Income Tax Appellate Tribunal - Delhi
Smt. Krishna Verma And Subhash Verma vs Assistant Commissioner Of Income Tax on 6 June, 2008
Equivalent citations: [2008]113ITD655(DELHI), (2008)116TTJ(DELHI)565
ORDER
N.S. Saini, A.M.
1. These appeals of the assessee were decided by the Tribunal vide consolidated order dt. 9th March, 2007 reported as Smt. Krishna Verma v. Asstt. CIT (2007) 109 TTJ (Del) (SB) 193Ed. Thereafter, the assessee filed miscellaneous applications bearing Nos. 327 and 264/Del/2007. The said miscellaneous applications were disposed of by the Tribunal vide consolidated order dt. 24th Aug., 2007.
2. In the miscellaneous applications filed, the grievance of the assessee was that the Tribunal had decided only one ground of appeal which related to the defect in the notice issued under Section 158BC by giving less than 15 days notice to the assessee to file block return and this Tribunal did not adjudicate upon the other grounds of appeal raised in the above appeals filed by the assessee. Since the Special Bench constituted to decide whole of the appeal and certain other legal grounds involving jurisdictional aspect, which were raised but have not been adjudicated upon, there was a mistake in the order of the Tribunal and the same should be rectified and the grounds of appeal, omitted to be decided, should be decided.
3. The Tribunal after hearing the arguments of both the sides, held as under:
Thus, it is seen that the entire appeal was to be disposed of by the Tribunal. The appellants apart from the validity of the notice issued, have challenged the validity of assessment on several other grounds also. Since the Special Bench of this Tribunal was constituted to dispose of the entire appeal, all other grounds were also to be adjudicated upon. Not doing so amounts to a mistake apparent on record. In a way, a mistake crept in the order of the Tribunal by not adjudicating upon other grounds raised. This miscellaneous application is allowed and to adjudicate upon other grounds raised in these appeals, the hearing is fixed on 22nd Oct., 2007. The parties were informed in the open Court on the conclusion of hearing and hence issue of notice for hearing is dispensed with.
3. In the result, the miscellaneous applications are allowed.
4. The appeals were, therefore, fixed for hearing and have been heard on the grounds omitted to be decided by the Tribunal. In IT(SS)A No. 555/Del/2003, the order of the Tribunal dt. 9th March, 2007 was recalled to decide the following grounds:
Ground No. 1: The learned CIT(A) erred on facts as well as in law in holding that:
(i) Search warrant dt. 10th March, 1999 was in the individual name of the assessee.
(ii) The authorizations dt. 10th March, 1999 and 16th March, 1999 were valid in law.
(iii) The Addl. CIT, Investigation Circle had jurisdiction to pass block assessment order under appeal.
(iv) The notice under Section 158BC dt. 12th Oct., 1999 was a valid notice and in holding that the proceedings undertaken on the basis of such notice were also valid but treating the irregularities in the notice as minor.
(v) The block assessment order under appeal was passed within the limitation provided under Section 158BE(l)(b).
(vi) Compliance to the provisions of Section 158BD was not necessary.
(vii) The provisions of Section 158BG had been complied with.
(viii) Procedure laid down under Section 158BB has been followed.
(ix) The provisions of Section 144/145 of IT Act, 1961 were rightly applied.
(x) The requirements of Section 132(1) and of Section 132(9A) were met.
(xi) The principles of natural justice had been followed.
(xii) Block assessment framed was independent of investigation carried on by the Dy. Director of IT (Inv.) and therefore, was not based on the report of the Dy. Director of IT (Inv.), i.e., appraisal report.
Ground No. 2 : The learned CIT(A) erred on facts as well as in sustaining, addition of Rs. 3,05,000 on account of repayment of loan to LIC of India, towards undisclosed income.
Ground No. 3 : In not deciding the assessee's ground Nos. 28, 30, 31, 32, 33, 34. 35, 36, 37, 38 and 40 raised by the assessee in grounds of appeal and contested vide submissions before the learned CIT(A) dt. 27th Sept., 2001.
5. In IT(SS)A No. 556/Del/2003. the order of the Tribunal was recalled to decide the following grounds:
Ground No. 1 : The learned CIT(A) erred on facts as well as in law in holding that:
(i) Search warrant dt. 10th March. 1999 was in the individual name of the assessee.
(ii) The authorizations dt. 10th March. 1999 and 16th March. 1999 were valid in law.
(iii) The Addl. CIT, Investigation Circle had jurisdiction to pass block assessment order under appeal.
(iv) The notice under Section 158BC dt. 12th Oct., 1999 was a valid notice and in holding that the proceedings undertaken on the basis of such notice were also valid but treating the irfegularities in the notice as minor.
(v) The block assessment order under appeal was passed within the limitation provided under Section 158BE(1)(b).
(vi) Compliance to the provisions of Section 158BD was not necessary.
(vii) The provisions of Section 158BG had been complied with.
(viii) Procedure laid down under Section 158BB has been followed.
(ix) The provisions of Section 144/145 of IT Act, 1961 were rightly applied.
(x) The requirements of Section 132(1) and of Section 132(9A) were met.
(xi) The principles of natural justice had been followed.
(xii) Block assessment framed was independent of investigation carried on by the Dy. Director of IT (Inv.) and therefore, was not based on the report of the Dy. Director of IT (Inv.), i.e., appraisal report.
Ground No. 2 : The CIT(A) erred on facts as well as in law:
(i) In sustaining addition of Rs. 40,000 on account of unexplained investment in construction of shop.
(ii) In sustaining addition of Rs. 1,25,000 on account of investment in property at Katra.
(iii) In sustaining addition of Rs. 50,000 on account of expenses on marriage of the assessee's son.
(iv) In sustaining addition of Rs. 40,000 on account of the assessee's alleged visit to Nepal.
(v) In sustaining addition of Rs. 15,000 on account of expenditure on repair of ear No. 6190.
(vi) In sustaining addition of Rs. 2,24,891 on account of alleged undisclosed expenditure on construction on Badkhal land.
(vii) In sustaining addition of Rs. 6,00,000 on account of alleged undisclosed household expenses.
Ground No. 3 : In rejecting the assessee's ground Nos. 44 and 45 to 59 without any reliable explanation.
Ground No. 4 : The learned CIT(A) erred on facts as well as in holding that ground Nos. 51 and 52 were not pressed.
6. At the time of hearing, the learned Authorised Representative submitted that, he is not pressing ground Nos. (i) to (iv) and (vi) to (xii) raised in ground No. 1 of both the appeals. Therefore, these grounds of appeal are dismissed as not pressed.
7. Thus, the effective ground to be decided in ground No. 1 in both the appeals is as under:
The learned CIT(A) erred on facts as well as in law in holding that:
The block assessment order under appeal was passed within the limitation provided under Section 158BE(1)(b).
8. The learned Authorised Representative of the assessee submitted that a search was conducted on the assessee on 12th March, 1999 pursuant to the authorization of search dt. 10th March, 1999. On 12th March, 1999, the officer authorized to search passed two separate restraint orders under Section 132(3). He submitted that thereafter, revocation orders against the restraint orders passed on 12th March, 1999 were passed on 18th March. 1999 and 16th April, 1999 respectively. He submitted that since the last Panchnarna executing the search order under Section 132(1) was drawn on 12th March, 1999, the search was concluded on that date and, therefore, the order under Section 158BC should have been passed by the AO within two years from the date of the execution of the last Panchnarna i.e., on or before 31st March, 2001. Since the order was passed by the AO under Section 158BC on 30th April, 2001, therefore, it is barred by limitation provided in Section 158BE(1)(b) of the IT Act, 1961. Therefore, the same should be annulled.
9. On the other hand, the submission of the learned Departmental Representative is that restraint order was passed on 12th March, 1999 under Section 132(3) as the documents in the lower drawer of the table in the office of I-16/10, Faridabad could not be searched. The operation on 16th April, 1999 was in continuation of the proceedings initiated on 12th March, 1999; the search operation was concluded only on 16th April, 1999 when certain documents as per Annex. A to the Panchnama drawn on that date were seized. Therefore, the search operation continued and was finally concluded on 16th April, 1999. Therefore, the limitation under Section 158BE in the case of the appellant as such starts from 30th April, 1999 and not on 31st March, 1999, as pointed out by the learned Authorised Representative of the assessee. The assessment completed on 30th April, 2001 was as such not barred by limitation of time.
10. The learned Authorised Representative of the assessee invited the attention to the affidavit dt. 24th Aug., 2001 filed by the assessee, which was also filed before the learned CIT(A). In the said affidavit in para 3, the assessee contended that at about 8 p.m. on 12th March, 1999 the authorised officer, Mr. Govind Singhal collected loose papers recovered from the residence of the first floor of premises located at 1-16, Sector-10, Faridabad and put them in the drawer of the table in the office located at the ground floor and the said drawer was sealed. He submitted that as the documents were within the knowledge of the Department and, therefore, sealing the drawer after putting the documents therein on 12th March, 1999 and later on 16th April, 1999 seizing the same does not amount to the continuation of the search and for all purposes the search warrant was executed on 12th March, 1999 and, therefore, the limitation for passing order under Section 158BC commences from 12th March, 1999 and the said order should have been passed by the AO on or before 31st March, 2001. The learned Counsel for his submissions, placed reliance on the decision of Mumbai Bench of the Tribunal in the case of Dy. CIT v. Adolf Patric Pinto and submitted that the Tribunal in that case has held that an order passed under Section 132(3) prohibits the person in possession of the book or the valuables to deal with the same except with the prior permission of authorised officer. It does not mean that the search shall not come to an end till the operation of the order under Section 132(3). Once all the materials and valuables, which are found during the search, are appraised, the search will come to an end. The passing of the prohibitory order under Section 132(3) is an administrative act and it is the domain of the authorised officer to decide during the course of search if any prohibitory order is required to be passed or not. However, in order to determine whether the search had come to an end or not, what is required to be seen is whether the documents or valuables being kept under prohibitory order have been appraised or not. The Expln. 2 to Section 158BE does not mean that the time limitation will not start till prohibitory order passed under Section 132(3) is in operation. Therefore, the order passed for the purpose of lifting of the prohibitory order could not be treated as execution of the search warrant. Hence, the assessment order passed under Section 158BC beyond the time provided under Section 158BE shall be barred by limitation and has to be quashed.
11. The learned Authorised Representative of the assessee further relied on the decision of the Hon'ble Bombay High Court in the case of CIT v. Mrs. Sandhya P. Nalk and submitted that the Hon'ble Bombay High Court in that case has held that action under Section 132(3) of the IT Act, 1961 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 represents undisclosed income. Power under Section 132(3) of the Act cannot be exercised so as to circumvent the provisions of Section 132(3) r/w Section 132(5) of the Act. The position has become much more clear after the insertion of Explanation to Section 132(3) effective from 1st July, 1995 that a restraint order does not amount to seizure. Therefore, by passing a restraint order, the time-limit available for framing of the order cannot be extended. He submitted that in the instant case also, the files were collected by the authorised officer from the first floor of the residence of the assessee and were put in the drawer of the table on the ground floor and the said drawer was sealed. Thus, the authorised officer had no practical difficulty in seizing the said documents and as the authorised officer was within know of the contents of the documents, therefore, passing of restraint order under Section 132(3) was not in continuation of the search commenced on 12th March, 1999. Therefore, the revocation of the order on 16th April, 1999 does not amount to the conclusion of the search or the execution of the last Panchnama pursuant to the authorization of the search on 10th March, 1999 and, therefore, the search in the case of the assessee was for all practical purposes concluded on 12th March, 1999 on the execution of the Panchnama and not on 16th April, 1999 when the AO merely opened the drawer and seized the files. Therefore, the order passed under Section 158BC on 30th April, 2001 was barred by limitation provided in Section 158BE of the Act and hence requires to be annulled. Further, in continuation to his arguments, the learned Authorised Representative submitted that the affidavit of the assessee dt. 24th Aug., 2001, wherein it was submitted that the authorised officer collected the loose papers recovered from the residence of the first floor of the said house and put them in the drawer of the table in the office located at the ground floor and sealed the said drawer was not controverted by the learned CIT(A) and the learned CIT(A) also did not give his finding on the same.
