TaxTMI 
TaxTMI 
2025 (5) TMI 1878
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the block assessment made under Section 158 is barred by limitation? (ii) Whether the Tribunal is right in holding that the prohibitory order passed under Section 132(3) is illegal without considering the fact that practical administrative difficulty faced by the Department during search and seizure operation done wherein voluminous documents nearly 500 kgs contained in 12 large trunks was recovered and one record room of the size of 30000 sq.ft was to be searched before seizure could be made? and (iii) Is not the finding of the Tribunal bad by holding that the material detected in survey which was subsequently converted into search operation would not come within the scope of block assessment made in terms of Section 158BC of the Income Tax Act?"" 3. By the Impugned Order dated 08.07.2011, the Appellate Tribunal has dismissed the Appellant Income Tax Department's appeal and allowed the Respondent-Assessee's Cross-Objection, against the Order dated 15.04.2004 of the Commissioner of Income Tax (Appeals) in Appeal No.CIT(A)XXXIII/Rg-2(3)/IT/13-S/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th Section 158BC of the Income Tax Act, 1961 as it stood then. A sum of Rs. 44,56,14,656/- was added to the income of the Respondent-Assessee as "undisclosed income" as tabulated below:- Sl. No. Computation of undisclosed income Amount (Rs.) 1. Disallowance of Depreciation at Tuticorin on the amount of steel consumption for the Copper Smelter and Sulphuric Acid Plant (as discussed in para 2) 34,39,37,070 2. Disallowance of depreciation in case of steel consumption at other plants (as discussed in para 3) 60,21,808 3. Depreciation on proportionate exchange fluctuation on indigenous capital expenditure (as discussed in para 4) 3,70,27,309 4. Cash Expenses (as discussed in para 5) 13,21,591 5. Travel Expenses of family members (as discussed in para 6) 19,00,000 6. Cash Salary (as discussed in para 7) 7,20,000 7. INDAL takeover Expenses (as discussed in para 8) 3,81,36,878 8. Estimate value of painting (as discussed in para 9) 5,00,000 9. Unexplained payment - Silvassa (as discussed in para 10) 6,90,000 10. Cash payment (as discussed in para 11) 1,48,60,000 11. Paymento to Adivasi V....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the present case, facts are entirely different from the facts of the cases relied on by the assessee. There is, therefore, no case to hold that the continuation of the search was illegal or ineffective. As a corollary, it must be held that the search was, in fact, concluded on 02.03.2000 and that the Assessment Order has been passed within the prescribed period of limitation of two years from the end of the month in which the search is concluded. I, therefore, reject these Grounds of Appeal, namely, Grounds 1 to 4." 15. The Appellate Commissioner also dealt with the merits and thus partly allowed the appeal of the Respondent-Assessee vide Appellate Order dated 15.04.2004 which was impugned by the Respondent-Assessee before the Appellate Tribunal in I.T.(SS) A.No.182/Mds/2004. 16. The Appellate Tribunal vide its Impugned Order dated 08.07.2011, has allowed the appeal of the Respondent-Assessee and thereby accepted the submission of the Respondent-Assessee on the ground of limitation under Section 158BE(1)(b) of the Income Tax Act, 1961. Relevant portion of the Impugned Order dated 08.07.2011 reads as under:- "22. ..... The warrant of authorization dated 08-12-1999 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment and (ii) the assessment order dated 28-03-2002 is barred by limitation. As we have quashed the assessment order as barred by limitation, we are not going into the merits of each of the additions. As we have quashed the assessment as barred by limitation, the appeal filed by the Revenue in respect of the additions which have been deleted by the learned CIT(A) is not being disposed of on merits and the appeal is dismissed." 17. Before the Appellate Tribunal, Letter dated 07.11.2011 of Mr.P.Selvaganesh, the Additional Commissioner of Income Tax, TDS Range - 1, Chennai - 34 addressed to the Senior Department's Representative, Office of the Commissioner of Income Tax, Appellate Tribunal, regarding the events surrounding the search between December 1999 and March 2000 under Section 132 of the Income Tax Act, 1961, was referred to when he acted as the Deputy Director of Income Tax (Investigation), Tirunelveli during the search operations. 18. The Appellate Tribunal has questioned as to how a search team that left for Tuticorin on the early morning on 08.12.1999 recorded statements, verifying documents and vouchers, contacted the Deputy Director of Income Tax, Mumbai and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be time-barred. 25. As far as the issue on merits are concerned, there are no discussion on the same, as the Appellant Income Tax Department's Appeal in I.T.(SS) A.No.182/Mds/2004 was dismissed by the Appellate Tribunal. The Cross-objection of the Respondent-Assessee in C.O.No.336/Mds/2005 was allowed on the ground of limitation. Operative portion of the Impugned Order dated 08.07.2011 of the Appellate Tribunal reads as under:- "28. In the result, the appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is allowed." 26. Thus, the only point for consideration before us is whether the search can be said to have been completed on 08.12.1999 as was the contention of the Respondent-Assessee or on 21.01.2000 or on 02.03.2000 as is the contention of the Appellant Income Tax Department i.e., the dates on which search was further conducted by the Department pursuant to the Warrant of Authorization dated 02.12.1999. 