Commissioner of Income Tax vs Om Prakash Mandora

This appeal under s. 260A of the IT Act, 1961 (''the Act'') has been preferred by the Revenue aggrieved against order dt. 12th Sept., 2012 passed by the income tax Appellate Tribunal, Jodhpur Bench, Jodhpur (''the Tribunal''), whereby, the appeal preferred by the Department against order dt. 20th Feb., 2008 passed by the Commissioner of income tax (Appeals), Jodhpur [''CIT(A)''] was dismissed. The facts in brief are that search operations were carried out at the residential premises of the assessee-respondent on 3rd Feb., 1999. The AO framed assessment under s. 158BC of the Act by assessment order dt. 27th April, 2001.

Aggrieved against the said assessment order, the assessee preferred appeal before the CIT(A), which was allowed on the CIT(A) coming to the conclusion that the block assessment order was not passed within the time-limit prescribed in the Act and, therefore, the same was treated as time barred.

The appeal preferred by the Department against the order dt. 20th Feb., 2008 passed by the CIT(A) was dismissed by the Tribunal on coming to the same conclusion that the block assessment order was barred by limitation.

It is submitted by learned counsel for the appellant that the CIT(A) and the Tribunal fell in error in coming to the conclusion that the block assessment order was time barred. It was submitted that the Expln. 2(a) to s. 158BE of the Act was not properly construed, which has resulted in passing of the orders impugned.

The learned CIT(A) while dealing with the factual aspect of the search and the Panchnama prepared observed thus:

I have given a careful consideration to the material facts on record as also the submissions made before me and it is observed that search was conducted on 3rd Feb., 1999 and as per the Panchnama dt. 3rd Feb., 1999 drawn, it is observed that books of accounts and documents as per para No. 5(b)(i) to the Panchnama were found whereas other valuable articles or things including money were found as per para No. 5(b)(ii) to the Panchnama dt. 3rd Feb., 1999. Books of accounts and documents were seized as per para No. 5(a)(i) of the Panchnama. No cash or jewellery or silver articles or other valuable items were seized. During the course of search, statement of the assessee was recorded (para No. 6 of the Panchnama). Para No. 8 of the Panchnama dt. 3rd Feb., 1999 reveals that the search commenced on 3rd Feb., 1999 at 8:45 AM, the proceedings were temporarily concluded on 3rd Feb., 1999 at 10:30 PM. Para No. 9 of the Panchnama dt. 3rd Feb., 1999 reveals that an order under s. 132(3) was passed in respect of an almirah in last bedroom of residence of the appellant. Subsequently, the search party visited the residence of the appellant on 13th April, 1999 and withdrew the prohibitory order under s. 132(3) relating to the almirah sealed earlier on 3rd Feb., 1999 and a fresh Panchnama dt. 13th April, 1999 was drawn. Perusal of the said Panchnama dt. 13th April, 1999 shows that nothing was found nor anything was seized from the said sealed almirah. This fact is clear from Para Nos. 5(a) and 5(b) to the Panchnama dt. 13th April, 1999. During the course of proceedings on 13th April, 1999, no statement was recorded. The proceedings on 13th April, 1999 commenced at 2:30 PM and closed on 3:00 PM on the same day. What was the purpose of issuing a prohibitory order for an empty almirah is not known.

On perusal of the Panchnama dt. 13th April, 1999, it becomes abundantly clear that nothing was found nor anything was seized on vacating the prohibitory order. In other words, the said almirah was vacant at the time of passing order under s. 132(3) on 3rd Feb., 1999 and whatever books of account, documents, jewellery etc. were found, either they were seized or not seized on 3rd Feb., 1999 itself. Therefore, I am of the view that the almirah, which was sealed on 3rd Feb., 1999, was without any basis or purposes as nothing was found from the said almirah and nothing was accordingly, seized. In other words, drawing of a Panchnama on 13th April, 1999 was an empty formality to vacate the restraint order issued earlier on 3rd Feb., 1999. In other words, the entire action on 13th April, 1999 relating to withdrawing the prohibitory order issued earlier was an empty formality through which the already concluded search was unnecessarily dragged to show continuity thereof. Therefore, the search effectively concluded on 3rd Feb., 1999.

