Commissioner Of Income Tax, Kota v. Shri Amar Nath Arora, 284 A, Talwlandi, Kota

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR. DB INCOME TAX APPEAL NO.262/2005 Commissioner of Income Tax, Kota. Versus Shri Amar Nath Arora, 284 A, Talwlandi, Kota. DATE OF ORDER ::: 06.12.2016. HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE DINESH MEHTA Mrs. Parinitoo Jain, for the appellant. 1.By way of this appeal, the department has challenged thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the appeal filed by the department whiledismissing the Cross Objections filed by the assessee. 2.This Court while admitting the appeal on 20.09.2005framed the following substantial questions of law: “1.Whether the findings of the Tribunal areperverse in holding that for the purpose oflimitation under Section 158BE, the period isto be counted from the date on which thedirection under Section 142(2A) is served onthe assessee and not from the date of issueof direction by the Assessing Officer underSection 142(2A)? 2.Whether the order of the Tribunal isperverse in holding that the block assessmentorder was barred by limitation despite therebeing specific provision of Section 158BEExplanation 1 clause (ii) that period forexclusion will commence from the day onwhich the AO gives a direction under Section142(2A)?” 3.The brief facts of the case are that assessee is a partnerof M/s Jai Bharat Fruit Co., Subzi Mandoi, Kota engaged in the business of commission agents and trading of vegetables. Thepremises of the said firm as well as its partners including theassessee were searched on 24.02.1999 u/s 132(1) of theIncome Tax Act, during which various valuables andincriminating books of account and many other documents werefound and seized from the premises of the firms as well as itspartners, including the assessee. During the course of searchoperation, statements of the assessee, his wife and otherconcerned persons were recorded u/s 132(4) of the Income TaxAct, and consequently, a notice under Section 158BC for theperiod ending on 24.02.1999, was issued by the DCIT, CircleKota on 29.10.1999, requiring the assessee to file the return onhis total income including undisclosed income within 16 days ofservice thereof. The assessee vide his letter dated 05.11.1999,requested that in view of delay in providing the photocopies ofthe seized documents, the time for filing the return of the blockperiod may be extended to 45 days. The assessee, however,filed his return of total income, including undisclosed income inthe prescribed Form No.2B on 08.12.1999 vide receiptNo.00410. In the said return, the assessee declared totalundisclosed income of the block period at Rs. Nil, Notice underSection 142 dated 18.12.2000 along with a query letter wasissued and duly served upon the assessee fixing case forhearing on 10.01.2001, subsequently the then AO's, havingjurisdiction over this case issued further notices u/s 143(2) and142(1) coupled with query letters, which were duly served upon the assessee pursuant to which the assessee made partialcompliance. Having regard to the peculiar nature andcomplexity involved in the seized books of accounts anddocuments, and in the background of:-(a) None maintenance ofregular or proper books of account with regard to certainbusiness activities; (b) Close inter-connection and inter-linkingwith business associates and seizure of incriminatingdocuments and duplicate sets of accounts, etc showingsubstantial tax evasion. (c) Incompleteness of financial oraccounting records relating to conduct of several businessactivities during the block period and in the interest of revenue,the Assessing Officer decided to get the accounts audited by anaccountant as defined in the Explanation below sub sec.(2) of288. Therefore, with the previous approval of the Commissionerof Income Tax, Jaipur communicated vide his letter No.CIT/JPR/ITO(R&S)/2000-01/2031 of 09/01/2001, direction undersub sec. (2A) of sec.142 of I.T. Act, 1961 were issued to theassessee vide letter No. JCIT(OSD)/JPR/2000-01/32 dated18/01/2001 by the Joint Commissioner of Income Tax (OSD),Jaipur, the then Assessing Officer, to get the accounts audited.It is pertinent to note that said notice was served upon theassessee on 23.01.2001. The assessee had furnished the auditreport of the nominated auditor M/s C.M. Birla & Co., Kota asper his letter dated 17/07/2001, in the office of the AO. 4.Notice was issued under Section 158BC on 29.10.1999 according to the provisions of Section 158BE, the period of two years would start from 28.02.1999 from the end of the month inwhich the search was carried out. Therefore, assessment oughtto have been passed before 28.02.2001. However, in the periodenter regnum, the Assessing Officer had ordered to furnish theaudit report as required under sub Section (2A) of section 142Aon 18.01.2001 which was required by the assessee on23.01.2001. The audit report was submitted by the assessee on17.07.2001. 5.Therefore, the questions which came for the considerationis as to whether the order of the assessment which has beenpassed on 24.08.2001 is time barred or not. For deciding thisissues, it will be apt to reproduce provisions of Section 158 BEwhich reads as under: “158BE. (1) The order under section 158BC shallbe passed— (a) within one year from the end of the monthin which the last of the authorisations forsearch under section 132 or for requisitionunder section 132A, as the case may be, wasexecuted in cases where a search is initiatedor books of account or other documents orany assets are requisitioned after the 30thday of June, 1995, but before the 1st day ofJanuary, 1997; (b) within two years from the end of themonth in which the last of the authorisationsfor search under section 132 or for requisitionunder section 132A, as the case may be, wasexecuted in cases where a search is initiatedor books of account or other documents orany assets are requisitioned on or after the1st day of January, 1997. (2) The period of limitation for completion ofblock assessment in the case of the otherperson referred to in section 158BD shall be— (a) one year from the end of the month inwhich the notice under this Chapter was served on such other person in respect ofsearch initiated or books of account or otherdocuments or any assets requisitioned afterthe 30th day of June, 1995, but before the 1stday of January, 1997; and (b) two years from the end of the month inwhich the notice under this Chapter wasserved on such other person in respect ofsearch initiated or books of account or otherdocuments or any assets are requisitioned onor after the 1st day of January, 1997. Explanation 1.