AI Drafter 
TaxTMI 
TaxTMI 
2016 (4) TMI 1133
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....9th June, 1998 which went upto in the morning hours of 23rd June, 1998. It was followed by further searches from time to time which went on till 5th August. 3) Notice under Section 158BC(c) of the Income Tax Act, 1961 (hereinafter referred to as the "Act') was issued on 28th June, 1999 requiring the appellants to furnish return for the block period from April 1, 1988 to 22nd June, 1998. This notice was withdrawn and another notice was issued on 26.07.1999. In response thereto, the appellants filed return for the aforesaid block period on 10th September, 1999. As per Section 158BE of the Act, assessment is to be completed within two years from the end of the month in which the last of the authorisation for search under Section 132 or for requisition under Section 132A, as the case may be. However, the assessing officer could not do so because of certain developments which took place and are narrated hereinafter. 4) A direction under Section 142(2A) was issued on 29.06.2000, which was served to the appellants on 19th July, 2000 for conducting special audit for the aforesaid block period. 5) A Writ Petition (Civil) No. 4685 of 2000 was filed by the appellants, wherein a c....
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....dmitted, returnable on 14th September, 2000. Mr. R.D. Jolly, Advocate accepts notice on behalf of respondents. C.M. No. 7227/2000 Notice for 14th September, 2000. Mr. Jolly accepts notice. Counter be filed by 13th September, 2000. Interim stay of the orders dated 29th June, 2000. Annexure-A read with Annexure-B dated 10th August, 2000." 9) This stay remained in operation during the pendency of the writ petition. 10) The matter was finally heard and decided by the Delhi High Court vide judgment dated 15th December, 2006. It has quashed the direction for special audit in view of the fact that no hearing was afforded to the appellant before issuing such direction, which was necessary as per the law laid down in the case of Rajesh Kumar and others Vs. Dy. Commissioner of Income Tax and others (2007) 2 SCC 181. 11) However, the High Court decided the question of limitation in favour of the Department holding that the period between 24th August, 2000, i.e, date on which interim order was passed staying special audit direction under Section 142(2A) dated 29th June, 2000 and 15th December, 2016, i.e., when the High Court has pa....
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....in instead of issuing fresh authorization for each visit and whether such revalidation can be done without recording any reasons justifying the revalidation as in the present case. 14) In effect the central issue is one of limitation, which has the following two facets, viz.; (a) Whether the period of limitation expired on 31st August, 2000 or the last date for completing block assessment was 30th June, 2000? (b) Whether the period between 24th August, 2000 to 15th December, 2006, when interim stay was in operation, required to be excluded for the purposes of counting limitation period? 15) First, we shall take up the second issue for discussion. It is not in dispute that the period during which interim stay of the order passed by the court is in operation has to be excluded while computing the period of two years as limitation period prescribed for completing the block assessment. The parties have, however, joined issue on the nature of stay order which qualify for such exclusion. For this, it would be necessary to scan through the language of Explanation 1 to Section 158BE(2) of the Act. This provision makes the following reading: "Explanation 1. - In computi....
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....no stay assessment proceedings. It was also argued that insofar as the provision relating to limitation is concerned it needs strict interpretation, and certain judgments were referred to, by the learned counsel, in this behalf. 18) Ms. Pinky Anand, learned ASG, on the other hand, supported the order of the High Court by arguing that with the passing of High Court order staying the orders dated 29th June, 2000 and 10th August, 2000 passed under Section 142(2A) of the Act which meant that the Department was prevented from carrying out special audit, it was not possible to proceed with the assessment as well as inasmuch as the assessing officer at the time of passing the order under Section 142(2A) of the Act recorded his satisfaction that in order to carry out the proper assessment, special audit was essential. She, thus, submitted that the High Court rightly held that special audit was integral part of the assessment. 19) We have already reproduced the language of Explanation 1. it is not in doubt that this explanation grants benefit of exclusion only for those cases where 'the assessment proceeding is stayed by an order or injunction' of the court. On literal constru....
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....ment order, even such type of order may amount to staying the assessment proceedings. In that context, we would like to comment that the High Court, in the impugned judgment has propounded the correct and relevant test, viz., whether the special audit is an integral part of the assessment proceedings, i.e., without special audit it is not possible for the assessing officer to carry out the assessment? If it is so, then stay of the special audit may qualify as stay of assessment proceedings and, therefore, would be covered by the said explanation. 21) The question, therefore, is as to whether, in the given case, the High Court was right in holding that the special audit was not only a step in the assessment proceedings, but an important and integral step, in the absence of which an assessment order could not be made. In support of the aforesaid conclusion, the High Court referred to the judgment in Auto and Metal Engineers and other Vs. Union of India and Others (1998) 229 ITR 399 wherein this Court examined in detail as to what constitutes assessment proceedings. The Court in that case was interpreting Explanation 1 to Section 153 of the Act, which is pari materia to Explanation....
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.... held that there was a stay of assessment proceedings for the purpose of Explanation 1 to section 153." 22) The aforesaid judgment applies on all force, as rightly held by the High Court. We may also refer to the judgment of the Madhya Pradesh High Court in Commissioner of Income Tax Vs. Dhariwal Sales Enterprises (1996) 221 ITR 240. That was a case where special audit report under Section 142(2A) of the Act was called for but could not be submitted. The High Court held that time period spent for obtaining a copy of the report upto the time when intimation of non-submission was given by the assessee would be excluded. 23) We, therefore, agree with the High Court that the special audit was an integral step towards assessment proceedings. The argument of the appellants that the writ petition of the appellant was ultimately allowed and the Court had quashed the order directing special audit would mean that no special audit was needed and, therefore, it was not open to the respondent to wait for special audit, may not be a valid argument to the issue that is being dealt with. The assessing officer had, after going through the matter, formed an opinion that there was a need for sp....
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....on 31st August, 2000. In the event the last date for completing the block assessment is held to be 30th June, 2000, then the assessment became time barred even before the interim stay was granted by the High Court as it was granted on 24th August, 2000, i.e. after the supposed limitation period was over and, therefore, the conclusion which we have recorded in answering the other question, as above, would not come to the rescue of the Department. On the other hand, if the period of limitation was to expire on 31st August, 2000, then by virtue of our answer to the first issue, the period of limitation for block assessment has not expired inasmuch as this Court has passed an order dated 5th February, 2007 that audit may go on but no final assessment order be passed. Because of this reason, it becomes necessary to decide this aspect of the matter as well. 26) The argument of learned counsel for the appellants on this issue is that there was only one warrant of authorisation which empowered the Revenue authorities to carry out search and visit of the revenue officials on 22nd June, 1998 on the basis of said Warrant of Authorisation dated 19th June, 1998, would end in exhausting the s....