TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1098
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.... assessee has raised the following grounds of appeal: 1. That on the facts and in the circumstances of the case, the Learned Commissioner of Income-tax (Appeals)-47, Mumbai (hereinafter referred to as the "Ld. CIT(A)"] erred in passing the impugned order dated 26.07.2023 in Appeal No. CIT(A)-47, Mumbai/ 10291/2018-19 dismissing the appeal filed by Appellant and confirming the order dated 06.09.2022 passed by the Assistant Commissioner of Income-tax, Central Circle-1(2), Mumbai [hereinafter referred to as the "AO"] under section 153A of the Income-tax Act, 1961 [hereinafter referred to as the "Act"], whereby the total income of the Appellant was assessed at Rs. 42,19,34,450 as against the total income of Rs.12,21,38,550 declared by the Appellant in its return of income. 2. That on the facts and in the circumstances of the case, the Ld.CIT(A) erred in passing the impugned order dated 26.07.2023 in Appeal No. CIT(A)-47, Mumbai/ 10291/2018-19 dismissing the appeal filed by the Appellant and confirming the order dated 06.09.2022 passed by the AO, because the assessment order is barred by limitation and is therefore invalid and non est. 3. That on the facts and in the circumstances....
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....nd in the circumstances of the case, the Ld.CIT(A) erred in passing the impugned order dated 26.07.2023 in Appeal No. CIT(A)-47, Mumbai/10291/2018-19 dismissing the appeal filed by the Appellant and confirming the addition of Rs. 2,76,85,351 made by the AO under section 68 r.w.s. 115BBE of the Act on account of unexplained cash credits, because the addition has been confirmed based on incorrect assumptions and relying upon the statements of persons who are not independent witnesses and have every motive to harm the Appellant and even when the provisions of sections 68 and 115BBE are not applicable in the case. 8. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in passing the impugned order dated 26.07.2023 in Appeal No. CIT(A)-47, Mumbai/ 10291/2018-19 dismissing the appeal filed by the Appellant and confirming the addition of Rs.2,98,78,540 made by the AO under section 69C r.w.s. 115BBE of the Act on account of unexplained cash payments, because the addition has been confirmed based on incorrect assumptions and relying upon the statements of persons who are not independent witnesses and have every motive to harm the Appellant and even when the provi....
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....vt Ltd and A.Y. 2011-2012 and A.Y. 2016-2017 to A.Y. 2020-2021 in the case of Ismail Muhammed Khan. The issue of limitation is not raised w.r.to A.Y. 2021-2022. The ground of limitation is raised as Ground No 2 in the Original Grounds of Appeal for AY 2016-17 to 2021-22 in the case of Index Logistics Pvt Ltd. The ground of Appeal No 2 for AY 2016-2017 in the case of Index Logistics Pvt Ltd reads as under: "That on the facts and in the circumstances of the case, the Ld CIT(A) erred in passing the impugned order dated 26/7/2023 in Appeal No. CIT(A)-47, Mumbai/ 10739/2015-16 dismissing the appeal filed by the Appellant and confirming the order dated 06.09.2022 passed by the AO because the assessment order is barred by limitation and is therefore invalid and non est.' The facts relevant for determination of this issue is in the case of Index logistics Private Limited is as as under: 1) In the present case a Search was authorised on the Assessee vide warrant of authorisation dated 23/3/2021. 2) Accordingly, Search in the case of Assessee commenced on 24/3/2021 and ended on 26/3/2021 on which day a Panchnama was prepared recording the details of search as well as the list/ ....
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....2 states that Search has to be continuous. It comes to an end when the Search party leaves the premises carrying with them the seized material. Authorisation for search is fully implemented once the search party leaves the premises. Para 75 states that restraint order u/s 132(3) can be passed when there is practical difficulty in seizing the material liable to be seized. If there is no such practical difficulty then officer has no option but to seize the material if it represents undisclosed income. By passing a restraint order, the time limit available for framing of the Assessment order cannot be extended. Para 76 states that in law officer is entitled to enter the search premises again with the earlier authorisation for the purpose of inspection of the subject matter of restraint order. When he enters again he has no jurisdiction to look into any new material. After inspection he can seize the incriminating material. 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 Panchama. Para 77 states that Section 132 has no reference to entering and searching premises which are subject ma....
