2012 (8) TMI 515 - AT - Income Tax

Tribunal Rules Assessment Orders Void Due to Time Bar under Income Tax Act

The Tribunal ruled that the assessment orders dated 30.11.2004 were time-barred under Section 158BE of the Income Tax Act, 1961. The Panchnama dated ... Block Assessment framed u/s. 153BC (c) - search and seizure operation - assessee contested against invoking of extended period of limitation - Held that:- Panchnama dated 3.1.2003 is not a panchnama which finds mentioned in Explanation 2 to section 158BE which reveals that except from passing the revocation order u/s 132 (3) of the prohibitory order passed on 21st December, 2002 no other activity had taken place. Hence, the limitation cannot be governed by the said panchnama. The search essentially was concluded and completed vide panchnama dated 21st December, 2002, when order under the second proviso to section 132(1) was passed deemed seizure of stock of goods of Rs. 25,43,500/- statement of one person was recorded and a restrain order u/s 132 was passed. Panchnama dated 21st December, 2002 was the last panchnama as described in Explanation 2 to section 158BE and, therefore, the limitation has to be commenced from the said panchnama which will be 31st December, 2004. As against that, the impugned assessment is passed on 31.1.2005 which is not passed within the limitation described in section 158BE. The assessment, therefore, is bad in law and has to be quashed - ‘Panchnama’ dated 1.11.2002 cannot give extended time to the A.O for further 2 months when in fact, in the case of these assessees, the search was finally concluded on 6.9.2002 - in favour of assessee. Issues Involved:1. Validity of block assessments framed under Section 158BC(c) of the Income Tax Act, 1961.2. Whether the assessment orders were time-barred under Section 158BE of the Act.Detailed Analysis:Issue 1: Validity of Block Assessments under Section 158BC(c)The appeals arise from block assessments framed under Section 158BC(c) following a search and seizure operation conducted on 5.9.2002. The assessees challenged the validity of these assessments, arguing they were beyond the limitation period prescribed under Section 158BE. The search action revealed that fictitious Fixed Deposit Receipts (FDRs) were created by the bank, and loans were sanctioned against these FDRs. The warrant of authorization was executed on 5.9.2002, and a prohibitory order under Section 132(3) was issued on 6.9.2002. The final Panchnama was drawn on 1.11.2002, which the assessees contested, arguing that the search was concluded on 6.9.2002, and the assessment orders should have been passed by 30.9.2004.Issue 2: Whether the Assessment Orders were Time-BarredThe core issue was whether the assessment orders dated 30.11.2004 were time-barred under Section 158BE. According to the provision, the Assessing Officer (A.O.) must pass assessment orders within two years from the end of the month in which the last of the authorization for search was executed. The assessees argued that the search concluded on 6.9.2002, and hence the deadline for passing the assessment orders was 30.9.2004. The A.O. relied on the Panchnama dated 1.11.2002 to extend the limitation period, which the assessees contended was merely a formality to extend the time limit.Legal Precedents and Tribunal's ObservationsThe Tribunal examined the Panchnama dated 1.11.2002 and found that it did not mention any seizure or verification of documents, indicating that no substantive action took place on that date. The Tribunal referred to the Bombay High Court's decision in CIT Vs. Plastica Enterprises, where it was held that a subsequent Panchnama that does not involve any substantive search or seizure cannot extend the limitation period. Similarly, in ACIT Vs. Shreeram Lime Products Ltd., the Special Bench of the Tribunal held that a Panchnama drawn merely to revoke a prohibitory order does not extend the limitation period.ConclusionThe Tribunal concluded that the Panchnama dated 1.11.2002 could not extend the time limit for passing the assessment orders. The search was deemed to have concluded on 6.9.2002, making the assessment orders dated 30.11.2004 time-barred and void. Consequently, the assessments framed by the A.O. were canceled. As the assessments were invalid, the revenue's cross-appeals did not survive.Final OrderThe Tribunal allowed the appeals of the assessees and dismissed the appeals of the revenue, declaring the assessment orders as time-barred and void. The order was pronounced in the open Court on 26th June 2012.