TaxTMI 
TaxTMI 
TaxTMI 
2008 (6) TMI 224
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....ound in the course of search. A panchnama was prepared in respect of the materials found in the course of search. As per paragraph 5 of the panchnama, only books of account and documents, as per annexure A, were seized and no seizure was made in respect of any other material particularly in respect of jewellery and shares. In paragraph 2 of the panchnama, it was stated that search was temporarily concluded for the day to be commenced subsequently. However, a prohibitory order was issued under section 132(3) of the Act in respect of jewellery and shares found from the cupboard kept in the bedroom of Bakul N. Gandhi, 11/12, Sandeep Building, Laxminarayan Lane, Matunga. The prohibitory order issued under section 132(3) of the Act in respect of jewellery was revoked on August 1, 1997 at 4.00 p.m. while the prohibitory order in respect of share certificates was revoked on September 8, 1997. On September 8, 1997, another panchnama was prepared wherein it was simply stated that search is finally concluded. Except this remark, nothing was stated. At this stage, it may be mentioned that between the period commencing from July 29, 1997 and September 8, 1997, certain statements were recorded.....
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....d, in fact, been completed on the date when the prohibitory order under section 132(3) was revoked. He drew our attention to various statements of the assessee recorded on August 1, 1997, August 14, 1997, September 5, 1997 and September 8, 1997, to point out that various questions were asked to explain the sources of jewellery and shares. It is only after considering explanation of the assessee that the search party considered it appropriate to revoke the prohibitory order. According to him, sometimes, it is not possible to seize the valuable articles or things found in the course of search and prohibitory orders are passed for the time being. Therefore, the search continues till the prohibitory order is revoked. Accordingly, it was contended that search was concluded only on September 8, 1997, when the last panchnama was prepared. Hence, it was prayed by him that the assessment order be held within the period of limitation. 5. The rival submissions have been considered carefully. The question for consideration is whether the block assessment made by the Assessing Officer is barred by period of limitation prescribed under section 158BE(1)(b) of the Act, which reads as under : "1....
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....ma dated September 8, 1997, prepared when the prohibitory order under section 132(3) of the Act was lifted by the authorised officer, can be said to be a valid panchnama for the purpose of section 158BE of the Act. " Panchnama" has not been defined in the Act. The provisions of the Code of Criminal Procedure, 1973 (" the Cr. P.C." ) relating to search and seizure have been made applicable to the searches and seizure under sub-section (1) and sub-section (1A) of section 132 of the Act by virtue of sub-section (13) of section 132. Even the relevant provisions relating to searches and seizure in Cr.P.C. do not define the word " panchnama" . Only a format is provided in which panchnama is to be prepared. The said format has been adopted by the Income-tax Department for preparing the panchnama. " Panchnama" is also not a word of English language. However, in India, " Panchnama" is a word of judicial recognition. " Panchnama" comprises of two Indian words " Panch" and " Nama" . " Panch" means -" witness" while " nama" is used to represent a " document" . Thus, " panchnama" in common parlance as well as in judicial circle is understood as a document prepared in respect of any proceeding i....
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....e not interchangeable. Act of seizure is the consequence of search but is not part of search. The word " search" means to go or look through a place or area or anything else in order to find something missing, lost or concealed, etc. So, once the things are found and inventoried, the process of search, in our opinion, is concluded. However, in pursuance of the authorization under section 132(1), the authorised officer is also authorised to seize all or any of the things found. If he thinks proper, he may not seize any of the items found. He may also partly seize and may leave the balance item with the person whose premises are searched. He may also issue prohibitory order either under the provisions of the second proviso to section 132(1) or under section 132(3). The prohibitory order under section 132(1) the second proviso is also considered as deemed seizure while the prohibitory order under section 132(3) is not to be considered as deemed seizure as per these provisions. The format of panchnama prescribed in Cr.P.C. provides recording of things found and seized in the presence of witnesses. The above discussion shows that though the proceedings of search as well as seizure are t....
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....uring compliance with this sub-section. 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)." 11. The perusal of the above shows that prohibitory order under section 132(1) can be issued where it is not possible or practicable to take physical possession of the things found in the search on account of its volume, weight or other physical characteristics or due to its being of dangerous nature. In such cases, the action of the authorised officer shall be deemed to be seizure. On the other hand, prohibitory order under section 132(3) can be issued where it is not practicable to seize for the reasons other than these mentioned in the second proviso to section 132(1). In such cases, the order of the authorised officer shall not be deemed to be seizure. In the present case, two prohibitory orders were issued under section 132(3). We need not go into the circumstances under which such orders were issued. However, one thing is clear that such ....
