2013 (11) TMI 577 - HC - Income Tax

Block assessment - Limitation of passing of the order by the department in case of search u/s 132 of the Income tax Act - Whether the order of assessment dated 30.06.2005 is well within the jurisdiction on the ground that it is passed beyond the period of limitation - First search was concluded as on 28-3-2003 - another authorisation was issued on 27.08.2003 under Section 132 of the Act to search the Bank, in which the assessee held his account and lockers. Pursuant to such authorisation, a panchanama was drawn on 28.08.2003, wherein, search was commenced on 28.08.2003 at 11.15 a.m., and concluded on 29.08.2003 at 12.05 p.m. In terms of the panchanama, the search concluded on 29.08.2003. Held that - In cases where there is more than one authorisation, the starting point of limitation is to be computed from the last of the authorisation which as per Explanation 2 to Sub Section 2 of Section 158 BE of the Act is deemed to have been executed on the conclusion of the search as recorded in the last panchanama drawn. Thus going by Explanation 2 with retrospective effect from 1.07.1995, the contention of the assessee cannot be accepted. Thus, with every panchanama drawn, the search team leaving the premises, the search conducted on 28.03.2003 came to an end as far as that authorisation was concerned. However the second search was admittedly on a fresh authorisation. Thus, in respect of search conducted on 27.03.2003 and 28.03.2003, panchanama was drawn with observation search continues , thus, considering the fact that the second search was to be carried on the different premises and materials to be seized, in fitness of things, fresh authorisation was issued by the Department on 27.08.2003 and as such under Section 158BE of the Act, limitation has to be worked out from that date, i.e., the end of the month of 28.08.2003 and not with reference to the first search i.e., 27.03.2003 and 28.03.2003 Decided in favor of Revenue.

Issues Involved:
1. Validity of the second search and its impact on the limitation period for assessment.
2. Maintainability of the writ petition despite the pending statutory appeal.
3. Jurisdictional question based on the limitation period.
4. Recovery proceedings challenged by the petitioner.

Detailed Analysis:

1. Validity of the Second Search and Limitation Period:
The primary issue revolves around whether the second search conducted by the Revenue was valid and whether it impacted the limitation period for completing the assessment. The assessee contended that the second search was not a continuation of the first search and hence was illegal. The first search concluded on 28.03.2003, and the assessment should have been completed by 31.03.2005. The Revenue argued that the last panchanama dated 28.08.2003 should be the starting point for the two-year limitation period, making the assessment order dated 30.06.2005 valid.

The court analyzed Section 158BE of the Income Tax Act, which specifies that the limitation period is two years from the end of the month in which the last of the authorizations for search was executed. The court concluded that the second search was conducted under a fresh authorization and the last panchanama dated 28.08.2003 was valid. Therefore, the assessment order dated 30.06.2005 was within the limitation period.

2. Maintainability of the Writ Petition:
The Revenue argued that the writ petition was not maintainable as the assessee had already filed an appeal before the Commissioner of Income Tax (Appeals), which was decided in favor of the assessee, and the Revenue's appeal before the Income Tax Appellate Tribunal was pending. The court held that the writ petition was maintainable considering the jurisdictional question of limitation raised by the assessee.

3. Jurisdictional Question Based on Limitation:
The court examined whether the assessment order was passed within the jurisdictional time frame. The assessee relied on precedents from the Kerala High Court and the Bombay High Court, asserting that the second search was not a continuation and hence should not affect the limitation period. The court, however, referred to Explanation 2 to Section 158BE, which states that the limitation period should be reckoned from the date of the last panchanama. The court concluded that the second search was valid and the limitation period started from 28.08.2003, making the assessment order dated 30.06.2005 within the permissible period.

4. Recovery Proceedings Challenged by the Petitioner:
The petitioner, who is the daughter of the defaulter, challenged the recovery proceedings based on a settlement deed in her favor. The court noted that the Act provides an effective forum for aggrieved parties to seek remedies and declined to interfere with the recovery proceedings. The petitioner was advised to pursue her remedies in accordance with the law.

Conclusion:
The court allowed the Revenue's appeal, setting aside the order of the learned Single Judge, and upheld the assessment order dated 30.06.2005 as within the limitation period. The writ petitions challenging the recovery proceedings were dismissed, and the petitioner was directed to seek remedies through the appropriate legal channels.

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