27. In support of the plea that the limitation under Section 158BE(1)(b) for passing the Block Assessment Order under Section 143(3) read with Section 158BC of the Income Tax Act, 1961, the learned Junior Standing Counsel f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld have expired on 31.03.2001, whereas, the Block Assessment Order was passed on 28.03.2002 long after the expiry of limitation prescribed for passing such order under Section 158BC of the Income Tax Act, 1961. It is submitted that it would have been different if based on the search that was conducted on 21.01.2000 and 02.03.2000, new and tangible materials were seized and recovered from the Respondent- Assessee. 30. It is submitted that however no additional tangible materials were recovered in further search conducted on these two days on 21.01.2000 and 02.03.2000 and since the assessment was based on the items identified on the date of Panchnama dated 09.12.1999 pursuant to search on 08.12.1999 at the Respondent-Assessee's premises on Tuticorin, the Block Assessment Order dated 28.03.2002 was correctly interfered with by the Appellate Tribunal. 31. That apart, it is submitted that the same Officer who was part of the search on the respective dates i.e., on 08.12.1999, 21.01.2000 and 02.03.2000 has confirmed that the Deputy Director of Income Tax was going to come and conclude the search. However, on account of tight schedule and enquiry at Mumbai, they could not come ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (i) where the keys thereof are not available; iia. Search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; 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; 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. 36. Section 132(1) of the Income Tax Act, 1961 as it stood at the time of search is reproduced below:- "132. Search and Seizure: (1) Where the Director General or Director or the Chief Commissioner or Commissioner or any such Joint Director of Joint Commissioner as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to belie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; 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; 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 where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any [Chief Commissioner or Commissioner], but such [Chief Commissioner or Commissioner] has not jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in Section [120], it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the au....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rohibitory Order that is contemplated under Section 132(3) of the Income Tax Act, 1961. A Restraint Order or Prohibitory Order under Section 132(3) of the Income Tax Act, 1961 is not be confused with the seizure under Section 132 of the Income Tax Act, 1961. 40. Sub-Section 3 to Section 132 reads as under:- "3.The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section." 41. Restraint Order or Prohibitory Order under Section 132(3) has been explained in Volume-I of the Search and Seizure Manual, 2007, as under:- "3.115 The Authorised Officer has the power to issue an order under section 132(3) where it is not practicable to seize any books of accounts, other documents, money, bullion, jewellery or other valuable article or thing found in the cour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(3) and serve the same on the assessee/person in whose possession and control, the FDRs were found and the Manager of the branch of the bank, or as the case may be the body or the person that issued the FDR or receipt of a similar nature to guard against any possibility of the issuance of duplicate receipts. While doing so, the point made at S.No.(6) below may also be kept in view. However, since with effect from 01.06.2002, an order issued under section 132(3) by an Authorised Officer remains in force for a maximum period of sixty days from the date of issue, it is advisable that if the retention continues after the expiry of the said period, the Manager/person-incharge of the Bank or the body or institution that issued the FDR, Term Deposit Receipt, etc. is informed that the retention of the seized FDR is continuing in accordance with the law. (6) The question whether an order under section 132(3) can be served on a bank prohibiting it from removing, parting with or otherwise dealing with the money in an account standing in the name of an assessee, whose premises has been searched, has been considered in the Board's Instruction No.1108 dated 06.10.1977. As stated in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Control Room, to temporarily conclude the search for the day and continue the same on a subsequent day, the Authorised Officer should take the following steps:- (1) The premises should be properly sealed in the presence of atleast two witnesses and placed under armed police guards along with some responsible persons of the Income Tax Department. In a case where only a part of the premises could not be searched, the decision whether to seal the entire premises or only that portion which is yet to be searched should be taken after a careful consideration of all the relevant factors, if possible in consultation with the Control Room. As far as possible only that portion of the premises should be sealed, which is yet to be searched so that minimum inconvenience is caused to its occupants. (2) The Authorised Officer should issue an order under Section 132(3) and serve the same on the person-in-charge of the premises or, as the case may be, of that part of the premises which has been sealed. Where the premises sealed are one where search could not commence because it was found to be locked, without any occupant, the procedure explained at paragraphs (3.12) and (3.13) a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se the search was conducted or, as the case may be, the person in-charge of the building, place, vessel, vehicle or aircraft searched, where such person is different from the former and acknowledgement for the same obtained on the original copy of the panchnama. (2) In case, personal search of any person has been taken under section 132(1)(ii)(a) of the Act, a copy of the inventory or the list of all the things taken possession of, should be given to such person and acknowledgement thereof obtained on the original copy of the inventory/list. A copy of this list is also required to be forwarded to the concerned Chief Commissioner of Income Tax or the Commissioner of Income Tax or where the authorisation is issued by any officer other than the Chief Commissioner or Commissioner, also to that officer. (3) The members of the search team should offer themselves for search by the person whose premises, is being searched or, as the case may be, the person incharge of or in occupation of premises. This should be done in the presence of the witnesses. Search of lady members of the search team should be allowed to be made only by a lady present in, or occupying, the premise....