Itxa/1101/2017 Of The Commissioner Of Income Tax-8 v. Pashupati Granites Pvt. Ltd

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (IT) NO.1101 OF 2017 Commissioner of Income Tax-8, Mumbai.… AppellantV/s. Pashupati Granites Pvt. Ltd.… Respondent --- Mr.Arvind Pinto, Advocate for the Appellant.Mr.Prakul Khurana with Ms.Ankita Sovani i/by M/s R V JAssociates, Advocate for the Respondent. --- CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : FEBRUARY 12, 2020 P.C.:- 1.Heard Mr.Arvind Pinto, learned standing counsel,Revenue for the appellant; and Mr.Prakul Khurana alongwithMs.Ankita Sovani, learned counsel for the respondent-assessee. 2.This appeal under Section 260A of the Income Tax Act,1961 (briefly “the Act” hereinafter) has been preferred by theRevenue assailing the order dated 26[th] July, 2013 passed bythe Income Tax Appellate Tribunal, Mumbai Bench “C”,Mumbai (briefly “the Tribunal” hereinafter) in Income TaxAppeal No.(SS)644/Mum/2002 for the block period 1[st] April,1988 to 15[th] September, 1998. Priya Soparkar 3.The appeal has been filed projecting the followingquestions as substantial questions of law:- 4.From the above it is evident that the core issue in theappeal requiring adjudication is annulment of the assessmentorder for the block period under consideration passed underSection 158BC of the Act by holding the same to be beyondthe limitation period prescribed under Section 158BE(b) ofthe Act. 5.It may be mentioned that following search and seizurein the premises of the respondent/assessee by thedepartmental authorities assessment proceedings underSection 158BC was taken up for the block year underconsideration and ultimately, the assessment order waspassed on 27[th] December, 2000. 6.Respondent challenged the said assessment order inappeal before the Commissioner of Income Tax(Appeals)Central-VIII, Mumbai, also referred to as the first appellateauthority, contending that the said assessment order passedon 27[th] December, 2000 was beyond the limitation period oftwo years, the search having taken place on 15[th] September,1998. After an elaborate discussion the first appellateauthority concluded that the search which was carried outpursuant to warrant of authorization dated 14[th] September,1998 was executed on 15[th] September, 1998 itself. Therefore,having regard to the limitation of two years from the end ofthe month in which the authorization was executed, the firstappellate authority held that the time limit for passing theassessment order under Section 158BC was available till 30[th]September, 2000 only. The assessment order passed on 27[th]December, 2000 was beyond the limitation period of twoyears and accordingly, it was annulled vide the appellateorder dated 11[th] September, 2002. 7.Aggrieved thereby Revenue went in appeal before theTribunal. Tribunal by the order dated 26[th] July, 2013 affirmedthe view taken by the first appellate authority by holding thatthe search operations were over in the month of September,1998. The limitation period of two years was available till30[th] September, 2000. The assessment order having beenpassed on 27[th] December, 2000 was therefore barred bylimitation. Accordingly, the appeal of the Revenue wasrejected. 8.Hence, this appeal. 9.Submissions made by learned counsel for the partieshave been considered. 10.Before adverting to the rival contentions, it may beapposite to refer to certain relevant provisions of the Act andthe Income Tax Rules, 1962 (briefly “the Rules” hereinafter)to have a proper perspective. 7.Aggrieved thereby Revenue went in appeal before theTribunal. Tribunal by the order dated 26[th] July, 2013 affirmedthe view taken by the first appellate authority by holding thatthe search operations were over in the month of September,1998. The limitation period of two years was available till30[th] September, 2000. The assessment order having beenpassed on 27[th] December, 2000 was therefore barred bylimitation. Accordingly, the appeal of the Revenue wasrejected. 8.Hence, this appeal. 9.Submissions made by learned counsel for the partieshave been considered. 10.Before adverting to the rival contentions, it may beapposite to refer to certain relevant provisions of the Act andthe Income Tax Rules, 1962 (briefly “the Rules” hereinafter)to have a proper perspective. 11.Section 132 of the Act deals with search and seizure. Theauthority mentioned under sub-section (1) can carry out asearch and seizure operation if he has reasons to believe inconsequence of information in his possession that any personhas failed to produce any books of account etc upon summonsor notice or is in possession of any money etc. which has notbeen or would not be disclosed for the purpose of the Act. Asper sub-section (3) the officer who is so authorized to carryout search and seizure where it is not practicable to seizeany such books of accounts, other documents, money,bullion, jewellery or other valuable articles or thing, shallserve an order on the owner or on the person in immediatepossession or control not to remove or part with orotherwise deal with it except with the the previouspermission of such officer. As per the Explanation thereto, itis declared that serving of an order under sub-section (3)shall not be deemed to be seizure of such books of accounts, Priya Soparkar other documents, bullion, jewellery or other valuable articlesor things in terms of sub-section (1) clause (iii). 