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....of the assessee 5,729 gms. of gold ornaments, cash of Rs. 1,69,000 and books of account, weighing nearly 500 kgs. Indeed, by simply stating in the panchanama 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). Action under section 132(3) 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 but to seize the item, if he is of the view that it represented undisclosed income. Power under section 132(3), thus, cannot be exercised so as to circumvent the provisions of section 132(3), read with section 132(5). The position has become much more clear after the insertion of the Explanation to section 132(3) effective from 1-7-1995, that a restraint order does not amount to seizure. Therefore, by passing a restraint order, the time-limit available for framing of the order cannot be extended. 3) PEIT v PPC Business & Products (P) Ltd (2017) 84 taxmann.com 19(Del) (HC)[Pg 70-801] Para 15 & 16 states that a restraint order was pa....
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....have recourse to Section 132(3). The stand that the restraint order is passed to avoid seizure till the statements u/s 132(4) are verified is untenable. S.132(3) order is to be passed only in case of impracticability of seizure due to nature, location or peculiar circumstance. 3) In Dr C. Balkrishnan Nair v CIT (1999) 237 ITR 70 (Ker)(HC)[Pg 14-19] It is held that Order u/s 132(3) cannot be passed on the ground that scrutiny could not be completed. At Para 11 it is held that Search has to be continuous. 4) In Maa Vaishnavi Sponge Ltd v DGIT (2012) 21 taxmann.com 512(Ori)(HC)[Pg 20-25][Para 9 & 11] it is held as under: Recourse to Section 132(3) can be taken only when the authorised officer believes that particular asset found during Search represent undisclosed asset. Section 132(3) order cannot be passed to ascertain whether any transaction made in the accounts represent undisclosed income. Also did not accept contention of the department that order u/s 132(3) for the period prescribed u/s 132(8A) is automatic. 5) CIT v S.K.Katyal (2009) 308 ITR 168(Del)(HC) [Pg 26-37] This case deals with the period of limitation. At Para 15 the concept of panchnama is explain....
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....to the revenue would not arise seeing as no writ petitions have been filed at the original instance, and hence, the last date for completion of assessments for the period 2011-12, 2012-13 and 2019-20 would be 30-9-2021. The impugned assessments have been framed on 29.01.22, beyond the stipulated time and are hence barred by time. 25. As far as the defence of the revenue based upon clause (xi) to Explanation to section 153B is concerned, that clause relates to exclusion of the period taken for handing over seized material the assessing officer. The clause has been inserted with effect from 1-4-2021 and hence operates prospectively only, being a substantive provision. The benefit of the exclusion under that clause thus, would not be available to the revenue in the present assessments. The impugned orders of assessment passed on 28-1-2022 in respect of AYs 11-12, 12-13 and 19-20 are hence held to be barred by limitation qua these three assessment years and are set aside. The writ petitions challenging those notices, orders of assessment and penalties are allowed." The similarity in facts is demonstrated as under: Agni Estates and Foundations (P)Ltd v DCIT (Supra) Present case. ....
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....nsferred to the charge of DCIT Central Circle1 (2), Mumbai. The assessment orders u/s. 153A for AYs 2016-17, 2017-18, 2018-19, 2019-20, 2020-21, 2021-22 in the case of M/s. Index Logistics Put. Ltd. were passed on 06.09.2022, 06.09.2022, 06.09.2022, 06.09.2022, 08.09.2022, 06.09.2022 respectively. STATUTORY FRAMEWORK: Time limit to complete assessment u/s 153A is provided u/s 153B(1)[(a) of the IT Act, 9161. The third proviso u/s 1538(1)(a) states that in the case where the last of the authorization for search under section 132 or for requisition under section 132A was executed during the financial year commencing on or after the 1 day of April, 2019, last date to pass Assessment Order would be 12 months from the end of the financial year in which last of the authorizations for the search under section 132 or the requisition under section 132A was executed. As per section 153(2) the authorization referred to in section 153(1)(a) shall be deemed to have been executed on conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorization has been issued. ISSUE: Assessee's contention: Last drawn panchnama is of ....
