2016 (4) TMI 1133 - SC - Income Tax

Period of limitation for passing the block assessment order - Whether on the facts and circumstances of the case the interim order dated 24th August 2000 staying the direction for special audit contained in order dated 29th June 2000 could be construed as amounting to stay of assessment proceedings? - Held that - In the estimation of the assessing officer special audit was essential for passing proper assessment order. If the court while undertaking judicial review of such an order of the assessing officer directing special audit ultimately holds that such an order is wrong (for whatever reason) that event happens at a later date and would not mean that the benefit of exclusion of the period during which there was a stay order is not to be given to the Revenue. Explanation 1 which permits exclusion of such a time is not dependent upon the final outcome of the proceedings in which interim stay was granted. - Decided in favour of revenue As noticed the revenue authorities visited and searched the premises of the appellants for the first time on 22nd June 1998. In the panchnama drawn on that date it was remarked temporarily concluded meaning thereby according to the revenue authorities search had not been concluded. For this reason the respondent authorities visited many times on subsequent occasions and every time panchnama was drawn with the same remarks i.e. temporarily concluded . It is only on 5th August 1998 when the premises were searched last the panchnama drawn on that date recorded the remarks that the search was finally concluded . Thus according to the respondents the search had finally been completed only on 5th August 1998 and panchnama was duly drawn on the said date as well. The appellants in the writ petition filed had no where challenged the validity of searches on the subsequent dates raising a plea that the same was illegal in the absence of any fresh and valid authorisation. On the contrary the appellants proceeded on the basis that search was conduced from 22nd June 1998 and finally concluded on 5th August 1998. On the aforesaid facts and in the absence of any challenge laid by the appellants to the subsequent searches we cannot countenance the arguments of the appellants that limitation period is not to be counted from the last date of search when the search operation completed i.e. 5th August 1998. Therefore this issue is also decided in favour of the respondents.

Issues Involved:
1. Whether the period of limitation expired on 31st August, 2000, or the last date for completing block assessment was 30th June, 2000.
2. Whether the period between 24th August, 2000, to 15th December, 2006, when interim stay was in operation, required to be excluded for the purposes of counting limitation period.
3. Whether the interim order dated 24th August, 2000, staying the direction for special audit, could be construed as amounting to stay of assessment proceedings.
4. Whether it is permissible under Section 132 of the Income Tax Act to execute the same warrant of authorization multiple times and revalidate it without issuing fresh authorization.

Detailed Analysis:

Issue 1: Period of Limitation
The central issue is the determination of the correct period of limitation for completing the block assessment. The appellants argued that the period of limitation expired on 30th June, 2000, while the respondents contended that it expired on 31st August, 2000. The court concluded that the period of limitation should be counted from 5th August, 1998, the date on which the last panchnama was drawn, thereby setting the expiration date as 31st August, 2000.

Issue 2: Exclusion of Period During Interim Stay
The court addressed whether the period from 24th August, 2000, to 15th December, 2006, should be excluded from the limitation period due to the interim stay. The court held that the period during which an interim stay is in operation should be excluded while computing the limitation period for completing the block assessment. The court emphasized that the nature of the stay order, which prevented the assessing officer from effectively passing the assessment order, qualifies for such exclusion under Explanation 1 to Section 158BE(2) of the Income Tax Act.

Issue 3: Effect of Interim Order on Assessment Proceedings
The appellants argued that the interim order dated 24th August, 2000, which stayed the direction for special audit, did not amount to a stay of the assessment proceedings. The court rejected this argument, stating that the special audit was an integral part of the assessment proceedings. The stay on the special audit effectively prevented the assessing officer from proceeding with the assessment, thereby qualifying as a stay of the assessment proceedings.

Issue 4: Execution and Revalidation of Warrant of Authorization
The appellants contended that the same warrant of authorization could not be executed multiple times without fresh authorization. The court noted that the appellants did not challenge the subsequent searches on this ground. The court held that the searches conducted on subsequent dates were valid, and the period of limitation should be counted from the date of the last search, i.e., 5th August, 1998.

Conclusion:
The appeal was dismissed with costs, and the court upheld the decision of the High Court. The period of limitation for completing the block assessment was set to expire on 31st August, 2000, and the period during which the interim stay was in operation was excluded from the limitation period. The court also affirmed that the special audit was an integral part of the assessment proceedings and that the searches conducted on subsequent dates were valid.

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