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....under section 132(3) could not remain in force for a period exceeding sixty days from the date of order. However, the authorised officer, for the reasons to be recorded by him in writing, could extend the period beyond sixty days after obtaining the approval of the Director of Income-tax or as the case may be the Commissioner of Income-tax for such extension. The proviso to this sub-section provided that the Commissioner shall not approve the extension of the period for any period beyond the expiry of thirty days after the completion of all the proceedings under this Act in respect of the years for which the valuable articles or things were relevant. This clearly shows that order under section 132(3) could be extended even beyond the period of completion of assessment. In such situations, it was impossible to compute the period of limitation. This aspect of the matter was considered by the Special Bench of the Tribunal in the case of C. Ramaiah Reddy v. Asst. CIT [2003] 87 ITD 439 (Bang.) ; [2004] 268 ITR (AT) 49. In paragraph 7.3 of its judgment, it was observed by the Bench as under (page 78 of 268 ITR) : " 7.3 An interesting argument was taken up to say that a prohibitory orde....
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.... search will come to an end." 15. In view of the above discussion, it is held that the panchnama dated September 8, 1997, was not a valid panchnama in the eye of law and, therefore, has to be ignored and consequently, period of limitation will commence from July 31, 1997, since the valid panchnama was prepared on July 29, 1997. Consequently the block assessment could be completed by July 31, 1999. Since the impugned block assessment order was passed on September 30, 1999, it was clearly beyond the period of limitation prescribed under section 158BE. Thus, the impugned order of the Assessing Officer was illegal being barred by the period of limitation. Therefore, the impugned orders of the lower authorities are cancelled. 16. Before parting with this order, we would like to mention that various arguments had been made on merits also in respect of the additions made by the Assessing Officer. Since the assessee succeeds on the legal ground, it is not necessary for us to deal with the submissions of the assessee on merits of the additions sustained by the learned Commissioner of Income-tax (Appeals). 17. In the result, the appeal stands allowed. S. C. TIWARI (ACCOUNTANT MEMBER).- ....
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....ect of any proceedings in the presence of witnesses. Because in the instant case there was only one authorisation under section 132(1) in pursuance of which search was " conducted" on July 28, 1997, and " panchnama" was prepared on July 29, 1997, the learned Judicial Member has further held that a " panchnama", in law could be made only where search in pursuance of the authorisation, still continued. Hence the crucial question to be adjudicated is whether search in pursuance of the last authorisation in the instant case was concluded on July 29, 1997, or continued till revocation of order under section 132(3) on September 8, 1997. Applying this legal view of the matter to the facts of the instant case before us the learned Judicial Member has stated the following as respects two prohibitory orders issued under section 132(3) : " We need not go into the circumstances under which such orders were issued. However, one thing is clear that such orders were revoked on August 1, 1997 and September 8, 1997, without any further proceeding. It is not in dispute that shares and jewellery were inventoried by the search party and even the valuation of jewellery was also done on the date of se....
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....hould be held that prohibitory orders under section 132(3) were revoked without any further proceedings. The shares and jewellery had already been inventoried by the search party and even the valuation of jewellery has also been done on the date of search itself. So nothing more was required to be done insofar as the act of search was concerned. Search means finding hidden or concealed things. Once things were found and inventoried the process of search came to an end. It was only the process of seizure which took place after the process of search. In nutshell the learned Judicial Member holds, " As already described, search means finding of hidden or concealed things. Once things are found and inventoried, the process of search comes to an end. It is only the process of seizure which takes place after the process of search. Therefore, in my humble opinion, search was completed on July 29, 1997, when inventory of things found was prepared and nothing remained to be done." It is submitted with respect that this reasoning is contrary to the scheme of the provisions of section 132 under the head " Search and seizure" . The title of section 132 itself suggests that the provision deals ....
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....s therefore incorrect to say that an authorisation under section 132(1) comes to an end " once things are found and inventoried" . The authorisation issued under section 132(1) has five limbs integrated with each other. There is nothing like a separate authorisation to enter and search the premises and another authorisation to break open the lock of any door, box, lockers, safe, almirah or other receptacles; another authorisation to search any person who gets out of, or is about to get into the search premises; another authorisation to require any person to afford the authorised officer the necessary facility to inspect such books of account or other documents; another authorisation to cause seizure and yet another authorisation to place marks of identification; or separate authorisation to make a note or preparation of an inventory. The authorising officer under section 132(1) issues a single authorisation to the authorised officer to carry out all the abovementioned activities jointly or severally. Thus the highly restrictive meaning given by my learned brother to authorisation of search under section 132 does not appear to be in conformity with the provisions of section 132(1). ....