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....nificance insofar as the point under consideration, namely, whether the circular can override or detract from the provisions of the Act, is concerned, inasmuch as what Section 119 has empowered is to issue orders, instructions or directions for the "proper administration of the Act or for such other purposes specified in sub-section (2) of the section. Such an order, instruction or direction cannot override the provisions of the Act, that would be destructive of all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament. Such a contention cannot seriously be even raised (Para 14) The said ratio was reiterated by Hon'ble Kerala High Court in the case of K.V. Produce v. CIT (1992) 196 ITR 293 (Kerala) wherein it was held that although circulars issued under section 119 of the Income Tax Act, 1961 have force of law, they do not override the law itself. Therefore, it is pleaded that circular/instructions issued by CBDT cannot override the Parent legislation i.e. Income Tax Act, 1961 to the extent they are contrary to the Act. Section 132(8A) clearly lays down the period for wh....
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....eted, i.e. 5th August, 1998. Therefore, this issue is also decided in favour of the respondents (Para 31) The Review Petition filed by the assessee in the above case was also dismissed vide citation [2017] 81 taxmann.com 358 (SC) Similarly, in the case of Anil Minda v. CIT [2023] 148 taxmann.com 407 (SC) Hon'ble SC reiterated the ratio laid down in the case of VLS Finance and held as under: In the present case, the first authorization was issued on 13-3-2001 which ultimately and finally concluded and/or culminated into Panchnama on 11-4-2001. However, in between there was one another authorization dated 26-3-2001 with respect to one locker and the same was executed on 26-3-2001 itself and Panchnama for the same was drawn on 26-3-2001. However, Panchnama drawn with respect to authorization dated 13-3-2001 was lastly drawn on 11-4-2001. As observed and held by this Court in the case of VLS Finance Limited (supra), the relevant date would be the date on which the Panchnama is drawn and not the date on which the authorization/s is/ are are issued. It cannot be disputed that the block assessment proceedings are initiated on the basis of the entire material collected during the....
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.... as post 1.6.2002 as statutory limit for which restraint order u/s 132(3) can be in force is restricted to 60 days. Hence assessee's contention that since restraint order u/s 132(3) is not lifted within one month the panchnama issued dated 24.05.2021 lifting the restraint order is invalid in law is not tenable. PRAYER: Hence in light of the facts and circumstances of the case and legal proposition put forward it is humbly prayed that ground raised by assessee pertaining to limitation period be dismissed and appeal shall be heard on merits." 4. We have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and the orders passed by the revenue authorities 5. From the records, we noticed that as per the facts of the present case a search and seizure action u/s 132 of the Act was conducted by DDIT (Inv) Mumbai, in the case of appellant i.e M/S Index logistics Private Limited on 24/03/2021. In this regard, the search was authorized vide warrant of Authorisation dated 23/03/2021. Accordingly search was commenced on 24/03/2021 and ended on 26/03/21, Regarding which a Punchnama was prepared thereby recording the details of sea....
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....DR stressed upon the point that as per section 153B(1)(a) of the Act, the time barring date for completion of assessment is to be determined from the date of last authorisation for search u/s 132 of the Act. And in this case, the date of last Punchnama drawn is 24/05/2021 and since the search got concluded on 24/05/2021 as per the Punchnama therefore, the assessment order was well within limitation. Even as per Ld. DR, the prohibitory orders passed u/s 132(3) of the Act dated 26/03/2021 and Punchnama dated 24/05/2021 narrates the whole proceedings, proves that assessee had not cooperated and left the premises. Therefore, the team examined the premises, recorded the statement of Ismail Khan, took back up and seized a substantial volume of digital data. 13. Now, the crucial questions for adjudication before us is as to whether the search was concluded on 26/03/2021 or on 24/05/2021 and whether the prohibitory orders passed u/s 132(3) of the act extends the time limit to complete the assessment. 14. After analysing the factual and legal proposition, our answer to above question is that as per the facts of the present case, admittedly only one warrant of authorisation dated 23/03/202....