12. Further, the learned Authorised Representative of the assessee submitted that at p. 3 of the paper book filed in the case of Smt. Krishna Verma, it will be observed that the authorised officers mentioned in the Panchnama dt. 18th March, 1999 are Shri S.B. Singla and Shri T.D. Gandhi. Similarly, from p. 5 of the paper book filed in the case of Shri Subhash Verma, it will be seen that the authorised officer mentioned in the Panchnama dt. 16th April, 1999 is Shri S.B. Singla. He submitted that the officers mentioned in the Panchnama of Smt. Krishna Verma were authorized by a search warrant dt. 16th March, 1999, which was the second search warrant after the first search warrant dt. 10th March, 1999. From these facts, it can be inferred that Shri S.B. Singla was authorised officer only in the warrant of authorization issued on 16th March, 1999 and not in the warrant of authorization issued on 10th March, 1999. Thus, the Panchnama executed on 16th April, 1999 by Shri S.B. Singla was not by the officer authorized in the search warrant dt. 10th March, 1999 and hence cannot be considered for the purpose of deciding the limitation under Section 158BE for passing of order under Section 158BC of the Act.
13. The learned Departmental Representative during the course of the arguments, submitted that the officers authorized to carry out a search are stated in the search warrant issued under Section 132(1) of the Act. All the officers authorized to carry out the search may not visit the premises of the assessee on the same day and may visit the premises on subsequent days. Therefore, to decide whether a particular officer was authorized to carry out the search in the case of the assessee has to be done after examining the search warrant issued under Section 132(1) and not on the basis of the Panchnama, as argued by the learned Authorised Representative; of the assessee. He argued that if the learned Authorised Representative of the assessee was so sanguine about his submissions that the Panchnama drawn on 16th April, 1999 was not by the authorised officer for carrying out search in the case of the assessee, then let him file an affidavit for the same and we shall demonstrate that the Panchnama drawn on 16th April, 1999 was by the authorised officer by producing the original search warrant issued under Section 132(1) of the Act. To this, the learned Authorised Representative submitted that he was not having copy of the search warrant issued under Section 132(1) dt. 10th March, 1999 and also copy of the restraint order passed under Section 132(3) of the Act on 12th March. 1999. To the suggestion of the learned Departmental Representative for filing of the affidavit, the learned Authorised Representative of the assessee did not make any submission.
14. The learned Departmental Representative further submitted that proviso to Section 132(1) provides that where it is not possible or practicable to take physical possession of any article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under Clause (iii). He further submitted that Sub-section (3) of Section 132 provides that where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to Sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section. Thus, he submitted that restraint order under Section 132(3) can be passed for reasons other than that stated in the second proviso to Sub-section (1) of Section 132.
15. Further, to buttress his arguments, he relied on Section 132(8A) of the Act. He submitted that the said subsection at the relevant time provided that an order under Sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order, except where the authorised officer, for reasons to be recorded by him in writing, extends the period of operation of the order beyond sixty days, after obtaining the approval of the Director or, as the case may be, CIT for such extension. He submitted that drawing an analogy from Section 132(1), where the search warrant under Section 132(1) is issued for carrying out search operation on an assessee, it has been provided that in consequence of information in possession of the concerned officer, he has reasons to believe that any income, property had not been or would not be disclosed for the purposes of the IT Act, may authorize carrying out of the search on the assessee concerned. But in contradistinction to this, in Section 132(8A), the legislature has provided that an order under Sub-section (3) of Section 132 shall not be in force for a period exceeding sixty days from the date of the order except in a case where the authorised officer for reasons recorded by him in writing extends the period of operation beyond sixty days after obtaining approval of the Director or the CIT, as the case may be. Thus, the provisions of Section 132(8A) are more stringent in operation than the provisions of Section 132(1), which does not require for recording the reasons in writing, as is the case in Section 132(8A).
16. He further submitted that since the section itself provides that under Section 132(3), a prohibitory order may be passed for a period of sixty days, therefore, the limitation period provided under Section 158BE cannot take away this period of sixty days. Therefore, the limitation period provided under Section 158BE stands increased by sixty days for passing of an order under Section 158BC by the AO. He submitted that until the contents of the documents are verified and a decision is arrived at to seize the documents or not and all the documents are seized, the assessment proceedings cannot be started, as the assessment proceedings under Section 158BC have to be based on the seized documents. For his contention, he placed reliance on the decision of Hon'ble Delhi High Court in the case of VLS Finance Ltd. and Anr. v. CIT and submitted that the Hon'ble Delhi High Court held that it was clear from the Panchnamas that a warrant of authorization was signed and shown each time the search was conducted and the contents thereof were explained to the persons present at the premises of the search. It was not as if the authorities conducted the search without any valid authorization. It took several days for the search to be concluded and this was an indication of the fact that a large number of documents had to be gone through. The authorities inspected as many as 5,000 documents. Even assuming that the books of accounts of the petitioner could be seized but were not seized, the seizure could have been effected on 22nd June, 1998. The last Panchnama was drawn on 5th Aug., 1998 well before the sixty day period, was to expire. Therefore, no ulterior motive could be attributed to the authorities in failing to seize the books of account and instead passing a restraint order in their respect. No prejudice had been caused to the petitioner. The Hon'ble High Court further observed that the authorities had drawn up 16 Panchnamas in respect of the visits they had made to the premises of the petitioner. No seizure was made on ten occasions. The authorities had effected seizure on six occasions. The authorities were concerned with the books of account of the petitioner and documents to confirm that they had undisclosed income and they were not concerned with the articles representing undisclosed income. The authorities went through the books and seized only those documents that were necessary, rather than seizing all the books and documents of the petitioner. The authorities could not be faulted for following a less drastic procedure. The authorities could have on the very first day of the search seized all the relevant and irrelevant documents and books of the petitioner, but they did not do so. Therefore, their decision on this could not be used against them. Even by adopting this procedure, the authorities did not exceed the sixty days limitation as provided in Section 132(8A) and for making the assessment order the authorities had still more than adequate time available. The authorities did not complete the search on 22nd June, 1998, nor did they unduly prolong it. The search concluded on 5th Aug., 1998 and so in terms of Expln. 2 to Section 158BE, the period of limitation would begin from the end of August, 1998 onwards.
17. In continuation to his arguments, the learned Departmental Representative contended that to the same effect was the decision of the Hon'ble Kerala High Court in the case of T.O. Abraham & Co. and Anr. v. Asstt. Director of IT (Inv.) and Ors. . He submitted that in the said decision, the Hon'ble Kerala High Court held as under:
Secection 132 of the IT Act, 1961, authorizes search and seizure, if the authorized officer has reason to believe in consequence of information that any person is in possession of money, income, etc., which has not been disclosed. Sub-section (5) of Section 132 of the Act obliges the ITO to pass appropriate orders within 120 days of seizure. The special procedure given under Chapter XTV-B gives a separate time-limit for completion of block assessment under Section 158BE of the Act. Section 158B of the Act, defines block period as consisting of the previous years relevant to ten assessment years preceding the previous year in which the search was conducted and the period upto the date of the commencement of the search. Section 158BE of the Act prescribed the time-limit of one year for the completion of block assessment. The period of one year starts from the execution of the authorization. On a plain reading of Section 158BE it could only mean that the one year period will start from the end of the month of the execution of the authorization meaning thereby after completion of search or implementation of the search order. Any other interpretation would be inconsistent with the object for which the special provision has been enacted. Only after the completion of the search, the Department will have the materials collected and be in a position to begin the assessment.
18. The learned Departmental Representative further relied on the decision of the Hon'ble High Court in the case of M.B. Lal v. CIT . He submitted that in that case, the Hon'ble High Court observed that authorization was issued on 2nd Feb., 2000. The search also started on the same day and continued till 29th June, 2000 during which period various articles and documents were seized. The search would end only upon revocation of the order passed under Section 132(3), which in the instant case, was revoked only on 29th June, 2000. The period of limitation for making an assessment order under Section 158BC r/w Section 158BE of the Act would, therefore, has to be reckoned from 30 th June, 2000, being the end of the month in which the last Panchnama was drawn would end on 30th June, 2002. Since the assessment was made on 27th June, 2001 within the outer limit of two years prescribed by law, the assessment made was valid.
19. The learned Departmental Representative further submitted that the decision of the Tribunal, relied on by the learned Authorised Representative of the assessee in the case of Adolf Patric Pinto (supra) had relied on the decision of the Bombay High Court in the case of Mrs. Sandhya P. Naik (supra), where it was held that limitation under Section 158BE for passing an order under Section 158BC cannot be extended by passing a prohibitory order under Section 132(3) r/w Section 132(5) of the Act. He submitted that in that case, the facts were that after the completion of the search, order under Section 132(3) of the Act was passed covering one cupboard in which all the silver articles, which were found and placed were seized on 20th Oct., 1996. On 26th Oct., 1996, six kgs. of silver vessels from this cupboard were released and further order came to be passed under Section 132(3) of the Act and the cupboard was sealed once again. On the same day, a Panchnama was also drawn concluding the search and indicating in the said Panchnama the fact that the cupboard containing the silver articles had been sealed and an order under Section 132(3) of the Act passed in relation thereto. On 13th Dec, 1997, the Asstt. CIT(A), who was not one of the authorised officers mentioned in the search warrant, removed the seal and made a further order under Section 132(3) of the Act, releasing the said silver vessels and articles. In these facts, it was held that the restraint order under Section 132(3) cannot extend the period of limitation for passing order under Section 158BC prescribed in Section 158BE of the Act. He submitted that in contradistinction to this, in the instant case the authorised officer was the one who was authorized to carry out the search under Section 132(1) of the Act in the search warrant. Further, the documents and files, which were sealed in the drawer, were not gone through by the authorised officer and as such there was no conscious decision arrived at about their seizure. Thus, the proceedings carried out on 16th April, 1999 were in continuation of the search proceedings commenced on 12th March, 1999. Thus, the said decision was not applicable to the facts of the case of the assessee.
20. We have heard the rival submissions and carefully gone through the materials available before us. On the basis of materials placed before us, we observe that in both of the cases taken together, 3 Panchnamas were drawn. A careful consideration of all the said Panchnamas shows that a search warrant was issued in the joint name of both the assessees, viz., Shri Subhash Verma and Smt. Krishna Verma by Director of IT (Inv.), Chandigarh to search the premises situated at House No. I-16, Sector 10, DLF, Faridabad. This authorization was Issued on 10th March, 1999. Further, in the case of Smt. Krishna Verma, one another search warrant was also issued, which was issued on 16th March, 1999 by the Addl. Director of IT (Inv.), Rohtak to search locker No. 84/6 situated at Oriental Bank of Commerce, Sector-7, Faridabad. This second authorization was issued on 16th March, 1999. In pursuance to this search authorisation, Shri S.B. Singla, ITO, CIB, Faridabad, and Shri T.D. Gandhi, TRO, Faridabad as authorised officers visited the bank on 18th March, 1999 at 12.45 p.m. and remained there upto 6 p.m. during which they operated the locker and by drawing a Panchnama on that day, in the name of Smt. Krishna Verma, seized bullion i.e., gold, silver etc. as per inventory in Annex. "B" (one sheet), and jewellery, ornaments etc., which have been inventorised as per Annex. "J" (one sheet), and it was stated in the Panchnama that the search has been concluded.
21. We observe that in the instant case it is not in dispute before us that search warrants were issued in the case of both the assessees by a competent official and in pursuance to the search warrant, a search under Section 132 of the Act was conducted in the case of both the assessees. The only question which has been posed before us for our consideration and adjudication is whether the order of block assessment passed under Section 158BC on 30th April, 1999 was within the time-limit as provided under the provisions of Section 158BE(1)(b) of the Act or not.
