Vildirect: IncomeTax-caselaws-2013-VIL-666-MAD-DT

2013-VIL-666-MAD-DT

Equivalent Citation: [2014] 362 ITR 619

MADRAS HIGH COURT

Writ Appeal No.874 of 2011 and M.P.No.1 of 2011 and Writ Petition.Nos.21071 and 21072 of 2010 and M.P.Nos.1 and 2 of 2010

Date: 24.09.2013

THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II(1)

M/s . RAKESH SARIN AND OTHERS

For the Appellants : Mr. T. Pramod Kumar Chopda

BENCH

Chitra Venkataraman And T. S. Sivagnanam,JJ.

JUDGMENT

(The Order of the Court was made by Chitra Venkataraman, J. )

Writ Appeal No.874 of 2011 filed by the Revenue is directed against the order and direction issued in W.P.25078 of 2005. For the sake of convenience the appellant is referred to as Revenue and the respondent as assessee.

2. The assessee had filed W.P.No.25078 of 2005 praying for issue of writ of certiorarified mandamus to quash the order of assessment dated 30.06.2005 for the block Assessment Years from 1997-98 to 2002-03 and part of 2003-04 and for a consequential direction to the respondents to drop the proceedings initiated against the petitioner in the block period.

3. The assessee filed the writ petition raising the contentions that his residential premises was searched on 27.03.2003; later another raid was conducted and was concluded on 17.06.2003 and the second raid was after a period of 81 days and there was no reason given by the Revenue as to why they came after a period of three months. Further, it was stated that in respect of the office premises, raid was conducted on 27.03.2003 and it was continued on 28.03.2003 and once-again, the Revenue came on 11.03.2003 and continued the raid in the business premises till 14.06.2003. Further it is contended that the Department did not give any reason why there was so much delay between the first and second search and the second search was not valid as it was not the continuation of the first search. Thus the second search being illegal; only the first raid could be taken for the purpose of limitation. As the Department has to pass orders within 2 years from the end of the month in which the last panchanama was drawn; limitation period starts from 01.04.2003 and the assessment ought to have been completed on or before 31.03.2005.

4. In support of the above contention, reliance was placed on the decision of the Kerala High Court reported in (1999) 237 ITR 70 in the case of Dr.C.Balakrishnan Nair and another Vs. Commissioner of Income Tax and another and that of the Bombay High Court reported in (2002) 253 ITR 534 in the case of Commissioner of Income Tax Vs. Mrs.Sandhya P.Naik and others. The contention thus raised was further elaborated by contending that there was no raid nor conclusion of raid on 28.03.2003 as urged by the Revenue and if the same was said to have been concluded, the Revenue ought to have issued the Panchanama to the assessee, therefore, the order of assessment is beyond the period of limitation and therefore has to be quashed.

5. In the affidavit filed in support of the writ petition (W.P.No.25078/2005), the assessee states that as against the order of assessment dated 30.06.2005, which was impugned in the writ petition, he had filed the statutory appeal before the Commissioner of Income Tax (Appeals). As the assessee had raised question of limitation before this Court, the writ petition was preferred.

6. The Department resisted the writ petition by contending that the writ petition was not maintainable on the ground that the assessee had already filed appeal before the Commissioner of Income Tax (Appeals), who by order dated 04.01.2007 decided the appeal in favour of the assessee and against the said order, the Revenue has preferred appeal before the Income Tax Appellate Tribunal and the same was pending at that point of time. Further, the contention raised regarding the limitation was denied in the counter affidavit contending that on 26.03.2003, the residential premises of the assessee was searched and on the same date, the office premises was also searched; on 17.06.2003, various SB Accounts, FD, RD held in the name of the petitioner and others in State Bank of Indore, Balaji Nagar Branch, Chennai-14 and the lockers standing in the name of the assessee was also searched. On 27.08.2003, the accounts held by the assessee in the Standard Chartered Bank, Armenian Street, Chennai-1 was also searched; it was stated that the last warrant was dated 27.08.2003 and was executed on 28.08.2003. Thus the assessment order dated 30.06.2005 is well within the period of two years from the end of the month in which the last of the authorisation for search under Section 132 of the Act was conducted as prescribed under the statute.

