TaxTMI 
TaxTMI 
2010 (9) TMI 862
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....ks of account, jewelleries, etc., which were earlier kept under the prohibitory order were released. There was no seizure effected on January 24, 1996, when the search proceedings were stated to be concluded in the panchnama. It states, the prohibitory order was passed on December 5, 1995, itself. Thereafter, an order of block assessment under section 158BC of the Income-tax Act, 1961 (for short, hereinafter referred to as, "the Act") was passed by the Assessing Officer on January 28, 1997. Aggrieved by the said order of assessment, the assessee preferred an appeal before the Tribunal in accordance with the provisions of the law, as was prevailing at the relevant point of time. The assessee contended before the Tribunal, among other grounds, that the block assessment was barred by limitation under section 158BE(i) of the Act. When the matter was pending before the Appellate Tribunal, the Revenue filed an application for referring the matter to a Special Bench, in view of the conflicting decisions rendered by various Tribunals in respect of the issues involved in the appeal. Accordingly, the Tribunal framed the following three questions for consideration by the Special Bench. The th....
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....n of the block assessment proceedings. It can look into whether the officer who had authorised the search has reason to believe that the search should be authorised which is the first jurisdictional fact which is the basis for further proceedings. If this jurisdictional aspect fails all the following steps culminating in the assessment order would fail. Therefore, in coming to the said conclusion it has to satisfy itself that all the procedural aspects and requirements have been complied with. A valid search is a sine qua non for initiating proceedings in a block assessment and unless the Tribunal records a finding that there was a valid search, when it is disputed there cannot be issue of any notice under section 158BC of the Act. 5. He further contended that the starting point of limitation is the day on which the first panchnama is made in respect of the last authorisation for search. The authorities conducting the search are not entitled to visit the premises for searching again and again based on authorisation. The subsequent visit is not a continuation of search but only inspection of the articles and books within the prohibitory order. If any panchnamas are recorde....
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....rials. Therefore, he contended, the Appellate Tribunal was justified in holding that in an appeal under section 253(1), it has no jurisdiction to go into the validity of the initiation and continuation of search proceedings under section 132(1) of the Act. 7. Further, he contended that the law contemplates issue of more than one authorisation in which event for the purpose of limitation, it is the last of such authorisation which has to be taken into consideration. Further, he contended that, in pursuance of an authorisation, the authorised officer visits the place of the assessee and if he is unable to complete the search, he has the discretion to pass prohibitory order, discretion to pass a restraint order and, thereafter, fix the date for further search and on a date convenient to him, he can visit the place again in pursuance of the authorisation, which was given to him earlier and examine the books or other materials which are the subject-matter of restraint order/prohibitory order and, if necessary, seize them at that point of time. It is only then the panchnama which is drawn in the end where he has recorded that the search is completed would be the basis for the s....
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....hapter. (2) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not. Explanation.-For the removal of doubts, it is hereby declared that- (a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period ; (b) the total undisclosed income relating to the bock period shall not include the income assessed in any regular assessment as income of such block period ; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. (3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-sec....
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....95, before January 1, 1997. In other words, it is a first appeal. However, now the position has changed. After that period, first appeal lies to the Commissioner of Income-tax (Appeals) and a second appeal to the Income-tax Appellate Tribunal. Therefore, in this ease we are concerned with the first appellate jurisdiction which is conferred on the Appellate Tribunal. Validity of search and seizure 12. Sections 132 and 132A is attracted to Chapter XIV-A. Therefore, the assessment of undisclosed income depends upon a valid search initiated under section 132. The search and seizure are dealt with section 132, which reads as under : "132.(1) Where the Director General or Director or the Chief Commissioner or Commissioner or any such Joint Director or Joint Commissioner 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 Income-tax 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 Income-tax Act, 1922, or u....
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.... account, other documents, money, bullion jewellery or other valuable article or thing ; (iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of subA-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents ; (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 : Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized, but the authorised officer shall make a note or inventory of such stock-in-trade of the business ; (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 whe....
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....ng or removal of something from the possession, actual or constructive, of another person or persons" (fifth edition). 14. A Division Bench of this court explaining the difference between search and seizure, search and an inspection in the case of G. M. Agadi and Bros. v. CTO [1973] 32 STC 243 (Mys) has held as under (page 245) : "All searches are inspections, but all inspections are not searches. A search is a thorough inspection of a man's house, building or premises or of his person with the object of discovering some material, which would furnish evidence of guilt for some offence with which he is charged. It implies a prying into hidden places for that which is concealed. If the object sought for is always in plain sight, then there is no search. If the private account books had been kept in the counter openly at all times and they could have been found on inspection at any time of the day, then the seizure of such account books cannot be said to have been made after a search." 15. This court, in the case of Southern Herbals Ltd. v. Director of Income-tax (Investigation) reported in [1994] 207 ITR 55 (Karn) has observed as under (pages 62 and 63) : ....