22. The relevant provisions of Section 158BE as was in the force at the material time are extracted as hereunder:
158BE.(1) The order under Section 158BC shall be passed-
(a) within one year from the end of the month in which the last of the authorisations for search under Section 132...in cases where a search is initiated...after the 30th day of June, 1995, but before the 1st day of January, 1997;
(b) within two years from the end of the month in which the last of the authorisations for search under Section 132...was executed in cases where a search is initiated...on or after the 1st day of January, 1997.
(2) The period of limitation for completion of block assessment in the case of the other person referred to in Section 158BD shall be-
(a) ...
(b) ...
Explanation 1In computing the period of limitation for the purposes of this section, the period-
(i) during which the assessment proceeding is stayed by an order or injunction of any Court, or
(ii) commencing from the day on which the AO directs the assessee to get his accounts audited under Sub-section (2A) of Section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, shall be excluded.
Explanation 2For 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...by the authorized officer.
23. Keeping in view the above provisions of law, it is observed that: in the case of Smt. Krishna Verma two search authorizations were issued. First one was with reference to the premises at I-16, Sector-10, Faridabad which was dt. 10th March, 1999 and the second search authorization was dt. 16th March, 1999 and hence last search authorization in this case and the same was in respect of locker No. 84/6 situated at Oriental Bank of Commerce, Sector-7, Faridabad. This last authorization was executed on 18th March, 1999 and only one Panchnama was drawn in respect of this last authorization and the same shows search in pursuance to this authorization was concluded on 18th March, 1999 itself. These facts are not in dispute before us. As per the plain reading of Section 158BE(1)(b), the order under Section 158BC shall be passed within two years from the end of the month in which the last of the authorisations for search under Section 132 was executed in cases where a search is initiated on or after 1st Jan., 1997. Hence, in view of this unambiguous provision, the last of authorizations being search authorization dt. 16th March, 1999 which was executed on 18th March, 1999 in her case, the block assessment order must have been passed on or before 31st March, 2001. Hence, in our considered view, the impugned order of block assessment passed on 30th April, 1999, i.e., after 31st March, 2001 by the learned AO in the case of Smt. Krishna Verma is unsustainable in law as barred by limitation and hence the same is quashed.
24. This leaves us with the case of Shri Subhash Verma. In his case only one search authorization dt. 10th March, 1999 was issued. In pursuance to this search warrant Shri Narender Kumar, Dy. Director of IT (Inv.), Hissar and Shri Govind Singhal, Dy. Director of IT (Inv.), Rohtak as authorised officers visited the premises situated at House No. I-16, Sector 10, DLF, Faridabad on 12th March, 1999. The Panchnama shows that search commenced on 12th March, 1999 at 7.50 a.m. and continued upto 8.50 p.m. of the said date. In the course of search, the following were seized:
Books of accounts and documents as per inventory in Annex. "A" (two sheets).
Cash as per Annex. "C"(one sheet).
Locker key as per entry in Annex. "O"(one sheet).
The Panchnama drawn up on 12th March, 1999, at para 8 showed as follows:
8. The search commenced on 12th March, 1999 at 7.50 a.m. The proceedings were closed on 12th March, 1999 at 8.50 p.m. as temporarily concluded for the day to be commenced subsequently for which purpose seals were placed on the drawer of table in the office at ground floor in our presence.
After this, a second Panchnama was also drawn on 16th April, 1999. The said Panchnama shows that Shri S.B. Singla, ITO, CIB, Faridabad as authorised officer visited the premises of the assessee at 12.15 p.m. on 16th April, 1999 and remained there upto 2 p.m. During this visit he revoked the prohibitory order in respect of the drawer, seized the documents inventorised as Annex. "A" (7 documents) to the Panchnama and in the Panchnama it was stated that the search has been finally concluded.
25. Now in the above circumstances, the determination of the date of execution of the search authorization dt. 10th March, 1999 will determine the outcome of the issue raised before us. Date when a search authorization is deemed to have been executed is stated in Expln. 2 to Section 158BE, as already extracted above. The same refers to conclusion of search' as recorded in last Panchnama drawn in relation to any person in whose case the warrant of authorization has been issued. Consequently, to adjudicate the issue raised before us, we are required to ascertain the date of 'conclusion of search'. It is observed here that word employed in the said Expln. 2 is conclusion of 'search' and not 'seizure'. In a nutshell, the contention of the learned Counsel of the assessee is that search was concluded on 12th March, 1999 and action taken on 16th March, 1999 was only for revocation of the prohibitory order passed under Section 132(3) of the Act. On the other hand, the contention of the learned Counsel for the Department, in a nutshell, is that the search was not concluded on 12th March, 1999 but the same was concluded on 16th April, 1999 when all the documents required to be seized were seized and the action taken on 16th April, 1999 was also a search in continuation to the search undertaken on 12th March, 1999 in pursuance to search authorization dt. 10th March, 1999.
26. In order to deal with the above issue and to appreciate the provisions relating to execution of the search and to understand the scheme of search and seizure as envisaged in the IT Act, it is deemed appropriate to consider the provisions of Section 132 of the Act, which for ready reference, have been extracted hereunder:
132. (1) Where the Director General or Director or the Chief CIT or CIT or any such Jt. Director or Jt. CIT as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to believe that--
(a) any person to whom a summons under Sub-section (1) of Section 37 of the Indian IT Act, 1922 (11 of 1922), or under Sub-section (1) of Section 131 of this Act, or a notice under Sub-section (4) of Section 22 of the Indian IT Act, 1922, or under Sub-section (1) of Section 142 of this Act was issued to produce, or cause to be produced, any books of account, or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or
(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian IT Act, 1922 (11 of 1922), or under this Act, or
(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian IT Act. 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,-
(A) the Director General or Director or the Chief CIT or CIT, as the case may be, may authorise any Jt. Director, Jt. CIT, Asstt. Director or Dy. Director, Asstt. CIT or Dy. CIT or ITO, or (B) such Jt. Director, or Jt. CIT, as the case may be, may authorise any Asstt. Director or Dy. Director, Asstt. CIT or Dy. CIT or ITO, (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to-
(i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;
(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by Clause (i) where the keys thereof are not available;
(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;
(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search;
(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;
(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing:
Provided that where any building, place, vessel, vehicle or aircraft referred to in Clause (i) is within the area of jurisdiction of any Chief CIT or CIT, but such Chief CIT or CIT has no jurisdiction over the person referred to in Clause (a) or Clause (b) or Clause (c), then, notwithstanding anything contained in Section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the Chief CIT or CIT having jurisdiction over such person may be prejudicial to the interests of the Revenue:
Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under Clause (iii).
(1A) Where any Chief CIT or CIT, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the Director General or Director or any other Chief CIT or CIT or any such Jt. Director or Jt. CIT as may be empowered in this behalf by the Board to take action under Clause (i) to (v) of Sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under Sub-section (1), such Chief CIT or CIT may, notwithstanding anything contained in Section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.
(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in Sub-section (1) or Sub-section (1A) and it shall be the duty of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to Sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub section.
ExplanationFor the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under Clause (iii) of Sub-section (1).
(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian IT Act, 1922 (11 of 1922), or under this Act.
ExplanationFor the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian IT Act, 1922 (11 of 1922), or under this Act.
(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed-
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.
(5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in Sections 132A and 132B referred to as the assets) is seized under Sub-section (1) or Sub-section (1A), as a result of a search initiated or requisition made before the 1st day of July, 1995, the ITO, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Jt. CIT,-
(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him;
(ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian IT Act, 1922 (11 of 1922), or this Act;
(iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian IT Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment;
(iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in Clause (a) of Sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets/or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clause (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized:
Provided that if, after taking into account the materials available with him, the ITO is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly:
Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in Clause (ii), (iia) and (iii) or any part thereof, the ITO may, with the previous approval of the Chief CIT or CIT, release the assets or such part thereof as he may deem fit in the circumstances of the case.
(6) The assets retained under Sub-section (5) may be dealt with in accordance with the provisions of Section 132B.
(7) If the ITO is satisfied that the seized assets or any part thereof were held by such person, for or on behalf of any other person, the ITO may proceed under Sub-section (5) against such other person and all the provisions of this section shall apply accordingly.
(8) The books of account or other documents seized under Sub-section (1) or Sub-section (1A) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same arc recorded by him in writing and the approval of the Chief CIT, CIT, Director General or Director for such retention is obtained:
Provided that the Chief CIT, CIT, Director General or Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian IT Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.
(8A) An order under Sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order, except where the authorised officer, for reasons to be recorded by him in writing, extends the period of operation of the order beyond sixty days, after obtaining the approval of the Director or, as the case may be, CIT for such extension:
Provided that the Director or, as the case may be, CIT shall not approve the extension of the period for any period beyond the expiry of thirty days after the completion of all the proceedings under this Act in respect of the years for which the books of account, other documents, money, bullion, jewellery or other valuable articles or things are relevant.
(9) The person from whose custody any books of account or other documents are seized under Sub-section (1) or Sub-section (1A) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf.
(9A) Where the authorised officer has no jurisdiction over the person referred to in Clause (a) or Clause (b) or Clause (c) of Sub-section (1), the books of account or other documents or assets seized under that sub-section shall be handed over by the authorised officer to the ITO having jurisdiction over such person within a period of fifteen days of such seizure and thereupon the powers exercisable by the authorised officer under Sub-section (8) or Sub-section (9) shall be exercisable by such ITO.
(10) If a person legally entitled to the books of account or other documents seized under Sub-section (1) or Sub-section (1A) objects for any reason to the approval given by the Chief CIT, CIT, Director General or Director under Sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents.
(11) If any person objects for any reason to an order made under Sub-section (5). he may, within thirty days of the date of such order, make an application to the Chief CIT or CIT, stating therein the reasons for such objection and requesting for appropriate relief in the matter.
(11A) Every application referred to in Sub-section (11) which is pending immediately before the 1st day of October, 1984, before an authority notified under that sub-section as it stood immediately before that day shall stand transferred on that day to the Chief CIT or CIT, and the Chief CIT or CIT may proceed with such application from the stage at which it was on that day:
Provided that the applicant may demand that before proceeding further with the application, he be reheard.
(12) On receipt of the application under Sub-section (10) the Board, or on receipt of the application under Sub-section (11) the Chief CIT or CIT, may, after giving the applicant an opportunity of being heard, pass such orders as it or he thinks fit.
(13) The provisions of the Cr.PC, 1973 (2 of 1974), relating to searches and seizure shall apply, so far as may be, to searches and seizure under Sub-section (1) or Sub-section (1A).
(14) The Board may make rules in relation to any search or seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer-
(i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available;
(ii) for ensuring safe custody of any books of account or other documents or assets seized.
Explanation 1-In computing the period referred to in Sub-section (5) for the purposes of that sub-section, any period during which any proceeding under this section is stayed by an order or injunction of any Court shall be excluded.
Explanation 2In this section, the word 'proceeding' means any proceeding in respect of any year, whether under the Indian IT Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.
