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TMI Blog2008 (6) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... whole of the appeal and certain other legal grounds involving jurisdictional aspect, which were raised but have not been adjudicated upon, there was a mistake in the order of the Tribunal and the same should be rectified and the grounds of appeal, omitted to be decided, should be decided. 3. The Tribunal after hearing the arguments of both the sides, held as under:- "Thus, it is seen that the entire appeal was to be disposed of by the Tribunal. The appellants apart from the validity of the notice issued, have challenged the validity of assessment on several other grounds also. Since the Special Bench of this Tribunal was constituted to dispose of the entire appeal, all other grounds were also to be adjudicated upon. Not doing so amounts to a mistake apparent on record. In a way, a mistake crept in the order of the Tribunal by not adjudicating upon other grounds raised. This Misc. Application is allowed and to adjudicate upon other grounds raised in these appeals, the hearing is fixed on22-10-2007. The parties were informed in the open court on the conclusion of hearing and hence issue of notice for hearing is dispensed with. 3. In the result, the Miscellaneous Applications ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Circlehad jurisdiction to pass block assessment order under appeal. (iv) The notice under section 158BC, dated12-10-1999was a valid notice and in holding that the proceedings undertaken on the basis of such notice were also valid but treating the irregularities in the notice as minor. (v) The block assessment order under appeal was passed within the limitation provided under section 158BE(1)(b). (vi) Compliance to the provisions of section 158BD was not necessary. (vii) The provisions of section 158BG had been complied with. (viii) Procedure laid down under section 158BB has been followed. (ix) The provisions of section 144/145 of Income-tax Act, 1961 were rightly applied. (x) The requirements of sections 132(1) and of 132(9A) were met. (xi) The principles of natural justice had been followed. (xii) Block assessment framed was independent of investigation carried on by the DDIT (Investigation) and therefore, was not based on the report of the DDIT, Investigations, i.e., appraisal report. Ground No. 2: The CIT(A) erred on facts as well as in law: (i) In sustaining addition of Rs. 40,000 on account of unexplained investment in construction of shop. (ii) In s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed on12-3-1999under section 132(3) as the documents in the lower drawer of the table in the office of I-16/to,Faridabadcould not be searched. The operation on16-4-1999was in continuation of the proceedings initiated on12-3-1999, the search operation was concluded only on16-4-1999when certain documents as per Annexure-A to the panchnama drawn on that date were seized. Therefore, the search operation continued and was finally concluded on16-4-1999. Therefore, the limitation under section 158BE in the case of the appellant as such starts from30-4-1999and not on31-3-1999, as pointed out by the learned AR of the assessee. The assessment completed on30-4-2001was such as not barred by limitation of time. 10. The learned A.R. of the assessee invited the attention to the affidavit dated24-8-2001filed by the assessee, which was also filed before the learned CIT (Appeals). In the said affidavit in paragraph 3, the assessee contended that at about 8.00 P.M. on 12-3-1999, the authorized officer, Mr. Govind Singhal collected loose papers recovered from the residence of the first floor of premises located at I-16, Sector-10, Faridabad and put them in the drawer of the table in the office lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y if there is any practical difficulty in seizing the item, which is liable to be seized. When there is no such practical difficulty, the officer is left with no other alternative but to seize the item, if he is of the view that it represents undisclosed income. Power under section 132(3) of the Act cannot be exercised so as to circumvent the provisions of section 132(3) read with section 132(5) of the Act. The position has become much more clear after the insertion of Explanation to section 132(3) effective from1-7-1995that a restraint order does not amount to seizure. Therefore, by passing a restraint order, the time-limit available for framing of the order cannot be extended. He submitted that in the instant case also, the files were collected by the authorized officer from the first floor of the residence of the assessee and were put in the drawer of the table on the ground floor and the said drawer was sealed. Thus, the authorized officer had no practical difficulty in seizing the said documents and as the authorized officer was within know of the contents of the documents, therefore, passing of restraint order under section 132(3) was not in continuation of the search commenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the search warrant issued under section 132(1) of the Act. All the officers authorized to carry out the search may not visit the premises of the assessee on the same day and may visit the premises on subsequent days. Therefore, to decide whether a particular officer was authorized