2016 (5) TMI 788 - AT - Income Tax

Validity of assessment u/s 158BC - Held that - In the instant case the search was commenced on 15-10-1997 and it was suspended on 16-10-1997 by stating that the search was concluded temporarily. The seizure of certain documents has taken place on that date only. Subsequent searches were related to lifting of prohibitory orders and placing the documents again under the P.O. Even though it is contended that certain unaccounted share certificates were seized subsequently the said claim suffers from two infirmities viz. (a) the assessee claims that the share certificates have simply been inventorised on those dates meaning thereby the seizure has already been completed on 16.10.1997 and (b) the inventorisation has also been done by some unauthorized officials. Hence in our view the date of execution of last authorization should be taken as 16.10.1997 only and hence the assessing officer should have passed the block assessment order before 31.10.1999. However the assessing officer has passed the order only 31.1.2000 and hence the same is barred by limitation and is liable to be quashed. Accordingly we set aside the orders passed by both the tax authorities. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the impugned assessment order is time barred.
2. Validity of search actions conducted by unauthorized officers.
3. The effect of prohibitory orders on the limitation period for completing the assessment.

Detailed Analysis:

1. Whether the impugned assessment order is time barred:
The assessee contended that the search action was effectively concluded on 16.10.1997, and subsequent actions were merely for lifting and re-imposing prohibitory orders (P.O.). According to Section 158BE(1)(b), the time limit for completing the assessment is two years from the end of the month in which the last authorization of search was executed. The assessee argued that the last valid panchanama was on 16.10.1997, making the assessment order passed on 31.1.2000 time-barred. The Tribunal agreed, citing case laws including CIT Vs. Sandha P Naik and Goldcrest Fin (India) Ltd Vs. DCIT, which held that actions to lift or re-impose P.O. do not extend the limitation period.

2. Validity of search actions conducted by unauthorized officers:
The assessee argued that subsequent searches conducted by officers not named in the original search warrant dated 14.10.1997 were unauthorized. Specifically, searches on 27.10.1997, 12.01.1998, and 15.01.1998 at Radha Bhavan Office, and 12.01.1998 at Bhupen Chambers Office, were conducted by officers not authorized by the original warrant. The Tribunal found that unauthorized officers conducted these searches, and any alleged seizures by them could not be considered valid. This finding was supported by precedent from the case of Goldcrest Fin (India) Ltd Vs. DCIT.

3. The effect of prohibitory orders on the limitation period for completing the assessment:
The Tribunal held that the panchanamas prepared solely for lifting or re-imposing P.O. could not be considered as the last of the authorizations for the purpose of Section 158BE. Citing multiple case laws, including Shahrukh Khan Vs. ACIT and DCIT Vs. Adlof Patric Pinto, the Tribunal emphasized that the limitation period begins from the date when the search is effectively concluded, not when P.O. actions are taken. It was concluded that the search effectively ended on 16.10.1997, and thus, the assessment order passed on 31.1.2000 was beyond the permissible time limit.

Conclusion:
The Tribunal quashed the assessment order as time-barred, setting aside the orders passed by both tax authorities. The issues related to the levy of surcharge and interest were not addressed as the primary order was quashed, rendering those issues academic.

Final Order:
The appeal filed by the assessee was allowed, and the appeal of the revenue was dismissed. The judgment was pronounced in the Open Court on 18.5.2016.