—In computing the period oflimitation for the purposes of this section,— (i) the period during which the assessmentproceeding is stayed by an order or injunctionof any court; or (a) one year from the end of the month inwhich the notice under this Chapter was served on such other person in respect ofsearch initiated or books of account or otherdocuments or any assets requisitioned afterthe 30th day of June, 1995, but before the 1stday of January, 1997; and (b) two years from the end of the month inwhich the notice under this Chapter wasserved on such other person in respect ofsearch initiated or books of account or otherdocuments or any assets are requisitioned onor after the 1st day of January, 1997. Explanation 1.—In computing the period oflimitation for the purposes of this section,— (i) the period during which the assessmentproceeding is stayed by an order or injunctionof any court; or (ii) the period commencing from the day onwhich the Assessing Officer directs theassessee to get his accounts audited undersub-section (2A) of section 142 and endingon the day on which the assessee is requiredto furnish a report of such audit under thatsub-section; or (iii) the time taken in reopening the whole orany part of the proceeding or giving anopportunity to the assessee to be re-heardunder the proviso to section 129; or (iv) in a case where an application madebeforetheSettlementCommissionunder section 245C is rejected by it or is notallowed to be proceeded with by it, the periodcommencing on the date on which suchapplication is made and ending with the dateon which the order under sub-section (1)of section245D isreceivedbythe [74][PrincipalCommissioneror]Commissioner under sub-section (2) of thatsection, shall be excluded: Provided that where immediately after theexclusion of the aforesaid period, the periodof limitation referred to in sub-section (1) orsub-section (2) available to the AssessingOfficer for making an order under clause (c)of section 158BC is less than sixty days, suchremaining period shall be extended to sixtydays and the aforesaid period of limitationshall be deemed to be extended accordingly. Explanation 2.—For the removal of doubts, itis hereby declared that the authorisationreferred to in sub-section (1) shall be deemedto have been executed,— (a) in the case of search, on the conclusionof search as recorded in the last panchnamadrawn in relation to any person in whose casethe warrant of authorisation has been issued; (b) in the case of requisition under section132A, on the actual receipt of the books ofaccount or other documents or assets by theAuthorised Officer.” 6.Sub clause (ii) appended with explanation 1 to Section 158BE uses the word direct, which is required to be interpreted,or according to clause (ii), the period between the date, onwhich Assessing Officer directs the assessee to get hisaccounts audited under sub-section (2A) of section 142 andending on the day on which the assessee is required to furnish areport of such audit under that sub-section, is to be excluded. 7.Counsel for the appellant has relied upon the following judgment of the Supreme Court and Kerala High Court:- (i) Trustees of H.E.H. The Nizam's SupplementalFamily Trust Vs. Commissioner of Income Tax,reported in (2000) 242 ITR 381 (SC) and; (ii) Decision of Kerala High Court in Cochin PlantationsLtd. Vs. State of Kerala, (1997) 227 ITR 38 andCommissioner of Income Tax Vs. N.C. John & SonsLtd., (2002) 172 CTR (Ker) 685. 8.We have heard counsel for the appellant. 9.In this appeal, sub clause (ii) is required to be interpreted.However, counsel for the appellant has taken us to Section 153& 153A which came up for consideration before the Kerala HighCourt and other Courts. 7.Counsel for the appellant has relied upon the following judgment of the Supreme Court and Kerala High Court:- (i) Trustees of H.E.H. The Nizam's SupplementalFamily Trust Vs. Commissioner of Income Tax,reported in (2000) 242 ITR 381 (SC) and; (ii) Decision of Kerala High Court in Cochin PlantationsLtd. Vs. State of Kerala, (1997) 227 ITR 38 andCommissioner of Income Tax Vs. N.C. John & SonsLtd., (2002) 172 CTR (Ker) 685. 8.We have heard counsel for the appellant. 9.In this appeal, sub clause (ii) is required to be interpreted.However, counsel for the appellant has taken us to Section 153& 153A which came up for consideration before the Kerala HighCourt and other Courts. 10.It can not be disputed that period of exclusion willcommence from the day on which the AO gives a directionunder Section 142 (2A) and would end on the day when theassessee furnishes such audit report. According to us, the dateof issuance of the notice (i.e. 18.01.2001) is the day on whichthe AO taken a decision to get the bond audited, when suchdecision is conveyed to the assessee then only it results intodirection. A purpose of interpretation of clause (ii) above, readwith the decision of Ho'ble Supreme Court (supra) would mean,the date on which the decision/notice is served on the assessee. 11.In that view of the matter, 23.01.2001 will be the crucialdate from which the period to be excluded is to be reckoned,and therefore, the period which is required to be excluded in theperiod from 23.01.2001 to 17.07.2001 from 18.01.2001 to23.01.2001 it was only decision, and not the direction. 12.Learned ITAT has thus committed no error of law inholding the assessment order to be time barred. 13.In that view of the matter, the issue is required to beanswered in favour of the assessee and against the department. Ordered accordingly. The appeal stands dismissed. (DINESH MEHTA), J. (K.S. JHAVERI), J. Asheesh Kr. Yadav189