2003 (7) TMI 260 - AT - Income Tax

Block Assessment in search case - authorization for search u/s 132 - time limit - deemed seizure -clamping of a prohibitory orders - Third member Order -Whether the period of limitation for passing an order under section 158BC of the Income-tax Act, 1961 is to be reckoned from the date on which the last of the prohibitory orders under section 132(3) was lifted drawing the last of the panchnamas OR/from the date of the first seizure effected by the Department under section 132(1) of the Income Tax Act, 1961 even though Panchnamas were drawn on subsequent date of search. HELD THAT - There is no right of appeal to the Tribunal against search proceedings u/s 132 and therefore questioning before the Tribunal cannot arise regarding the validity of authorization issued u/s 132 or even the mode of conduct of search pursuant to authorization including impugning the validity of prohibitory order issued u/s 132(3), except to the extent of those aspects of search as are necessary to adjudicate the point of limitation, including as to whether the search was actually conducted on the named person or whether the authorization was actually issued in the assessee's name or whether the last panchnama was issued as per legal requirements such as whether the authorized officer has signed it or whether specified number of witnesses signed it and the like. Beyond the purview of the Tribunal are those questions as to whether the search is mala fide or valid under law and whether the prohibitory order u/s 132(3) is justified or whether the panchnama has to be ignored as it has not recorded seizure. When going into the question of search is beyond the jurisdiction of the Assessing Officer for the reason that he is not in possession of the material that led to the search, the appellate authority viz. the Tribunal too cannot. Even if search is bad in law and therefore what is seized must be returned to the assessee, the evidence is still admissible for assessment purposes. Hence, to hold that the Tribunal could go into the questions of even legality of search or of prohibitory order u/s 132(3), would be meaningless. Only about the validity of assessment u/s 158BC(c) and not of search u/s 132 could be appealed against before the Tribunal. Recovery of seized material or retention of assets u/s 132(5) cannot be a subject-matter in the appeal before the Tribunal. The words 'last panchnama' mean earlier panchnama drawn while executing an authorisation u/s 132 and the limitation can be counted from the last panchnama but before completion of assessment. If order u/s 132(3) does not elongate the search as contended, then the authorized officer cannot even visit the premises on subsequent dates even for lifting prohibitory order. If the assessment is completed after the period of one year from the date of last panchnama, whether or not that panchnama records seizure, the assessment is liable to be quashed as time-barred. There are inherent safeguards provided under section 132(8A) against abuse of power by the authorized officer. Even otherwise, there is High Court to exercise judicial review of administrative action too which the Tribunal, therefore cannot and should not assume. Thus while the assessee's learned counsel and of the interveners submitted that the first two questions have to be answered in affirmative, and the third question in the negative, the learned Standing Counsel for the Department as well as the learned representative of the Revenue countered that the first two questions have to be answered in negative while the third in affirmative. Ultimately for the reasons detailed as stated above in the proposed order as well as in the supplemented order by my other Brothers and in my concurred order too, the 1st and 3rd questions are answered by the Special Bench in the affirmative while the second question in negative. Insofar as the point as to whether assessment in the instant case is in time or time-barred, according to me, I refrain from answering it as done in the supplemented order of the other learned Brother unlike in the proposed order by my learned Brother, for the reason that it has not been referred to us in the three questions aforesaid of being answered. I, therefore, leave it to the regular Bench to adjudicate it in the light of the answers to the questions referred to this Special Bench, before proceeding to the other issues raised in this appeal. In the result, while I have filled in the gap in the other orders of my learned Brothers, insofar as the preliminary points discussed and decided by me hereinabove, I agree with the main points, discussed and decided by the proposed order together with the supplemented order by adopting the reasons therein subject to the slight limitation I have incorporated hereinabove.

Summary

Issues Involved:
1. Tribunal's power to examine search activity and determine the conclusion of search.
2. Interpretation of the term "execution of the warrant" under section 158BE.
3. Continuation and conclusion of search involving prohibitory orders.

Summary:

Issue 1: Tribunal's Power to Examine Search Activity
The Tribunal has the power to examine the search activity from the beginning to determine whether the assessment made under section 158BC is within the limitation prescribed under section 158BE. This includes verifying the existence of a valid search warrant and the validity of the panchnama. However, the Tribunal cannot decide on the necessity or propriety of actions taken during the search, such as the issuance of prohibitory orders under section 132(3). The Tribunal's role is limited to ensuring that the assessment order is legally valid and within the prescribed time limit.

Issue 2: Interpretation of "Execution of the Warrant"
The term "execution of the warrant" under section 158BE should be interpreted to mean the conclusion of the search as recorded in the last panchnama. The limitation period for passing an order under section 158BC starts from the end of the month in which the last panchnama is drawn, indicating the conclusion of the search. The issuance of prohibitory orders and successive visits based on the initial authorization do not extend the commencement of the limitation period. The search is deemed to be continuing until all materials and valuables are either seized or released, and a final panchnama is prepared.

Issue 3: Continuation and Conclusion of Search
A search involving the issuance of prohibitory orders under section 132(3) is considered continuing until the authorized officer declares the search concluded by issuing a panchnama. The search comes to a close only when the authorized officer states that he will no longer visit the premises. The Tribunal cannot question the administrative decision to issue prohibitory orders or the timing of their revocation. The limitation period for completing the assessment starts from the date of the last valid panchnama, regardless of whether the items under prohibitory orders were seized or not.

Conclusion:
The Tribunal has the authority to examine the search activity to determine the validity of the assessment order under section 158BC and whether it is within the limitation period prescribed under section 158BE. The term "execution of the warrant" refers to the conclusion of the search as recorded in the last panchnama, and the search is considered continuing until the authorized officer declares it concluded. The Tribunal cannot question the necessity or propriety of actions taken during the search, such as the issuance of prohibitory orders.