The Commissioner Of Income Taxtrichy v. Shri Subashchand Jain16B 10[Th] Cross Thillai Nagar,Trichy 620 018

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 31.01.2022 CORAM THE HONOURABLE MR.JUSTICE R.MAHADEVANandTHE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ T.C.A. Nos.478 and 758 of 2010 The Commissioner of Income TaxTrichy ... Appellant in both T.C.A's Vs. Shri Subashchand Jain16B 10[th] Cross Thillai Nagar,Trichy 620 018.... Respondent in both T.C.A's COMMON PRAYER : Appeals filed under Section 260A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal, "D" Bench, Chennai, dated 31.05.2007 in I.T(SS)A.Nos.177/Mds/2006 and 158/Mds/2006, respectively. Against the order of the Commissioner of Income Tax (AppealsII),Chennai 34. dated 05.05.2006 and made in ITA.NO.180/03-04and ITA.NO.95/04-05 for the Block Period ending 27.09.2000 andBlock period ending 28.09.2000. Against the order of the Deputy Commissioner of IncomeTax,Central Circle III(4),Chennai 34. dated 30.06.2003 and29.01.2004 and made in PA.NO./GI NO.34713-S/AA D[K 8697H andAADFJ3401 D/34301-J for the Block Period ending 27.09.2000 and28.09.2000 respectively. For Appellant:Mr.M.Swaminathan, Senior standing counsel& Mrs.V.Pushpa, Junior standing counsel For Respondent :Mr.P.Senthilkumar for M/s.Philip George COMMON JUDGMENT (Judgment of the Court was delivered by R.MAHADEVAN, J.) Both the tax case appeals filed at the instance of theRevenue, are directed against the order dated 31.05.2007 passedby the Income Tax Appellate Tribunal, 'D' Bench, Chennai, in I.T(SS)A.Nos.177/Mds/2006 and 158/Mds/2006, respectively relatingto the block period ending 27.09.2000 and 28.09.2000. 2.The case in brief is as follows:Based on the information that the assessee / respondent wasdoing unaccounted business in jewellery, a search and seizureaction under section 132 of the Income Tax Act was conducted inthe residential as well as the business premises of the assesseeon 28.09.2000 and the search was concluded on 01.06.2001 as perthe last panchanama drawn, according to which, the warrant isshown to have been issued in the name of the assessee and hisbrother and father, while the premises searched were that ofM/s.Kalyani Thanga Maligai and M/s.Sugali Bankers situated atNo.115, Arcot Road, Virugambakkam, Chennai-600 092. Pursuant tothe same, notice under section 158 BC of the Act was issued on25.06.2001, to which, the assessee filed his return of incomedisclosing Rs.21,34,144/- as his undisclosed income acquiescingwith the date of warrant with reference to which M/s.KalyaniThanga Maligai and M/s.Sugali Brothers were searched. Theassessing officer made various additions and determined thetotal undisclosed income of the assessee at Rs.5,28,08,070/- andaccordingly, levied tax and completed the assessment on30.06.2003. Challenging the same, the assesseee filed appealbefore the CIT(A), who by order dated 05.05.2006, partly allowedthe appeal and reduced the addition to the tune ofRs.7,09,279/-. Aggrieved over the same, both the Revenue and theassessee filed appeals before the Income Tax Appellate Tribunal.By order dated 31.05.2007, the Tribunal held that the assessmentorder is barred by limitation and accordingly, quashed theassessment order. Therefore, the Revenue is before this courtwith the present appeals. 3.By separate orders dated 22.06.2010 and 04.06.2013, thiscourt admitted the aforesaid tax case appeals on the followingsubstantial questions of law: “ (i) Whether on the facts and in thecircumstances of the case, the Income Tax Tribunalis right in law in holding that the assessment orderdated 30.06.2003 was barred by limitation,especially when the last of Panchanama was dated01.06.2001? (ii) Whether on the facts and in thecircumstances of the case, the Income Tax Tribunal 3.By separate orders dated 22.06.2010 and 04.06.2013, thiscourt admitted the aforesaid tax case appeals on the followingsubstantial questions of law: “ (i) Whether on the facts and in thecircumstances of the case, the Income Tax Tribunalis right in law in holding that the assessment orderdated 30.06.2003 was barred by limitation,especially when the last of Panchanama was dated01.06.2001? (ii) Whether on the facts and in thecircumstances of the case, the Income Tax Tribunal is right in quashing the block assessment as timebarred especially when Section 158 BE(1) clearlyholds that the limitation for completion of theassessment and the limitation is to start from theend of the month in which the last of the panchanamaunder Section 132 was drawn up and also whenexplanation 2 to Section 158 BE clearly providesthat the last panchanama referred in Section 132shall be deemed to have been executed in the case ofsearch on the conclusion of search as recorded inthe last panchanama? (iii) Whether on the facts and in thecircumstances of the case, the Income Tax Tribunalis right in law in going into issue relating tovalidity of the search conducted under Section 132of the Income Tax Act while dealing with blockassessment? 4.When the matters were taken up for consideration, thelearned counsel for the appellant as well as the respondentjointly submitted that the substantial questions of law involvedherein were already decided and answered in favour of theassessee, in the case of A. Rakesh Kumar Jain v. JointCommissioner of Income Tax [(2013) 31 taxmann.com 312 (Madras) /(2012) 254 CTR 576(Madras). The relevant paragraphs of the saiddecision are usefully extracted below: "13. As reasoned out therein, there could be onlyone authorisation and a panchanama drawn as regardsthe conduct of the search, i.e., once when the searchparty concluded the search and leaves the premisesafter carrying with them the seized material, theauthorisation for the search is fully implemented uponand execution completed. There afterwards , if theDepartment has to enter the premises again, as by wayof search, certainly, one requires fresh authorisation; however, as stated by the Karnataka High Court, nosuch authorisation is required to enter the premisesto inspect the materials, which are the subject