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....r the purpose of limitation u/s 158BE it would not be the last panchnama. Para 80 states that search commences pursuant to an authorisation and comes to an end with the drawing of panchnama. Panchnama drawn w.r.to visit for the subject matter of restraint order is not a panchnama which is relevant for the purposes of computation of limitation. The word seizure is missing in Section 158BE. Thus, even if the is seizure pursuant to restraint order, it will not extend the period of limitation. 16. Therefore, in our view, the search was commenced pursuant to an authorisation and comes to an end with the drawing of Punchnama on 26/03/2021 for all practical purposes as the search party left the premises carrying with them the seized material. The Authorisation for search stands fully implemented, once the search party leaves the premises. However, the Punchnama drawn with regard to the visit on 24/05/2021 for the subject matter of restraint order dated 26/03/2021 is not a Punchnama, which is relevant for the purpose of computation of limitation and we are also of the view that the restraint order u/s 132(3) of the Act only be passed, when there is practical difficulty in seizing the ma....
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....search warrant which was issued on 16-10-1996, and executed between 16-10-1996, and 20-10-1996, and which expired, thus, on 20-10-1996. The warrant was issued on 7-10-1996, and the search was conducted continuously between 16-10-1996 and 20-10-1996. In between, the search was suspended only during the late hours of the night. On 20-10-1996, having seized all the relevant materials and valuables, the search party obviously had come to the conclusion that there was no further material to be seized and no more search operation to continue. The search comes to an end when the search party leaves the premises after carrying with it the seized material and, thus, authorisation for search is fully implemented and execution is complete. There was no practical impediment to seizure of the said 45 kgs, of silver, if it was considered by the authorised officer as necessary. The contention of the learned counsel for the department that it was not practical to seize huge quantity of silver at odd hours, was rightly held to be untenable by the Tribunal, because at the same odd hour, the search party seized and removed from the premises of the assessee 5,729 gms. of gold ornaments, cash of Rs. ....
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....not give rise to a second panchnama. Such panchnama cannot postpone the period of completion of assessment. 22. In this case also, in the visit pursuant to the restraint order, there was a seizure. However, nothing new was found so as to constitute the visit as a Search. The facts recorded in the Panchnama clearly exhibit that there was no search conducted on 24.05.2021. This is because everything had already been searched out and found and there was nothing further to be searched and found. On 24.05.2021, the search team merely visited the premises, went straight to the Prakash Nair cabin, wherein they had put the things and locked it on 26.03.2021 on the strength of a restraint order issued under section 132(3) of the Act. 23. Even The Restraint Order u/s 132(3) is bad in law as the same is in violation of the provisions of Section 132(3) of the Act. As Section 132(3) provides that a restraint order can be passed if it is not practicable to seize something, for reasons other than those mentioned in the second proviso to section 132(1). This means that the decision to seize has already been taken, only it is not practicable to seize. In the case of the Appellant, the order passe....
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.... recorded that ingredients of Section 132(3) are satisfied. No reason has been given for the gap in the search from 26/3/2021 till 24/5/2021. Hence, in our considered view the Panchnama dated 24/5/2021 cannot be accepted as a last drawn Panchnama so as to extend the period of limitation. 25. As the restraint order u/s 132(3) is not lifted within one month of the date of passing of the order as required by CBDT Instruction F.No 286/57/2002-IT(Inv-II) dated 3/7/2022. Therefore the Panchnama dated 24/5/2021 lifting the restraint order is invalid in law 1) In this regard, reliance is being placed upon the decision in the case of Polisetty Somasundaram v DCIT (2023) 153 taxmann.com 591 (Vishakapatnam) (Trib) Para 22-27 (Rel Paras 26-27) it holds that release of a prohibitory order after 30 days is contrary to CBDT Circular dated 3-7-2002 [Pg 134-136) which is binding on the revenue and thus the release of PO and the resultant Panchnama becomes invalid in law. Moreover Clause (xi) in Explanation to Section 153B providing exclusion of period from commencement of Search till handing over of seized materials to the Assessing Officer for computing the period of limitation u/s 153B is no....
