2009 (9) TMI 650 - HC - Income Tax

Period of limitation - assessment - search the two-year period is to be counted on the conclusion of the search as recorded in the last panchnama. The premises of the respondent- assessee were finally searched on March 26 2002 when certain material was seized and panchnama was also prepared. Thereafter there was no search at the premises of the assessee. If the material seized by the Revenue i.e. the carton was opened on a subsequent date and inventory prepared or the CPU seized was opened later on to find out whether it contains any information/data relevant for the purposes of assessment or not that would be of no consequence. This is the exercise done by the Revenue authorities sitting in their office dealing with the material seized. It cannot amount to search as mentioned in the aforesaid Explanation. If this contention is accepted it would give the Department undue advantage of their own inaction or sluggishness and can be misused by showing any such subsequent date of in-house investigation into the seized material in their records at their whim to bring the case within limitation. assessment was time barred. No question of law arises in this appeal. Dismissed.

Summary

Issues:
1. Calculation of the period of limitation for completion of assessment in cases of search under the Income-tax Act, 1961.

Analysis:
In this case, a search was conducted at the premises of the assessee, and a restraint order was initially passed, followed by the revocation of the restraint orders. The central issue revolves around the determination of the conclusion of the search for the purpose of calculating the two-year period for assessment completion. The contention raised was whether the search should be considered concluded on the date of the initial seizure or on a subsequent date when further examination of the seized materials took place.

The appellant argued that the search should be deemed concluded on a later date when the inventory was prepared and the CPU was examined, thereby justifying the assessment order passed within the two-year period. However, the court disagreed with this interpretation, emphasizing that the two-year period for completion of block assessments is to be calculated based on the conclusion of the search as recorded in the last panchnama. The court highlighted that subsequent in-house investigations into the seized material do not constitute a continuation of the search for the purpose of limitation calculation.

The court's analysis focused on the specific provision of Section 158BE, which clarifies that the authorization for search is deemed executed on the conclusion of search as recorded in the last panchnama. Therefore, the search was deemed concluded on the date when the premises were finally searched, and any subsequent actions by the revenue authorities regarding the seized materials did not extend the search period for limitation purposes. The court emphasized that allowing such interpretations would grant undue advantage to the department and could lead to potential misuse. Consequently, the court upheld the Tribunal's decision that the assessment in question was time-barred, leading to the dismissal of the appeal with no question of law arising.

In conclusion, the judgment clarifies the interpretation of the time limit for completion of block assessments in cases of search under the Income-tax Act, emphasizing the significance of the conclusion of the search as recorded in the last panchnama. The decision reinforces the importance of adhering to the statutory provisions and prevents potential misuse by authorities seeking to extend the limitation period through subsequent actions unrelated to the actual search process.