matterof prohibitory order or restraint order. The saidorder itself acts as an authorisation to enter thepremises and inspect the materials, which are thesubject matter of those orders. However, afterentering the premises of such person, he has toconfine his actions only for inspection of thesubject-matter of prohibitory order or restraintorder. He cannot search the premises over again. Anymaterial seized after such inspection would be theundisclosed income for the purpose of the blockassessment in pursuance of search under Section 132(1) of the Act. Thus, the panchanama evidencing suchinspection and seizure would be the last panchanama inrespect of the said premises. But for the purpose oflimitation under Section 158BE, it would not be thelast panchanama drawn in proof of conclusion ofsearch, as defined in Explanation 2 to Section 158BE.For the purpose of limitation, there can be only onesearch and one panchnama as reasoned out by theKarnataka High Court. 14. Referring to the Kerala High Court decisionin the case of Dr.C.Balakrishnan Nair Vs. CIT reportedin (1999) 237 ITR 70 (Ker), the Karnataka High Courtheld that there is no provision in the CriminalProcedure Code or in the Income Tax Act therein, forpostponing the search for such a long period. It isworthwhile to extract the decision of the KarnatakaHigh Court, which in clear terms brings out theconcept of search and validity of the authorisationissued for the search. ............. 14. Referring to the Kerala High Court decisionin the case of Dr.C.Balakrishnan Nair Vs. CIT reportedin (1999) 237 ITR 70 (Ker), the Karnataka High Courtheld that there is no provision in the CriminalProcedure Code or in the Income Tax Act therein, forpostponing the search for such a long period. It isworthwhile to extract the decision of the KarnatakaHigh Court, which in clear terms brings out theconcept of search and validity of the authorisationissued for the search. ............. 15. As already seen, merely because, more thanone panchanama is drawn in the given case on oneauthorisation, one cannot construe that the subsequentand the last of the panchanama issued as one flowingout of the search as a last of the panchanamareferrable to Explanation (2) to Section 158BE. Oncethe warrant of authorisation has been issued and thepremises is searched and the search party leaves thepremises, there is the end of the search and whatcould be postponed is only seizure of the articles andissuance of prohibitory order ; however, limitationfor the completion of the block assessment begins onthe conclusion of the search and issuance ofpanchanama and in case of single authorisation, themoment such party leaves the premises by drawing ofthe panchanama noting conclusion of the search, thelimitation period begins. 16. Going by the facts herein, viz., as to thesearch completed on 13.12.2001 with drawing of thepanchanama and the search party leaving the premises,the mere fact that the panchanama contain theobservation that "search continues" per se would notenable the search party to keep the search in asuspended animation to carry on the search in futuredate to contend that the limitation has to be workedout on the last panchanama drawn ie. 15.02.2002, thuscalculating the limitation from 15.02.2002. We have nohesitation in accepting the case of the assessee that the limitation ends on 31.12.2003. The contention ofthe Revenue that the limitation has to be taken as29.02.2004 does not go with the provisions of the Act.In such circumstances, the Tax Case Appeal is allowed.Accordingly, we set aside the order of the Income TaxAppellate Tribunal. No costs.” 5.In the present case, search was conducted on various datesfrom 28.09.2000 to 01.06.2001 and various panchanamas wereissued, the last of which is dated 01.06.2001. There was noseizure on 18.01.2001, 29.01.2001, 16.03.2001, 14.05.2001 and01.06.2001. The prohibitory order was lifted on 29.01.2001 andhence, the Tribunal was of the opinion that the subsequentpanchanama from 29.01.2001 are irrelevant and the time shall bereckoned for the purpose of determining the time limit for thecompletion of the assessment under section 158BE from the end ofthe month of January 2001. Accordingly, the assessment ordershould be completed on or before 31.01.2003, whereas theassessing officer completed the assessment only on 30.06.2003,which is absolutely time barred. Thus, the Tribunal set asidethe assessment order. We do not find any infirmity or illegalityin the order so passed by the Tribunal, warranting interference. 6.Be it noted, in the decision referred to above, this courthas categorically held that 'mere fact that the panchanamacontains the observation that 'search continues' per se wouldnot enable the search party to keep the search in a suspendedanimation to carry on the search in future date to contend thatthe limitation has to be worked out on the last panchanamadrawn' and the same is squarely applicable to the facts of thepresent case. It is also brought to the notice of this courtthat the appeal filed by the Revenue by way of Civil AppealNo.5220 of 2013, was dismissed by the Hon'ble Supreme Court on21.10.2019. 7.Therefore, we decide the substantial questions of lawinvolved herein in favour of the assessee and accordingly,dismiss the tax case appeals filed by the Revenue. No costs. 7.Therefore, we decide the substantial questions of lawinvolved herein in favour of the assessee and accordingly,dismiss the tax case appeals filed by the Revenue. No costs. Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar mka/smn To 1. The Commissioner of Income Tax Trichy. 2. The Income Tax Appellate Tribunal, "D" Bench, Chennai Chennai 3.The Commissioner of Income Tax (Appeals) Central Circle -III (4), Chennai. Central Circle -III (4), Chennai. 4.The Commissioner of Income Tax (Appeals II),Chennai 34. 5.The Deputy Commissioner of Income Tax,Central Circle III(4),Chennai 34.Central Circle III(4),Chennai 34. +2 ccs to Mr.P.Senthil Kumar, Advocate Sr.NO. 5462,5463T.C.A. Nos.478 and 758 of 2010T.C.A. Nos.478 and 758 of 2010 SV(CO) A.SK(09/03/2022)