7. Learned Single Judge held that although the assessee had filed the statutory appeal, considering the question of jurisdiction raised on the basis of limitation pleaded, the writ petition was maintainable. Further considering the order passed in the stay petition in the writ proceedings, Revenue and the assessee contested the appeal on other issues. As regards the plea of limitation, learned Single Judge rejected the case of the Revenue that the last panchanama dated 28.08.2003 could not be treated as the starting point for limitation. Pointing out that the panchanama dated 12.06.2003 and 14.06.2003 recorded that the search in the residential and office premises were finally concluded on 17.06.2003 and 14.06.2003, the search on the Standard Chartered Bank on 28.08.2003 was fresh search. For this distance of time, there was no valid explanation. Learned Single Judge pointed out that the prohibitory order passed on 27.03.2003 and 28.03.2003 became ineffective after 27.05.2003 and 28.05.2003 and the seizures following the lifting of the panchanama dated 17.06.2003 and 12.06.2003, 14.06.2003 were not in continuation of the search commenced on 27.03.2003 and 28.03.2003. Thus learned Single Judge held that the search concluded on 27.03.2003 and 28.08.2003 and the panchanama drawn on 27.03.2003 and 28.03.2003 were the last of the panchanamas for reckoning the time limit of 2 years for completion of block assessment. Thus, referring to the decision of the Bangalore Tribunal reported in (2007) 106 ITD 569 in the case of DTS.Rao Vs. Assistant Commissioner of Income Tax, Investigation Circle-2, Mysore and the decision of the Mumbai Tribunal reported in 2002 ITR 534 (Bombay) in the case of Commissioner of Income Tax Vs. Mrs.Sandhya P.Naik and others and the decision of the Kerala High Court reported in (1999) 237 ITR 158 in the case of Dr.C.Balakrishnan Nair and another Vs. Commissioner of Income Tax and another and the unreported decision of the Delhi High Court in Commissioner of Income Tax, Delhi Vs. Deepak Aggarwal, learned Single Judge allowed the writ petition. Thus, learned Single Judge held that the impugned assessment order dated 30.06.2005 was barred by limitation. Challenging the same, the Revenue is on appeal before this Court.

8. Learned Standing counsel appearing for the Revenue contended that the last panchanama is dated 28.08.2003, therefore, the commencement of time limit of two years for the completion of assessment must be reckoned from the date of last panchanama i.e., dated 28.08.2003 and the assessment order dated 30.06.2005 passed within the period of limitation as referred to in Explanation 2(a) under Section 158BE of the Act. Learned Standing counsel appearing for the Revenue further contended that as per Section 158BE(b) read with Explanation 2(a) of the Act, the date of the last of the panchanamas should be taken for reckoning the commencement of time limit of two years for the completion of assessment and in the present case, the last of the panchanamas is dated 28.08.2003 and there is no provision to hold that the said panchanama is to be treated as invalid on the ground of time factor between the first search warrant and the second warrant and that a valid search warrant was issued to search the bank locker and the contents of the bank lockers was recorded in the panchanama. Further, learned Standing counsel submitted that as against the order passed by the Commissioner of Income Tax (Appeals) dated 04.01.2007, the Revenue preferred appeal before the Income Tax Appellate Tribunal, which is pending at the time the writ petition was heard; however, subsequently, the Income Tax Appellate Tribunal dismissed the appeal filed by the Revenue on account of the order passed by learned Single Judge in the impugned judgment herein. As against the said order of the Income Tax Appellate Tribunal, the Revenue preferred Tax Case (Appeal) before this Court and the same is pending.