27. A complete reading of Section 132 shows that as per the scheme of the Act, Sub-section (1) provides the provisions regarding search which contain under what circumstances search operation can be conducted and what can be done in the course of the search operation. Sub-section (1A) empowers Chief CIT or C1T in certain circumstances to authorize for taking action under Clause (i) to (v) of Sub-section (1) notwithstanding anything contained in Section 120 of the Act. Sub-section (2) empowers the authorised officer to requisition service of any police officer or any officer of the Central Government or of both, to assist him for all or any of the purposes specified in Sub-section (1) or Sub-section (1A) of the Act. Sub-section (3) empowers the authorised officer in the circumstances where it is not practicable to seize any books of accounts etc. for reasons other than those mentioned in second proviso to Sub-section (1), then to issue a prohibitory order. It has also been clarified that such prohibitory order shall not be deemed to be a seizure. Sub-section (4) empowers the AO to examine on oath any person in the specified circumstances during the course of the search. Sub-section (4A) provides for some statutory presumptions in respect of books of accounts etc. found in the course of the search. Sub-section (5) provided for a summary assessment in respect of search initiated before first day of July, 1995 for the purpose of retention and releasing of the seized material. Sub-section (6) provides that how the assets retained under Sub-section (5) are to be dealt with. Sub-section (7) empowers AOs to proceed under Sub-section (5) against the actual owner of the seized assets. Sub-section (8) provides for the period during which documents seized under Sub-section (1) or Sub-section (1A) can be retained. Sub-section (8A) provides for the period during which prohibitory order under Sub-section (3) can be imposed. This sub-section also provides that prohibitory order can be imposed in certain circumstances even for a period beyond the expiry of 30 days after the completion of all the proceedings in respect of the year for which books of accounts etc. are relevant. Sub-section (9) empowers the persons from whom books etc. have been seized under Sub-section (1) or (1A) to make copies thereof. Sub-section (9A) provides for handing over of the seized material by the authorised officer to the AO having jurisdiction over the seized (sic-searched) person. Sub-section (10) provides for making of objections by the person who is legally entitled to material seized under Sub-section (1) or (1A) to raise objections against an order passed under Sub-section (8). Sub-sections (11) and (11A) empower a person to raise objection against an order passed under Section 132(5). Sub-section (12) provides for disposal of objection raised under Sub-section (10) and Sub-section (11). Sub-section (13) provides that provisions of Cr.PC relating to search and seizure shall so far as may be applicable apply to search and seizure under Sub-section (1) or Sub-section (1A). Sub-section (14) empowers the Board to make rules in relation to any search or seizure under the section.
28. Thus, Section 132 shows that search operations are carried out under Sub-section (1) or Sub-section (1A) of the Act. The other sub-sections, including Sub-section (3), provide for consequential powers etc. Further, search and seizure operation is a serious matter; it invades the right and privacy of a citizen and hence, the same should be carried out strictly in accordance with the letter and spirit of the law and the law is also required to be interpreted strictly. Still further, 'search' and 'seizure' are not synonymous. The phrase, 'to search' implies that to find out or to look out for something which is not apparently visible or which is hidden or concealed and 'to seize' implies taking over of the possession so as to dispossess the immediate possessor. Thus, the words 'to search' and to seize' convey different meanings. We also observe that books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of the search can be dealt in any of the three ways by the authorised officer:,
(a) Firstly, if he finds that money, bullion, jewellery or other valuable article or thing found as a result of search represents wholly or partly any undisclosed income and books of account or other documents found as a result of search will be useful for or relevant to any proceeding under this Act and which has not or will not be produced in response to summons or notice, then he is required to seize them and, if it is practicable to seize the same then he is duty bound to seize them.
(b) Secondly, if he finds that though the materials so found as a result of the search are required to be seized as above but for any reason it is not practicable to seize them, then, if the reason for which it is not practicable to seize them is one which is specified under second proviso to Sub-section (1) then he should issue a restraint order in respect of the same which will be a deemed seizure but if the reason for which it is not practicable to seize them is not the one which is specified in the said second proviso then he should pass a prohibitory order under Section 132(3) in respect of the same which shall not amount to seizure but mere attachment.
(c) Thirdly, if he finds the books of account or document or money, bullion, jewellery or other valuable article or thing found as a result of the search is not of the above nature, for example, disclosed asset then he should not seize them.
29. In the instant case as observed above only one search authorization dt. 10th March, 1999 was issued and the same was in respect of the premises situated at 1-16, Sector-10, DLF, Faridabad. The Panchnama prepared on 12th March, 1999 in pursuance to this authorization apparently states that search is temporarily suspended to be commenced on a later date. However, the Hon'ble Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik (supra) held that, "Indeed, by simply stating in the Panchnama that the search is temporarily suspended, the authorised officer cannot keep the search proceeding in operation by passing a restraint order under Section 132(3)". In view of the above principle of law declared by the Hon'ble Bombay High Court, we cannot ignore the claim of the assessee that search was actually concluded on 12th March, 1999 itself, merely on the basis of one line statement written by the authorised officer in the Panchnama that search proceeding is temporarily concluded to be commenced subsequently. We cannot close our eyes to the real facts and it cannot be taken as we are bound to treat the one line sentence written by the authorised officer as sacrosanct. In our considered opinion for determining the real fact as to whether the search was really completed or not on 12th March, 1999, we are required to look into and read all the recordings which have been made in the Panchnama on that date, from the Panchnama we are required to decipher the actions taken by the search team till the preparation of Panchnama and actions left to be taken by them for ascertaining the actual date of conclusion of the search together with all the attendant circumstances of the case and the relevant legal position.
30. In the instant case, we find on reading of all the recordings made in the Panchnama dt. 12th March, 1999 that it nowhere conclusively records or states that any part or portion of that premises remained to be searched on that date. The recording in the Panchnama is to the effect that the search proceedings were temporarily concluded for the day to be commenced subsequently for which purpose seals were placed on the drawer of table in the office at ground floor. In respect of the drawer, this recording only evidences' that seals were placed on drawer. From this recording in Panchnama it is not clear whether the drawer was examined or not on that date. The said recording does not necessarily or conclusively convey that drawer could not be searched on that date and the search of the drawer was pending on that date.
31. Further, nowhere in that Panchnama dt. 12th March, 1999 it was recorded that the drawer of the table kept at the ground floor office of the said premises could not be examined, inspected or searched due to any reason whatsoever. There is no recording in the Panchnama to the effect that the drawer in the table in office at the ground floor of the premises was locked and it was not possible or desirable to broke-open the same on that date and therefore could not be searched or inspected on that date or any other similar reason. We find that no material including the statements recorded under Section 132(4) on 12th March, 1999 could be placed before us which might indicate that due to any reason search of the said drawer or any portion of the premises situated at I-16, Sector-10, DLF, Faridabad could not be carried out by the authorised officer.
32. The arguments of the learned Departmental Representative before us were to the effect that as a prohibitory order was passed under Section 132(3) of the Act on 12th March, 1999 and hence it cannot be held that the search was concluded on that date and as the prohibitory order was revoked on 16th April, 1999 by making some seizures, the said 16th April, 1999 only should be taken as the date of conclusion of the search. We find that the learned Departmental Representative could not point out any provision in the Act which provides that when an order under Section 132(3) is passed during the course of a search proceeding, it shall be deemed that search has not been concluded. The conclusion of search means when the place etc. in respect of which search authorization has been issued was entered into by the search team and all the books of account, document, money, bullion, jewellery, and other valuable articles or things kept therein were found in the sense that further looking for of such articles etc. is considered as not required by the searching team. The provision of Sub-section (3) of Section 132 shows that where in the wisdom of the authorised officer it is not practicable 'to seize' any books of account, document, money, bullion, jewellery or other valuable article or thing which is otherwise liable to be seized, for any reason other than those mentioned in the second proviso to Sub-section (1) of Section 132, then he is empowered to pass a prohibitory order under Section 132(3) of the Act. The words employed by the legislature in Section 132(3) are where it is not practicable 'to seize', which are quite distinct and different from the phrase where it is not practicable 'to search'. The purpose and the object of passing the said prohibitory order are to forbid the immediate possessor the materials or items not practicable to seize, from dispossessing with the same except with the previous permission of the authorised officer. Hence, it cannot be held that passing of an order under Section 132(3) shows that the article in respect of which it was passed was not searched. Merely from passing of such prohibitory order it cannot be held that search was not concluded and the same is pending or continuing. On the other hand, when a prohibitory order under Section 132(3) is passed in respect of things etc. kept in the searched premises, it implies that firstly, the same was found as a result of the search, secondly, the authorised officer considered them as one which is liable to be seized under Section 132(l)(iii) and thirdly, for some reason, which is other than those mentioned in second proviso to Section 132(1), the authorised officer found that it is not practicable to seize them on that date. It is obvious that finding about the impracticability of seizure be formed only when the same was found as a result of the search of the premises and the nature of the same came to the knowledge of the authorised officer. In other words, the same is no longer concealed and it is no longer required to be unearthed or searched. Further, the effect of an order passed under Section 132(3) is that the owner or the possessor is precluded from removing or parting with or otherwise deal with the same without the previous permission of search officer. The order under Section 132(3). gives rise to an attachment and not seizure. It cannot be held that the effect of this prohibitory order is that things etc. in respect of which the order is passed are not searched and hence merely from passing of an order under Section 132(3) in respect of a drawer it cannot be concluded that the same was not searched and the search was pending. The search does not remain pending on merely passing of a prohibitory order under Section 132(3) becomes very obvious when we harmoniously read the provisions of Sub-section (8A) of Section 132 with the other provisions of the Act. As per provisions of Section 132(8A), in certain circumstances by observing specified formalities, a prohibitory order under Section 132(3) can be extended even beyond the date of completion of the assessment. Thus, if it is taken that till the prohibitory order under Section 132(3) is in force search is not concluded then the provisions of Sub-section (8A) will lead to an absurd situation. If such an effect of passing of a prohibitory order is taken as correct then, until search is concluded, assessment in respect of searched person cannot be made and till such assessment is not made, prohibitory order under Section 132(3) can remain in force. Thus, this interpretation will lead to a situation where assessment will never be completed and order under Section 132(8A) will never be required to be revoked. Definitely, such a situation could never have been intended by the legislature. This itself conclusively proves that the interpretation placed by the Revenue in respect of the effect of passing of a prohibitory order under Section 132(3) is not correct. Our above view finds support from the decision of the Hon'ble Allahabad High Court in the case of Sriram Jaiswal v. Union of India and Ors. wherein it was held that, "It is manifest that the condition precedent to make a seizure under Clause (iii) of Sub-section (1) or make an attachment under Sub-section (3) is the discovery of undisclosed asset during the search". In this decision it was also held that, "No order under Sub-section (3) can be passed, when the authorised officer is in doubt whether the asset is disclosed or undisclosed". To the same effect are also the decisions of the Hon'ble Punjab & Haryana High Court in Om Parkash Jindal v. Union of India and of the Hon'ble Delhi High Court in Mrs. Kanwal Shamsher Singh v. Union of India . The Hon'ble Bombay High Court also in the case of Mrs. Sandhya P. Naik (supra) at page No. 541 held that, "Action under Section 132(3) of the IT Act can be resorted only if there is any practical difficulty in seizing the item which is liable to be seized". Items which are liable to be seized are items which are found as a result of the search and items which are not yet found cannot be held as items which are liable to be seized. In view of the above, we do not find much force in the arguments of the learned Departmental Representative. Before proceeding further, we would also like to observe here that passing of an order under Section 132(3) is an administrative act and law presumes that such an official act was done bonafidely and correctly unless otherwise is proved. We find that no material was brought before us to show that order under Section 132(3) was not correctly passed.
33. The learned Departmental Representative also submitted that a conscious decision in respect of seizure of documents kept in the drawer could not be taken on 12th March, 1999 as the authorised officers could not go through those documents and hence it should be taken that search was not concluded on 12th March, 1999. In our considered opinion, the above view is contrary to the materials available on record. It is observed that an order under Section 132(3) was passed in respect of those, and as it has already been observed by us on the basis of decisions of the Hon'ble Bombay High Court, the Hon'ble Allahabad High Court and other High Courts cited in the immediately preceding para that such an order can be passed only when it is found that item is otherwise liable to be seized but due to some reason it is not practicable to seize and no order under Section 132(3) can be passed when the authorised officer is in doubt that item is to be seized or not. Hence, it cannot be assumed that the authorised officer without ascertaining that those were liable to be seized or not might have passed an order under Section 132(3). If we take the submission as correct that though the prohibitory order under Section 132(3) was passed but the authorised officer has not gone through the contents of the document and hence search is not concluded then, on the same analogy, it can also be very well argued that though the documents were seized under Section 132(1)(iii), but the authorised officer has not gone through each and every document seized and, therefore, search was not completed. Still further, no reason as to why the authorised officer could not go through the seven documents kept under prohibitory order on 12th March, 1999 could be given by the Revenue while he could go through the several documents seized on that date. Moreover, we find no such recording either in the Panchnama dt. 12th March, 1999 which indicates that the authorised officer could not go through the said seven documents and reason thereof or any other material. Hence, we find that the above submission of the learned Departmental Representative is unacceptable.