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.... to the witnesses, it was not possible to complete the search on that day. Shri Palshikar, learned counsel appearing for the accused, made a submission that this could not be a ground within the import of the term " reason" as envisaged in sub-section (3) of section 132 of the Act. According to learned counsel, may be due to late hours, it might be inconvenient for the concerned officers to complete the search, still it was not difficult, nor impossible. The proviso to sub-section (1) of section 132 of the Act deals with various contingencies when it becomes impracticable to seize the particular property or articles. The first proviso refers to building, place, vessel, vehicle, aircraft, etc., whereas the second proviso to subsection (1) refers to the impossibility or impracticability of taking physical possession of any valuable article. Sub-section (3) of section 132 of the Act with which we are concerned deals with the contingencies which are not covered by the second proviso to sub-section (1). Section 132(3) of the Act lays down that ' the authorised officer may, where it is not practicable to seize any such books of account, other documents, money, etc., . . . for reaso....
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....cision was arrived at not to seize the shares in question and thereupon prohibitory order under section 132(3) was lifted. Merely because the final decision was not to seize the shares in question it cannot be said that the proceedings undertaken after prohibitory orders under section 132(3) were a nullity and the last " panchnama" drawn was in eye of law no " panchnama" at all. On the contrary as held by the hon'ble jurisdictional High Court in the case of Narayan Champalal Bajaj [1993] 201 ITR 315 (Bom) the last " panchnama" drawn in the instant case was to bring the single continuous and homogenous process with various stages as envisaged under the provisions of section 132 to its logical conclusion. 25. I am unable to subscribe to the view that unless the Department established before us with sufficient evidence/material that the provisions of section 132(3) were resorted to with valid reasons to enquire and verify further as to the source and nature of possession of the shares in the hands of the assessee, it should be assumed that prohibitory order under section 132(3) was wantonly issued and without any purpose. On the contrary the authorised officer of the Assessing Office....
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....esentative) strongly relied upon the order of the Income-tax Appellate Tribunal, Mumbai Bench " E" in the case of Tips Films (P.) Ltd. [IT(SS) A. No. 338 (Mum.) of 2003, dated January 31, 2004] wherein the aforesaid judgment of the hon'ble Bombay High Court was carefully analysed and the Tribunal observed as under : " 96. The learned Commissioner of Income-tax Departmental representative took us closely through the judgment of the hon'ble Bombay High Court in the case of Mrs. Sandhya P. Naik [2002] 253 ITR 534. He referred to page 538 of the judgment and pointed out that the hon'ble High Court had noticed several irregularities. In that case an order under section 132(3) came to be made by an officer who was not one of the authorized officers mentioned in the search warrant. In that case the search was concluded but at the same time a restraint order under section 132(3) was passed. Subsequently again a restraint order was passed by an officer who was not one of the authorized officers. Learned counsel for the Department himself admitted that there were many defects in the said panchnama. It was not signed by the assessee nor by any witnesses. The panchnama was drawn at Belgaum a....
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....t would there fore, not be fair to conclude that there were no reasons at all for issuance of order under section 132(3) in continuation of the search. In our view the validity of an order under section 132(3) cannot be tested from what is finally seized. It is a question of bona fide action of the authorized officers to be seen from the over all facts and circumstances of each case. If the over all appraisal of the facts of a particular case do not in particular indicate any callousness, indifference or mala fide on the part of the authorized officers, it should be assumed that the search was conducted in a proper manner and an order under section 132(3) was made for cogent reasons. In the case of Mrs. Sandhya P. Naik [2002] 253 ITR 534 the indifferent and callous manner in which the matter was approached is patent on the facts of the case. From that judgment it cannot be said that the law has been laid down that in every case the burden should be cast on the Department to prove the cogent reasons in relation to an order under section 132(3) otherwise subsequent actions would be rendered a nullity. As pointed out by us the law does not require the authorized officers to record the....
