2011 (8) TMI 726 - HC - Income Tax

Search and Panchanamas prepared on 22.12.1999 14.1.2000 and 19.12.2000 shows complete inventory of each item was prepared - for a valid search requirement of Explanation 2(a) to Section 158BE shall be fulfilled. - Held That - Panchnama dated 14.1.2000 nor dated 19.12.2000 shows that any search was conducted on that day and only depicting revocation of restraint order. Only panchnama dated 22.12.1999 which related to the conclusion of search. Thus assessment was time barred. Suo motu extension of time for special audit under Section 142(2C) - Held That - Amendments which inserted word suo motu were applicable from 01.04.08 amendment was prospective. Thus appeal of revenue for the relevant A/Y is dismissed.

Summary

Issues:
1. Whether the assessment order under Section 158BC of the Income Tax Act was time-barred based on the panchnama dates?
2. Whether the Assessing Officer had the power to suo motu extend the time for special audit report before the amendment in the Finance Act, 2008?

Analysis:

Issue 1:
The appeals were against a common order by the Income Tax Appellate Tribunal (ITAT) regarding cross appeals filed by the assessee and revenue for the block period 1st April, 1989 to 22nd December, 1999 under Section 158BC of the Income Tax Act. The search and seizure operation was conducted on 22nd December, 1999, and the Assessing Officer (AO) made additions on substantive and protective bases. The central issue was whether the assessment order passed on 27th June, 2003, was time-barred. The Tribunal held that only the panchnama dated 22nd December 1999 was relevant for computing limitation under Section 158BC(b) of the Act. The panchnamas dated 14th January 2000 and 19th December 2000 were deemed invalid for calculating limitation as they did not indicate a search operation. The Tribunal upheld the CIT(A)'s decision that the assessment was time-barred based on this analysis.

Issue 2:
Regarding the power of the Assessing Officer to extend the time for special audit report under Section 142(2C) of the Act, the Tribunal referred to the amendment in the Finance Act, 2008. The Tribunal relied on a previous case, Bishan Saroop Ram Kishan Agro Pvt. Ltd., where it was held that before the amendment, the AO did not have the authority to extend the time period suo motu. The Tribunal concluded that the assessment order in both cases was barred by limitation. The Tribunal found no error in this decision. The judgment also referenced a similar case, CIT v Bishan Saroop Ram Kishan Agro Pvt. Ltd., where the interpretation of the proviso to Section 142(2C) was discussed, emphasizing that the amendment was prospective from 1st April, 2008. The Tribunal dismissed the appeals, affirming the decisions of the lower authorities.

In conclusion, the High Court upheld the Tribunal's decisions on both issues, affirming that the assessment order was time-barred based on the panchnama dates and that the AO did not have the power to extend the time for special audit report before the relevant amendment.