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....e under sub-section (1) or subA-section (1A)". 18. As the procedure to be followed in searches is as contemplated under the Code of Criminal Procedure, in order to decide the legality of the searches, the said searches should be in conformity with section 165 of the Code of Criminal Procedure, which deals with searches and seizures. It. reads as under : "165. Search by police officer.-(1) Whenever an officer-in-charge of a police station or a police officer making an investigation has reasonable grounds for believing that anything necessary for the purposes of an investigation into any offence which he is authorised to investigate may be found, in any place within the limits of the police station of which he is in charge, or to which he is attached, and that such thing cannot in his opinion be otherwise obtained without undue delay, such officer may, after recording in writing the grounds of his belief and specifying in such writing, so far as possible, the thing for which search is to be made, search, or cause search to be made, for such thing in any place within the limits of such station. (2) A police officer proceeding under subA-section (1) shall,....
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.... searches under sub-section (2). We cannot see any warrant for this assumption. The proviso clearly lays down that all searches made under this sub-section, so far as may be, shall be made in accordance with the provisions of the Code of Criminal Procedure. Thus, all the provisions contained in the Code of Criminal Procedure relating to searches would be applicable to searches under sub-section (2), so far as may be. Some of these provisions are contained in Chapter VII but one such provision is contained in section 165. It is true that that section specifically refers to an officer-in-charge of a police station or a police officer making an investigation. But when the proviso applies the provisions of the Code of Criminal Procedure to all searches made under this sub-section, as far as may be possible, we see no reason why section 165 should not apply mutatis mutandis to searches made under sub-section (2). We are, therefore, of the opinion that safeguards provided in section 165 also apply to searches made under sub-section (2). These safeguards are- (i) the empowered officer must have reasonable grounds for believingthat anything necessary for the purpose of recovery of tax may ....
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....es made under sub-section (2). These safeguards are-(i) the empowered officer must have reasonable grounds for believing that anything necessary for the purpose of recovery of tax may be found in any place within his jurisdiction, (ii) he must be of the opinion that such thing cannot be otherwise got without undue delay, (iii) he must record in writing the grounds of his belief, and (iv) he must specify in such writing so far as possible the thing for which search is to be made. After he has done these things, he can make the search. These safeguards, which, in our opinion, apply to searches under sub-section (2) also clearly show that the power to search under sub-section (2) is not arbitrary. In view of these safeguards and other safeguards provided in Chapter VII of the Code of Criminal Procedure, which also apply so far as may be to searches made under sub-section (2), we can see no reason to hold that the restriction, if any, on the right to hold property and to carry on trade, by the search provided in sub-section (2) is not a reasonable restriction keeping in view the object of the search, namely, prevention of evasion of tax'. We are, therefore, to see what are th....
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....f the articles after seizure is also made in rule 112. In our opinion, the safeguards are adequate to render the provisions of search and seizure as less onerous and restrictive as is possible under the circumstances. The provisions, therefore, relating to search and seizure in section 132 and rule 112 cannot be regarded as violative of articles 19(1)(f) and (g)." 21. The hon'ble Supreme Court, in the case of ITO (Special Investigation) v. Seth Brothers reported in [1969] 74 ITR 836 (SC) has observed as under (page 843) : "The Commissioner or the Director of Inspection may, after recording reasons, order a search of premises, if he has reason to believe that one or more of the conditions in section 132(1) exist. The order is in the form of an authorisation in favour of a subordinate Departmental officer authorising him to enter and search any building or place specified in the order, and to exercise the powers and perform the functions mentioned in section 132(1). The officer so authorised may enter any building or place and make a search where he has reason to believe that any books of account or other documents which in his opini....
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....r are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises a designated officer to enter and search premises for books of account and documents relevant to or useful for any proceeding under the Act, the court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken, provided the officer has in executing the authorisation acted bona fide. The Act and the Rules do not require that the warrant of authorisation should specify the particulars of documents and books of account : a general authorisation to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requir....