to carry out the search in the case of the assessee has to be done after examining the search warrant issued under section 132(1) and not on the basis of the panchnama, as argued by the learned AR of the assessee. He argued that if the learned AR of the assessee was so sanguine about his submissions that the panchnama drawn on 16-4-1999 was not by the authorized officer for carrying out search in the case of the assessee, then let him file an affidavit for the same and we shall demonstrate that the panchnama drawn on 16-4-1999 was by the authorized officer by producing the original search warrant issued under section 132(1) of the Act. To this, the learned AR submitted that he was not having copy of the search warrant issued under section 132(1) dated10-3-1999and also copy of the restraint order passed under section 132(3) of the Act on12-3-1999. To the suggestion of the learned DR for filing of the aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of the Income-tax Act, may authorize carrying out of the search on the assessee concerned. But in contradistinction to this, in section 132(8A), the Legislature has provided that an order under sub-section (3) of section 132 shall not be in force for a period of exceeding sixty days from the date of the order except in a case where the authorized officer for reasons recorded by him in writing extends the period of operation beyond sixty days after obtaining approval of the Director or the Commissioner, as the case may be. Thus, the provisions of section 132(8A) are more stringent in operation than the provisions of section 132(1), which does not require for recording the reasons in writing, as is the case in section 132(8A). 16. He further submitted that since the section itself provides that under section 132(3), a prohibitory order maybe passed for a period of sixty days, therefore, the limitation period provided under section 158BE cannot take away this period of sixty days. Therefore, the limitation period provided under section 158BE stands increased by sixty days for passing of an order under section 158BC by the Assessing Officer. He submitted that until the conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not exceed the sixty-day limitation as provided in section 132(8A) and for making the assessment order the authorities had still more than adequate time available. The authorities did not complete the search on22-6-1998, nor did they unduly prolong it. The search concluded on5-8-1998and so in terms of Explanation 2 to section 158BE, the period of limitation would begin from the end of August, 1998 onwards. 17. In continuation to his arguments, the learned DR contended that to the same effect was the decision of the Hon'ble Kerala High Court in the case of T.O. Abrahim Co. v. Asstt. DIT(Inv.) [1999] 238 ITR 501. He submitted that in the said decision, the Hon'ble Kerala High Court held as under:- "Section 132 of the Income-tax Act, 1961, authorizes search and seizure, if the authorized officer has reason to believe in consequence of information that any person is in possession of money, income, etc., which has not been disclosed. Sub-section (5) of section 132 of the Act obliges the Income-tax Officer to pass appropriate orders within 120 days of seizure. The special procedure given under Chapter XIV-B gives a separate time-limit for completion of block assessment under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one cupboard in which all the silver articles, which were found and placed were seized on20-10-1996. On26-10-1996, six kg. of silver vessels from this cupboard were released and further order came to be passed under section 132(3) of the Act and the cupboard was sealed once again. On the same day, a panchnama was also drawn concluding the search and indicating in the said panchnama the fact that the cupboard containing the silver articles had been sealed and an order under section 132(3) of the Act passed in relation thereto. OnDecember 13, 1997, the Assistant Commissioner (Appeals), who was not one of the authorized officers mentioned in the search warrant, removed the seal and made a further order under section 132(3) of the Act, releasing the said silver vessels and articles. In these facts, it was held that the restraint order under section 132(3) cannot extend the period of limitation for passing order under section 158BC prescribed in section 158BE of the Act. He submitted that in contradistinction to this, in the instant case the authorized officer was the one who was authorized to carry out the search under section 132(1) of the Act in the search warrant. Further, the docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant provisions of section 158BE as was in the force at the material time is extracted as hereunder:- "158BE. (1) The order under section 158BC shall be passed- (a) within one year from the end of the month in which the last of the authorisations for search under section 132... in cases where a search is initiated... after30-6-1995, but before1-1-1997; (b) within two years from the end of the month in which the last of the authorisations for search under section 132... was executed in cases where a search is initiated... on or after1-1-1997. (2) The period of limitation for completion of block assessment in the case of the other person referred to in section 158BD shall be- (a) and (b) ** Explanation 1.