2012 (7) TMI 620 - HC - Income Tax

Challenge the search - Held that - The order of the Tribunal stated that the contentions made by the assessee that the mother represented the minor child, who was the legal representative of the deceased. Thus the estate of the deceased was represented by the minor through the mother. In the circumstances no hesitation in holding that the assessment based on the search made in the premises of the deceased and the warrant in the name of the mother as a representative of the legal heir of the deceased, is proper. The purpose of search was to find out the undisclosed income of the deceased and on his demise, the estate was represented by the legal heirs, one of whom happened to be the minor son and the property represented by him - confirm the order of the Tribunal. Challenge the assessment as barred by limitation - Held that - As going by the factual details as are available that the two year time limit commencing from 30.11.1997 the last of the panchnama evidencing the conclusion of search with reference to the authorization was issued ended on 30.11.1999, thus no hesitation in holding that the assessment made herein under Chapter XIV-B is well within the period of limitation, as provided for under Section 158BE (1)(b) - against assessee.

Issues Involved:
1. Calculation of limitation period for completing block assessment.
2. Legality of search proceedings and jurisdiction of assessment based on search conducted on an appellant's erstwhile spouse.
3. Validity of search warrant issued on the estate or legal heirs of the deceased.

Detailed Analysis:

1. Calculation of Limitation Period for Completing Block Assessment:
The primary issue revolves around the interpretation of Section 158 BE of the Income Tax Act, specifically concerning the limitation period for completing block assessments. The court examined whether the date of seizure of bank accounts covered by a prohibitory order should be considered for calculating the limitation period. The Tribunal held that the limitation should be counted from the date of the last panchnama evidencing the conclusion of the search, not from the date of the prohibitory order.

The relevant provision, Section 158 BE(1)(b), states that the order under section 158 BC should be passed within two years from the end of the month in which the last of the authorisations for search was executed. Explanation 2 clarifies that the authorisation is deemed to be executed on the conclusion of the search as recorded in the last panchnama. The court referred to several precedents, including decisions from the Karnataka High Court and the Delhi High Court, which supported this interpretation. The court concluded that the period of limitation starts on the date on which the last authorisation has been executed, not when the authorised officer states that the search is finally concluded. Consequently, the assessment made on 26.11.1999 was within the period of limitation as it was calculated from the last panchnama dated 03.11.1997.

2. Legality of Search Proceedings and Jurisdiction of Assessment Based on Search Conducted on an Appellant's Erstwhile Spouse:
The assessee challenged the jurisdiction of the assessment on the grounds that the search was conducted on the appellant's erstwhile wife, and no warrant was issued on the estate or the legal heirs of the deceased. The Tribunal found that the search was conducted based on information that the deceased had acquired assets from undisclosed income. The search included the residence of the deceased and his divorced wife, among other locations. The Tribunal noted that the minor child, represented by his mother, was the legal representative of the deceased's estate. The court upheld the Tribunal's view that the assessment was proper as the mother represented the minor child, who was the legal heir. The purpose of the search was to uncover the deceased's undisclosed income, and the estate was represented by the legal heirs, including the minor son.

3. Validity of Search Warrant Issued on the Estate or Legal Heirs of the Deceased:
The assessee contended that no search warrant was issued on the estate or the legal heirs of the deceased. The Tribunal observed that the panchnama was issued in the name of the deceased's divorced wife, who represented the minor child as his natural guardian. The Tribunal dismissed the claim of improper or illegal initiation of the search due to non-observance of provisions. The court agreed with the Tribunal's findings, stating that the search was conducted to uncover the deceased's undisclosed income, and the estate was represented by the legal heirs. Therefore, the assessment based on the search was valid.

Conclusion:
The court allowed the Revenue's appeal regarding the limitation issue, holding that the assessment was within the period of limitation as provided under Section 158 BE(1)(b). The court dismissed the assessee's appeal, confirming the Tribunal's order that the search and subsequent assessment were proper and valid. The estate of the deceased was represented by the legal heirs, and the search was conducted to uncover the deceased's undisclosed income.

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