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ept of 'revalidation of authorisation' provided under the Act, which has been applied by the High Court in the impugned judgment, which according to the learned counsel for the appellants, amounts to legislating a new concept which is contrary to law. 28. The learned Additional Solicitor General, refuting the aforesaid contention, submitted that as per explanation (2) to Section 158BE, when it is a case of search, period of limitation is to be counted 'on the conclusion of search as recorded in the last panchnama drawn.....' It was argued that last panchnama was admittedly drawn on 5th August, 1998 and, therefore, period of limitation is to be counted from that date. 29. After considering the respective submissions, we are of the opinion that on the facts of this case, the issue also has to be answered in favour of the Revenue without going into the legal niceties. 30. As noticed above, the revenue authorities visited and searched the premises of the appellants for the first time on 22nd June, 1998. In the panchnama drawn on that date, it was remarked 'temporarily concluded', meaning thereby, according to the revenue authorities, s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be completed either on 08.12.1999 or on 21.01.2000. The search was continued and completed only on 02.03.2000 when the Prohibitory Order dated 21.01.2000 that was passed after search on 21.01.2000 was lifted. 55. Explanation to Section 132(3) of the Income Tax Act, 1961 itself also makes it clear for the removal of doubts, it is hereby declared that serving of an order as aforesaid under the said sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1). Explanation to Sub-Section 3 to Section 132 is reproduced below:- "Explanation - For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under Clause (iii) of sub-section (1)". 56. All that is mandated under Section 132(8) of the Income Tax Act, 1961, is that the books of account or other documents seized under subsection (1) or sub-section (1A) to Section 132 of the Income Tax Act, 1961 shall not be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....32(5) of the Income Tax Act, 1961 was deleted with effect from 01.06.2002 vide Finance Act, 2002. It is therefore no relevant for these appeals. Section 132(5) of the Income Tax Act, 1961 as it prevailed till 01.06.2006 reads as under:- "132. Search and Seizure: (1) ..... (2) ..... (3) ..... (4) ..... (5)Where any money, bullion, jewellery or other valuable article or thing (hereafter in this Section and in Sections 132A and 132B referred to as the assets) is seized under sub-section (1) or subsection (1A), as a result of a search initiated or requisition made before the 1st day of July, 1995, the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Joint Commissioner,- i. estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; ii. calculating the amount of tax on the income so es....
X X X X Extracts X X X X
X X X X Extracts X X X X
....It cannot be said that the search was completed on 08.12.1999 merely because the Restraint Order or Prohibitory Order was passed on 09.12.1999 in respect of certain items mentioned above while search was continued on 21.01.2000 and on 02.03.2000. 65. Seizure of the documents will be complete only after Restraint Orders or Prohibitory Orders passed are vacated after the search is complete. Therefore, for the purpose of computation of limitation, the date of initial search is not relevant in this case. It is the actual date of completion of the search by the Officers of the Department under Section 132 of the Income Tax Act, 1961 that is relevant. 66. Under Section 158BC(a)(ii) of the Income Tax Act, 1961, a Notice has to be issued calling upon an Assessee to file Return of Income within 15 to 45 days of such Notice who has been either searched under Section 132 of the Income Tax Act, 1961 or where books of account, other documents or assets were requisitioned under Section 132A of the Income Tax Act, 1961. Once service of such Notice is effected, no further Notice is required to be issued under Section 148 of the Income Tax Act, 1961. This is evident from a reading of the firs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned to the extent necessary and the provisions of Section 132B shall apply subject to such modifications as may be necessary and the references to "regular assessment" or "reassessment" in Section 132B shall be construed as references to "block assessment". 69. Sub-Section (1) and (2) to Section 158BE of the Income Tax Act, 1961, prescribes the limitation for the situation covered under Section 158BC and Section 158BD of the Income Tax Act, 1961 namely "the searched person" and the "other person." 70. As far as the petitioner is concerned, the limitation is to be reckoned in terms of Clause (b) to Sub-Section (1) to Section 158BE of the Income Tax Act, 1961. Section 158BE of the Income Tax Act, 1961 reads as under:- Section 158BE of the Income Tax Act, 1961 Sub-Section (1) to Section 158BE Sub-Section (2) to Section 158BE (1) The order under Section 158BC shall be passed- (a) within one year from the end of the month in which the last of the authorisations for search under section 132 or for requisition under section 132Awithin one year from the end of the month in which the last of the authorisations for search under section 132 or for requisition under sectio....