-In computing the period of limitation for the purposes of this section, the period- (i) during which the assessment proceeding is stayed by an order or injunction of any court, or (ii) commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, shall be excluded. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of search, the following were seized:- - Books of account and documents as per inventory in Annexure "A" - (two sheets). - Cash as per Annexure "C" (one sheet). - Locker key as per entry in Annexure "O" - (One sheet). The panchnama drawn up on12-3-1999, at para 8 showed as follows: "8. The search commenced on12-3-1999at 7-50 A.M. The proceedings were closed on12-3-1999at8.50 P.M.as temporarily concluded for the day to be commenced subsequently for which purpose seals were placed on the drawer of table in the office at G.F. in our presence." After this, a second panchnama was also drawn on16-4-1999. The said panchnama shows that Shri S.B. Singla, ITO, CIB, Faridabad as authorized officer visited the premises of the assessee at 12.15 P.M. on 16-4-1999 and remained there up to 2.00 P.M. During this visit he revoked the prohibitory order in respect of the drawer, seized the documents inventorised as Annexure "A" (7 documents) to the panchnama and in the panchnama it was stated that the search has been finally concluded. 25. Now in the above circumstances, the determination of the date of execution of the search authorization dated10-3-1999will determine the outcome of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,- (A) the Director General or Director or the Chief Commissioner or Commissioner, as the case may be, may authorise any Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) such Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, (the officer so authorised in all cases being here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to be seizure of such valuable article or thing under clause (iii). (1A) Where any Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the Director General or Director or any other Chief Commissioner or Commissioner or any such Joint Director or Joint Commissioner as may be empowered in this behalf by the Board to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such Chief Commissioner or Commissioner may, notwithstanding anything contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft. (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) or sub-section (1A) and it shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) is seized under sub-section (1) or sub-section (1A), as a result of a search initiated or requisition made before 1-7-1995, the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Joint Commissioner,- (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons for retaining the same are recorded by him in writing and the approval of the Chief Commissioner, Commissioner, Director General or Director for such retention is obtained: Provided that the Chief Commissioner, Commissioner, Director General or Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. (8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order, except where the authorised officer, for reasons to be recorded by him in writing, extends the period of operation of the order beyond sixty days, after obtaining the approval of the Director or, as the case may be, Commissioner for such extension: Provided that the Director or, as the case may be, Commissioner shall not approve the extension of the period for any period beyond the expiry of thirty days after the completion of all the proceedings under this Act in respect of the years for which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, may, after giving the applicant an opportunity of being heard, pass such orders as it [or he] thinks fit. (13) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1) or sub-section (1A). (14) The Board may make rules in relation to any search or seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer- (i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available; (ii) for ensuring safe custody of any books of account or other documents or assets seized. Explanation 1.-In computing the period referred to in sub-section (5) for the purposes of that sub-section, any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. Explanation 2.-In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (11 of 1922), o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the completion of all the proceedings in respect of the year for which books of account etc. are relevant. Sub-section (9) empowers the persons from whom books etc. have been seized under sub-section (1) or (1A) to make copies thereof. Sub-section (9A) provides for handing over of the seized material by the authorized officer to the Assessing Officer having jurisdiction over the seized person. Sub-section (10) provides for making of objections by the person who is legally entitled to material seized under sub-section (1) or (1A) to raise objections against an order passed under sub-section (8). Sub-sections (11) and (11A) empower a person to raise objection against an order passed under section 132(5). Sub-section (12) provides for disposal of objection raised under sub-section (10) and sub-section (11). Sub-section (13) provides that provisions of Criminal Procedure Code relating to search and seizure shall so far as may be applicable apply to search and seizure under sub-section (1) or sub-section (1A). Sub-section (14) empowers the board to make rules in relation to any search or seizure under the section. 