2010 (9) TMI 348 - HC - Income Tax

Section 132(1) of the Income Tax Act, 1961 Relating to question of Law based on the interpretation - Tribunal has held that the assessment orders passed in the case of all these assessees were time barred, as the assessments were not completed within two years from the end of month in which the last authorization for search under Section 132 of the Act was issued Time limit for completion of Block Assessment under Section 158BE - Time for completion of Block Assessment under Section 158BC/158BE, is the conclusion of search/drawing of last Panchnama, which will be relevant and not the dates of issuance of various authorizations Based on the precedent Judgement it is concluded that the Tribunal erred in holding that the assessment order framed by the AO was barred by limitation

Summary

Issues Involved:
1. Interpretation of Section 132(1) of the Income Tax Act.
2. Limitation period for assessment under Section 158BE of the Income Tax Act.
3. Validity of the assessment orders passed by the Assessing Officer.

Issue-Wise Detailed Analysis:

1. Interpretation of Section 132(1) of the Income Tax Act:
The primary issue in these appeals revolves around the interpretation of Section 132(1) of the Income Tax Act, specifically concerning the limitation aspect. The Revenue raised the question of whether the Income Tax Appellate Tribunal (ITAT) erred in holding that the assessment framed by the Assessing Officer was barred by limitation.

2. Limitation Period for Assessment under Section 158BE:
The ITAT held that the assessment orders were time-barred as they were not completed within two years from the end of the month in which the last authorization for search was issued. The controversy centered on whether the limitation period should be computed from the date of the last authorization or the date of the last Panchnama drawn. The assessee argued that the limitation should be counted from the date of the last authorization, which was executed on 26.03.2001, making the assessment time-barred by March 2003. Conversely, the Revenue contended that the limitation should be computed from the date of the last Panchnama, which was executed on 11.04.2001, thus making the assessment within the prescribed period.

3. Validity of the Assessment Orders Passed by the Assessing Officer:
The court examined Section 158BE, which prescribes a two-year period from the end of the month in which the last authorization for search was executed. The court also considered Explanation 2 to Section 158BE, which clarifies that the authorization is deemed executed on the conclusion of the search as recorded in the last Panchnama. The court emphasized that the deeming provision creates a legal fiction, meaning the limitation period starts from the date of the last Panchnama. The court concluded that the purpose of Explanation 2 is to ensure that the limitation period begins only after the search is fully concluded, allowing the Assessing Officer to have all the necessary material for assessment.

Conclusion:
The court held that the ITAT erred in its interpretation and that the assessment orders were within the period of limitation. The court emphasized the importance of the Explanation 2 to Section 158BE, which mandates that the limitation period starts from the conclusion of the search as recorded in the last Panchnama. The court set aside the ITAT's order and remitted the cases back to the Tribunal to decide the appeals on merits.