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....fter 1/4/2022. Assessment order dated 28-1-2022 passed w.r.to search prior to 1/4/2021 and passed after 1/4/2022. Assessment order dated 28-1-2022 passed w.r.to search prior to 1/4/2021 and passed after 1/4/2022. 30. Therefore taking into consideration, the entire facts and circumstance and also the decisions as discussed by us above the period of limitation is crystallised when the search ends. The exclusions as prevailing on that day can only apply. Thus a vested right to obtain the Assessment order by a particular date is created at the end of Search. Thus in the facts of the present case as Search commenced and concluded prior to 1/4/2021 and also Asst Year 2021-2022 is not involved, therefore clause (xi) in Section 153B cannot be applied. 31. Even in the case of Ismail Khan, the Panchnama dated 25/3/2021 states that the Search is concluded. [Pg 130-131]. There is no restraint order passed u/s 132(3). Therefore the last date to pass the Assessment Order is 31/3/2022. Hence, the Assessment orders passed are barred by limitation. 32. Although Ld. DR has argued that CBDT Circular purportedly overrides Section 132(8A) of the Act (which prescribes a maximum duration of sixty ....
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.... (ii) The Hon'ble Supreme Court in Para 29 has clearly stated that the issue of limitation was decided on the facts of said case only. In Para 30, the Supreme Court had held that 5 August 1998 will be the last date of Search as the Assessee had not challenged the validity of search on subsequent dates raising the plea that same was illegal in absence of fresh and valid authorization. 38. Thus, the issue dealt with by the Supreme Court was only whether fresh authorization was required for each visit during search period. 39. However In the facts of the present case, Assessee has clearly challenged the validity of Search on 24/5/2021 by submitting that said visit cannot be construed as a search. Further, said visit was pursuant to a restraint order u/s 132(3) which itself was unreasoned and bad in law as it was passed in respect of articles for which there existed no impracticability to seize on the day of Search. Therefore, the restraint order u/s 132(3) in the facts of the present case was a ruse. The Hon'ble Supreme Court has not dealt with the issue of validity of restraint order in the facts of the case. 40. Moreover In this case Hon'ble Supreme Court has not inte....
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....he respondents did not complete the search on 22-6-1998, as alleged by the petitioners, nor did they unduly prolong it. The search concluded on 5-8-1998, and so in terms of Explanation 2 to section 158BE of the Act the period of limitation would begin from the end of August, 1998, that is, 31-8-1998 onwards..." (p. 297) 31. The factual basis of the decision in VLS Finance Ltd.'s case (supra) is entirely different to that of the present case. On law, there is nothing in VLS Finance Ltd.'s case (supra) which contradicts what we have explained above. If the search concluded on 5-8-1998, as held by the court, and the panchnama of that date was the last of the string of 16 panchnamas, obviously this would be the date on which the search was concluded and the date on which the warrant of authorization for search was executed. But, in the present appeal, no search whatsoever was conducted on 3-1-2001. Hence, the panchnama drawn up on 3-1-2001 cannot be regarded as a document evidencing the conclusion of a search. If that be so, 3-1-2001 cannot be regarded as the date on which the warrant of authorization was executed. Moreover, while in VLS Finance Ltd.'s case (supra), the ....
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...."It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Court, divorced from the context of the question under consideration and treat it to be the complete "law' declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Court. A decision of the Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a latter case, the Courts must carefully try to ascertain the true principle laid down by the decision of the Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by the Court, to support their proceedings." 44. After having gone through the entire arguments and submissions put fourth before us, we found that Ld. JCIT in his submissions, has not provided any explanation or justification as to why the items such as SIM cards, 2 CPUs, 1 desktop, and loose papers could not be seized on 26.03.2021 itself. On that day, several items including diaries, loose papers, pen drives, hard disks, and ....
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....estraint orders will not postpone the counting of period of limitation. 46. We also noticed that the revenue has misplaced reliance on the 2002 amendment to Section 132(84) as at Paras 8 and 9 of the written submission it is contended that no reasons are required to be recorded while passing prohibitory order u/s 132(3) in view of the amendment u/s 132(8A) by Finance Act, 2002. 47. However this argument is completely misplaced as the amendment has only done away with recording of reasons for extension of time as the provision for extension of time itself was removed. However, nowhere the requirement to record reasons for issuing order u/s 132(3) is taken away. 48. In-fact the argument of the department is contrary to the ratio laid down by the Karnataka High court in C. Ramaiah Reddy v ACIT (2011) 339 ITR 210 (Karn)(HC) wherein at Para 82 it is recorded "(3) The power to put prohibitory order under section 132(3) is under law but the reasons for doing so has to recorded in writing and has to be justiciable.". 49. As far as the applicability of the decision of the Hon'ble Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik [2002] 253 ITR 534 (Bom) is concerned, in o....