AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2016 (11) TMI 1495
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed up to March 16, 1999 and therefore a show-cause notice was issued along with a notice under section 142(1) of the Act on March 16, 1999 requiring the assessee to furnish explanation with regard to the assets found and seized from his premises and also to explain all the incriminating seized papers. The return was filed on April 29, 1999 declaring therein undisclosed income of Rs. 30 lakhs. While furnishing the return a brief note was annexed describing therein the history of the assessee and also the basis of showing such undisclosed income. The brief note so annexed is reproduced hereunder for ready reference : "1. The assessee was born in the year 1950 in a poor family. The assessee's father Sh. Mohd. Umar was doing cycle repairing work and to meet the livelihood the assessee started helping his father in his work at a very early age. Thereafter the assessee started his own cycle repairing centre in the year 1965 in Ramganj Bazar, Jaipur. He is still popularly known as Yasin Cyclewala in his area. The lady members of the family were also engaged in the job work of Purari and Bindai to support the family. 2. The assessee got married to Smt. Rahmat Bano ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....closed investments and estimated unexplained expenditure is aggregated. For this purpose investments held in the name of family members of the assessee are also considered in the hands of the assessee. In case of any such investment is considered in the hand of any other member, corresponding deduction be given in the assessee's case. This amount is equal to income since income is either spent or invested. On this basis the investment/expenditure for the block period is determined as under :- (a) Cash : Total cash found was Rs. 39,105 from the residence of the assessee. Out of which 19,105 was released and balance Rs. 20,000 is seized. The cash balance available as per cash book of M/s. Umar Gems as on May 16, 1997 is Rs. 21,301 and further a sum of Rs. 5,000 is considered as the savings of family members. The balance of Rs. 12,804 is considered as unexplained. (b) Stock : Total stock of precious and semi-precious stones were found and seized was valued at Rs. 19,27,778. Out of which the book stock as on March 31, 1997 is Rs. 96,586. The purchases from April 1, 1997 to May 15, 1997 amounts to Rs. 4,19,492. There is no sale during the period. Thus, stock as per....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er assets, expenditure is found uncovered from loose papers and statements the same be covered out of the additional income so offered. Accordingly, the above amount of Rs. 30 lakhs is included in the block return of Mohd. Yasin in a fair and reasonable manner. If the Department wants to compute income in the individual hand of family members, then corresponding deduction be given in the case of the assessee. Further the total undisclosed income for the block period is offered to tax in the search year, i.e., assessment year 1998- 99 as the rate of tax is same for the entire block period. If the Department computes year-wise income then corresponding deduction be given in the assessment year 1998-99 to that extent." 3. This court while admitting the appeal framed the following substantial questions of law vide order dated March 6, 2002 : "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that assessment order passed under section 158BC/143(3) dated August 16, 1999 is not barred by limitation as per Explanation 2 to section 158BE(1)(b) of the Act ? Whether on the facts and in the circumstances of the case, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 158BD shall be- (a) one year from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997 ; and (b) two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997." 6. The search warrant was issued on May 15, 1997 and search of factory premises concluded on May 16, 1997. However, on the panchnama prepared, a restraint order was passed on August 14, 1997 and again the factory was searched on July 14, 1997, valuation was done and the last panchnama was drawn on August 14, 1997, therefore, it would be valid on August 1, 1997 and limitation started on August 31, 1997. 7. He has taken us to the provisions of section 132(2) and also 158BE and contended that in view of the decision of the Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik reported in [2002] 253 ITR ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs. 1,69,000 and books of account, weighing nearly 500 kgs. on October 26, 1996, 6 kgs. of silver articles in the said cupboard were released, a panchnama was made and a further order under section 132(3) passed with respect to the said sealed cupboard and the seal was placed again. Thus, the Income-tax Appellate Tribunal rightly held that the proceedings on October 26, 1996, could not be considered as part of the execution of the search proceedings which concluded on October 20, 1996. Indeed, 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 on the judgment of the Allahabad High Court in the case of Sriram Jaiswal v. UOI [1989] 176 ITR 261 (All), 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 Income-tax 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s regards the conduct of the search, i.e., once when the search party concluded the search and leaves the premises after carrying with them the seized material, the authorisation for the search is fully implemented upon and execution completed. There afterwards, if the Department has to enter the premises again, as by way of search, certainly, one requires fresh authorisation ; however, no such authorisation is required to enter the premises to 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. However, after entering the premises of such person, he has to con fine 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. Thus, the panchnama evidencing such inspection and seizure would be the last panchnama in respect of the said premises. But for the purpo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is