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....se or not. That statement of the law, in our judgment, accurately states the true effect of section 132. The mere fact that it may ultimately be found that some document seized was not directly relevant to any proceeding under the Act or that another officer with more information at his disposal may have come to a different conclusion will not be a ground for setting aside the order and the proceeding for search and seizure." The Supreme Court in the case of K. L. Subhayya v. State of Karnataka reported in AIR 1979 SC 711 dealing with the consequence flowing from failure to record the grounds of his belief under the Mysore Excise Act held as under (page 712) : "In the instant case, it is admitted that the inspector who searched the car of the appellant had not made any record of any ground on the basis of which he had a reasonable belief that an offence under the Act, was being committed before proceeding to search the car and thus the provisions of section 54 were not at all complied with. This, therefore, renders the entire search without jurisdiction and as a logical corollary vitiates the conviction. We feel that both sectio....
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.... matter of search and to ignore it is to ignore the material part of the provisions governing such search. If this step is ignored, search would be in contravention of the provisions of the Act. The requirement of sub-section (1) are clearly intended to restrain a police officer from initiating or conducting anything in the nature of general search. Similarly, the empowered authority under the Act, after recording reasons only order a search of premises, if he has reason to believe that one or more of the conditions in section 132(1) exist. The order is in the form of an authorisation in favour of a subordinate Departmental officer authorising him to enter and search any building or place specified in the order and to exercise the powers and perform the functions mentioned in section 132(1). The section does not confer any arbitrary authority upon the Revenue officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorisation in favour of a designated officer to search the premise....
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....y enquiry with a view to determine how much of what is seized will be retained by him to cover the estimated tax liability and how much will have to be returned forthwith. This is most important. Rule 112 provides for the actual search and seizure being made after observing normal decencies of behaviour. 25. The obvious consequence is that the requirement about the existence of reason to believe, consequent upon the information in possession and concerned authority is not satisfied, the search cannot be said to be a search under section 132 of the Act as contemplated by the provisions of section 158B of the Act. A search under section 132 as contemplated in the Chapter has to be a valid search. An illegal search is no search and the necessary corollary, in such a case, Chapter XIV-B would have no application. If the search conducted is without jurisdiction, then it would be void ab initio. If the action is illegally taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the court. If the conditions for the exercise of power are not satisfied, the proceeding is liable to be quashed. The eminent conclusion would be that Cha....
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.... by the authorising officer and, second, by the authorised officer. 30. When the authorised officer acts upon the warrant, then the law enjoins upon him to make an investigation again on the questions ? (i) Whether the assets found during search were disclosed ? (ii) Whether the assets so found were not disclosed ? (iii) Whether the assets found during search need further verification, which is necessary only when the authorised officer is in doubt as to whether such asset is disclosed or undisclosed ? 31. If he is satisfied that the assets are fully disclosed, then no order can be passed either under sub-section (1) or sub-section (2). If the assets are undisclosed, then the authorised officer may act either under sub-section (1) or subA-section (3) depending on the fact whether it is practicable or not to seize the assets, found to be undisclosed during the search. If it is practicable to seize, then the asset will be seized under sub-section (1), but if it is otherwise, then an order will be passed under sub-section (3). It is manifest that the condition precedent to make a seizure under clause (iii) of subA-section (1) or to make an at....
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....with the order. The Explanation to sub-section (3) makes it clear the serving of an order aforesaid shall not be deemed to be a seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1) of the Act. Such an order is known as a restraint order. Therefore, the said provisions makes out a distinction between a seizure order and a restraint order. 36. Sub-section (8A) of section 132 of the Act makes it clear that an order under sub-section (3) shall not be in force for a period exceeding 60 days from the date of the order. From the tenor of the language used in the said proviso, it is clear that the said restraint order seizes to be operating on the expiry of 60 days from the date of the said order. No express order requiring the withdrawal or cancellation of the said order is required to be passed under the Act. It ceases to exist automatically on expiry of 60 days prescribed. 37. If the restraint order and the prohibitory orders are passed without complying with the requirement as set out in the aforesaid provisions what would be the effect were the subject-matter of several....