34. The submissions of the counsel of the assessee were to the effect that entire premises including the drawer was searched on that date and nothing remained to be searched. He also pointed out that assessee has filed an affidavit before the CIT(A) and made a sworn statement therein that some loose documents found by the authorised officers from the first floor of the premises were brought by them to the ground floor and put in the drawer of the table and a seal was put on that drawer and in respect of that drawer a prohibitory order under Section 132(3) of the Act was passed. The learned Departmental Representative could not rebut this averment of the assessee and he has also not denied before us the event which is alleged to have taken place on 12th March, 1999 by the assessee in the affidavit. On the contrary to this, his submission in respect of this was that the authorised officers had not gone through the documents and files kept in the drawer and as such there was no conscious decision arrived at about their seizure. In other words, according to the learned Departmental Representative decision on the seizure was pending on 12th March, 1999 and he does not categorically deny that the drawer was examined, inspected or searched by the authorised officers on that date.
Further, in this connection, the submission of the AO before the CIT(A), as recorded in para 5 of the order of the CIT(A), was that the search proceedings did not come to an end on 12th March, 1999 but continued till 16th April, 1999 when the restraint order under Section 132(3) was revoked, the documents in the drawer were seized and a Panchnama was drawn up on that date. Thus, it is observed that the AO has also not disputed or denied the fact claimed by the assessee before the CIT(A) in the affidavit to the effect that authorised officer collected loose papers recovered from the residence at the first floor of the premises and put them in the drawer of the table in the office located at the ground floor of the said premises. Thus, the case of the Revenue is that even on the facts as claimed by the assessee in the affidavit, the search cannot be taken as completed on 12th March, 1999 as seizure was not completed and prohibitory order under Section 132(3) was passed. In the above circumstances, we observe that the claim of the assessee, that certain loose papers found during the course of search in the residence situated at the first floor of the premises were brought to the office situated at ground floor and were put in a drawer and sealed by the authorized official, was neither challenged by the Revenue either before the CIT(A) nor before us. This coupled with the fact that the Revenue at no stage sought cross-examination of the deponent assessee or any of the witnesses of the search in respect of these averments in the affidavit of the assessee to rebut the same and in absence of any material on record to show that these averments cannot be true, in our considered opinion and keeping in view the legal principle as settled by the Hon'ble Supreme Court in the case of Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC), it is not permissible for us to arrive at a different conclusion merely on the basis of assumptions or suppositions.
35. The Panchnama drawn on 16th April, 1999 shows that seven documents kept in the drawer of the table were seized by the authorised officer Shri S.B. Singla, ITO, CIB, Faridabad on that date and the prohibitory order passed on 12th March, 1999 was revoked. The said Panchnama does not show any search was conducted on that date. The Hon'ble Supreme Court in the case of CIT v. Tarsem Kumar and Anr. quoted with approval from the decision of the Division Bench of the Hon'ble Allahabad High Court in the case of Mottled and Ors. v. Preventive Intelligence Officer, CCE and Ors. that, "The power conferred under Section 132(1) of the Act was contemplated in relation to those cases where the precise location of the article or thing was not known to the IT Department, and therefore, a search was necessary for it". Thus, after passing of an order under Section 132(3), on 16th April, 1999, the location of documents kept in the drawer was well-known to the authorised officer and hence, question of search in respect of those documents as contemplated under Section 132(1) could not be carried out. Further, an order was already passed under Section 132(3) of the Act on 12th March, 1999. The later part of the provisions of Section 132(3) empowers the authorized officer to take such steps as may be necessary for ensuring compliance with this sub-section. Hence, in our considered opinion, on the facts of the present case, on 16th April, 1999 in exercise of this power available under Section 132(3), by the later part of the same, only lifting of the prohibitory order and seizure was made on that date and in relation to this seizure the Panchnama dt. 16th April, 1999 was drawn. In other words, the Panchnama drawn on 16th April, 1999 was not directly in pursuance to search authorization dt. 10th March, 1999 but was in pursuance to order passed under Section 132(3) on 12th March, 1999.
36. Further, it is not in dispute in the instant case that the search party vacated the premises on 12th March, 1999 and also taken the seized materials with them. Even then, for the sake of argument, it is assumed that search could not be completed on 12th March, 1999 for certain extreme reason which was beyond the control of the authorised officers, then also we find that the Department could not give any convincing reason of not resuming the search immediately on succeeding day and for keeping the search suspended for about 34 days. In this connection the contention of the learned Departmental Representative was that as revocation of order under Section 132(3) could have been made at any time within 60 days on the passing of order and hence the same was validly revoked on 16th April, 1999 and Department cannot be found in fault in that respect. We are in agreement with this submission of the learned Departmental Representative to the extent that revocation of prohibitory order under Section 132(3) can be made at any time within 60 days of the passing of the order as per statutory provisions contained in Sub-section (8A) of Section 132. But, in respect of the issue before us we are not concerned with the validity of passing of an order under Section 132(3) or validity of revocation of such an order. We find that no statutory provision or authority can be cited before us which enables an authorised officer to legally keep search suspended for such a long duration of 34 days without any valid, compelling and convincing reason. In our considered view, the search should be completed continuously on succeeding days and if there is a gap, there should be a compelling and valid reason for the same. The search should have been resumed immediately on a succeeding date. Our above view finds support from the decision of the Hon'ble jurisdictional Delhi High Court in CIT v. Sarb Consulate Marine Products (P) Ltd. (2007) 211 CTR (Del) 54 : (2007) 294 ITR 444 (Del) wherein it was held that, "a general consensus appears to have emerged among the High Courts to the effect that a search under Section 132 of the Act should be continuous and if it is discontinued and thereafter resumed, then there must be a valid explanation for the gap". We find that in the instant case, no reason could be given by the Revenue for the gap of 34 days. Thus also in view of the above decision of the Hon'ble jurisdictional High Court, in absence of any valid reason given by the Revenue for the long gap of 34 days, in our considered opinion, if the action taken by the authorised officer on 16th April, 1999 was taken as a search in continuation to the search conducted on 12th March, 1999 in pursuance to the search authorization dt. 10th March, 1999, then the search on 16th April, 1999 was an invalid and illegal search. Thus looking from this angle also the valid search in pursuance to the search warrant dt. 10th March, 1999 was concluded on 12th March, 1999.
37. Further, the issue that a prohibitory or restraint order passed under Section 132(3) does not extend the time-limit of passing assessment order is no more res integra. The issue has been decided by the Hon'ble Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik (supra) wherein it was held that by simply stating in the Panchnama that the search is temporarily suspended, the authorised officer cannot keep the search proceedings in operation by passing a restraint order under Section 132(3). Reliance placed by the Department (sic-assessee) on the judgment of the Allahabad High Court in the case of Sriram Jaiswal v. Union of India and Ors. (supra), was correct. The restraint order in view of this authority cannot be cancelled and renewed from time to time. Action under Section 132(3) of the IT 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(3) of the IT Act thus cannot be exercised so as to circumvent the provisions of Section 132(3) r/w Section 132(5) of the IT Act. The position has become much more clear after the insertion of the Explanation to Section 132(3) effective from 1st July, 1999, that a restraint order does not amount to seizure. Therefore, by passing a restraint order, the time-limit available for framing of the order cannot be extended.
38. This order of the Hon'ble Bombay High Court was approved and followed by the Hon'ble Delhi High Court, which is also the jurisdictional High Court in the present case, in CIT v. Sarb Consulate Marine Products (P) Ltd. (supra). The Hon'ble Delhi High Court has held that a general consensus appears to have emerged among the High Courts to the effect that a search under Section 132 of the Act should be continuous and if it is discontinued and thereafter resumed, then there must be a valid explanation for the gap. By merely resorting to a restraint order under Section 132(3) of the Act, and that too, only upto 30th Sept., 1997, the Revenue could not have extended the time-limit for passing an assessment order.
39. Lastly, the argument of the learned Departmental Representative to the effect that till all the seizure is not effected all the materials are not available with the AO which is required for assessment and hence, time-limit under Section 158BE will not start running if found not in conformity with the plain words employed in that section. The phrase 'conclusion of search' employed in Expln. 2 to Section 158BE does not necessarily also mean 'conclusion of seizure'. If search is concluded on an earlier date, merely because on that that a prohibitory order under Section 132(3) was passed on that date and in pursuance to such prohibitory order some seizure was made on a subsequent date, cannot extend the time-limit of passing the assessment order, as the time-limit is to be calculated with reference to conclusion of search and not with reference to conclusion of seizure. In support of the above view Expln. 1 of Section 158BE can also be pressed into. Explanation 1 provides for exclusion of certain periods for calculation of time-limit for completion of the assessment. Under Section 158BE the legislature in their wisdom thought it fit to not to incorporate here the time or period taken for the revocation of an order under Section 132(3). When the legislature has not so provided, no authority including the Tribunal can read the same in the said Explanation.
40. The learned Departmental Representative also cited before us the decisions of the Hon'ble Delhi High Court in the case of M.B. Lal v. CIT (supra) and VLS Finance Ltd. and Anr. v. CIT (supra) for his contention that an order passed under Section 132(3) extends the time-limit provided under Section 158BE for making an assessment. The decision in (supra) was rendered on 22nd Oct., 2005 and in (supra) was rendered on 31st Aug., 2005 and the decision of the Hon'ble Delhi High Court in the case of CIT v. Sarb Consulate Marine Products (P) Ltd. (supra) was rendered on 2nd May, 2007. Even if it is taken that the view expressed in (supra) and (supra) by the Hon'ble Delhi High Court are contrary to the view expressed by the Hon'ble Delhi High Court in (2007) 211 CTR (Del) 54 : (2007) 294 ITR 444 (Del) (supra), then also the decision of (2007) 211 CTR (Del) 54 : (2007) 294 ITR 444 (Del) (supra) being a later decision the same is to be followed. Moreover, the later decision of the Hon'ble Delhi High Court is in agreement with the decision Hon'ble Bombay High Court in CIT v. Mrs. Sandhya P. Naik (supra).
41. In view of the above we reiterate that on full reading of all the recordings made in the Panchnama drawn on 12th March, 1999 in respect of premises situated at I-16, Sector-10, DLF, Faridabad we find that search party left the premises on that day after carrying with it the seized materials which prima facie shows that authorization of search is fully implemented and execution is complete. No material was found in the said Panchnama to show that factually search was not concluded on 12th March, 1999 and any portion of that premises remained to be searched on that date for any reason. Further, it has been settled by the decisions of the Hon'ble High Court that the authorised officer by simply stating in the Panchnama that the search is temporarily suspended cannot keep the search proceedings in operation by passing a restraint order under Section 132(3). It has to be shown by the Revenue that for some valid reason the search of any portion of the premises could not be done continuously and a gap was necessary. A search under Section 132 of the Act should be continuous and if it is discontinued and thereafter resumed, then there must be a valid explanation for the gap. In the instant case we find that no reason could be adduced by the Revenue before us for a long gap of 34 days for next visit at the premises of the assessee. Thus, in our considered opinion visit on 16th April, 1999 in the premises of the assessee by the authorised officer was in exercise of power available under Section 132(3) for the purpose of revocation of the order passed earlier under Section 132(3) of the Act etc. and not to make any fresh search. Hence in our considered view the authorization dt. 10th March, 1999 for search was executed on 12th March, 1999. Hence in view of the provisions of Section 158BE(1)(b) the order for the block assessment ought to have been passed on or before 31st March, 2001. The impugned order of block assessment passed on 30th April, 2001, being after lapse of more than two years from the end of the month in which last of the search warrant was executed and hence the same is barred by limitation. Hence we cancel the impugned block assessment order. Thus, the ground of appeal of both the assessees are allowed.
42. The other grounds of appeal in both the cases relate to the merits of various additions or disallowances made in the block assessment order. In view of our decision in respect of the grounds of appeal relating to the jurisdictional issue, we refrain from adjudicating the same following the decision of the Special Bench in the case of Rahul Kumar Bqjqj v. ITO .
43. In the result the appeals of both the assessees are allowed.
R.V. Easwar, Vice President and Deepak R. Shah, A.M.