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.... important step and a condition precedent to the authorisation of search and seizure. It is nevertheless basically a subjective step. It is one essentially of making up one' s mind-in this case by the Director of Inspection himself-as to whether on the information presented he had or had not formed the reason to believe. This belief, of course, cannot be a mere pretence nor can it be a mere doubt or suspicion . ... His reasons and his belief do not constitute a judicial or a quasi-judicial act nor is issue of authorisation a judicial or a quasi-judicial function. And the matter, though to an extent justiciable, extremely limited and circumscribed are the court' s power of scrutiny and review in that behalf. One may not like the belief of the Director of Inspection. But if the belief is bona fide, if the same is in good faith, if it is not a pretence and if it is cogently supported-in this case also overwhelmingly-by the information as of the nature here, this court will not interfere therewith or sit in appeal over it. Indeed, there would, in such circumstances, be no jurisdiction to interfere. Where the Commissioner entertains the requisite belief and for reasons recorde....
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.... 158BC we refer the following question of difference to the hon'ble President for nominating Third Member so that the point of difference may be decided according to the opinion of the majority of the Members of the Appellate Tribunal:- " 1. Whether, on the facts and in the circumstances of the case, the order under section 158BC made by the Assessing Officer is time barred within the meaning of section 158BE of the Act?" ORDER OF THIRD MEMBER G. D. AGRAWAL (VICE-PRESIDENT).- Since there was a difference of opinion between the learned Members constituting " E" Bench of the Income-tax Appellate Tribunal, Mumbai in respect of the aforesaid appeal, I was nominated as Third Member by the hon'ble President, Income-tax Appellate Tribunal under section 255(4) of the Income-tax Act, 1961. The question referred to me reads as under : " Whether, on the facts and in the circumstances of the case, the order under section 158BC made by the Assessing Officer is time barred within the meaning of section 158BE of the Act ?" 32. The issue before the Tribunal was whether the block assessment order dated September 30, 1999 passed under section 158BC was barred by limitation in terms of sectio....
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....fore the Commissioner of Income-tax (Appeals) agitating that the order passed by the Assessing Officer on September 30, 1999, was beyond the stipulated period of 2 years from the end of the month in which the warrant of authorization of search was executed, i.e., July 28, 1997, within the meaning of section 158BE of the Act. However, the assessee was unsuccessful before the Commissioner of Income-tax (Appeals) on both counts, i.e. additions made to the undisclosed income and assessment order being barred by limitation. 34. The assessee came in appeal before the Tribunal agitating the order passed under section 158BC being barred by limitation as also additions made and confirmed by the Commissioner of Income-tax (Appeals) to the total undisclosed income in such assessment. After hearing the parties, considering the evidence on record and discussing several case laws on the issue, the learned Judicial Member (J.M.) held that- (i) The prohibitory order under section 132(1) second proviso is considered as deemed seizure while the prohibitory order under section 132(3) is not to be considered as deemed seizure. The format of panchnama prescribed in Cr. P.C. provides recording of thi....
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....tory order under section 132(3) could not remain in force for a period exceeding 60 days from the date of order. However, the authorized officer, for the reasons to be recorded by him in writing, could extend the period beyond 60 days after obtaining the approval of the Director of Income-tax or the Commissioner of Income-tax, as the case may be, for such extension. The proviso to this sub-section pro vided that the Commissioner shall not approve the extension of the period for any period beyond the expiry of 30 days after the completion of all the proceedings under this Act in respect of the years for which the valuable articles or things were relevant. This clearly shows that order under section 132(3) could be extended even beyond the period of completion of assessment. In such situations, it was impossible to compute the period of limitation. Relying on the Special Bench decision of the Income-tax Appel late Tribunal, Bangalore in the case of C. Ramaiah Reddy [2004] 268 ITR (AT) 49 (Bang) and another decision of the Tribunal in the case of Adolf Patric Pinto [2006] 284 ITR (AT) 207 (Mumbai), the learned Judicial Member held that the order under section 132(3) has to be ignored ....
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....uld be seized or released. Therefore, it cannot be said that this action of the Assessing Officer is not part of search itself and hence prohibitory orders under section 132(3) were revoked without any further proceedings. He held that if the prohibitory orders under section 132(3) were validly or correctly issued, how can revocation of those prohibitory orders be held to be no action at all. (ii) Referring to various clauses of section 132(1) for the purpose of application of limitation under section 158BE Explanation 2, the learned Accountant Member held that an authorization by the authorizing officer to an authorized officer under section 132(1) to search is not limited to discovery of hidden or concealed things. It includes seizure as contemplated in clauses (a) to (c) of section 132(1). It is, therefore, incorrect to say that an authorization under section 132(1) comes to an end once things are found and inventoried. There is nothing like a separate authorization to enter and search the premises, another authorization to break open the lock of any door, box, lockers, almirah, another authorization to require any person to afford the authorized officer the necessary facility....