no practical difficulty, then an authorised officer has the jurisdiction and duty to seize the books of account, other documents, money, bullion, valuable articles, etc., which are found as a result of the search, if no explanation is coming forward in respect thereof. Therefore, when the search was effected on February 11, 1991, and the petitioners were unable to give any valid explanation as demanded by the respondents, then the only power which could have been exercised or should have been exercised by the authorised officer was to effect seizure. It could not be said that, because no explanation is being offered by the petitioners, it is impracticable to effect seizure. When no explanation or an unsatisfactory explanation is offered and valuable articles are found at the time of search, then the authorised officer would be fully justified in effecting seizure. Once seizure is effected, the period of limitation starts and an order under sub-section (5) of section 132 has to be passed within the stipulated period. In our opinion, the power under section 132(3) cannot be so exercised as to circumvent the provisions of section 132(1) read with sub- section (5) thereof. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that, on June 20, 1991, reasons were recorded by the Commissioner of Income-tax while granting extension. Be that as it may, we find that, just prior to the expiry of 60 days of the order, dated February 11, 1991, the order under section 132(3) was revoked on April 9, 1991, and a fresh order in respect of the same goods was again passed on April 9, 1991. This exercise was repeated on June 6, 1991. In our opinion, it is not permissible to do so. The orders which are passed under section 132(3) may have a very far-reaching effect on the business of an assessee. The order of restraint may adversely affect the business and, therefore, adequate safeguards are sought to be provided in the Act by the insertion of the provisions of sub-section (8A) in section 132. In order that the restraint order must not be continued indefinitely, sub-section (8A) of section 132 provides that the restraint order can be continued only if, before the expiry of 60 days, and for reasons to be recorded the Commissioner of Income-tax grants an extension. The provisions of sub-section (8A) cannot be by- passed or rendered nugatory by revoking an order under section 132(3) and thereafter passing anot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rly, the second revocation of June 6, 1991, was also effected only about one or two days before the expiry of 60 days from April 9, 1991. We are, therefore, of the opinion that the approval of the Commissioner of Income-tax not having been obtained under section 132(8A), the continuation of the restraint order under section 132(3), even if it could be validly passed, was not warranted." 9. Counsel for the respondent Mr. Mehta has taken us to the decision of the Supreme Court in the case of VLS Finance Ltd. v. CIT reported in [2016] 384 ITR 1 (SC) and contended that in view of the recent decision of the Supreme Court, the issue is now decided in favour of the Department. 10. In view of the concurrent finding of the authority, the search was continued and it concluded on August 14, 1997, therefore, the limitation starts from August 31, 1997. 11. Counsel for the assessee Mr. Jhanwar has drawn our specific attention to the paragraphs Nos. 27, 29 and 30 of the Income-tax Appellate Tribunal holding as under : "27. Rival submissions have been heard in the light of the material placed on record. The assessee's wife Smt. Rehmat Bano gave a statement that month....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... block period out of which Rs. 3,68,850 are relatable to the previous years 1987-88 to 1995-96 and the same could be considered as household expenses incurred by the assessee. Since the assessee himself has disclosed only Rs. 2,53,850 for the previous years 1991-92 to 1995-96 for which, the Assessing Officer is found to have given credit, the balance of Rs. 1,14,800 shall also constitute undisclosed income of the block period. With this out of the total undisclosed income of Rs. 9,74,650 sustained by the Commissioner of Income-tax (Appeals) only Rs. 2,63,300 is confirmed and balance is directed to be deleted. On the other hand, the learned Departmental representative has opposed the submissions of the assessee and has also filed written submissions. He has relied upon the detailed findings given by the Assessing Officer as well as the Commissioner of Income-tax (Appeals) and contends that the facts mentioned in the order may be considered in detail. The learned Departmental representative also contends that there was sufficient material found as a result of search on the basis of which the Assessing Officer could have made estimation. Reliance has been placed on the decisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax (Appeals) it is evident that the invitation card for the marriage of his daughter indicates that the marriage of these girls and one boy was ceremonised together and this was not at the invitation of the appellant alone. The assessee did not show any contribution from any other person nor did he place any material that it was a joint marriage for which expenditure can be said to have been met by any other person. The Commissioner of Income-tax (Appeals) took note of all such glaring facts for holding that the Assessing Officer has made a bona fide estimate on the basis of seized documents, statements and surrounding circumstances. He has, however, observed that by its very nature estimate may be underestimate or over estimate. The assessee's counsel also has contended that certain expenses viz. on milk, electricity, tent and decoration, list of dowry items etc. have already been considered by the assessee in his estimates. Such a claim does support his plea to some extent that the estimates are excessive we, therefore, keeping in view the totality of the facts and circumstances as brought before us, consider the estimate of expenditure at Rs. 5,50,000 to be reasonable as ag....