44. We have had the benefit of going through the order proposed by our Brother holding that the block assessments in both the cases are time-barred and, therefore, they have to be cancelled. We are however unable to concur with the view for reasons which follow in the succeeding paras.
45. We may notice the facts of the case of Subhash Verma first. It is not in dispute that on 12th March, 1999, there was a search under Section 132(1) under authorization dt. 10th March, 1999 issued by Director of IT (Inv.), Chandigarh. It is also not in dispute that in the Panchnama drawn up on 12th March, 1999, para 8 showed as follows:
8. The search commenced on 12th March, 1999 at 7.50 a.m. The proceedings were closed on 12th March, 1999 at 8.50 p.m. as temporarily concluded for the day to be commenced subsequently for which purpose seals were placed on the drawer of table in the office at G.F. in our presence.
The Panchnama is witnessed by two Panchas, it has been signed by the authorised officer and also signed by Subhash Verma. The Panchnama mentions in the first page that the warrant was issued in the case of "Shri Subhash Verma and Smt. Krishna Verma". Another Panchnama was prepared on 16th April, 1999. In para 2 of the Panchnama, it was stated as under:
2. As today's search was in continuance of the proceedings on 12th March, 1999, we, along with the aforesaid authorised officers, before the commencement of the proceedings today, inspected the seals which had been placed on that date and found them to be intact....
It is common ground that on 16th April, 1999, the documents in the drawer were seized. The Panchnama prepared on that day has been signed by two Panchas, the authorised officer and Subhash Verma. Para 8 of the Panchnama states that the search commenced at 12.05 p.m. on 16th April, 1999 and the proceedings were closed at 2 p.m. as finally concluded.
46. In the case of Smt. Krishna Verma, the authorisation under Section 132(1) to search was issued on 10th March, 1999 by Director of IT (Inv.), Chandigarh. Another authorisation appears to have been issued on 16th March, 1999 by the Addl. Director of IT (Inv.), Rohtak in respect of locker No. 84/6 situated at Oriental Bank of Commerce, Sector 7, Faridabad. Pursuant to this authorisation, the officers of the IT Department visited the bank on 18th March, 1999 and operated the locker. A Panchnama was drawn up on that day in the name of Smt. Krishna Verma and gold, silver, ornaments, etc. were seized and inventorised.
47. One important aspect to be noticed is that the warrants were issued by Director of IT (Inv.), Chandigarh in the names of "Shri Subhash Verma and Smt. Krishna Verma" and the Panchnamas drawn up show that the warrants were issued to search H.No. 1-16, Sector 10, DLF, Faridabad. Even the Panchnama drawn up on 16th April, 1999 is a Panchnama showing both the names. It is this Panchnama which says that the proceedings were closed on that date as finally concluded.
48. Section 158BE provides for time-limit for completion of block assessment. Clause (b) of Sub-section (1) provides the time-limit of two years from the end of the month in which the last of the authorizations for search under Section 132 was executed, for passing the block assessment order, where the search was initiated on or after 1st Jan., 1997. Clause (a) of Expln. 2 below the section provides that the authorization for the search shall be deemed to have been executed on the conclusion of the search as recorded in the last Panchnama drawn in relation to any person in whose case the warrant of authorization was issued. If the conclusion of the search in both the cases is taken as 12th March, 1999, then as the assessee contends the block assessments ought to have been completed on or before 31st March, 2001 and since the same have been completed on 30th April, 2001 they are barred by limitation. On the other hand, if the conclusion of the search is taken as 16th April, 1999, then as the Department contends the block assessments could be completed on or before 30th April, 2001 and since they have been completed on 30th April, 2001, they are not barred by limitation.
49. The date on which the search was concluded is thus by law to be taken according to the recording made in the last Panchnama. In the present case, in the Panchnama prepared on 16th April, 1999, as has already been noticed, it has been recorded that the search proceedings were finally concluded on that date. Since this Panchnama has been issued in both the names of "Shri Subhash Verma and Smt. Krishna Verma" the date on which the search was concluded as per this Panchnama should be 16th April, 1999 in both the cases. Therefore, if an uncomplicated view of the facts is taken, there should be no difficulty in holding that the AO could complete the block assessments on or before 30th April, 2001.
50. The complication introduced is because of the assessee's contention that the search was concluded on 12th March, 1999 itself and the reason why it is so contended is that according to the assessee, a restraint order or prohibitory order was passed on that date under Section 132(3) and the same was revoked on 16th April, 1999 and the mere passing of the restraint order cannot extend the period of limitation for making the assessments. In other words, it is contended that the restraint order cannot keep in abeyance the search proceedings so that it can be said that only on lifting the restraint order the search proceedings get concluded.
51. In order to appreciate the contention, it is necessary to look into Section 132 and notice how it authorises and provides for passing of restraint orders and for what purpose. The second proviso to Section 132(1) inserted by the Finance Act, 1988, w.e.f. 1st April, 1989 says that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, a restraint order may be served on the owner or the person who is in possession of the article or thing that he shall not remove, part with or otherwise deal with the same except with the previous permission of the authorised officer. More importantly, the proviso says that the serving of the order of restraint shall be deemed to be seizure of the article or thing. In contrast, Sub-section (3) of Section 132 provides for a different type of restraint order. It says that where it is not practicable to seize any books of account, other documents, money, bullion, jewellery or other valuable article or thing for reasons other than those mentioned in the second proviso to sub-section, the authorised officer may serve a restraint order on the owner or the person in possession that he shall not remove, part with or otherwise deal with the same except with the previous permission of the officer. The officer is also empowered to take steps for ensuring compliance with the restraint order. In the Explanation below the subsection which was inserted by the Direct Tax Laws (Amendment) Act, 1987, it has been stated that for the removal of doubts, it is declared that serving of a prohibitory order under the above sub-section shall not be deemed to be seizure of the books of account, money etc. The provision authorising the passing of the restraint and prohibitory orders both under the second proviso to Sub-section (1) and under Sub-section (3) of Section 132 are incidental to the powers of search under Section 132 and are designed to enable and effectuate the purposeof the search. The difference between a prohibitory order passed under the second proviso to Section 132(1) and that passed under Sub-section (3) of Section 132 are these. Under the former, the passing of the prohibitory order itself will be deemed to be seizure of the article or thing, because of the impossibility or impracticability of taking physical possession of such article or thing due to various reasons. The restraint order passed under the second proviso amounts to seizure and it has been expressly stated so therein. In contrast, the restraint order passed under Sub-section (3) has been expressly clarified not to amount to seizure. Secondly, the reasons which justify the passing of the order under Sub-section (3) should be different from the reasons stated in the second proviso to Sub-section (1). Obviously, the authorised officers conducting a search cannot be expected to be continuously present in the searched premises till the entire exercise is over. There may be administrative and other practical difficulties in continuing the search for days together. In case of such practical difficulties, where the search is not completed, Sub-section (3) authorises the officer to serve a restraint order on the owner or person in possession directing him not to remove or otherwise deal with the articles placed under restraint. Such an order can be passed even where a part of the premises could not be covered during the search and where for administrative or several other reasons the officers conducting the search are obliged to leave the premises. That is precisely why it has been stated in the Explanation that the serving of the restraint order on the owner or the person in possession shall not be deemed to be seizure. Whereas under the second proviso to Sub-section (1) the serving of the restraint order amounts to seizure, under Sub-section (3) the serving of the restraint order does not amount to seizure. The reason is simple. The officers place a restraint on the owner or the person in possession for a temporary period so that the search can be revived at a later point of time and continued.
52. It is necessary to refer to Sub-section (8A) of Section 132, to which attention was drawn on behalf of the Department. At the relevant time, the sub-section read as under:
(8A) An order under Sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order, except where the authorised officer, for reasons to be recorded by him in writing, extends the period of operation of the order beyond sixty days, after obtaining the approval of the director or, as the case may be, CIT for such extension:
Provided that the director or, as the case may be, the CIT shall not approve the extension of the period for any period beyond the expiry of thirty days after the completion of all the proceedings under this Act in respect of the years for which the books of account, other documents, money, bullion, jewellery or other valuable articles or things are relevant.
The aforesaid sub-section contains safeguards against attempts sought to be made to harass the searched person by prolonging the proceedings beyond reasonable time. The restraint order passed under Sub-section (3) is to have effect only for a period of sixty days from the date of the order (not from the date of service of the order); however the said period can be extended by the authorised officer after recording reasons in writing and after obtaining the approval of the Director or the CIT for the extension. Thus, the decision of the authorised officer to extend the period of sixty days is strictly supervised by his superior officers. As if this is not enough, the proviso says that the Director or the CIT shall not approve the extension of the period for any period beyond the expiry of thirty days after the completion of all the proceedings under this Act in respect of the years for which the books of account etc. are relevant. It must be remembered that the authorised officers who conduct the search are from the Investigation Wing of the Department and normally they are different from the officers who complete the assessment consequent to the search. At the time when the authorised officers conduct a search, the question of limitation for completing the assessment is not, and cannot be, in the very nature of things, in their minds. The reason is that the period of limitation comes in for reckoning only when the search is complete and the search is not complete till the entire premises covered have been searched and all the materials have been examined and seized or released, wherever necessary. It would not be charitable on the part of anybody to attribute to the authorised officers who conduct the search any motive to delay the proceedings because the entire exercise of a search is to strike swiftly, take the errant assessee by surprise, give him due opportunity of explaining the seized material and then complete the assessment as quickly as possible. It is common knowledge that in search cases, huge amount of revenue is normally involved and it is in the Department's own interest to collect the tax as quickly as possible. This is possible only if the assessment is made as early as possible. Taking all these into consideration, it is not possible to jumpif the expression can be usedto the conclusion that the passing of a prohibitory order under Sub-section (3) is in all cases only to extend the period of limitation, without any facts and circumstances or evidence justifying the conclusion. It may happen in extreme cases that prohibitory orders are passed without justification. In such cases, Courts have come down heavily on such attempts and have seen through the game and held that the restraint orders have no useful purpose to serve and, therefore, the search must be deemed to have been concluded much earlier. But, in a bona fide case, where there is no such attempt and the prohibitory order is passed in the normal course and for bona fide reasons, the search cannot be deemed to have been concluded on the day on which the said order was passed.
53. It is to be noted that after the execution of the search warrant dt. 12th March, 1999, a restraint order was passed under Section 132(3) of the Act. The search party visited the premises of assessee once again on 16th April, 1999 and revoked the restraint order after seizing the contents of the drawer, which was placed under restraint order under Section 132(3). If it is to be said that the search was concluded on 12th March, 1999 itself, the authorised officer could not have entered the premises of assessee without one more authorisation being issued under Section 132(1) of the Act. However, the authorised officer entered the premises of assessee pursuant to the very same warrant of authorisation issued on 10th March, 1999 and first executed on 12th March, 1999. But the execution of search warrant on 12th March, 1999 did not result into conclusion of search as there was a restraint order placed under Section 132(3). Since the search commenced once again pursuant to the original warrant of authorisation issued on 10th March, 1999 and which was till in operation, it can be said that the search concluded only on 16th April, 1999 when the restraint order was revoked and the contents of the drawer, which was under the restraint order were examined and seized. On seizure of the contents of the drawer one more Panchnarna was prepared which recorded a finding that the search was concluded on that day. Therefore, for the purpose of commencement of limitation as prescribed in Expln. 2 to Section 158BE shall be only on conclusion of search as recorded in the last Panchnarna dt. 16th April, 1999 as the same is in relation to the warrant of authorisation issued under Section 132(1).
