Ita/171/2008 Of The Commissioner Of Income Tax v. M/S The South India Paper Mills Ltd

IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE O2 DAY OF SEPTEMBER 2014 PRESENT: THE HON'BLE MR.JUSTICE N.KUMAR| AND| THE HON BLE MRS.JUSTICE RATHNAKALA| ITA NO.171 OF 2ZOOC/W ;ITA NO.172 OF 2008, ITA NOS.359360 OF 2014,LTA.CROB NQ.1L OF ZOQLL IN LTA NQOQ.1L/71L OITA CROB NO.7 OF ZOLO IN ITA NO.1L/72 OF 20 ITA NO.1/71/2008BEI|WEEN 1.The Commissioner of Income-tax No.55/1, Snilpasnree| Vidyaranya Complex. Vishvesnwarapuram| Mysore. 2.Tne Assistant Commissioner of Income-TaxCentra] CircleCentra] Circle No.55/1, Snilpasnree| Vidyaranya Complex. Vishvesnwarapuram| Mysore. ...APPELLANT (By Sri.Jeevan J.Neeralgi, Advocate) 2 2 AND" M/s.The Soutn India Paper Millis Ltd.,ChikkKayanacnatnra P.O., Nanjangud — 571 301. RESPONDENT| (By Sri.A.Shankar and Sri.M.Lava, Advocates) ITA No.171/2008 is filed under Section 260-A of)I.T.Act, 1961 arising out of Order dated 12.10.2007 passedin IT(SS)A No.17/BNG/1998, for the Block AssessmentPeriod 1/4/1986 to 14/11/1996, praying to formulate thesubstantial questions of law stated therein and to allow theappeal and set aside the order passed by the ITAT,Bangalore in IT(SS)A No.17/BNG/1998 dated 12.10.2007and confirm the order of tne Appellate Commissionerconfirming the order passed by the Assistant Commissionerof Income Tax, Central Circle, Mysore. ITA NO.1/72/2008BETWEEN: 1.The Commissioner of Income-tax No.55/1, Snilpasnree| Vidyaranya Complex. Vishvesnwarapuram| Mysore. 2.Tne Assistant Commissioner of Income-TaxCentral CircleCentral Circle No.55/1, Snilpasnree| Vidyaranya Complex. Vishvesnwarapuram| Mysore. APPELLANTS (By Sri.E.I.Sanmatni, Advocate) A A AND" M/s.The South India Paper Mills Ltd.,ChikkKayanacnatnra P.O.,Nanjangud — 571 301. RESPONDENT| (By Sri.A.Shankar and Sri.M.Lava, Advocates) ITA No.172/2008 is filed under Section 260-A of)I.T.Act, 1961 arising out of Order dated 12.10.2007 passedin IT(SS)A No.73/BNG/2002, for the Block AssessmentPeriod 1/4/1986 to 14/11/1996, praying to formulate thesubstantial questions of law stated therein and to allow theappeal and set aside the order passed by the ITAT,Bangalore in IT(SS)A No.73/BNG/2002 dated 12.10.2007and confirm the order of tne Appellate Commissionerconfirming the order passed by the Assistant Commissionerof Income Tax, Central Circle, Mysore. -ITA NOS. 35360/2014:BETWEEN M/s.The Soutn India Paper Milis LimitedRep. by its General Manager — Finance & AccountsSri.B.Ravi Holla|ChikkKayana Chatra P.O.Nanjangud|Mysore District - 5/1 301. APPELLANT (By Sri.A.Shankar and Sri.M.Lava, Advocates) AND The Assistant Commissioner of Income-Tax v v Central Circle#55/1, Snilpasnree|Vidyaranya Complex.Vishvesnwarapuram|Mysore — 575 008. ~ RESPONDENT (By Sri.Jeevan J.Neeralgi, Advocate) ITA Nos.359-360/2014 are filed under Section 260-A.of I.T.Act, 1961 arising out of the Order dated 12.10.2007passed in IT(SS)A No.17/Bang/1998 and 73/Bang/2002, forthe Assessment Period 01/04/1986 to 14/11/1996 praying|to adjudicate and decide the foregoing question of lawand/or sucn other question of law as may be formulated bythis Hon'ble court and to aliow the appeal of the Appellantand set aside the findings to the extent against theAppellant in the order passed by the ITAT, Bangalore Bench,‘B’ in IT(SS)JA Nos.17/Bang/1998 and 73/Bang/2002 dated12.10.2007 on the validity of Block Assessment PeriodO1L.04.1986 to 14.11.1996 Annexure-aA ITA.CROB No.1/2011 in ITA No.1/1/2008:BEIWEEN M/s.The Soutn India Paper Milis LimitedRep. by its General Manager — Finance & AccountsSri.B.Ravi HollaChikkKayana Chatra P.O.Nanjangud|Mysore District - 571 301.) CROSS OBJECTOR| (By Sri.A.Shankar and Sri.M.Lava, Advocates) AND 1 1.The Commissioner of Income-Tax.#55/1, Snilpasnree|Vidyaranya Complex.