28. Thus, section 132 shows that search operation are carried out u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. In the instant case as observed above only one search authorization dated10 March, 1999was issued and the same was in respect of the premise situated at I-16, Sector-10, DLF,Faridabad. The panchnama prepared on12-3-1999in pursuance to this authorization apparently states that search is temporarily suspended to be commenced on a later date. However, the Hon'ble Bombay High Court in the case of Mrs. Sandhya P. Naik held that, "Indeed, by simply stating in the panchnama that the search is temporarily suspended, the authorized officer cannot keep the search proceeding in operation by passing a restraint order under section 132(3)". In view of the above principle of law declared by the Hon'ble Bombay High Court, we cannot ignore the claim of the assessee that search was actually concluded on 12-3-1999 itself, merely on the basis of one line statement written by the authorized officer in the panchnama that search proceeding is temporarily concluded to be commenced subsequently. We cannot close our eyes to the real facts and it cannot be taken as we are bound to treat the one line sentence written by the authorized officer as sacrosanct. In our considered opinion for determining the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was revoked on 16-4-1999 by making some seizures, the said 16-4-1999 only should be taken as the date of conclusion of the search. We find that the Ld. DR could not point out any provision in the Act which provides that when an order under section 132(3) is passed during the course of a search proceeding, it shall be deemed that search has not been concluded. The conclusion of search means when the place etc. in respect of which search authorization has been issued was entered in to by the search team and all the books of account, document, money, bullion, jewellery, and other valuable articles or things kept therein was found in the sense that further looking for of such articles etc. is considered as not required by the searching team. The provision of sub-section (3) of section 132 shows that where in the wisdom of the authorized officer it is not practicable 'to seize' any books of account, document, money, bullion, jewellery or other valuable article or thing which is otherwise liable to be seized, for any reason other than those mentioned in the second proviso to sub-section (1) of section 132, then he is empowered to pass a prohibitory order under section 132(3) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 132(8A), in certain circumstances by observing specified formalities, a prohibitory order under section 132(3) can be extended even beyond the date of completion of the assessment. Thus, if it is taken that till the prohibitory order under section 132(3) is in force search is not concluded then the provisions of sub-section (8A) will lead to an absurd situation. If such an effect of passing of a prohibitory order is taken as correct then, until search is concluded assessment in respect of searched person cannot be made and till such assessment is not made prohibitory order under section 132(3) can remain in force. Thus, this interpretation will lead to a situation where assessment will never be completed and order under section 132(8A) will never be required to be revoked. Definitely, such a situation could never have been intended by the Legislature. This itself conclusively proves that the interpretation placed by the revenue in respect of the effect of passing of a prohibitory order under section 132(3) is not correct. Our above view finds support from the decision of the Hon'ble Allahabad High Court in the case of Sriram Jaiswal v. Union of India [1989] 176 ITR 261 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised Officer is in doubt that item is to be seized or not. Hence, it cannot be assumed that the authorized officer without ascertaining that those were liable to be seized or not might have passed an order under section 132(3). If we take the submission as correct that though the prohibitory order under section 132(3) was passed but the authorized officer has not gone through the contents of the document and hence search is not concluded then, on the same analogy, it can also be very well argued that though the documents were seized under section 132(1)(iii), but the authorized officer has not gone through the each and every document seized and, therefore, search was not completed. Still further, no reason as to why the authorized officer could not go through the seven documents kept under prohibitory order on12-3-1999could be given by the revenue while he could go through the several documents seized on that date. Moreover, we find no such recording either in the panchnama dated12-3-1999which indicate that the authorized officer could not go through the said seven documents and reason thereof or any other material. Hence, we find that the above submission of the learned D/R is una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the premises were brought to the office situated at ground floor and were put in a drawer and sealed by the authorized official, were neither challenged by the revenue either before the CIT(A) nor before us. This coupled with the fact that the revenue at no stage sought cross-examination of the deponent assessee or any of the witnesses of the search in respect of these averments in the affidavit of the assessee to rebut the same and in absence of any material on record to show that these averments cannot be true, in our considered opinion and keeping in view the legal principle as settled by the Hon'ble Supreme Court in the case of Mehta Parikh Co. v. CIT [1956] 30 ITR 181, it is not permissible for us to arrive at a different conclusion merely on the basis of assumptions or suppositions. 