2020 (3) TMI 397 - HC - Income Tax

Block assessment - Annulment of the assessment order for the block period under consideration passed u/s 158BC beyond the limitation period prescribed u/s 158BE(b) - HELD THAT - Action u/s132(3) can be resorted to only if there is any practical difficulty in seizing the things which are likely to be seized. When there is no such practicable difficulty, the officer is left with no other alternative but to seize any item if he is of the view that it represented undisclosed income. This court categorically held that power u/s 132(3) cannot be exercised so as to circumvent the provisions of Section 132(3). Referring to the Explanation to Section 132(3), this court held that a restraint order does not amount to seizure. By passing a restraint order, the time limit available for framing of assessment order cannot be extended. Adverting to the facts of the present case, we find that the first appellate authority had recorded a clear finding of fact that as per panchanama drawn on 15th September, 1998, the search which was carried out in terms of authorization dated 14th September, 1998 was fully executed. After 15th September, 1998 there was no search or seizure. On 13th October, 1998 a prohibitary order was passed under Section 132(3) regarding the computer CPU of the respondent/ assessee which was revoked on 14th December, 1998. The first appellate authority had rightly held that passing of prohibitory order and revocation thereof were wholly irrelevant for the purpose of determining limitation under Section 158BE. Tribunal had considered the submission of the Revenue regarding Explanation 2 to Section 158BE but did not accept the same and rightly so. Finding returned by the first appellate authority as affirmed by the Tribunal is a finding of fact and we do not find any element of perversity in such finding of fact. In the absence thereof, no question of law, much less any substantial question of law, can be said to arise therefrom, there being concurrent findings of facts by the two lower appellate authorities.

Summary

Issues Involved:

1. Validity of the assessment order annulment based on the limitation period prescribed under Section 158BE(b) of the Income Tax Act.
2. Interpretation and application of Explanation 2 to Section 158BE of the Income Tax Act.
3. Jurisdiction of the Commissioner of Income Tax (Appeals) [CIT (A)] in adjudicating the restraint order passed under Section 132(3) of the Income Tax Act.

Detailed Analysis:

1. Validity of the Assessment Order Annulment Based on Limitation Period:

The core issue revolves around the annulment of the assessment order for the block period from 1st April 1988 to 15th September 1998. The search and seizure operation occurred on 15th September 1998, and the assessment order was passed on 27th December 2000. The respondent challenged the assessment order, arguing it was beyond the two-year limitation period, which should have ended on 30th September 2000. The first appellate authority agreed, stating the search was executed on 15th September 1998, and thus the assessment order was annulled as it was beyond the prescribed limitation period. The Tribunal upheld this decision, confirming that the search operations concluded in September 1998, making the assessment order passed in December 2000 barred by limitation.

2. Interpretation and Application of Explanation 2 to Section 158BE:

Explanation 2 to Section 158BE, inserted by the Finance (No. 2) Act, 1998, with retrospective effect from 1st July 1995, clarifies that the authorization for search is deemed executed on the conclusion of the search as recorded in the last panchanama. The Revenue argued that the limitation period should be computed from the last panchanama. However, the first appellate authority and Tribunal found that the search concluded on 15th September 1998, and subsequent actions, including the prohibitory order on the CPU, were irrelevant for determining the limitation period. The Tribunal noted that the search operations were over in September 1998, and only panchanamas were drawn afterward, thus not extending the limitation period.

3. Jurisdiction of CIT (A) in Adjudicating the Restraint Order under Section 132(3):

The Revenue contended that the CIT (A) erred in adjudicating the administrative order under Section 132(3), which was beyond the scope of Section 246A. The first appellate authority noted that the prohibitory order on the CPU was unnecessary after the backup was taken on 13th October 1998, and its revocation on 14th December 1998 was irrelevant for determining the limitation period. The Tribunal upheld this view, indicating that the restraint order did not affect the computation of the limitation period for the assessment order.

Conclusion:

The High Court dismissed the appeal, finding no merit in the Revenue's arguments. The concurrent findings of fact by the first appellate authority and the Tribunal were upheld, confirming that the search concluded on 15th September 1998, and the assessment order passed on 27th December 2000 was beyond the limitation period. The court found no substantial question of law arising from the appeal, thereby affirming the annulment of the assessment order.