12.The consequence of such search is to have assessmentof undisclosed income as a result of such search which isprovided in Section 158BA as per which the Assessing Officershall proceed to assess the undisclosed income of suchperson for the related block period. 13.Block period is defined in Section 158BA to mean theperiod comprising previous years relevant to 10 assessmentyears preceding the previous year in which the search wasconducted under Section 132 or any requisition was madeunder Section 132A. 14.Procedure for block assessment is provided in Section158BC. 15.What is relevant for the present case is Section158BE which lays down the time limit for completion ofblock assessment. As per sub-section (1)(b), the assessmentorder under Section 158BC in the case of search underSection 132 or requisition under Section 132A made on orafter 1[st] January, 1997 should be passed within two yearsfrom the end of the month in which the last of theauthorizations for search or requisition was executed.Section 158BE(1)(b), which is relevant and as it stood at therelevant time, is extracted hereunder:- “158BE-(1) The order under section 158BC shallbe passed- (a) …………... (b) within two years from the end of the month inwhich the last of the authorisations for searchunder section 132 or for requisition under section132A, as the case may be, was executed in caseswhere a search is initiated or books of account orother documents or any assets are requisitionedon or after the 1[st] day of January, 1997.” 16. As per Explanation 2 it has been declared that theauthorization referred to in sub-section (1) shall be deemedto have been executed, in the case of search, on theconclusion of search as recorded in the last panchanamadrawn in relation to any person in whose case the warrant ofauthorization has been issued. 17.Having noticed the relevant legal provisions as above,we may now advert to the facts of the present case. (a) …………... (b) within two years from the end of the month inwhich the last of the authorisations for searchunder section 132 or for requisition under section132A, as the case may be, was executed in caseswhere a search is initiated or books of account orother documents or any assets are requisitionedon or after the 1[st] day of January, 1997.” 16. As per Explanation 2 it has been declared that theauthorization referred to in sub-section (1) shall be deemedto have been executed, in the case of search, on theconclusion of search as recorded in the last panchanamadrawn in relation to any person in whose case the warrant ofauthorization has been issued. 17.Having noticed the relevant legal provisions as above,we may now advert to the facts of the present case. 18.Search warrant was issued by the Director of IncomeTax (Investigation), Mumbai on 14[th] September, 1998. As perpanchanama drawn on 15[th] September, 1998, documentsmarked as Annexure A-1 to Annexure A-11 were seized and aprohibitary order under Section 132(3) was put up on theCPU of the computer of the respondent/assessee. The firstappellate authority noted that the search party had come tothe conclusion that there were no further materials to beseized and no further search to be conducted; the searchhad ended on that day i.e. 15[th] September, 1998. Thus, thefirst appellate authority concluded that the authorization forthe search was fully implemented and its execution wascompleted on 15[th] September, 1998. 19.The first appellate authority also noted that thoughthere were warrants of authorization on 15[th] September, 1998,13[th] October, 1998 and 14[th] December, 1998, after 15[th]September, 1998 the authorized officer had nothing to searchor seize and could not have lawfully conducted any search.Life term of search warrant issued on 14[th] September, 1998came to an end on 15[th] September, 1998, when it was dulyexecuted. It was noticed that back up copy of the CPU of thecomputer was taken by the authorized officer on 13[th]October, 1998 by passing prohibitory order. However, therewas no purpose to keep or continue the same underprohibitory order. Therefore, what was done on 14[th]December, 1998 was final revocation of the order underSection 132(3) relating to the CPU of the computer and it washeld that such final revocation of the order under Section132(3) was wholly irrelevant for the purpose of determininglimitation under Section 158BE. The first appellate authorityaccepted the contention of the respondent/assessee thatsearch operation was completed on 15[th] September, 1998 