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....ld not have afforded any assistance to the authorised officers respecting 32 ornaments of annexure 'D-I' or 4 ornaments of annexure 'D-II'. Smt. Savitri Devi, wife of Shri Om Parkash Jindal, and Smt. Sachita Devi, his daughter-in-law, were present on June 6, 1974, at the premises when the same were searched and inventory (annexure 'D-II') had been prepared respecting the ornaments worn by them. So, verification of the statement of Shri Om Parkash Jindal respecting 32 ornaments of annexure 'D-I' and 4 ornaments of annexure 'D-II' could be obtained from them. Shri Prithvi Raj Jindal was present at the premises on July 12, 1974, and verification of the aforesaid statement of Shri Om Prakash Jindal could be secured from him on that day. Therefore, there are no grounds to maintain that the authorised officers had any necessity of examination of Bajrang Lal and Chuni Lal for coming to a finding that there were reasons to believe that the aforesaid 32 ornament of annexure 'D-I' or 4 ornaments of annexure 'D-II' were undisclosed property. Further, there is nothing in the Act or the Rules to show that the authorised officer can kept the property, found on search, under his seal and retain t....
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....the Delhi High Court in the case of B. K. Nowlakha v. Union of India reported in [1991] 192 ITR 436 (Delhi) at page 442 has held as under : "Reading the second proviso to section 132(1) and sub-section (3) of section 132, it appears that the Legislature, with effect from April 1, 1989, has regarded certain orders of restraint as amounting to an order of seizure. The phraseology of the two provisions is somewhat identical. Sub-section (3) of section 132 enables the authorised officer to pass a restraint order where it is 'not practicable to seize' any such books of account, documents, valuable articles, etc. The second proviso to section 132(1) also talks of a case where it is not practicable to take physical possession of a valuable article or thing and in which case an order of restraint may be issued but the second proviso would come into play only where it is not practicable to take physical possession of the valuable article for any of the four reasons, viz., due to its volume or weight or other physical characteristics or due to its being of a dangerous nature. To put it differently, if any of these four reasons exists, then the a....
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....as deemed seizure under sub-clause (iii) of section 132(1). The intention of the Legislature is very clear, viz., it is the duty of the authorised officers to effect seizure wherever any valuable article or thing is found during the course of the search and the words 'not practicable to seize' used in section 132(3) have to be understood in this sense, viz., where there is a practicable difficulty in effecting seizure, then an order under section 132(3) can be passed. Not knowing the value of the articles or whether they are antique or not cannot be regarded as a practical difficulty on the part of the authorised officer in effecting seizure. In our opinion, therefore, the orders which were issued under section 132(3) were not validly issued and the goods which were found at the premises could have been seized by actually seizing the articles or by making an order of restraint under the second proviso to section 132(1) of the Act. This was not done in the present case. Whenever there is a seizure of articles under section 132(1) including a deemed seizure, an order under sub-section (5) has to be passed within 120 days of the seizure. Where no such order is passed, the go....
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.... June 6, 1991. The order under section 132(3) was, in effect, extended twice without any concurrence from the Commissioner of Income-tax and merely on the Assistant Director of Income-tax deciding to revoke the order and passing a fresh order. The provisions of sub-section (8A) of section 132 were thereby circumvented. In our opinion, once an order under section 132(3) has been passed, then the limitation period commences and such order cannot be continued unless and until the provisions of section 132(8A) are satisfied." 40. The Allahabad High Court, in the case of Sriram Jaiswal v. Union of India reported in [1989] 176 ITR 261 (All) has held as under (page 267) : "Then, we come to the important question whether an order under section 132(3) can be passed merely to ascertain whether a given asset is disclosed or undisclosed. To find out the true answer to this question, we will have to dissect the anatomy of section 132. Section 132, sub-section (1), so far as is relevant for our purposes, read that where the authorising officer, as specified in sub-section (1) of section 132, in consequence of information in his possession has reason to believe that any per....
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....or thing under clause (iii) and a consequential amendment has been made in sub-section (3) with effect from April 1, 1989, by adding a parenthetical clause thus : ('for reasons other than those mentioned in the second proviso to sub-section (1)'). Whereas sub-section (1) of section 132, read with the second proviso, to be inserted with effect from April 1, 1989, refers to seizure or deemed seizure, sub-section (3) of section 132 refers to attachment of the assets mentioned in clause (iii). Sub-section (4) empowers the authorised officer to examine on oath, any person who is found to be in possession or control of any asset mentioned in clause (iii) of sub-section (1). Sub-section (4A) raises certain presumptions. Then comes sub-section (5) which contemplates a summary enquiry with a view to determine how much of the seized assets can be legitimately and reasonably retained to cover the tax liability already incurred. Sub-section (11) provides a remedy against the order made in sub-section (5), in that objections may be filed before the Commissioner challenging the order for any reason passed under sub-section (5)." 41. From the aforesaid discussion, it is clear that th....
