2008 (11) TMI 46 - HC - Income Tax

Appellant/revenue is aggrieved by the fact that the Tribunal held the block assessment order to be beyond the time specified under section 158BE(1)(b) - no search whatsoever was conducted on 03.01.2001 - hence, the panchnama drawn up on 03.01.2001 cannot be regarded as a document evidencing the conclusion of a search. If that be so, 03.01.2001 cannot be regarded as the date on which the warrant of authorization was executed revenue appeal against tribunal s decision is dismissed

Issues Involved:
1. Whether the block assessment order was beyond the time specified under section 158BE(1)(b) of the Income Tax Act, 1961.
2. Whether the search and seizure operation concluded on 17.11.2000 or 03.01.2001.
3. Whether the panchnama dated 03.01.2001 was merely a release order or a continuation of the search.

Issue-wise Detailed Analysis:

1. Time Limit for Block Assessment:
The appeal under section 260A of the Income Tax Act, 1961, was directed against the order dated 14.11.2006 passed by the Income Tax Appellate Tribunal, which held the block assessment order to be beyond the time specified under section 158BE(1)(b) of the Act. The Tribunal concluded that the search and seizure were completed on 17.11.2000, and therefore, the assessment order was required to be passed on or before 30.11.2002. Since the assessment was made on 30.01.2003, it was beyond the prescribed time limit.

2. Conclusion of Search and Seizure Operation:
The search was initiated on 17.11.2000 at the residential premises of the assessee, where certain documents, cash, and jewelry were found and inventorized. A restraint order under section 132(3) of the Act was passed, sealing the cash box containing the jewelry. The revenue contended that the search had not finally concluded on 17.11.2000 but was temporarily concluded to be resumed later. However, no further seizure was made, and the restraint order was revoked on 03.01.2001. The Tribunal found that the search was completed on 17.11.2000 and that the panchnama dated 03.01.2001 was merely a release order.

3. Nature of Panchnama Dated 03.01.2001:
The panchnama of 03.01.2001 revealed that nothing was seized on that date, and no further search was conducted. The jewelry found on 17.11.2000 had already been inventorized and valued. The Tribunal held that the panchnama of 03.01.2001 was merely a release order and could not extend the period of limitation. The court examined the relevant statutory provisions and concluded that the panchnama mentioned in Explanation 2(a) to section 158BE must document the conclusion of a search. Since no search was conducted on 03.01.2001, the panchnama of that date could not be regarded as the conclusion of a search.

Relevant Legal Provisions and Case Law:
The court examined section 158BE, which stipulates the time limit for completion of block assessment, and section 132, which deals with search and seizure. The court also referred to the Code of Criminal Procedure, 1973, and Rule 112 of the Income Tax Rules, 1962, which emphasize that a search must be conducted in the presence of independent and respectable inhabitants of the locality. The court cited various decisions, including Dr. C. Balakrishnan Nair v. CIT, CIT v. Mrs. Sandhya P. Naik, and CIT v. Sarb Consulate Marine Products P. Ltd, which established that a search must be continuous and any hiatus must be explained. The court distinguished the present case from M.B. Lal v. CIT and VLS Finance Ltd v. CIT, noting that the facts in those cases were different.

Conclusion:
The court agreed with the Tribunal's finding that the search and seizure were completed on 17.11.2000, and the panchnama dated 03.01.2001 was merely a release order. Consequently, the authorization for search was executed on 17.11.2000, and the assessment order passed on 30.01.2003 was beyond the prescribed time limit. The appeal was dismissed, and no substantial question of law arose for consideration.

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