#55/1, Snilpasnree|Vidyaranya Complex. Vishvesnwarapuram| Mysore — 575 008. ITA.CROB No.1/2011 in ITA No.1/1/2008:BEIWEEN M/s.The Soutn India Paper Milis LimitedRep. by its General Manager — Finance & AccountsSri.B.Ravi HollaChikkKayana Chatra P.O.Nanjangud|Mysore District - 571 301.) CROSS OBJECTOR| (By Sri.A.Shankar and Sri.M.Lava, Advocates) AND 1 1.The Commissioner of Income-Tax.#55/1, Snilpasnree|Vidyaranya Complex.#55/1, Snilpasnree|Vidyaranya Complex. Vishvesnwarapuram| Mysore — 575 008. 2.Tne Assistant Commissioner of Income-TaxCentra] Circle#55/1, Snilpasnree|Centra] Circle#55/1, Snilpasnree| Vidyaranya Complex. Vishvesnwarapuram| Mysore — 5/75 OQ8. ~. RESPONDENTS (By Sri.Jeevan J.Neeralgi, Advocate) ITA.Crob No.1/2011 in ITA No.1/71/2008 is filed underOrder XLI Rule 22 of CPC, 1908 arising out of order dated17.10.2007 for the Assessment Period 01.04.1986 _ t14.11.1996 praying to formulate the substantial questionsof law stated therein and to allow the cross objection appealand set aside the findings to the extent against the crossobjector in the order passed by the ITAT, Bangalore Bencn‘BY in IT(SS)JA No.17/Bang/1998 dated 12.10.2007 asAnnexure-A. ITA.CROB No.7/2010 in ITA No.1/2/2008:BEIWEEN M/s.The Soutn India Paper Milis LimitedRep. by its General Manager — Finance & AccountsSri.B.Ravi Holla|ChikkKayana Chatra P.O.Nanjangud|Mysore District - 571 301.) CROSS OBJECTOR| B (By Sri.A.Shankar and Sri.M.Lava, Advocates) AND 1.The Commissioner of Income-Tax.#55/1, Snilpasnree|#55/1, Snilpasnree| Vidyaranya Complex. Vishvesnwarapuram|Mysore — 575 008.Mysore — 575 008. 2.Tne Assistant Commissioner of Income-TaxCentral Circle#55/1, Snilpasnree|Central Circle#55/1, Snilpasnree| Vidyaranya Complex.Vishvesnwarapuram|Mysore — 5/75 OQ8.Vishvesnwarapuram|Mysore — 5/75 OQ8. ~. RESPONDENTS (By Sri.Jeevan J.Neeralgi, Advocate) ITA.Crob No.7/2010 in ITA No.172/2008 is filed under|Order XLI Rule 22 of CPC, 1908 arising out of order dated 17.10.2007 for tne Assessment Period 01.04.1986 _ t14.11.1996 praying to formulate the substantial questionsof law stated therein and to allow the cross objection appealand set aside the order passed by the Tribunal in IT(SS)ANo./73/Bang/2002 dated 12.10.2007. These Appeals and Cross Objections coming on for|Admission, this day, N.KUMAR, J.,delivered tne following: | 7 JUDGMENT Tne revenue nas preferred the appeals in ITA|Nos.1/71/2008 and 1/72/2008 challenging the order of thTribunal granting relief to the assessee on merits. Whereas,the assessee has preferred appeal Nos.359-360/2014|challenging the finding of the Tribunal that the order of theBlock Assessment passed was not within the time andtnerefore, it is void. Therefore, all the appeals are taken uptogether and disposed of by this common order. 2.It is submitted that if the impugned blockassessment order is not passed witnin the time, thequestion of going into merits would not arise. Therefore,the question whether the block assessment order waspassed in time or not is gone into as a preliminary issue. | 3.Tne assessee is a limited company registered under the provisions of the Companies Act. The factory and ! Tne revenue nas preferred the appeals in ITA|Nos.1/71/2008 and 1/72/2008 challenging the order of thTribunal granting relief to the assessee on merits. Whereas,the assessee has preferred appeal Nos.359-360/2014|challenging the finding of the Tribunal that the order of theBlock Assessment passed was not within the time andtnerefore, it is void. Therefore, all the appeals are taken uptogether and disposed of by this common order. 