9. Per contra, learned counsel appearing for the assessee reiterated that the search was conducted on 27.03.2003 and it ended on 28.03.2003. In terms of Section 158B of the Act, which defines the "block period" as the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted under Section 132 or any requisition was made under Section 132A and also includes the period up to the date of the commencement of such search or date of such requisition in the previous year in which the said search was conducted or requisition was made. Therefore, it is the contention of the respondent/assessee that the block period to be reckoned under Section 158BA along with Section 158BB of the Act for the purpose of assessment shall be by reckoning the date on which panchanama was recorded i.e., 28.03.2003. Therefore, the subsequent panchanama recorded on 28.08.2003 cannot be taken for the purpose of limitation. Further, learned counsel appearing for the assessee contended that the question of limitation was not decided by the Commissioner of Income Tax (Appeals), therefore, the assessee was entitled to canvass such contention before this Court in writ petition and thus the assessee prayed for the dismissal of the Writ Appeal.

10. We have heard learned counsel for the parties and perused the materials placed on record.

11. The short question that falls for consideration is as to whether the order of assessment dated 30.06.2005, which is impugned in the writ petition is well within the jurisdiction on the ground that it is passed beyond the period of limitation.

12. In order to appreciate the said contention, it is necessary to refer the statutory provision. Section 158BA along with Section 158BE read as under:-

"Assessment of undisclosed income as a result of search.

158BA(1). Notwithstanding anything contained in any other provisions of this Act, where after the 30th day of June, 1995 a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of any person, then, the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter.

(2) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in Section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not.

Explanation- For the removal of doubts, it is hereby declared that-

(a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period;

(b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period;

) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period.

(3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents mentioned in the normal course relating to such previous years, the said income shall not be included in the block period."

Time limit for completion of block assessment.

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 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 after the 30th day of June, 1995, but before the 1st day of January, 1997;

(b) within two years from the end of the month in which the last of the authorisations for search under section 132 or for requisition under section 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, 1996.

(2) The period of limitation for completion of block assessment in the case of the other person referred to in section 158BD shall be-

(a) one year from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997; and

(b) two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997.

Explanation 1- In computing the period of limitation for the purposes of this section,-

(i) the period during which the assessment proceeding is stated by an order or injunction of any court ; or

(ii) the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section; or

(iii) the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee to be re-heard under the proviso to section 129 ; or

(iv) in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded:

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub-section (1) or sub-section (2) available to the Assessing Officer for making an order uncder clause ) of section 158BC is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.

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."

As is evident from the reading of the provision to Section 158 BE of the Act, in the case of search conducted after 01.01.1996, it was declared that limitation for passing the order under Section 158 BE of the Act is given as 2 years from the end of the month in which last of the authorisation was executed. Explanation 2 clarifies "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 panchanama drawn in relation to any person in whose case the warrant of authorisation has been issued." Therefore, for finding out the limitation, all that is required to be seen is as to what is the last panchanama drawn in relation to the assessee, in whose case, warrant of authorisation was issued.

13. It is seen from the facts stated that the authorisation was issued by the Department on 26.03.2003 under Section 132 of the Act to search the residential and office premises of the assessee. In terms of the said authorisation, the premises was searched on 27.03.2003 and 28.03.2003. In the panchanama drawn on 27.03.2003 and 28.03.2003, copies of which have been filed in the typed set of papers, it is seen that the Officer has recorded as "search continues" (temporarily concluded). Thereafter, we find that another authorisation was issued on 27.08.2003 under Section 132 of the Act to search the Bank, in which the assessee held his account and lockers. Pursuant to such authorisation, a panchanama was drawn on 28.08.2003, wherein, search was commenced on 28.08.2003 at 11.15 a.m., and concluded on 29.08.2003 at 12.05 p.m. In terms of the panchanama, the search concluded on 29.08.2003. In an unreported decision in Tax Case (Appeal).No.1240 of 2006, by order dated 25.09.2012 (A.Rakesh Kumar Jain Vs. The Joint Commissioner of Income Tax, Central Range IV, Chennai-600 034), this Court considered the similar question on limitation under Section 158 BE of the Act.