35. The panchnama drawn on16-4-1999shows that seven documents kept in the drawer of the table was seized by the authorized officer Sh. S.B. Singla, ITO, CIB,Faridabadon that date and the prohibitory order passed on12-3-1999was revoked. The said panchnama does not show any search was conducted on that date. The Hon'ble Supreme Court in the case of CIT v. Tarsen Kumar[1986] 161 ITR 505 quote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be made at any time within 60 days of the passing of the order as per statutory provisions contained in sub-section (8A) of section 132. But, in respect of the issue before us we are not concerned with the validity of passing of an order under section 132(3) or validity of revocation of such an order. We find that no statutory provision or authority can be cited before us which enables an authorized officer to legally keep search suspended for such a long duration of 34 days without any valid, compelling aI1d convincing reason. In our considered view, the search should be completed continuously on succeeding days and if there is a gap, there should be a compelling and valid reason for the same the search should have/been resumed immediately on a succeeding date. Our above view finds support from the decision of the Hon'ble Jurisdictional Delhi High Court in CIT v. Sarb Consulate Marine Products (P.) Ltd. [2007] 294 ITR 444 wherein it was held that, "a general consensus appears to have emerged among the High Courts to the effect that a search under section 132 of the Act should be continuous and if it is discontinued and thereafter resumed, then there must be a valid explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consulate Marine Products (P.) Ltd. The Hon'ble Delhi High Court has held that "a general consensus appears to have emerged among the High Courts to the effect that a search under section 132 of the Act should be continuous and if it is discontinued and thereafter resumed, then there must be a valid explanation for the gap. By merely resorting to a restraint order under section 132(3) of the Act, and that too, only up to30-9-1997, the revenue could not have extended the time-limit for passing an assessment order." 39. Lastly, the argument of the learned D/R to the effect that till all the seizure is not effected all the materials are not available with the Assessing Officer which is required for assessment and hence, time-limit under section 158BE will not start running is found not in conformity with the plain words employed in that section. The phrase 'conclusion of search' employed in Explanation 2 to section 158BE does not necessarily also mean 'conclusion of seizure'. If search is concluded on an earlier date, merely because on that date a prohibitory order under section 132(3) was passed on that date and in pursuance to such P.O. some seizure was made on a subsequent dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horised officer by simply stating in the panchnama that the search is temporarily suspended cannot keep the search proceedings in operation by passing a restraint order under section 132(3). It has to be shown by the revenue that for some valid reason the search of any portion of the premises could not be done continuously and a gap was necessary. A search under section 132 of the Act should be continuous and if it is discontinued and thereafter resumed, then there must be a valid explanation for the gap. In the instant case we find that no reason could be adduced by the revenue before us for a long gap of 34 days for next visit at the premises of the assessee. Thus, in our considered opinion visit on16-4-1999in the premises of the assessee by the authorized officer was in exercise of power available under section 132(3) for the purpose of revocation of the order passed earlier under section 132(3) of the Act etc. and not to make any fresh search. Hence in our considered view the authorization dated10-3-1999for search was executed on12-3-1999. Hence in view of the provisions of section 158BE(1)(b) the order for the block assessment ought to have been passed on or before31-3-2001. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat on16-4-1999, the documents in the drawer were seized. The panchnama prepared on that day has been signed by two panchas, the authorised officer and Subhash Verma.Para8 of the panchnama states that the search commenced at12.05 p.m.on16-4-1999and the proceedings were closed at2.00 p.m.as finally concluded. 