TaxTMI 
TaxTMI 
2020 (8) TMI 313
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....at assessee was advised to file an appeal against this order before Tribunal for which due date was 3.6.2008. It was stated that this appeal was drafted by M/s. D.M. Harish & Co. and draft was circulated to Directors of assessee on 8.5.2008 for their approval and filing but this appeal could not be filed due to the following circumstances (which are narrated in letter dtd 21.8.2008 of the assessee), which are as under:- "In respect of the block assessment of the Company (period from 1.4.1990 to 7.11.2000) the CIT(A) has confirmed additions of Rs. 4.97 crores. This has resulted into IT demand of Rs. 4 crores including interest levied u/s 220(2). The grounds of appeal as settled by M/s. D.M. Harish & Co., the Company's tax advisors and Consultants since 40 years were forwarded to you by me on 8.5.2008 for your doing the needful. Further in respect of Asstt. Year 2002-03 (Y.E. 31.3.2002), the CIT(A) has confirmed additions of Rs. 40 crores. This has resulted into net IT demand of Rs. 15 crores and further liability of recurring interest @ 12% p.a. The grounds of appeal as settled by M/s. D.M. Harish & Co., were forwarded to you by me on 10.7.2008 for your doing the needful. You ....
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....11.2001 was in continuation of the earlier proceedings, insofar the subsequent panchnama dtd. 8.11.2001 was made not bonafide, and made only to illegally extend the period of assessment. iv) The appellant, therefore, submits that the assessment is barred by limitation and thus bad in law by applying the ratio of the decisions of the jurisdictional High Court in the case of CIT vs. Mrs. Sandhya P. Naik (2002) 178 CTR 448 and Kerla High Court in the case of Dr. C. Balkrishnan Nair vs. CIT (1999) 237 ITR 70." 5. Brief facts are that a search and seizure action under section 132 of the Act was carried out on the residential and business premises of the Narang Group of cases. The assessee company was one of the group entities and consequently it was covered under the search action. The assessee before us narrated that a search was conducted on 07.11.2000 under section 132 of the Act vide authorization issued dated 04.11.2000. The assessee brought out the complete details of events in its written submission vide Para 1 to 5 as under: - "1. An action u/s 132 of the Act was conducted against the Appellant on 7-11-2000 under an authorisation dated 4-11-2000. The search proceedings were....
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....onsidered for limitation purpose, in any case, limitation expired for framing of block assessment from 04.12.2000 and since period of 2 years from the end of month will expire on 31.12.2002, whereas the bock assessment in this case was framed vide order dated 28.11.2003. The learned Counsel stated that the CIT(A) as well as now the Revenue before us relying on the fact that the limitation will start from 07.11.2001 by virtue of explanation 2 read with section 158BE of the Act and hence, the block assessment framed vide order dated 28.11.2003 is within the limitation period. The learned Counsel for the assessee stated that the commencement of limitation period, considered by Revenue, by stating that Panchanama dated 07.11.2001 is to be considered for starting point of limitation for the purpose of section 158BE of the Act cannot be accepted. According to the learned Counsel for the assessee, this objection was taken before Assessing Officer and the said objection is dealt with in the block assessment order by the AO and then by CIT(A) in the appellate order. The learned Counsel stated that last visit by the investigation team on the premises of the assessee for conducting search und....
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....ion so as to enable the search party to enter the premises for conducting search. Therefore, it was argued that based on one authorization issued one year back, the Revenue cannot conduct search after one year and draw a panchnama concluding search and thereby contending that limitation under section 158BE of the Act read with explanation 2 thereto should begin from the date of last drawn panchnama. It was explained that this practice or such interpretation would be contrary to the scheme and object of provisions relating to search. Assessee mainly relied on the decision of Hon'ble Karnataka High Court in the case of C. Ramaiah Reddy vs. ACIT (2011) 339 ITR 210 (Karnataka). 8. On the other hand, the learned CIT Departmental Representative never disputed the fact but agreed to the above fact reproduced from the submission of the assessee in para 5 of this order. The learned CIT Departmental Representative, Shri Rahul Raman, argued that the assessee has misinterpreted the provision to sections 132(1), 132(1)(iii) and 158BE of the Act. He referred to the proviso to Section 132(1) of the Act, and argued that where it is not possible or applicable to take physical possession of any val....