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....earch is initiated" or the expression "where any search is conducted" used by the Legislature in Chapter XIV-B of the Act. Right of appeal to the assessee would not include assailing any action of the income-tax authority prior to initiation of search. The only remedy available with the assessee is to challenge the same before the High Court in a writ petition under article 226/227 of the Constitution of India. 44. Therefore, the question is while exercising the appellate jurisdiction, the Appellate Tribunal has to confine itself to the order passed by the Assessing Officer or can it go through the legality of the proceeding commencing from a search under section 132 which ultimately culminated in the order. 45. Section 253 of the Act provides for an appeal to the Appellate Tribunal. Clause (b) of sub-section (1) of section 253 specifically provides that the order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997. It reads as under : ....
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....eferred to in section 131 and any proceedings before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXX-V of the Code of Criminal Procedure. Sub-section (6), which deals with the power of the Appellate Tribunal, read as under : "(6) The Appellate Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the income-tax authorities referred to in section 131, and any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860) and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXX-V of the Code of Criminal Procedure, 1898 (5 of 1898)." 47. The Revenue in support of their contention relied on the judgment of the Special Bench in the case of Promain Ltd. v. Deputy CIT reported in [2006] 281 ITR (A....
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....the right of appeal to the assessee as well as the powers of the Tribunal to hear the appeal are limited to the actions of the Assessing Officer and not beyond that whereas the conditions to be satisfied as prescribed in clauses (a) to (c) of section 132(1) are prior to initiation of the search. According to the legal connotation, the word 'initiate' means to begin or to commence. A search is a physical act of the party making search and, therefore, a search can be said to have begun or commenced when the first act to enter the premises is taken by the search party. Therefore, in our humble opinion, anything done by the income-tax authorities prior to the above action would be beyond the pale of the expression 'where a search is initiated' or the expression 'where any search is conducted' used by the Legislature in Chapter XIV-B of the Act . . . Consequently, right of appeal to the assessee would not include assailing any action of the income-tax authority prior to initiation of search. Hence, it has to be held that the requirements of clauses (a) to (c) of section 132(1) are not justiciable before the appellate authority. If the assessee is aggrieved by the action of the....
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....bility of firms which have discontinued their business and provides for three con-sequences, (1) that on the discontinuance of the business of a firm, every person who was at the time of its discontinuance a partner is liable in respect of income, profits and gains of the firm to be assessed jointly and severally, (2) each partner is liable to pay the amount of tax payable by the firm, and (3) that the provisions of Chapter IV, so far as may be, apply to such assessment. The liability declared by section 44 is undoubtedly to assessment under Chapter IV, but the expression 'assessment', used therein does not merely mean computation of income. The expression "assessment", as has often been said, is used in the Income-tax Act with different connotations. In CIT v. Khemchand Ramdas [1938] 6 ITR 414, 416 the Judicial Committee of the Privy Council observed : 'One of the peculiarities of most Income-tax Acts is that the word "assessment" is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the taxpayer. The Indian Income-tax Act is no ex....
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....ends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the taxing authorities ; but it is imposed as a part of the machinery for assessment of tax liability. The use of the expression 'so far as may be' in the last clause of section 44 also does not restrict the application of the provisions of Chapter IV only to those which provide for computation of income. By the use of the expression 'so far as may be' it is merely intended to enact that the provisions in Chapter IV which from their nature have no application to firms will not apply thereto by virtue of section 44. In effect, the Legislature has enacted by section 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontinued as if discontinuance has not taken place. It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of firms. By a fiction, the firm is deemed to continue after discontinuance for the purpose of assessment under Chapter IV. The Legisla....
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....ovision conferring a right of appeal, it should be read in a reasonable, practical and liberal manner. Having considered the two alternatives which have been placed before us, we agree with the cases which have taken the view that the cases before us can be treated as cases where the application or declaration is not in order and is consequently rejected. This construction does not place any undue strain on the language of section 185(2) or (3). It will be appreciated that, even if an application is filed before the Income-tax Officer which prima facie appears to be out of time, the Income-tax Officer cannot straightaway reject it or refuse to entertain it. He will have to give an opportunity to the assessee to show cause as to how it can be entertained. Sometimes, even his impression that there is delay may itself be shown to be wrong. If the assessee satisfies the Income-tax Officer that there was sufficient cause, then the application has to be entertained by the Income-tax Officer. In other words, the defect that the application was beyond time stands remedied and the application is in order." 55. The apex court in the case of ITO v. M. K. Mohammed Kunhi reported in [....
