows that the statement was recorded around midnight and much after the P.O. was clamped and that is why there is no mention of the said statement in the panchanama dated 23.12.1996 which is the record of the search proceedings. As such it is wrong to say on the part of the Revenue that the PO was clamped at the instance of the assessee and the PO cannot be justified on the said basis.
16. He further stated that the total jewellery found was of Rs. 8.67 lakhs and the search could not have been kept pending for such a small amount of jewellery particularly in view of the instructions of the CBDT that jewellery upto 500 grams in respect of each leady should not be seized and similarly some small concession has also been given for each male member of the house. Shri Hiro Rai also stated that the last of the authorisations was dated 12.03.1996 in respect of the locker and same was executed on that day itself. It is clear form the Panchanama 23.12.1996 prepared after the search of locker which states that the search was concluded.
17. We have given anxious consideration to the arguments given by both the parties and have also gone through the documents placed in the paper books. In the beginning we shall deal with the last argument raised by the Counsel for the assessee to support his claim that the assessment made is barred by time limitation. Admittedly three authorisation warrants were issued. The 1st authorisation warrant in respect of resident-cum-office was issued on 17.12.1996 and subsequently 2 authorisation warrants in respect of two lockers, whose keys were found at the residence of the assessee, were issued on 23.12.1996. The search was conducted at the residence of the assessee on 18.12.1992 and continued till 19.12.1996 and was temporarily concluded. Thereafter search was conducted at two lockers of the assessee on 23.12.1996 and was concluded on that day. Jewellery found at one locker was brought to the residence of the assessee on that very day i.e. 23.12.1996 and P.O. was imposed and fresh panchanama was prepared at the residence and it was mentioned in that panchanama that the search was temporarily concluded. On 30.01.1997 the P.O. was lifted and the jewellery was released and another panchanama was drawn in which it was mentioned that the search was finally concluded. The question before us to be considered is when was the last of the authorisations for search issued Under Section 132 was executed, for the purpose of Section 158BE. The relevant provision of Section 158BE and explanation 2 are reproduced below:
158 BE The order under Section 158 BC shall be passed-(a) within one year from the end of the month in which the last of the authorizations for search under Section 132 or for requisition under 132A, as the case may be, was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997;
Explanation 2- For the removal of doubts, it is hereby declared that the authorization 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 authorization has been issued;
(b) in the case requisition under Section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer.
18. From bare reading of sub Section 158BE it is clear that the assessment has to be concluded Under Section 158BC, in cases where the search is initiated after 30 th June 1996 but before 1st June 1997, within one year from the end of the month in which the last of the authorizations for the search Under Section 132 was executed. The explanation 2 of Section 158BC was inserted by Finance (No.2) Act 1998 with retrospective effect from 01.07.1995, which makes it clear that the authorization referred to Sub-section (1) of Section 158 BE shall be deemed to have been executed on the conclusion of search as recorded in the last panchanama drawn in relation to any person in whose case the warrant of authorization has been issued. The said explanation is with regard to authorization referred to Sub-section (1) which refers to last of the authorizations. Which means that the last of the panchnama has to be taken into account in respect of last of the Authorisations for search, as there could be more than one panchnamas in respect of same Authorization. The crux of the matter remains that the limitation shall start from the end of the month in which last of the Authorisation is executed.
19. In the case of the assessee three authorizations were issued, one on 17.12.1996 and two on 23.12.1996. As such there can not be any doubt that the last authorization in relation to assessee was issued on 23.12.1997. The authorizations dated 23.12.1997 were in respect of two lockers of the assessee whose keys were found during the search at the residence of the assessee. One locker was found to be empty and in the second locker some jewellery was found which was inventorised and got valued from the approved valuer and it was brought to the residence of the assessee. It was mentioned in the panchanama drawn at both the lockers on 23.12.1997 that the search was finally concluded. The jewellery was brought home and P.O. was clamped and then another panchanama was drawn at the residence. The authorizations issued on 23.12.1996 were with regard to two lockers and were executed on the same day. This fact is also clear from the panchanamas drawn at the time of search of the lockers which clearly states that the search has been concluded.
20. The copies of the authorizations warrants clearly shows that the authorization dated 17.12.1996 was in respect of the residence-cum-office of the assessee and it was used on 18.12.1996, 23.12.1996 and on 30.01.1997. The authorizations dated 23.12.1996 were in respect of two lockers and same could not have been used to enter the residence of the assessee on 23.12.1996 as such it is clear that the P.O. was clamped at the residence on 23.12.1996 in execution of authorization warrant on 17.12.1996. The copy of the authorizations dated 23.12.1996 clearly shows that the same were used only once for the purpose of searching the lockers on 23.12.1996.
21. We do not agree with the contentions of the ld. CIT DR that all the authorizations are to be treated as common kitty and the last date of any of the authorizations should be taken as starting point for the purpose of limitation. The Section 158BE clearly states that the limitation will start from the end of the month in which last of the authorizations was executed. It pre-supposes that there can be a situation where more than one authorizations for search Under Section132 are issued and the execution of the last of the such authorizations is to be considered as the starting point for the purpose of limitation. It clearly refers to the last authorization in case where more than one authorizations are issued. As such it cannot be held that all the authorizations issued should be treated as a common kitty and any one of the authorization which is executed at the end should be considered for the purpose of limitation.
22. In view of the above facts and legal position, we hold that the last of the authorizations issued in the case of the assessee dated 23.12.1996 was executed on that day itself. The assessment was required to be concluded with one year from the end of the month in which last of the authorizations were executed. Meaning thereby that as per the provision of Section 158BE the assessment was required to be completed by 31st December 1997. Hence the assessment order passed Under Section158BC on 23.01.1998 was barred by time limitation and same is quashed.
23. Having quashed the assessment being barred by time limitation, on the basis of the one of the contentions raised. We do not see any need to go into the other issues raised by both the parties as same will only be an academic exercise. We also see no reason to go into the merits of the case which have been raised in other grounds of the appeal as assessment has been quashed on the legal issue.
24. In the result, appeal of the assessee is allowed. This order is pronounced in the open court on this day of 13th May two thousand and six.
SD/- SD/-
(C.D. RAO) (SALIL KAPOOR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 17th May, 2006
CORRIGENDUM
Salil Kapoor, Judicial Member
1. In order dated 17th May 5 006 in IT(SS) No. 44/Mum/1998 of this Cribanal the following typographical errors are noted, hence this corrigendum is being issued.
2. In Para 17, 11th line "on 18.12.1992" should be read as "on 18.12 1996". In Para 19, 4th line & 11th line "23.12.1997" should be read as "23.12.1996" (three places).