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.... prohibitory order, the search has not taken place at all and the issue of seizure of the goods is yet to be decided whereas in the case of deemed seizure, the search has concluded and the Department has now come to a conclusion that the impugned goods or documents deserve to be seized. So, a prohibitory order and a deemed seizure are two different things altogether and should not be confused with each other. In the present case, the earlier Panchnamas dated 10-11-2000 and 04-12-2000 are essentially prohibitory orders. He argued that the deemed seizure has been done only with the Panchnama dated 07-11-2001 but the assessee has mistakenly got over-impressed with the inventory of prohibitory order and the inventory of deemed seizure being one and the same. Since it was a case of painting /artefacts etc., the inventory for both the prohibitory order and the deemed seizure are one and the same. However, if we have to understand the prohibitory order and deemed seizure properly, then, a more apt example shall be a bank locker which is placed under prohibitory order. When a bank locker is placed under prohibitory order, no inventory is available except that the copy of the prohibitory or....
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.... 2 that in the case of a Search, the meaning of phrase, "execution of last authorisation" would mean last Panchnama drawn on conclusion of Search. Now, looked at from this angle, there does not seem to be any scope for any more confusion. Now, this fact is not in doubt that the last Panchnama drawn in this case is dated 07-11-2001. That is when the Search was concluded with deemed seizure vide Panchnama dated 07-11-2001. Hence, the period of reckoning for passing an assessment order shall start from 07-11-2001 and not earlier. The earlier panchnamas were the panchnamas for prohibitory orders. A panchnama for Prohibitory Order is not a conclusion of search. In fact, in case of a Prohibitory Order, no search has taken place at all. It is only with the deemed seizure that the search can be said to have been concluded. Therefore, the assessment order passed on 28-11-2003 is very much within the time limit and the assessment order is not time- barred. The Ld. Counsel for the assessee has relied upon the judgement of the Karnataka High Court in the case of C. Ramaiah Reddy (supra) order dated 08-9-2010. However, as against the same, the Hon'ble High Court of Delhi in CIT Vs. Anil Min....
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.... converted into deemed seizure. The Revenue has not explained the delay in revisiting the premises from time to time under the same old authorisation dated 10-11-2000 and therefore the subsequent visit after almost one year is an attempt to extend the limitation period. He argued that every visit under section 132 of the Act after some gap requires fresh authorisation and therefore the panchanama drawn on 07-11-2001 based on authorisation dated 10-11-2000 is illegal. This is evident from the action of the Revenue themselves. On 07-11-2000 they conducted search based on authorisation dated 04-11-2000. The said authorisation was executed on 08-11-2000. On 10-11-2000 when the investigation team visited again they came with a fresh authorisation dated 10-11-2000. This itself proves that every visit after some gap requires fresh authorisation. Therefore, the visit on 07-11-2001 based on authorisation of 10-11-2000 cannot be treated as execution of authorisation dated 10-11-2000 and therefore panchnama drawn on 07-11-2001 cannot be the starting point of limitation under Explanation 2 to section 158BE of the Act. He argued that each authorisation's life starts on entry of the premises spe....
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....ad in isolation to the main section 158BE of the Act but same has to be read together and along with section 132 of the Act. The Explanation cannot override the main section as it refers to "authorisation" and the panchnama cannot be looked at in isolation but the same has to be read along with the authorisation pursuant to which the panchnama is prepared. The provision for "authorisation" is to be found in section 132(1) of the Act which provides for officers specified therein to obtain "authorisation" from higher authorities to enter and search any premises, etc. on a particular day. This is also fortified by Form No. 45 which prescribes the form of authorisation. Therefore, the authorisation is executed the moment the investigating agency enters the premises and searches the same for any undisclosed income. The said authorisation is followed by drawing up of the panchnama before leaving the premises. The moment the search party leaves, the search comes to an end unless it is temporarily suspended to be continued immediately after a short break due to various reasons like search extending into the night, voluminous documents that cannot be examined in 24 hours, etc. Every fresh e....
