Assessment invalidated due to procedural flaws; appeals allowed, assessment orders set aside.

The assessee challenged the notice under section 158BC, arguing the search was invalid as no seizure or incriminating material was found. The Tribunal held the second search during the first was unjustifiably prolonged, making it invalid. The assessment order was deemed barred by limitation and invalid as it was passed after the limitation period. Additionally, the assessment under section 158BC was invalidated due to the lack of seized incriminating material. The block assessment proceedings under section 158BD were held invalid as the satisfaction note was recorded after completion of the assessment. The assessee's appeals were allowed, setting aside the assessment orders, while the Revenue's appeal was dismissed.

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Issues Involved:
1. Validity of notice under section 158BC.
2. Validity of the second search conducted during the pendency of the first search.
3. Whether the assessment order is barred by limitation.
4. Validity of the assessment order under section 158BC without seizure of incriminating material.
5. Validity of the block assessment proceedings under section 158BD.

Detailed Analysis:

1. Validity of Notice under Section 158BC:
The assessee challenged the notice under section 158BC as void ab-initio, arguing that the search conducted on 4.5.2000, which continued until 20.8.2000, was invalid since no seizure was made, and no incriminating material was found. The CIT(A) dismissed this contention, stating that the assessment was based on sworn statements recorded during the second search, thus validating the notice under section 158BC.

2. Validity of the Second Search:
The assessee contended that a second search during the pendency of the first search was not permissible under the Income Tax Act. The Tribunal noted that the first search commenced on 25.11.1999 and concluded on 4.5.2000, while the second search started on 4.5.2000 and ended on 28.8.2000. The Tribunal found that the search was prolonged unjustifiably, as no fresh authorization was issued after the initial 60 days, making the second search invalid.

3. Whether the Assessment Order is Barred by Limitation:
The Tribunal examined whether the assessment order was passed within the period of limitation as per section 158BE. The Tribunal concluded that the last valid panchanama was dated 4.5.2000, and thus, the period of limitation ended on 31.05.2002. Since the assessment order was passed on 30.08.2002, it was held to be barred by limitation and thus invalid.

4. Validity of the Assessment Order under Section 158BC without Seizure of Incriminating Material:
The Tribunal observed that no incriminating documents were seized during the search proceedings. The addition made against the assessee was based on voluntary disclosure rather than any seized material. The Tribunal held that, as per section 158BB, the assessment should be based on evidence found during the search. Since no such evidence was seized, the assessment under section 158BC was invalid.

5. Validity of the Block Assessment Proceedings under Section 158BD:
In the case of the assessee company, the Tribunal examined the validity of the block assessment under section 158BD. The Tribunal noted that the satisfaction note for initiating proceedings under section 158BD was recorded after the completion of the block assessment under section 158BC for the person searched. Citing the Special Bench decision in Manoj Aggarwal and the Punjab & Haryana High Court decision in Mirdula, the Tribunal held that the satisfaction note must be recorded before the completion of the block assessment of the person searched. Since this was not done, the notice under section 158BD and the subsequent proceedings were held to be invalid.

Conclusion:
- The appeals of the assessee were allowed, and the assessment orders were set aside as being barred by limitation and invalid due to the lack of seizure of incriminating material.
- The appeal of the Revenue was dismissed, affirming that the block assessment proceedings under section 158BD were invalid due to the satisfaction note being recorded beyond the period of limitation.

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