andnothing connected with the search was done on subsequentdates. It was held as under:- “17. It is notable that once the back up copy ofthe CPU of the computer had been taken by theauthorised officer on 13.10.98 there waspractically no purpose in keeping the sameunder prohibitory orders up to 14.12.98. Seenfrom this perspective also, there was no need toput fresh prohibitory order on the CPU of thecomputer on 13.10.98. Thus there is substance inthe contention of the appellant that the searchoperations in this case were completed on 15.9.98the CPU of the computer had been taken by theauthorised officer on 13.10.98 there waspractically no purpose in keeping the sameunder prohibitory orders up to 14.12.98. Seenfrom this perspective also, there was no need toput fresh prohibitory order on the CPU of thecomputer on 13.10.98. Thus there is substance inthe contention of the appellant that the searchoperations in this case were completed on 15.9.98 Priya Soparkar and nothing connected with the search operationwas done on 13.10.98 and 14.12.98.” Priya Soparkar and nothing connected with the search operationwas done on 13.10.98 and 14.12.98.” 20.Referring to a decision of this court in CIT Vs. Mrs.Sandhya P. Naik, 253 ITR 534, the first appellate authorityheld that the warrant of authorization having being executedon 15[th] September, 1998, the limitation period of two yearsfor passing assessment order under Section 158BE wasavailable till 30[th] September, 2000. The block assessmentorder passed on 27[th] December, 2000 was thus beyondlimitation and was accordingly annulled by holding asunder:- “23. As I have concluded that the search wascompleted and warrant of authorization dated14.9.1998 was executed on 15.9.1998 itself, theassessment order, could have been framed bythe AO till 30.9.2000 only. The order dated27.12.2000 passed by the AO, which is beyondthe period of two years and is barred by limitationis thus not maintainable and is thereforeannulled.” 21.While annulling the assessment order as above the firstappellate authority observed that if for an indefinite period asearch is continued under the whims of the searching partywithout any real purpose or for any collateral purpose and ifthe search party goes on visiting the premises off and onhaving a panchanama on each day without carrying out anysearch operation, Explanation 2 to Section 158BE cannotvalidate such invalid panchanama. 22.We would again refer to Explanation 2 to Section 158BEof the Act on which much reliance has been placed by Mr.Pintoafter we deal with the order passed by the Tribunal. As already Priya Soparkar noted above, by the order dated 26[th] July, 2013, Tribunal hadaffirmed the order passed by the first appellate authority.Before the Tribunal also revenue heavily relied uponExplanation 2 to Section 158BE. However Tribunal did notaccept the contention of the revenue and declined tointerfere with the order passed by the first appellate authorityby holding as under :- “4. We have heard the rival submissions andperused the material before us. It is found thatwhile deciding the issue, special bench hadspecifically dealt with the question ofretrospective amendment and decided that ifnothing connected with the search was done on aparticular day time limit for assessment will notextend to that date. In other words time limitavailable to the AO is upto the date of actualconduct of search. In the case under considerationFAA has given a finding of fact that searchoperations were over in the month of September,1998 and after that only panchanamas weredrawn. In these circumstances, we are of theopinion that there is no need to interfere with theorders of the FAA. So respectfully following theorder of the Special bench delivered in the case ofShree Ram Lime Products Ltd.(supra), we upholdthe order of the FAA. Grounds of appeal 1-3 aredecided against the AO. As we have upheld theorder of the FAA, who have annulled the blockassessment order, so we are of the opinion thatother rounds do not need any adjudication by us.” 23.Explanation 2 was inserted in Section 158BE of the Actby the Finance (No.2) Act, 1998 with retrospective effectfrom 1[st] July, 1995. It clarifies that the authorization referredto sub-section (1) of Section 158BE shall be deemed to havebeen executed in the case of a search (with which this appealis concerned) on the conclusion of search as recorded in the Priya Soparkar 10 4 itxa 1101-17-o 23.Explanation 2 was inserted in Section 158BE of the Actby the Finance (No.2) Act, 1998 with retrospective effectfrom 1[st] July, 1995. It clarifies that the authorization referredto sub-section (1) of Section 158BE shall be deemed to havebeen executed in the case of a search (with which this appealis concerned) on the conclusion of search as recorded in the Priya Soparkar 10 4 itxa 1101-17-o last panchanama drawn in relation to any person in whosecase the warrant of authorization has been issued. Therefore,what Explanation 