2.It is submitted that if the impugned blockassessment order is not passed witnin the time, thequestion of going into merits would not arise. Therefore,the question whether the block assessment order waspassed in time or not is gone into as a preliminary issue. | 3.Tne assessee is a limited company registered under the provisions of the Companies Act. The factory and ! its registered office is situated at Chikkayyana Chatra Post,Nanjangud.Tne.aSsSeSsSeIS|IntheDusiInessOT|manufacturing and trading in paper. A search was|conducted under Section 132 of the Act in the businesspremises of the assessee on 14.11.1996. In pursuance of a|search, warrant was issued by the competent authority.Tne search was also continued on 15.11.1996, 16.11.1996,and 27.11.1996. Prohibitory order came to be passed on14.11.1996. The documents, which were kept in almirah inthe course of search dated 14.11.1996, 15.11.1996,|16.11.1996 and 27.11.1996 were seized. Again on|13.01.1997, the board minutes book was seized and ajmahazar was drawn stating that the search was closed. It|is also not in dispute that there was no authorization issuedby the competent authority to search on 15.11.1996,|16.11.1996, 27.11.1996 and 13.01.1997. Tne record,discloses that the authorization for search and seizure wasissued on 05.11.1996. At the end of 14.11.1996,| C 15.11.1996 and 16.11.1996, a mahazar was drawn. Infact,a pronibitory order had Deen passed on those days also andDOOKS Nad been Kept in aimiran. It is only on 27.11.1996,all the documents were seized and yet another manhnazawas drawn. Tne autnorities nave neld that the day on wnhicnthe searcn was completed and a manazar was drawn, the|period of limitation is to be computed from that date. If socomputed, the order passed on 29.01.1998 is well withintime. However, the assessee contends that the searcn was|conducted on 14.11.1996 in pursuance of an authorizationand a manazar was drawn. Hence, tne period of one year isto be computed from 14.11.1996 as for the subsequent|search and seizure, there was no authorization at all. TheSaid orders were passed by the authorities relying on thejudgment of a Special Bench of the Tribunal in|RameajigReady'’case. The said judgment of the Special Bench waschallenged in an appeal before this Court. This Court in thecase orfC.,.RAMAIAH REDDY VS. ASSISTANT COMMISSIONE 10 OF INCOME-TAX reported in [2011] 339 ITR 210|held tnat|tne period of limitation starts on tne date on which the l!astof authorization has been executed and not when theautnorized officer states that the searcn is finally concluded.Putting a pronibitory order under Section 132 (3) does notelongate the starting point of limitation. 4In view of the aforesaid judgment, in the instantcase, there was only one authorization dated 05.11.1996 inpursuance of which search was conducted on 14.11.1996. |Even if itis to be held tnat tne searcn was continued on tnetwo consecutive dates and it ended on 16.11.1996, theDIOcK assessment orders snould Nave been passed on orbefore 30.11.1997. Whereas the block assessment order ispassed on 29.01.1998 whicn is clearly barred by law oflimitation. Therefore the block assessment order passed isliable to be set aside. In view of the fact tnat the DIockassessment order is held to be barred by limitation, 11 question of going into merits of the said order does notarise. Consequently, we pass the following: ORDER 1.ITANos.359-360/2014IS.alliowec.ITANo.171/2008andITANos.1/72/2008alregcismissed. ITA.Crob No.1/2011 and ITA.CrobNo.171/2008andITANos.1/72/2008alregcismissed. ITA.Crob No.1/2011 and ITA.Crob No.7/2010 are also dismissed. 11 question of going into merits of the said order does notarise. Consequently, we pass the following: ORDER 1.ITANos.359-360/2014IS.alliowec.ITANo.171/2008andITANos.1/72/2008alregcismissed. ITA.Crob No.1/2011 and ITA.CrobNo.171/2008andITANos.1/72/2008alregcismissed. ITA.Crob No.1/2011 and ITA.Crob No.7/2010 are also dismissed. 2).Tne block assessment order dated 29.01.1998 Is nerepy set aside. 3.Parties to pear tneir own costs. It is submitted that the judgment of this Court in| Ramaian Reddy's caseis now pending consideration before| tne Apex Court. Revenue as well as the assessee are at|liberty to seek for revival of these appeals, if need arises,after the judgment of the Apex Court. �� �*'��$$7/)����$$*/2<'��2$/*)$5��%9)($2�'(�3$*&'..$5�.%�+'2$�#'(�3%8$*�+%*�*$7$)9$�8'.#')�+%9*�8$$>(�+*%&�.%5/6�� �*'��$$7/)����$$*/2<'��2$/*)$5��%9)($2�'(�3$*&'..$5�.%� ��������5 -������������ ��������5 -������������ �*(L