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.... answering the said question, the Rajasthan High Court in the case of CIT v. Smt. Chitra Devi Soni [2009] 313 ITR 174 (Raj) at paragraphs 10 and 11 has held as under (page 180) : "A bare reading of the abovequoted clauses leaves no manner of doubt, in view of the use of word 'then', that the action of authorising search provided under clauses (A) and (B) has of necessity to be preceded by the existence of the requirements of the other part of said section, as quoted above. In other words, existence of reason to believe, in consequence of information in possession of the officer, mentioned in sub-section (1), about the existence of one or more of the eventualities catalogued in clauses (a) to (c) is the sine qua non to entitle the authority to make authorisation, as required by clauses (A) and (B). The obvious consequence is that if the requirement of sub-section (1) about the existence of the reason to believe, consequent upon the information in possession of the concerned authority is not satisfied there could possibly be no authorisation, irrespective of the fact that it may have been made and in turn if any search is conducted in pursuance of the authorisation issued i....
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....mplitude and have in some cases been held similar to and identical with the powers of an appellate court under the Civil Procedure Code. 60. A mere search or seizure, by itself would not result in foisting the liability on the assessee though it would invade his right to privacy and the fundamental right to carry on business. But, if the said search and seizure results in determination of liability and levy of tax then the assessee is said to be an aggrieved person. The said determination of liability and levy of tax would be by way of an assessment order. Then only he can avail of the remedy of appeal provided under the statute. In other words, he cannot prefer an appeal against authorisation of search and seizure as illegal. But, once such unauthorised or illegal search and seizure culminates in an assessment order, than he gets a right to challenge the assessment on several grounds including the authorisation and initiation of search and seizure without which no order of assessment could have been passed. Though the authorisation and search and seizure may not be by the Assessing Officer, the basis of such assessment order by him is the authorisation and consequent sea....
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....e initiation of assessment proceedings the same can be assailed before the appellate authority. If the initiation of these block assessment proceedings is vitiated, in the eye of law, there is no search and the entire proceedings based on such search has no legs to stand. 61. Therefore, in an appeal filed challenging the block assessment order, it is open to the assessee to contend that this foundation for block assessment is an illegal search. Therefore, it is obligatory on the part of the Tribunal first to go into the jurisdictional aspect and satisfy itself that the said search was valid and legal. It is only then it can go into the correctness of the order of block assessment. Therefore, it cannot be said merely because the assessee did not choose to challenge the search conducted in his premises on the aforesaid grounds by way of a writ petition under article 226 of the Constitution before the High Court, he cannot challenge the said order in appeal. In the absence of a specific provision provided under the Act for appeal against such orders, in the appeal filed against the assessment order, the Tribunal is not estopped from going into such question. 62. Th....
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....en "authorisation" is deemed to have been executed. The authorisation referred to in sub-section (1) shall be deemed to have been executed 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. The words "last of the authorisation" used in section 158BE implies there can be more than one authorisation for search under section 132. Explanation 2 do not refer to such last of the authorisation. It only refers to authorisation and how it shall be deemed to have been executed. It is because, when the law provides for more than one authorisation, the limitation is to be computed from the date of the last of the authorisation, which is executed. If the authorisations are executed and search is conducted on different dates there will be panchnamas on different dates. A doubt may arise regarding the commencement of the day from which limitation is to be computed. In order to remove the said doubt this Explanation was added by the Finance (No. 2) Act, 1998, with retrospective effect from July 1, 1995. The expression used is "last panchnama" and not "last of the panchnama".....
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....t they witness is known as the panchnama. The word 'nama', refers to a written document. Its type is usually determined by the word which is combined with it as a suffix. Examples being, nikah-nama (the written muslim marriage contract), hiba-nama (gift deed, the word 'hiba' meaning-gift), wasiyat-nama (written will) and so on. So a panchnama is a written record of what the panch has witnessed. In Mohan Lal v. Emperor, AIR 1941 Bom 149, it was observed that 'the panchnama is merely a record of what a panch sees . . .' Similarly, the Gujarat High Court in the case of Valibhai Omarji v. State, AIR 1963 Guj 145, noted that '(a) panchnama is essentially a document recording certain things which occur in the presence of panchas and which are seen and heard by them'. Again, in State of Maharashtra v. Kachardas D. Bhalgar [1978] Bom LR 396, a panchnama was stated to be 'a memorandum of what happens in the presence of the panchas as seen by them and of what they hear'." 66. Therefore, if there are more than one authorisation, irrespective of the date of such authorisation, it is the date of execution of the said authorisation, which is to be reckoned, as evidenced by th....