54. What has happened in the present cases? The search party visited the premises of the assessees on 12th March, 1999. A Panchnarna was duly prepared on that day and it was signed by everyone who is expected to sign the same. It was served on the assessees. It clearly stated that the search was not completed and was only temporarily concluded to be commenced subsequently. The reason was that a drawer at the ground floor of the premises could not be examined. No objection was taken at that time either by the Panchas or even by the assessees to the effect that the averment in the Panchnarna about the search continuing was contrary to the factual position. Because the drawer or contents therein remained to be examined, the authorised officers had to pass a restraint order under Section 132(3) directing the assessees not to tamper with the same. The order thus had a purpose to serve, i.e., to effectuate the search proceedings. It was a bona fide exercise of the power and not shown to have been exercised mala fide. It was incidental to the search proceedings. The search was conducted from 7.50 a.m. till 8.50 p.m. but the drawer remained to be seen. The search party, therefore, while leaving the premises without completing the search, had to pass the restraint order so that they can come again in due time and examine the drawer and complete the search. They actually came again on 16th April, 1999, revoked the prohibitory order, opened the drawer, searched the same and took away the papers found therein. This is also recorded in the Panchnarna prepared on 16th April, 1999. The papers in the drawer were seized only on 16th April, 1999. In para 2 of this Panchnarna also, it was clearly stated that the search was in continuance of the proceedings on 12th March, 1999. Para 8 of this Panchnarna categorically recorded that the search was finally concluded at 2 p.m. on this day. If one takes an unbiased and uncomplicated view of the facts, as they are found, and on the basis of the records and orders passed by the Departmental authorities and the averments made therein and the unprotesting conduct of the assessees at the relevant time, the only conclusion that is possible to be reached is that the search was not completed on 12th March, 1999, that it was only temporarily concluded on that day and was revived on 16th April, 1999. On this date, it was completed and, therefore, this is the date of conclusion of the search as recorded in the last Panchnarna drawn up, within the meaning of Section 158BE(1)(b) r/w Expln. 2(a) of the Act.
55. It was said on behalf of the assessees that the search was complete on 12th March, 1999 itself as on that date the authorised officers had actually found the papers in the first floor of the premises, seized them and then put them in the drawer in the ground floor and having done so, they cannot contend that the search was not complete on that day. This claim is sought to be supported by an affidavit filed before the CIT(A). The contention is that the CIT(A) has not referred to the affidavit. Our attention is drawn to paras 3 and 5 of the order of the CIT(A) as well as to pp. 42 to 44 in the paper book filed in the case of Krishna Verma. In the affidavit, it has been stated that at about 8 p.m. on 12th March, 1999, the authorised officer collected loose papers recovered from the residence of the first floor of the house and put them in the drawer of the table in the office located at the ground floor and sealed the same. In the impugned order, the CIT(A) has held in para 5 that the AO has stated before him that the search proceedings did not come to an end on 12th March, 1999 but continued till 16th April, 1999 when the restraint order was revoked, the documents in the drawer were seized and a Panchnama was drawn up on that date. Thus, the affidavits filed by the assessees before the CIT(A) have been controverted by the AO and this has been noted by the CIT(A) in para 5 of his order. Thus, the averments in the affidavit have been denied by the AO if one were to go by the order of the CIT(A). That apart, it would be unsafe to decide the issue merely on the basis of the affidavit filed by the assessees. If that were to be permitted the consequences may be grave. All that the assessee has to do, in order to dispute the regularity of an official act performed by an official of the Government, is to file an affidavit disputing the same without anything more. It has already been noticed that on 12th March, 1999, a Panchnama was drawn up in which there was a clear averment that search was only temporarily concluded and would be recommenced later. The purpose why the search was only temporarily concluded has also been stated in para 8 of the Panchnama. The assessee and the Panchas have signed the same. The assessee did not protest at that time against the averment. The entire sequence of events, namely, the commencement of the search, the temporary conclusion thereof, the passing of the restraint order under Section 132(3) on the same day on which the search was temporarily concluded, the second visit of the authorised officers on 16th April, 1999, the revoking of the restraint order on that date for the purpose of seizing the documents found in the drawer, the drawing up of a Panchnama on that day which recorded that the search concluded on that day, all of them show that all these official acts have been regularly performed without any ulterior motive. The averment in the affidavit filed by the assessee has also been denied by the AO as seen from para 5 of the order of the CIT(A). The AO has also stated in his reply dt. 7th July, 2003 that the case of Smt. Neena Wadhwa v. Dy. CIT, New Delhi, relied on by the assessee, was distinguishable as in that case two separate authorizations were issued on different dates. The tenor of the submissions of the AO before the CIT(A) is to the effect that the search was not complete on 12th March, 1999 which means that the AO was actually disputing the assessee's affidavit and the contention based thereon. It is, therefore, not possible to accept the submission of the learned Counsel for the assessee that the affidavit filed by the assessees remained uncontroverted. Besides the affidavit, which is insufficient to displace the presumption flowing from the acts regularly performed by the authorised officers conducting the search, there is no other evidence to show that the search was actually completed on 12th March, 1999. In this view of the matter, the reference to the judgment of the Supreme Court in the case of Mehta Parikh & Co. v. CIT (supra) is not apposite. In fact, in Smt. Gunwantibai Ratilal v. CIT , the Madhya Pradesh High Court distinguished the judgment of the Supreme Court cited above by holding that the said decision "cannot be construed to lay down the proposition that unless the deponents are cross-examined, the affidavits cannot be rejected. That decision lays down that if there is no material whatsoever on record for doubting the veracity of the statements made in the affidavits and if the deponents have also not been subjected to cross-examination for bringing out the falsity of their statements, then the Tribunal would not be justified in doubting the correctness of the statements made by the deponents in the affidavits. The finding arrived at in such a case would, according to the Supreme Court, be a finding based on pure surmise, having no basis in evidence. In the instant case, however, there was material on record which was considered by the Tribunal along with the affidavits and the Tribunal found that no reliance could be placed on the affidavits. A statement by a deponent can be held to be unreliable by the Tribunal either on the basis of cross-examination of the deponent or by a reference to other material on record leading to the inference that the statement made in the affidavit, cannot be held to be true". In the present case, there is other material on record, namely, the Panchnamas, the signatures of the Panchas and the assessees therein, the orders of restraint, their revocation, etc., all of which show that the official acts were regularly performed by the Departmental authorities. In the light of this material, the averments in the affidavit cannot be relied upon and it cannot be said that the deponents not having been cross-examined the affidavits have to be accepted.
56. It was then said that there was an unreasonable delay of 34 days between 12th March, 1999 on which date the restraint order was passed and 16th April, 1999 on which date the order was revoked. The judgment of the Kerala High Court in Dr. C. Balakrishna Nair and Anr. v. CIT and Anr. has been cited. This judgment of the Single Judge of the High Court has been reversed by a Division Bench and the judgment is reported as CIT and Anr. v. Dr. C. Balakrishnan Nair and Anr. (2005) 199 CTR (Ker) 279 : (2006) 282 ITR 158 (Ker). The Division Bench held that the Single Judge was not right in saying that there was no satisfactory explanation as to why the books of account, documents, etc. were not practicable to be seized on the date of search and, therefore, there was a contravention of Section 132(3). The Division Bench pointed out at pp. 171 and 172 that where it was not practicable to seize all the books of account and records which are relevant or irrelevant, the authorised officer may serve a restraint order on the person who is in immediate possession or control thereof and if such a procedure has been followed, no fault can be found with the IT authorities. At p. 172, it has been held that a search followed by a prohibitory order would not amount to seizure. In the case before the Kerala High Court, the search took place on 27th Oct., 1995. The prohibitory order was passed on that day and thereafter the search resumed on 10th Nov., 1995. The Division Bench of the High Court held that the seizure took place only on 10th Nov., 1995. At p. 173, the Division Bench also dealt with the contention that the search was prolonged unreasonably. It was held that in the absence of any time-limit prescribed in the Cr.PC or the IT Act, it cannot be said that the delay in concluding the search has vitiated the search and seizure. The Division Bench ultimately held that there was no procedural violation of the search proceedings and that the search was valid. The judgment of the Single Judge was reversed. In the case before us, the search was not completed on 12th March, 1999 and, therefore, a restraint order was passed under Section 132(3). Section 132(8A) gives a period of sixty days for the tenure of the restraint order. In the present case, the restraint order was effective only for a period of 34 days which is well within the period of sixty days mentioned in Section 132(8A). It cannot, therefore, be said to be operative for an unreasonably long period.
57. The case of the Bombay High Court (Panaji Bench) in CIT v. Mrs. Sandhya P. Naik and Ors. (supra) was strongly relied upon on behalf of the assessees. A perusal of the judgment shows that a restraint order can be passed only if there is a practical difficulty in seizing the item liable to be seized but in the absence of any such difficulty, the officer is left with no alternative but to seize the item if he is of the view that it represents undisclosed income. This stage can be reached only if the items have been examined by the search party and they have formed an opinion that they represent concealed income of the assessee. But where, as in the present case, the materials have not been examined at all due to various reasons, it cannot be said that the search party have reached a stage where they are in a position to form an opinion that the materials represent undisclosed income of the assessee. What seems to have happened in the present case is that the documents in the drawer in the ground floor of the premises were not examined by the authorised officers and that is the reason why they resorted to Section 132(3) so that they can be seized at a later point of time to find out whether they represent any undisclosed income. In the judgment of the Bombay High Court (Panaji Bench) cited supra, the emphasis appears to be on this, namely, that once the materials have been examined and are found to represent concealed income then they have to be seized and the authorised officers cannot, by passing a restraint order under Section 132(3), seek to extend the time-limit for making an assessment. This position does not obtain in the present case. There is no evidence to show that the authorised officers did examine the papers found in the drawer and reached the conclusion that they represented concealed income of the assessee but still failed to seize them and passed a restraint order only with a view to extending the time-limit for framing the assessment. Thus, the Bombay judgment is not applicable to the present case.
58. Reliance was then placed on the order of the Mumbai Bench of the Tribunal in Dy. CIT v. Adolf Patric Pinto (supra). In this case, on 19th June, 1998 when the search took place, an inventory was prepared of the shares and debentures found at the residence of the assessee. The search party was aware of the nature and contents of the documents which were kept in the cupboard as was clear from the inventory. A prohibitory order was passed on that date and on 1st Aug., 1998 what happened was merely that the said order was lifted. On these facts, the Tribunal held that the Panchnama prepared on 1st Aug., 1998 was only for the purpose of lifting the prohibitory order and could not be treated as execution of the search warrant. The facts of the present case are distinguishable. The authorised officers were not aware of the contents of the drawer on 12th March, 1999 when the search first took place. They did not take any inventory of the contents of the drawer. They merely passed a prohibitory order on that date. When they visited the premises on 16th April, 1999, not only was the prohibitory order revoked but the contents of the drawer were seized as is evident from the Panchnama prepared on that date. There was actual seizure of the contents of the drawer on 16th April, 1999 and the Panchnama prepared on that date was not merely for the purpose of lifting the prohibitory order, as was the case before the Bombay Bench of the Tribunal.
