2008 (7) TMI 991 - HC - Income Tax

Assessment u/s 158BC - period of limitation - proper authorization - search u/s 132 - search and seizure were conducted on two days by two different authorised persons - The limitation commences from the last day of the month in which the last panchnama was recorded - Whether Tribunal has power to go into the factual correctness and legality of the Panchnama drawn by the empowered officer executing the last authorisation for Conducting search? - HELD THAT - In the instant case, the Tribunal has recorded a finding of fact on the basis of material before it in exercise of its power rightly after following the observations made by the Division Bench of Rajasthan High Court in the case of CIT v. Smt. Chitra Devi Soni (supra) on which strong reliance has rightly been placed by the learned counsel appearing for the assessee in support of the finding recorded by the Tribunal on the question of limitation in passing the block period assessment order. It is not in dispute that the second authorisation dated 12th Dec, 1995 issued by the empowering officer in favour of search conducting officer is the last authorisation for conducting searching in the residence of the assessee at 21.45 p.m. on the same date, which is the last authorisation executed by the search conducting officer, the same was closed at 6 p.m. and Panchnama was drawn to evidence the fact that cash was seized from the residence of the assessee. Therefore, for the purposes of limitation u/s 158BE(1)(a), the block period assessment order passed by the AO is beyond the period of limitation. On this ground also the finding of fact recorded by the Tribunal is based on undisputed facts. Therefore, we have to accept the finding of fact recorded by it in the impugned judgment on the question of limitation holding that the last Panchnama dated 12th Feb., 1996 on the first authorisation executed by search conducting officer that nothing was found and seized is an undisputed fact and the finding of fact recorded by the Tribunal is based on strong foundation of the provisions of the Act, as last Panchnama stated by the Revenue is not the Panchnama in the eyes of law for the reason that the prohibitory order was passed on 12th Dec, 1995 by the officer after conducting search and nothing was found in the premises of the office of the assessee and drawing the Panchnama to this effect cannot be in the legal term called as last Panchnama. Panchnama dated 12th Feb., 1996 could not have been drawn by the search conducting officer for the purpose of computation of limitation under section 158BE(1)(a) to pass assessment order. Taking the abovesaid Panchnama date as last one to justify the assessment order with regard to limitation, the same is not passed within one year as provided under section 158BE(a) of the IT Act. Hence the findings recorded by the Tribunal on the contentious point of limitation are legal and valid as the same are based on facts and the provisions of the Act. Therefore, we answer the substantial question of law against the Revenue and confirm the finding of fact recorded by the Tribunal in the impugned judgment on the question of limitation. The Tribunal has rightly rejected the miscellaneous petition of the Revenue holding that the order passed on merits on the question of limitation is not vitiated in law. In our considered view there is no error apparent on the face of the record. Hence, the order passed in the miscellaneous petition by the Tribunal which is impugned herein in IT Appeal cannot be gone into by this Court as no substantial question of law would arise much less the question framed in the appeal. Hence, we dismiss the connected appeal for the very same reasons, as we have answered substantial question of law framed regarding the question of limitation in passing the order of block period of assessment. Accordingly, the appeals are dismissed.

Issues Involved:
1. Computation of limitation period for block assessment orders.
2. Tribunal's jurisdiction to examine the duration of search.
3. Consideration of material evidence by the Tribunal.
4. Determination of profit realization in land sale transactions.

Issue-wise Detailed Analysis:

1. Computation of Limitation Period for Block Assessment Orders:
The primary issue revolves around whether the Tribunal was correct in holding that the last drawn Panchnama dated 12th Feb., 1996 should not be considered for computing the limitation period as per Explanation 2 to section 158BE of the Income Tax Act. Instead, the intermediary date of 19th Jan., 1996 should be taken for this purpose, thus treating the block assessment order as barred by limitation.

The Tribunal's decision was based on the interpretation of section 158BE and the relevant rules, determining that the Panchnama drawn on 12th Feb., 1996 was not valid for computing the limitation period since no seizure was made, and it was not attested by two witnesses as required by law. The Tribunal held that the last valid Panchnama was drawn on 13th Dec., 1995, making the assessment order beyond the permissible period of limitation.

2. Tribunal's Jurisdiction to Examine the Duration of Search:
The Tribunal examined the duration of the search from 12th Dec., 1995 to 12th Feb., 1996, which was raised by the assessee for the first time. The Revenue argued that the Tribunal had no power to examine the correctness of the finding recorded by the assessing authority regarding the last drawn Panchnama.

The Tribunal, however, justified its jurisdiction by referencing section 132(13) of the IT Act, which incorporates the provisions of the Cr.PC, 1973 relating to search and seizure, thus allowing the Tribunal to examine the legality and factual correctness of the Panchnama.

3. Consideration of Material Evidence by the Tribunal:
The Revenue contended that the Tribunal failed to consider material evidence and instead considered irrelevant material, leading to a perverse finding that the search concluded on 19th Jan., 1996. The Tribunal, however, meticulously examined the statutory provisions and the facts on record, concluding that the Panchnama dated 12th Feb., 1996 could not be considered the last Panchnama for computing the limitation period.

The Tribunal's finding was based on the fact that the Panchnama drawn on 12th Feb., 1996 did not involve any seizure and was not attested by two witnesses, thus not meeting the legal requirements.

4. Determination of Profit Realization in Land Sale Transactions:
The Tribunal concluded that the nature of the assessee's business of selling land would result in profit only upon the completion of the transaction, not when the actual profit arises during the relevant assessment year. This was in line with the apex court's decision in P.M. Mohammed Meerakhan v. CIT, which held that profit realization occurs upon the completion of the transaction.

Conclusion:
The High Court upheld the Tribunal's findings on all issues, confirming that the block assessment order was barred by limitation. The Tribunal's jurisdiction to examine the duration of the search and its consideration of material evidence were deemed appropriate. The determination of profit realization in land sale transactions was also upheld, leading to the dismissal of the appeals.

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