2 clarifies is that for the purpose ofcomputing the limitation period of two years from the end ofthe month in which the authorizations for search wasexecuted would mean the last panchanama drawn in respectof such search which therefore is indicative of a scenariowhere a number of panchanamas are drawn in relation to thesearch. Therefore, in the case of multiple panchanamas beingdrawn it is the last panchanama drawn on the conclusion ofthe search which would be relevant for the purpose ofcomputation of the limitation period of two years in terms ofSection 158BE(1)(b) of the Act. 24.Having noticed the above, we may also refer to Rule 112of the Rules which lay down the procedure following searchand seizure carried out under Section 132. What is ofrelevance is sub-Rule (7). Sub-Rule (7) says that the searchas contemplated under Section 132(1) shall be made in thepresence of witnesses as provided in the rules and a list of allthings seized in the course of such search and of the placesin which they were respectively found shall be prepared bythe authorized officer and signed by such witnesses but noperson witnessing a search shall be required to attend as awitness of the search in any proceedings under the Act unlessspecifically summoned. 25.Sub-Rule (7) of Rule 112 would go to show that a searchis to be conducted in the presence of witnesses and whatever Priya Soparkar things or materials are seized in the course of the search, alist of all such things shall be prepared by the authorizedofficer which should have the signature of the witnesses.Though the word “panchanama” has not been used in sub-Rule (7) it is evident that the reference to the list of all thingsseized in the course of such search bearing signature of thewitnesses is nothing but a panchanama drawn at theconclusion of the search. 26.Delhi High Court in Commissioner of Income-Tax Vs.S.K. Katyal, (2009) 177 Taxman 380 examined themeaning of the expression “panchanama” as occurring inExplanation 2(a) to Section 158BE of the Act. Delhi HighCourt held that the word “panchanama” is not defined in theAct. However, panchanama which is mentioned inExplanation 2(a) to Section 158BE is nothing but a documentrecording what happened in the presence of the witnesses(panchas). It documents the conclusion of a search. 27.In Sandhya P. Naik (supra) this court held that bysimply stating in the panchanama that a search istemporarily stopped, the authorized officer cannot keep thesearch in operation by passing a restraint order under Section132(3). Action under Section 132(3) can be resorted to onlyif there is any practical difficulty in seizing the things whichare likely to be seized. When there is no such practicabledifficulty, the officer is left with no other alternative but toseize any item if he is of the view that it representedundisclosed income. This court categorically held that power Priya Soparkar 4 itxa 1101-17-o under Section 132(3) cannot be exercised so as to circumventthe provisions of Section 132(3). Referring to the Explanationto Section 132(3), this court held that a restraint order doesnot amount to seizure. By passing a restraint order, thetime limit available for framing of assessment ordercannot be extended. Priya Soparkar 4 itxa 1101-17-o under Section 132(3) cannot be exercised so as to circumventthe provisions of Section 132(3). Referring to the Explanationto Section 132(3), this court held that a restraint order doesnot amount to seizure. By passing a restraint order, thetime limit available for framing of assessment ordercannot be extended. 28.Adverting to the facts of the present case, we find thatthe first appellate authority had recorded a clear finding offact that as per panchanama drawn on 15[th] September,1998, the search which was carried out in terms ofauthorization dated 14[th] September, 1998 was fully executed.After 15[th] September, 1998 there was no search or seizure.On 13[th] October, 1998 a prohibitary order was passed underSection 132(3) regarding the computer CPU of therespondent/ assessee which was revoked on 14[th] December,1998. The first appellate authority had rightly held thatpassing of prohibitory order and revocation thereof werewholly irrelevant for the purpose of determining limitationunder Section 158BE. Tribunal had considered the submissionof the Revenue regarding Explanation 2 to Section 158BEbut did not accept the same and rightly so. 29.Finding returned by the first appellate authority asaffirmed by the Tribunal is a finding of fact and we do notfind any element of perversity in such finding of fact. In theabsence thereof, no question of law, much less anysubstantial question of law, can be said to arise therefrom, Priya Soparkar 13 4 itxa 1101-17-o there being concurrent findings of facts by the two lowerappellate authorities. 30.Consequently we do not find any merit in the appeal.Appeal is accordingly dismissed. No cost. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) ….