59. While on this, it may be useful and relevant to refer to a few judgments of the Hon'ble Delhi High Court. In Mrs. Kanwal Shamsher Singh v. Union of India and Ors. (supra), the question arose as to the meaning of the word "seize" appearing in Section 132(1)(iii) of the IT Act. The High Court held that it refers to the dispossession of the person from whom seizure is made and its assumption by the authorised officer. It was further held that the issuance of a prohibitory order under Section 132(3) does not amount to seizure within the meaning of Section 132 because the authorised officer, under the prohibitory order, did not assume possession of the assets; they remained where they were. With reference to the lockers, it was held that the mere taking over of the keys of the locker did not amount to dispossession of the contents of the locker from the assessee. It was held that the order of the authorised officer did have the effect of disabling the assessee from dealing with the contents of the locker, but it did not have the effect of the contents being taken over by the authorised officer on behalf of the Department. It was however cautioned that the authorised officer did not have an unfettered discretion in the matter and to keep indefinitely under seal the detained goods found during a search by resort to Section 132(3). The other judgment of the Delhi High Court is the case of M.B. Lal v. CIT (supra) which has also been cited on behalf of the Department. The contention before the High Court on behalf of the assessee was that by merely passing an order under Section 132(3) in regard to the contents of the almirah and cupboard, the search cannot be artificially prolonged and that there was no practical difficulty in seizing the items liable to be seized nor can the authorised officer exercise the power under Section 132(3) to circumvent the provisions of Section 158BE. In this case, the Tribunal was found to have recorded a finding that there was no delay in executing the search inasmuch as various lockers, almirahs and cupboards have to be searched. On the basis of this finding, the High Court held that the period of limitation has to be reckoned from the last Panchnama drawn up in which it was stated that the search was concluded. If there is no artificial extension of the search proceedings by resort to Section 132(3), then the search would end only on revocation of the prohibitory order and the limitation for making the block assessment, it was held, would commence only from the date of revocation of the prohibitory order. In VLS Finance Ltd. and Anr. v. CIT and Anr. (supra), the Hon'ble Delhi High Court noticed that the last Panchnama was drawn well before the 60 days period given by Section 132(8A) expired and, therefore, no ulterior motives could be attributed to the authorities in not seizing the books of account and instead passing a prohibitory order under Section 132(3). In CIT v. Sarab Consulate Marine Products (P) Ltd. (supra), the facts were somewhat extreme. In that case, on 6th Nov., 1996 some documents were seized and a Panchnama was drawn up on the same day. An inventory was also made. On the same day, three trawlers belonging to the assessee were subjected to a restraint order under Section 132(3). The order was extended on 30th March, 1997 to 30th Sept., 1997. No further extension orders were passed. A notice under Section 158BC was issued on 16th Dec, 1997 asking the assessee to file a block return and during the pendency of the assessment proceedings a further search was conducted on the trawlers on 14th Sept., 1998 and a Panchnama was drawn up, but without any seizure. It was on these facts it was held by the Delhi High Court that prima facie there was no justification for keeping the search pending for more than one year and ten months without any semblance of activities by the Revenue. The High Court did not accept the explanation of the Revenue that there was transfer of jurisdiction in respect of some officers and enquiries were required to be made into the assets of the assessee. The reasons given by the Revenue, according to the High Court, were worth nothing for prolonging the search and seizure operation for such a long period of time. It was, therefore, held that the date of search cannot be taken to be 14th Sept., 1998 and the assessment order passed on 30th Sept., 1998 was barred by limitation. Significantly, the High Court also observed that the subsequent search on 14th Sept., 1998 of the trawlers and Panchnama drawn up on that day took place when there was no restraint order in operation, The facts of the cases before us are different, the significant distinction being firstly that the restraint order was effective for a period of only 34 days (12th March, 1999 to 16th April, 1999) and secondly that the search resumed on 16th April, 1999 during the operation of the restraint order. It is no doubt true that the Delhi High Court has observed that a search should be continuous but at the same time it has also been observed that "if it is discontinued and thereafter resumed, then there must be valid explanation for the gap". These observations show that there could be reasons justifying the discontinuance and resumption of the search. In the cases before us, we are unable to put the Department in a situation where they are bound to explain the reasons why there was a gap of 34 days because Section 132(8A), as it stood at the relevant time provided that the restraint order could be operative for a period of sixty days initially. We have already seen that in VLS Finance Ltd. and Anr. v. CIT (supra), the Delhi High Court has observed that no ulterior motives could be attributed to the authorities in not seizing the books and instead passing the prohibitory order under Section 132(3) where the last Panchnama was drawn well before the period of sixty days given by Section 132(8A). The whole exercise appears to be to see whether the authorised officers conducting the search had any ulterior motive in not seizing the books of account, documents, etc. but choosing to pass a prohibitory order under Section 132(3) merely with a view to prolonging the search and putting the assessee to needless harassment and hardship. Acts of the authorised officers done in the regular course and bona fide cannot be questioned. These are, in our humble opinion, the parameters to be kept in view while examining the question whether the block assessment was within the time-limit or not. Further, it is not correct to say that we are sitting in judgment over the correctness of the prohibitory order passed under Section 132(3), which is no doubt an administrative act, merely because the circumstances under which such an order was passed have been examined by us in the light of the parameters laid down by the Courts. It has to be remembered that the contention on behalf of the assessees is that the restraint order cannot be passed merely for the purpose of extending the time-limit for making the block assessments. It is to test the correctness of the contention that it has become necessary to examine the question whether the motive of passing the restraint order on 12th March, 1999 was merely to extend the time-limit for completing the block assessments. We do not see how this exercise can be avoided, given the stand taken by the assessees.
60. At this juncture, it is also relevant to consider the decision of Special Bench of the Tribunal in the case of C. Ramaiah Reddy v. Asstt. CIT (2003) 81 TTJ (Bang) (SB) 1044 : (2003) 87 ITD 439 (Bang) (SB). In that case, following questions were referred to the Special Bench:
(1) Whether the Tribunal could examine the search activity from the time the search was started so as to determine as. to at what point of time the search could be said to be closed for the sole purpose of examining whether the assessment was in time or otherwise;
(2) Whether the term 'within one year from the end of the period in which the last of the authorizations for search under Section 132 was executed' has to be taken to mean the execution of the warrant resulting in seizure and not with reference to issue of prohibitory orders and successive visits that were claimed as searches which were so carried out on the basis of the only authorization that was issued initially; and (3) Whether where a search is carried on the basis of an authorization, resulting in seizure of some items, issue of prohibitory orders on others, search can be said to be continuing and comes to a close only when the authorized officer says that he is no longer going to visit the premises by issuing a Panchnama and by seizing some items that are covered by the prohibitory order which could have been seized by him even at the first instance.
Answering the second and third question, Special Bench of the Tribunal held as under:
The second question pertained to the commencement of time-limit prescribed under Section 158BE. When a search is conducted under Section 132, the AO can take any of the actions specified in Section 132(1)(i) to Section 132(1)(v). As mentioned earlier, during the course of search, the AO may pass an R.O. under second proviso to Section 132(1) or pass a P.O. under Section 132(3). It is not necessary that every search should result in seizure of any material or valuable article or thing. What is a prerequisite for an order under Section 158BC(c) is an action under Section 132 and not seizure of article or records. The time-limit under Section 158BE(1) to pass an order under Section 158BC(c) is to commence from end of month in which last of authorizations for search under Section 132 is executed. The time-limit commences on conclusion of search as recorded in last Panchnama drawn. As described earlier, a Panchnama is drawn when a search is conducted. The Panchnama is like minutes of the proceedings conducted during search of a premises, belonging to the person searched. At the time of conducting a search, the AO may not be able to complete the search for variety of reasons. The AO, thus, for the time being concludes the search and reserves the right to resume the search on a subsequent visit. To protect the interest of the Revenue, the AO passes an R.O. or P.O. If certain material is left at the premises searched, the same is kept under P.O. On a subsequent visit, which may be according to convenience of both the AO and the assessee, the P.O. is revoked and depending upon the circumstances, further P.O. is either clamped or the search is concluded. In all these visits also a Panchnama is prepared. Thus as per Expln. 2 to Section 158BE, the limitation will commence from the last Panchnama drawn stating that the search is concluded. So long as certain material and valuables are under P.O. at the place searched, no one can conclude whether the material and valuables represent undisclosed income. Unless both the parties, namely the Revenue authorities and the assessee have a relook in the matter which is either seized or released, it is impossible to arrive at a primary conclusion suggesting any undisclosed income shown therein. Though it is not mentioned clearly as to when a notice under Section 158BC(a) can be issued requiring the assessee to file a return of income in respect of undisclosed income, yet reading the said Section 158BC(a), it can be concluded that only if a search is conducted under Section 132, a notice under Section 158BC(a) can be issued. This, in other words means, only when search is concluded, notice under Section 158BC(a) can be issued. Now it is not the intention of legislature to suggest that though the material or valuables are under a P.O. at the premises of the assessee, the assessee can be asked to file a return in respect of the undisclosed income. Hence, it will be counter to the scheme of Act that even though notice under Section 158BC(a) is not issued, time-limit for completion of assessment will commence. It is also clear that for a subsequent visit, either to revoke the P.O. or renew the same, no fresh authorization is required. The search is deemed to be continuing so long as all the materials and valuables are either not seized or released but in respect of which certain P.O. is clamped at the premises searched. Each time a Panchnama is required to be prepared. This also suggests that the time-limit will not commence so long as the Panchnama declaring the conclusion of search is not drawn.
What the Explanation to Section 158BE(1) says is that time-limit will start from last of the Panchnama and it cannot be interpreted to mean that the time-limit will not commence till order under Section 132(3) is in operation. An order under Section 132(3) can be passed restraining a person in possession of books or valuables to deal with same. However, once all the materials and valuables are appraised the search will come to an end and to this effect a Panchnama will be prepared. Even at the time of conclusion of search an order under Section 132(3) can be passed which in certain circumstances as per Section 132(8A) may operate even after completion of assessment. This does not mean that time-limit does not commence at all. The time-limit will definitely commence on conclusion of search as per last Panchnama prepared. Hence, the second question was-answered in the negative.
If a P.O. is passed at the premises of assessee under which certain books, records or valuables are kept, to be looked into at a next visit as per the convenience of both Revenue officials and the assessee, the Panchnama prepared at such a moment will suggest whether the search is continuing or not. However, if on the first day of the search itself, if the search is concluded and same is noted in Panchnama which records such a finding, even though certain material is under P.O., search will be declared to have come to an end. Thus, the Panchnama prepared will give an indication whether the search is continuing or not. If on reading of the Panchnama, it can be found out whether the search is to continue due to the claiming of a P.O. when a subsequent visit takes place, once again a Panchnama will be prepared based on action taken at the time of subsequent visit. From the Panchnama drawn, it can be decided whether the search is continuing or not. After all materials are looked into the search will be declared to have come to an end. A reading of the Panchnama will, therefore, clearly indicate whether the search is continuing or not, which in turn will determine commencement of time-limit.
Placing a P.O. at a particular moment in respect of particular items is the administrative act of the AO. How and in what circumstances a P.O. is issued is to be left to the wisdom of the AO concerned. The Tribunal cannot substitute its wisdom, or based on its appreciation of fact, decide whether such P.O. should have been issued or not. What can be appealed before the Tribunal is the order passed under Section 158BC(c), which should be within the time-limit prescribed under Section 158BE and not the administrative act of passing a P.O./R.O., seizing or releasing certain materials, valuables etc. There may be variety of reasons for temporarily suspending the search by passing a P.O. and mentioning the same in the Panchnama as per law.
What is to be seen is the date of last valid Panchnama. Seizure or absence of seizure will not determine validity of Panchnama. What Section 132(13) suggests is that the Cr.PC, 1973 relating to search and seizure shall apply, so far as may be, to searches under Section 132(1). Thus as per the Cr.PC, what is to be seen is valid Panchnama only and not seizure resulting from such search. It is not the intention of legislature to suggest that if there is no final seizure, the Panchnama releasing the material from P.O. is to be ignored. An action under Sections 132(1) and 132(3) is purely an administrative act and not a quasi judicial order. Thus, we are of consider opinion that if an order under Section 132(3) is passed, which is indicated in a valid Panchnama drawn (whether such material under P.O. is seized or not) such Panchnama is to be considered as valid for the purpose of calculating the time-limit prescribed under Section 158BE.
The facts in the present case are also identical. The search commenced on 12th March, 1999 on execution of the warrant of authorisation issued under Section 132(1) dt. 10th March, 1999, The restraint order was placed under Section 132(3) on 12th March, 1999. The search commenced once again pursuant to the very same warrant of authorisation dt. 10th March, 1999 and was finally concluded on 16th April, 1999 as recorded in the Panchnama prepared on 16th April, 1999. Hence, the time-limit for framing the assessment shall commence on conclusion of search as recorded in last Panchnama dt. 16th April, 1999. Therefore, the assessment order framed on 30th April, 2001 is within the limitation.
For the above reasons, we are unable to accept the contentions put forth on behalf of the assessees that the block assessments were barred bytlme.
61. In our decision in respect of the issue whether the block assessments would be invalid because the notice issued under Section 158BC gave a period of less than 15 days for filing the block return, we had held that it would not be so and had also held that the AO would issue a valid notice under Section 158BC and pass the assessment orders de novo. Accordingly, the merits of the additions are not examined. The appeals are partly allowed.