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....aint order, prohibitory order and then fix another date for continuing such search. Thereafter, at his convenience and discretion, he can visit the premises again and continue the search in respect of the subject-matter of the restraint order and prohibitory order and he can also make a fresh search. Every visit made by the authorised officer for inspection is a search under the Act and such a search comes to an end only when the panchnama is written and in the panchnama it is expressly stated that it is finally concluded. It is in the light of the said contentions it is necessary to consider when the search begins and when the search ends in law. This aspect has drawn attention of the various courts in this country and the law on this point is well settled. 68. In fact, it is useful to refer to the observations of the Income-tax Tribunal Bangalore in the case of Kirloskar Investments and Finance Ltd. v. Asst. CIT [1998] 67 ITD 504 (page 542) : "53. Execution of authorisation of search means actual implementation of such authorisation, i.e., the officials authorised under the said authorisation act on it by entering the building wh....
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....me items and after a gap of few days re-enter the premises and carry on the search, and repeat this after gaps and finally decide that no more search is called for, it is at that point that the search is completed. This to our view is a wrong appreciation of the provisions contained in section 132(1) of the Act because, if the officials found some items on search and had seized them and had left the premises, they had exhausted the power under the authorisation to carry out the search. This is obvious because, the search was based on an information on which a belief was formed that a person is in possession of books, etc., that show income or property that is not disclosed or that would not be disclosed and acting on this belief, the authorisation is issued that is followed by action taken by searching the premises and seizing items. It is quite possible that at the time of formation of belief, the officials may not have a clear picture about the form in which the undisclosed income may be found but merely because, the seized items is not found matching expected or anticipated quantum of undisclosed income that was believed to be existing, it cannot be taken to mean that the search....
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.... seized there is no reason why it could not be closed on October 27, 1995, and even if it is provisionally concluded why it could not be continued immediately. There is no bar for the operation to continue on holidays. The absence of the petitioners in the house is nothing but a lame excuse. If the respondents wanted the operation to be continued there are ways to secure the presence of the petitioners and continue the operations. Therefore, unless there is convincing reason for not resuming search immediately the proceedings undertaken by the second respondent for a second search cannot be held to be legal. It is invading the right and freedom of the petitioners for a period more than required or necessary. The averment that the petitioners were not available for two days is denied by them. Instead it is stated that they could not keep the house in order as the search was incomplete and that they had telephoned and required the officers to complete the search. Therefore, search has prolonged unreasonably without justification. Thirdly, the seized documents and records cannot be retained by the authorised officer for more than 15 days. It shall be handed over to the Incom....
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....cealed. When once the search starts it can go on continuously day or night, rain, or shine. There is no bar for the operation to continue on holidays. It is possible, in a given case, due to the volume of the place to be searched or on account of the volume of the articles to be seized, it may not be possible to complete the search within 24 hours. In which event, there is no prohibition to continue search beyond 24 hours and in such an event, the search would come to an end only after the search is completed may be 48 hours or 72 hours, but the search should be continued without any interruption. 72. The life of the authorisation starts with its issue and ends with its execution by the officials resulting in seizure of books, documents, money and so on. The search is to be carried out at one stretch and completed. The search comes to an end when the search party leaves the premises after carrying with them the seized material. As soon as the search party leaves the premises, the authorisation for search is fully implemented upon and execution is complete. They had exhausted the power under the authorisation to carry out the search. Otherwise, it would lead to a situation....
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.... so as to circumvent the provisions of section 132(1)(iii) read with section 132(1)(v) of the Income-tax Act. It is open for the authorised officer to visit the place for the purpose of investigation securing further particulars. Under the scheme, the law provides for such procedure. But not when he visits the premises for further investigation for the materials already secured. It does not amount to search as the materials to be looked into and investigated is already known and is the subject-matter of a prohibitory order or a restraint order. Though it is not seizure or deemed seizure, it amounts to deemed possession. What is in your possession is to be looked into to find out, is there any incriminating material. It does not amount to search as understood under section 132 of the Act. It is only because of paucity of time he has gone back and wants to come back and look into the matter leisurely. There is no provision in the Criminal Procedure Code or in the Income-tax Act or the rules for postponing the search for a long period. Then, the concept of search as understood either under the provisions of the Criminal Procedure Code or the Act which are made applicable expressly, wo....