14. A reading of the decision of the Karnataka High Court reported in (2011) 339 ITR 210 (Karn) in the case of C.Ramaiah Reddy Vs. Assistant Commissioner of Income-Tax (IMV), wherein, heavy reliance was placed by the assessee clearly point out that the limitation in the case, where, the prohibitory order was issued following the search and panchanama was drawn, the same could be worked out not with reference to the date of the prohibitory order, but with reference to the panchanama drawn in proof of conclusion of search, as defined in Explanation 2 to Section 158BE of the Act. Applying the said decision of the Karnataka High Court reported in (2011) 339 ITR 210 (Karn) in the case of C.Ramaiah Reddy Vs. Assistant Commissioner of Income-Tax (IMV), this Court decided a similar question in the unreported decision in Tax Case (Appeal).No.1240 of 2006 dated 25.09.2012 (A.Rakesh Kumar Jain Vs. The Joint Commissiner of Income Tax, Central Range IV, Chennai). In such circumstances, we do not find that there is any justification to accept the plea of the assessee to confirm the order of learned Single Judge.

15. Learned counsel appearing for the assessee pointed out that in any extent, there is only one search, therefore, limitation has to be worked out taking the search conducted on 27.03.2003 as the date where the last panchanama was drawn; if the Revenue had any case, whatever be the annexures to the contents of the panchanama in the second search, it is open for the Revenue to make such of the assessment based on the materials covered in the course of second search. In the circumstances, the assessment fails in this case.

16. We do no accept the above said line of submission of learned counsel for the assessee. As already pointed out in the preceding paragraphs, in cases where there is more than one authorisation, the starting point of limitation is to be computed from the last of the authorisation which as per Explanation 2 to Sub Section 2 of Section 158 BE of the Act is deemed to have been executed on the conclusion of the search as recorded in the last panchanama drawn. Thus going by Explanation 2 added by the Finance (No.2) Act, 1998 with retrospective effect from 1.07.1995, the contention of the assessee cannot be accepted. Thus, with every panchanama drawn, the search team leaving the premises, the search conducted on 28.03.2003 came to an end as far as that authorisation was concerned. However the second search was admittedly on a fresh authorisation. Thus, in respect of search conducted on 27.03.2003 and 28.03.2003, panchanama was drawn with observation "search continues", thus, considering the fact that the second search was to be carried on the different premises and materials to be seized, in fitness of things, fresh authorisation was issued by the Department on 27.08.2003 and as such under Section 158BE of the Act, limitation has to be worked out from that date, i.e., the end of the month of 28.08.2003 and not with reference to the first search i.e., 27.03.2003 and 28.03.2003.

17. In the background of this, we do not accept the plea of the assessee to uphold the order of learned Single Judge that the assessment is barred by limitation. Consequently, the Writ Appeal is allowed, the order of learned Single Judge is set aside. Thus, the Revenue succeeds on the aspect of limitation as regards the assessment made in this case.

18. As regards the writ petitions filed in W.P.Nos.21071 and 21072 of 2011, we find that the same are filed challenging the recovery order made. The petitioner is the daughter of the defaulter. Placing reliance on the settlement deed made in her favour, the present writ petitions have been filed.

19. Considering the fact that the Act provides effective and sufficient forum for any aggrieved party to work out their remedy, we do not find any ground for this Court to interfere with the recovery proceedings at this stage to go into the questions of fact. In the circumstances, it is open to the petitioner to work out her remedy in accordance with law.

20. In the result, Writ Appeal No.874 of 2011 is allowed. M.P.No.1 of 2011 stands closed. No costs.

Writ Petition.Nos.21071 and 21072 of 2010 are dismissed. No costs. Consequently, connected MPs are closed.

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