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....E of the Act. As per our understanding of the provision of section 132 of the Act is that each authorisation's life starts on entry of the premises specified therein and ends when the investigating agency leaves the premises unless a short break is taken but same cannot be after a long delay from the last entry date and that also one year to seize the same contents. Every fresh entry has to be authorised by a fresh authorisation. We noted from the facts that on 07-11-2001 the investigation team did not conduct any search but only converted the prohibitory order passed on 04-12-2000 into deemed seizure u/s 132(1)(iii) of the Act. Nothing new was found on 07-11-2001 and therefore the panchnama dated 07-11-2001 is an attempt to extend the period of limitation which action cannot be permitted to overcome limitation provisions. We found that on 04-12-2000, the investigation team passed prohibitory order u/s132(3) of the Act. On a reading of section 132(3) of the Act it is clear that the said power can be exercised only for the reasons other than that specified in section 132(1)(iii) and section 132(1)(iii) of the Act empowers seizure if the items specified therein cannot be removed o....
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....earch 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, would lose its meaning. If such a course is attracted, it is open to an authorised officer to keep the authorisation in his pocket like a season ticket and go on visiting the premises according to his whims and fancies. It seriously affects the valuable right of the assessee conferred under the Constitution. To keep the affected parties in a suspended animation about the probable continuation of search would be agonising. It is invading the right and freedom of the petitioners for a period more than required or necessary. 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 ....
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....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 inspection of the subject-matter of either the prohibitory order or the restraint order. When he enters the premises again, he has no jurisdiction to look into any other material except those materials which are the subject-matter of a prohibitory order or a restraint order. As he is not entering the premises again with the intention of making a search of the premises, the authorisation contemplated under section 132(1) of the Act is not necessary. However, when he inspects the materials which are the subject-matter of these two orders it is done in furtherance of the search conducted when he entered the premises by virtue of the authorisation granted under section 132(1) of the Act. He can after such inspection seize any incriminating materials which disclose undisclosed income for the purpose of block assessment under Chapter XIV of the Act. Merely because one more panchnama is drawn evidencing seizure of any material in the course of such inspection that cannot be construed as a last panchnama referred to in Explan....
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....he last panchnama drawn in proof of conclusion of search, as defined in Explanation 2 to section 158BE. For the purpose of limitation, there can be only one search and one panchnama. ........" 18. Further, Hon'ble Karnataka High Court finally interpreted the authorization vis-à-vis Panchanama as under: "80. The law does not contemplate the authorised officer to set out in any of the panchnama that he has finally concluded the search. If for any reason the authorised officer wants to search the premises again, it could be done by obtaining a fresh authorisation. There is no prohibition in respect of the same premises. It is open to the empowered authority to issue authorisation but when the authorisation is issued once, the authorised officer cannot go on visiting the premises under the guise of search. Therefore, it is clear once in pursuance of an authorisation issued the search commences, it comes to an end with the drawing of a panchnama. When the authorised officer enters the premises, normally, the panchnama is written when he comes out of the premises after completing the job entrusted to him. Even if after such search he visits the premises again, for investigati....
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....on cannot be counted from such illegal authorisation/panchnama. The Madras High Court in the case of A. Rakesh Kumar Jain vs. JCIT [2013] 214 Taxman 39 (Madras) has observed that there cannot be multiple panchnamas based on one authorisation. The one panchanama one authorisation principle laid down by the Madras High Court squarely applies to the present matter. Therefore, the panchnamas dated 24-11-2000, 04-12-2000 and 07-11-2001 drawn based on authorisation dated 10-11-2000 is bad in law and therefore the limitation cannot be counted from 07-11-2001 but ought to be counted from 10-11-2000 or at the most 4-12-2000. Reliance is also placed on the decision of the Delhi High Court in the case of PCIT Vs. PPC Business & Products (P.) Ltd. [2017] 398 ITR 71 (Delhi) in support of the above propositions of the assessee. 20. We noted from the decision of the Hon'ble Supreme Court in the case of VLS Finance Ltd. Vs. CIT reported in [2016] 384 ITR 1 (SC) that the assessee VLS Finance Ltd. had not challenged before the High Court subsequent panchnama and the assessee themselves proceeded on the footing that limitation would start from the last panchnama drawn on 05-08-1998 and therefore th....