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.... the proposition that various actions taken by the authorized officer during the course of proceedings under section 132 are administrative acts of the Assessing Officer in exercise of powers conferred upon him and such actions cannot be called a nullity merely because in the superior wisdom of the appellate authority or the court the authorised officer should have acted in a manner different from he acted, unless it is seen that the Officer did not act bona fide or in good faith or there was scant regard to the relevant facts and law. (vi) On the above reasonings, the learned Accountant Member concluded the matter as under : " 6. On consideration of the matter I am of the view that if in a given case a prohibitory order under section 132(3) is issued that would ordinarily denote continuation of the execution of an authorization under section 132(1) of the Act and any " panchnama(s)" drawn in relation to such prohibitory order under section 132(3) would for the purpose of the provisions of section 158BE read with Explanation 2 have the effect of extending the time-limit for completion of the order under section 158BC. It is only the extreme cause of abuse of power or abdication....
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....g the search for a long period. This view is taken by the hon'ble Kerala High Court in the case of Dr. C. Balakrishnan Nair v. CIT [1999] 237 ITR 70 and has held that the search cannot be prolonged unreasonably without justification and the action of the officer was clearly an arbitrary exercise of power and hence the search was not valid. (f) That in the instant case of the assessee, the panchnama issued on September 8, 1997, was only for the purpose of recording statement of the assessee under section 131 and for which the search cannot be said to be continuing for a period of 42 days from the date of search action, i.e., July 28, 1997. Hence, the order passed under section 158BC is barred by limitation and liable to be quashed. (g) Learned counsel further contended that the search action, whether conducted by the Income-tax Department or other agency, has to adhere with the Cr. P.C. section 76 of the Cr. P.C. does not provide for a case whereby search action is prolonged for such a long period. If the search is prolonged for such a long period under the guise of panchnama, it could only lead to the conclusion that the officer is arbitrarily exercising the powers which could ....
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....that, the first panchnama dated July 29, 1997, was finally concluded on September 8, 1997. He, therefore, submitted that, in fact, the search had been completed on the date when the prohibitory order under section 132(3) was revoked, which in this case was September 8, 1997. He further submitted that in between the period of the first panchnama dated July 29, 1997, and the second panchnama dated September 8, 1997, statements under section 132(4)/131 on five occasions were recorded from the assessee on August 23, 1997, August 1, 1997, August 14, 1997, September 5, 1997 and September 8, 1997, and after considering the statements recorded, the authorised officer considered it appropriate to lift the prohibitory order. Therefore, in this case search concluded on September 8, 1997, when finally the prohibitory order under section 132(3) was revoked. Referring to section 132(8A) of the Act, the learned Departmental representative submitted that the prohibitory order under section 132(3) shall not be in force for a period exceeding 60 days from the date of the order. Section 132(3) empowers the assessing authority to take steps as may be necessary for ensuring compliance from the summoned....
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.... from July 1, 1995, reads as under : " Explanation 2.-For the removal of doubts, it is hereby declared that the authorisation referred to in sub-section (1) shall be deemed to have been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued ; (b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the authorised officer." 42. Thus, as per section 158BE(1), assessment under section 158BC should be completed within one year from the end of the month in which the last of the authorization for search under section 132 was executed. In the case under consideration before me, search operation in pursuance to the warrant of authorization issued under section 132 was carried out at the residential premises of the assessee on July 28, 1997, and it continued till July 29, 1997. Only one authorization for search was issued. However, prohibitory order under section 132(3) was issued in respect of jewellery, and shares on July 29, 1997. The prohibitory order in respect o....
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....ons of section 132(3) and not with reference to the specific facts of a particular case. Therefore, in my opinion, the above interpretation of their Lordships of the hon'ble jurisdictional High Court to the provisions of section 132(3) would be applicable to all the cases falling within the jurisdiction of the hon'ble Bombay High Court. Their Lordships have clearly laid down that by passing a restraint order under section 132(3), the time-limit available for framing the assessment cannot be extended. In the case under consideration before me also, the Department is seeking the extension of time limit for framing the assessment on the strength of prohibitory order issued under section 132(3) on July 29, 1997, which was finally revoked on September 8, 1997. The Revenue wants the period of limitation for the purpose of section 158BE to be reckoned from September 8, 1997, when the prohibitory order under section 132(3) was revoked and a panchnama was prepared stating that the search is finally concluded. However, from the facts of the case it is evident that so far search is concerned, it was already completed on July 29, 1997, when the premises of the assessee was completely searched ....