2015 (5) TMI 622 - HC - Income Tax

Validity of assessment under Section 158BC - whether barred by limitation and is therefore illegal, invalid and without jurisdiction? - Held that - The period of limitation for the purposes of Income Tax Act under Section 158BE is dependent on the conclusion of search and not on the conclusion of the investigation. Investigation includes examination of witnesses which can be done under Section 131 of the Income Tax Act. The Assessing Officer wanted to examine the assessee but he did not turn up after the conclusion of the search as would appear from the assessment order quoted above. Another pertinent question in accordance with Section 465(2) of CRPC shall be whether by keeping the search pending till 31st January 2000 any failure of justice was occasioned? Neither in the case of Katyal nor before us any such point was canvassed. The second pertinent question shall be was the point of limitation raised at the earliest stage before the assessing officer? The assessee by his letter dated 28th January, 2002 addressed to the assessing officer contended that due to his preoccupation he was unable to appear before the latter to record his deposition. When the case of the assessee is that the time prescribed for assessment had expired on 31st December, 2001, he should have raised the point in his letter dated 28th January, 2002 which he did not do. Therefore prolongation of the search did not cause any prejudice to the assessee not to talk of occasioning any failure of justice. It appears from the assessment order that the assessee was served with a notice u/s 131 to appear for recording his deposition. Time to do so was extended on four occasions. The assessee by his letter dated 28th January, 2002 evinced his intention not to appear. In those circumstances the assessment was completed on 31st January, 2002 which otherwise might have been completed on or before 31st December, 2001. For the aforesaid reasons, we are of the opinion that the period of limitation has to be reckoned from 31st January, 2000. Decided in favour of the Revenue.

Issues Involved:
1. Validity of the assessment order dated 31st January 2002 concerning the limitation period under Section 158BE(b) of the Income Tax Act.
2. Legality of the prohibitory order under Section 132(3) of the Income Tax Act regarding the seizure of jewellery.
3. Competence of the authorized officer to conduct a search while a prohibitory order under Section 132(3) is operative.
4. Validity of the assessment order under Section 158BC(c) in the absence of further authorization.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Concerning the Limitation Period:
The primary issue debated was whether the assessment order dated 31st January 2002 was barred by limitation as per Section 158BE(b) of the Income Tax Act. The search and seizure were conducted on 8th December 1999 and 25th January 2000. The petitioner contended that the search concluded on 8th December 1999, and the restraint order was vacated on 31st January 2000, implying the period of limitation expired on 31st December 2001. The court, however, held that the search concluded on 31st January 2000, as recorded in the panchnama, which stated the search commenced at 15:20 hours and closed at 15:30 hours. The court rejected the petitioner's reliance on CIT -Vs- S. K. Katyal, finding the judgment did not lay down the correct law. Instead, the court upheld the views from M. B. Lal -Vs- CIT and VLS Finance Ltd. -Vs- CIT, which emphasized that the limitation period starts from the last panchnama date. Thus, the assessment order dated 31st January 2002 was within the prescribed period, and the question was answered in the negative and in favor of the Revenue.

2. Legality of the Prohibitory Order Under Section 132(3):
The second issue was whether the prohibitory order made under Section 132(3) concerning jewellery found during the search was valid. The petitioner argued that the order was illegal as the authorized officer did not record any reasons for not seizing the jewellery under the second proviso to Section 132(1). The court did not address this issue in detail as it was not pressed by the petitioner during the hearing.

3. Competence of the Authorized Officer to Conduct a Search Under Section 132(3):
The third issue involved the competence of the authorized officer to conduct a search while a prohibitory order under Section 132(3) was operative. The petitioner questioned the jurisdiction of the officer to conduct any further search on the same articles covered under the prohibitory order. The court did not delve into this issue as it was not pressed by the petitioner during the hearing.

4. Validity of the Assessment Order Under Section 158BC(c):
The fourth issue was whether the assessment order under Section 158BC(c) was valid in the absence of any further authorization. The petitioner contended that the order was barred by limitation and thus illegal and without jurisdiction. The court, having established that the period of limitation was to be reckoned from 31st January 2000, found the assessment order dated 31st January 2002 to be within the prescribed period. Therefore, this issue was also not pressed further by the petitioner.

Conclusion:
The court dismissed the appeal, holding that the assessment order dated 31st January 2002 was within the limitation period prescribed under Section 158BE of the Income Tax Act. The questions regarding the legality of the prohibitory order, the competence of the authorized officer, and the validity of the assessment order under Section 158BC(c) were not pressed by the petitioner and thus were not addressed in detail. The appeal was dismissed, with each party bearing its own costs.

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