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....reak open any room in the premises, any locker in the premises, any almirah or where it is not possible or practicable to take physical possession, the second proviso to sub-section (1) of section 132 applies and pass a prohibitory order which amounts to a deemed seizure. In cases where sub-section (1) is not attracted, sub-section (3) provides for a restraint order which is not a deemed seizure. In the course of search if no incriminating material is found also, the search comes to an end. These are the four contingencies that can normally happen after the authorised officer enters the premises, before comes out of the premises. It is in the course of search those materials were considered and such orders were passed. Even in respect of the subject-matter of those two orders the search comes to an end when the authorised officer comes out of the premises. Once he comes out, the authorisation comes to an end. On the basis of the same authorisation he cannot enter the premises again for search. If he wants to search again he has to obtain another authorisation. However, in law he is entitled to enter the premises again, not for the purpose of search, but only for the purpose of insp....
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....and section 132 specifically refers to authorisation to enter and search and it has no reference to entering and searching the premises which are the subject-matter of prohibitory order or restraint order. No authorisation is required to enter the premises and inspect the materials which are the subject-matter of prohibitory order or restraint order. The said order itself acts as an authorisation to enter the premises and inspect the materials which are the subject-matter of those orders and it also empower them to seize any incriminating material. However, after entering the premises of such person, he has to confine his actions only for inspection of the subject-matter of prohibitory order or restraint order. He cannot search the premises over again. Any material seized after such inspection would be the undisclosed income for the purpose of the block assessment in pursuance of search under section 132(1) of the Act. The panchnama evidencing such inspection and seizure would be the last panchnama in respect of the said premises. But for the purpose of limitation under section 158BE, it would not be the last panchnama drawn in proof of conclusion of search, as defined in Explanati....
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....editiously, as the period of limitation starts from the date of search was concluded as evidenced by the panchnama, as otherwise the very object with which these provisions was introduced would be defeated. 79. Circular No. 772, dated 23rd December, 1998, issued by Central Board of Direct Taxes explains this position as under ([1999] 235 ITR (St.) 35) : "According to section 158BE, limitation of 2 years has to be counted from the end of the month in which last of the authorisations was executed. Use of the word 'authorisations' implies issue of more than one authorisation. Supposingly two authorisations are issued one after the other and the last authorisation is executed first while the authorisation issued earlier is executed later on. In such case, limitation should be counted from the date of issue of the execution of the last authorisation, though it is executed earlier and not from the execution of the earlier authorisation which is executed later. This anomalous situation is intended to be removed by insertion of Explanation 2 below section 158BE with effect from July 1, 1995, by the Finance (No. 2) Act, 1998. This Explanation reads as follows : ....
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.... assessee would acquire a valuable right. Such a right cannot be at the mercy of the officials, who do not discharge their duties in accordance with law. The procedure prescribed under section 132 of the Act is elaborate and exhaustive. The said substantive provision expressly provides for search and seizure. In the entire provision there is no indication of that search once commenced can be postponed. What can be postponed is only seizure of the articles. Therefore, once search commences it has to come to an end with the search party leaving the premises whether any seizure is made or not. The limitation for com-pletion of block assessment is expressly provided under section 158BE which clearly declares that it is the execution of the last of authorisation which is to be taken into consideration. The word "seizure" is conspicuously missing in the said section. The same cannot be read into the section for the purpose of limitation. Then it amounts to rewriting the section by the court, which is impermissible in law. 81. The aforesaid Circular No. 772, dated December 23, 1998 (see [1999] 235 ITR (St.) 35) refers to this dilemma faced by the Department. "127. Execution of l....
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....the execution of the last one. A contrary view is as much possible if one were to consider the spirit of the scheme which envisages expeditious disposal of the search cases and it would be reasonable to interpret that execution of warrant is not tantamount to completion of proceedings under section 132 or 132A the period during which the proceedings under section 132(3) remained pending has to be excluded for the purpose of counting limitation of one or two years under section 158BE. Otherwise, it may lead to absurd results as it may take several years before restraint under section 132(3) is lifted and it may thus extend the period of one or two years by all those years during which proceedings under section 132(3) remained pending it may be agreed against this view that section 132(8A) takes care that there is no extension of proceedings under section 132(3) and that the view cannot be taken without doing violence to the language of the Act." 82. Therefore, the Explanation added to remove a doubt cannot be construed as a provision providing a longer period of limitation than the one prescribed in the main section. When under the scheme of the section there is no indicat....