2008 (1) TMI 459 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the block assessment order being barred by limitation.
2. Validity of search and seizure proceedings.
3. Addition of Rs. 50,80,000 as unexplained investment u/s 69.
4. Additions on account of alleged excess stock.
5. Interest charged u/s 158BFA(1).

Summary:

Issue 1: Validity of the Block Assessment Order Being Barred by Limitation

The assessee contended that the assessment framed for the block period was barred by limitation as per s. 158BE(1) of the Act. The search was initiated on 20th Dec., 2002, and the block assessment order was passed on 31st Jan., 2005. The key dispute was whether the Panchnama drawn on 3rd Jan., 2003, for lifting the prohibitory order could be considered the 'last Panchnama' for limitation purposes. The Tribunal held that the Panchnama drawn on 3rd Jan., 2003, merely for lifting the prohibitory order without any seizure, could not be treated as the execution of the authorization for search u/s 132. Therefore, the assessment order was held to be time-barred and quashed as illegal.

Issue 2: Validity of Search and Seizure Proceedings

The assessee argued that the search and seizure proceedings conducted u/s 132 and subsequent proceedings u/s 158BC were invalid and without jurisdiction. However, since the assessment order was quashed on the ground of being time-barred, this issue was not separately adjudicated.

Issue 3: Addition of Rs. 50,80,000 as Unexplained Investment u/s 69

The assessee challenged the addition of Rs. 50,80,000 made by the AO as unexplained investment u/s 69, arguing that it represented the share capital of the Lakhotia Group in the appellant company. The CIT(A) had confirmed the addition, but since the assessment order was quashed, this issue became infructuous.

Issue 4: Additions on Account of Alleged Excess Stock

The assessee contested the additions made on account of alleged excess stock of hydrated lime, quick lime, and work-in-progress found during the search. The CIT(A) had confirmed these additions, but they were rendered academic due to the quashing of the assessment order.

Issue 5: Interest Charged u/s 158BFA(1)

The assessee also challenged the interest charged u/s 158BFA(1). However, this issue was not separately addressed as the assessment order itself was quashed.

Conclusion:

The appeal of the assessee was allowed in part on the legal issue of the assessment order being time-barred. Consequently, the grounds on merit in both the appeals became infructuous, and the appeals were disposed of accordingly.