2012 (7) TMI 515 - HC - Income Tax

Writ petition - Search and seizure - prayer for release of the seized assets as well as two Bank guarantees deposited by the petitioner for release of a portion of the seized jewellery Held that - Matter was pending before the Settlement Commission - by virtue of the amendment in the Finance Act 2007 on June 1 2007 the pending proceedings before the Settlement Commission since abated therefore on March 31 2008 in case the orders were not passed by then the assessment was to be made thereafter by the Assessing Officer and therefore to give lease of life to such assessments the Finance Act of 2007 also added the second proviso to section 153(4) of the Income-tax Act 1961 on June 1 2007 which in fact enlarged the period of limitation by another one year with effect from March 31 2008 i.e. up to March 31 2009 for passing the assessment order - aforesaid provision provided a period of one additional year for completing the assessment if the proceedings before the Settlement Commission abated under section 245HA - all assessment proceedings in pursuance of the search and seizure conducted by the Income-tax Department on February 9 2000 are a nullity and are liable to be set aside - jewellery which finds mention in the panchnama dated February 9 2000 is liable to be released forthwith along with two bank guarantees furnished by the petitioner for release of a portion of the seized jewellery - writ petition is allowed.

Summary

Issues:
Challenge of search and seizure by Income-tax Department
Release of seized assets and bank guarantees following Settlement Commission orders
Abatement of proceedings before Settlement Commission due to amendment in Finance Act, 2007
Validity of assessment proceedings post abatement of Settlement Commission proceedings

Analysis:
The petitioner, an assessee under the Income-tax Act, contested the search and seizure carried out by the Income-tax Department and sought the release of seized assets and two bank guarantees following Settlement Commission directives. The petitioner filed returns and applied before the Settlement Commission, leading to the release of certain jewellery upon deposits and bank guarantees. However, an amendment in the Finance Act, 2007, introduced a provision stating that proceedings before the Settlement Commission would abate if final orders were not passed by a specified date.

The abatement of proceedings before the Settlement Commission had implications on the assessment process, shifting the responsibility to the Assessing Officer to complete the assessment within the extended timeframe provided by the amendment. The assessing authority was mandated to pass the assessment order by a specified deadline, failing which the returns filed by the petitioner became time-barred, halting any further assessment proceedings.

The petitioner sought the release of seized jewellery and refunds based on relevant provisions of the Income-tax Act. The legal arguments revolved around the statutory limitations for passing assessment orders and the impact of abated proceedings on subsequent assessments. The judgment referenced a Delhi High Court case to support the position that barred assessments render further proceedings futile.

The court emphasized that the statutory limitations prescribed under the Act must be adhered to strictly, without room for extensions based on lack of knowledge or other grounds. Consequently, the court declared all assessment proceedings post the search and seizure as null and void, directing the immediate release of seized jewellery, refunds, and bank guarantees in favor of the petitioner in line with the provisions of the Act.

In conclusion, the court allowed the writ petition, quashing all assessment proceedings post the search and seizure, and ordering the prompt release of seized assets and bank guarantees to the petitioner.