In the light of the entire discussion as above, I have no hesitation to hold that the time-limit for completion of the block assessment will have to be reckoned from 3rd Feb., 1999 on which date the search was concluded against the appellant. Consequently, the block assessment order was required to be passed on or before 28th Feb., 2001 as against which the block assessment order was passed on 27th April, 2001. Therefore, it has to be held that the said block assessment order was not passed within the time-limit prescribed in the Act and, therefore, has to be treated as time barred.

Similarly, the Tribunal in its order dt. 12th Sept., 2012 observed thus:

We have considered the submissions of learned Departmental Representative and gone through the orders of the authorities below. In the present case, it is an admitted fact that the search was conducted on 3rd Feb., 1999 at the residential premises of the assessee and the Panchnama was drawn on the same date. All the incriminating documents, valuable jewellery, cash etc. were found only on that date. On the said date of search, one almirah was sealed by passing the prohibitory order under s. 132(3) of the Act on 3rd Feb., 1999 and the said prohibitory order was lifted on 13th April, 1999. However, nothing was seized or bund from the said almirah. Even no statement was recorded during the course of proceedings on 13th April, 1999 and the proceedings on the said date were closed within half an hour i.e. it started at 2.30 PM and closed at 3.00 PM, therefore, it is not known that what was the purpose for issuing a prohibitory order for an empty almirah particularly when nothing is brought on record to substantiate that the assessee was not co-operating for opening of almirah, if it was locked at the time of search on 3rd Feb., 1999.

In the instant case, nothing was done on 13th April, 1999 except merely preparing the Panchnama and the search commenced at 2.30 PM which was concluded at 3.00 PM. Therefore, in view of the ratio laid by the Hon''ble Supreme Court in the aforesaid referred to case, the said exercise would not extend the time-limit for passing an order of block assessment. In that view of the matter, we do not see any infirmity in the order of learned CIT(A) cm this issue. Accordingly, we do not see any merit in the appeal of the Department and dismiss the same.

Provision of s. 158BE of the Act, insofar as relevant, reads thus:

158BE. Time limit for completion of block assessment--(1) The order under s. 158BC shall be passed--

(a) ......

(b) within two years from the end of the month in which the last of the authorisations for search under s. 132 or for requisition under s. 132A, as the case may be, was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997.

(2) .......

Explanation 1.........

Explanation 2.--For the removal of doubts, it is hereby declared that the authorisation referred to in sub-s. (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 s. 132A, on the actual receipt of the books of account or other documents or assets by the authorised officer.

The content on of the Revenue is that since the last Panchnama was drawn on 13th April, 1999, the search was concluded on that date and, as such, the assessment made on 27th April, 2001 was within limitation in view of provisions contained in s. 158BE(1)(b) of the Act.

A bare look at the Expln. 2(a) would reveal that the same provides for deeming authorisation to have been executed 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. The Explanation nowhere provides that it would be the last Panchnama drawn irrespective of the fact as to whether the conclusion of search has been recorded in the said Panchnama or not.

From the facts noticed by both the CIT(A) and the Tribunal, which are not in dispute, it is clear that the Panchnama dt. 13th April, 1999 itself reveals that nothing was seized on that date nor was anything found on that date. In fact no search was conducted and the drawing of the Panchnama on 13th April, 1999 was an empty formality and was executed merely for the purpose of vacating the restraint order issued on 3rd Feb., 1999, when a restraint order under s. 132(3) of the Act was passed in respect of an almirah in the last bedroom of residence of assessee and subsequently the search party visited the residence of the assessee on 13th April, 1999 and withdrew the prohibitory order under s. 132(3) relating to the almirah and prepared a Panchnama showing that nothing was found nor anything was seized from the said almirah, therefore, essentially from 3rd Feb., 1999 when the last Panchnama was drawn and the restraint order passed, till 13th April, 1999 when the last Panchnama was drawn whereby the restraint order was vacated, nothing else was found and in fact no further search was conducted, therefore, the last Panchnama dt. 13th April, 1999 was merely a release order and the same could not extend the period of limitation as concurrently found by the CIT(A) and the Tribunal.

This Court in Commissioner of Income Tax Vs. White and White Mineral P. Ltd., in similar circumstances upheld the order passed by the Tribunal, SLP filed against which, was also dismissed by the Hon''ble Supreme Court reported at (2010) 322 ITR (St) 4.

In view of the foregoing discussion, there is no substance in the appeal filed by the Revenue, the impugned orders passed by the CIT(A) and the Tribunal do not call for any interference and no substantial question of law arises for consideration by this Court. Consequently, the appeal is dismissed.