46. In the case of Smt. Krishna Verma, the authorisation under section 132(1) to search was issued on10-3-1999by Director of Income-tax (Investigation),Chandigarh. Another authorisation appears to have been issued on16-3-1999by the Additional Director of Income-tax (Inv.), Rohtak in respect of locker No. 84/6 situated at Oriental Bank of Commerce, Sector 7,Faridabad. Pursuant to this authorisation, the officers of the income-tax department visited the bank on18-3-1999and operated the locker. A panchnama was drawn up on that day in the name of Smt. Krishna Verma and gold, silver, ornaments, etc. were seized and inventorised. 47. One important aspect to be noticed is that the warrants were issued by Director of Income-tax (Investigation),Chandigarhin the names of "Sh. Subhash Verma and Smt. Krishna Verma" and the panchnamas drawn up show that the warrants were issued to searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restraint order cannot extend the period of limitation for making the assessments. In other words, it is contended that the restraint order cannot keep in abeyance the search proceedings so that it can be said that only on lifting the restraint order the search proceedings get concluded. 51. In order to appreciate the contention, it is necessary to look into section 132 and notice how it authorises and provides for passing of restraint orders and for what purpose. The second proviso to section 132(1) inserted by the Finance Act, 1988, with effect from 1-4-1989 says that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, a restraint order may be served on the owner or the person who is in possession of the article or thing that he shall not remove, part with or otherwise deal with the same except with the previous permission of the authorised officer. More importantly, the proviso says that the serving of the order of restraint shall be deemed to be seizure of the article or thing. In contrast, sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restraint order on the owner or person in possession directing him not to remove or otherwise deal with the articles placed under restraint. Such an order can be passed even where a part of the premises could not be covered during the search and where for administrative or several other reasons the officers conducting the search are obliged to leave the premises. That is precisely why it has been stated in the Explanation that the serving of the restraint order on the owner or the person in possession shall not be deemed to be seizure. Whereas under the second proviso to sub-section (1) the serving of the restraint order amounts to seizure, under sub-section (3) the serving of the restraint order does not amount to seizure. The reason is simple. The officers place a restraint on the owner or the person in possession for a temporary period so that the. search can be revived at a later point of time and continued. 52. It is necessary to refer to sub-section (8A) of section 132, to which attention was drawn on behalf of the department. At the relevant time, the sub-section read as under: "(8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search any motive to delay the proceedings because the entire exercise of a search is to strike swiftly, take the errant assessee by surprise, give him due opportunity of explaining the seized material and then complete the assessment as quickly as possible. It is common knowledge that in search cases, huge amount of revenue is normally involved and it is in the department's own interest to collect the tax as quickly as possible. This is possible only if the assessment is made as early as possible. Taking all these into consideration, it is not possible to jump-if the expression can be used-to the conclusion that the passing of a prohibitory order under sub-section (3) is in all cases only to extend the period of limitation, without any facts and circumstances or evidence justifying the conclusion. It may happen in extreme cases that prohibitory orders are passed without justification. In such cases, courts have come down heavily on such attempts and have seen through the game and held that the restraint orders have no useful purpose to serve and, therefore, the search must be deemed to have been concluded much earlier. But, in a bona fide case, where there is no such attempt and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nama about the search continuing was contrary to the factual position. Because the drawer or contents therein remained to be examined, the authorised officers had to pass a restraint order under section 132(3) directing the assessees not to tamper with the same. The order thus had a purpose to serve, i.e., to effectuate the search proceedings. It was a bona fide exercise of the power and not shown to have been exercised mala fide. It was incidental to the search proceedings. The search was conducted from7.50 a.m.till8.50 p.m.but the drawer remained to be seen. The search party, therefore, while leaving the premises without completing the search, had to pass the restraint order so that they can come again in due time and examine the drawer and complete the search. They actually came again on16-4-1999, revoked the prohibitory order, opened the drawer, searched the same and took away the papers found therein. This is also recorded in the panchnama prepared on16-4-1999. The papers in the drawer were seized only on16-4-1999. In paragraph 2 of this panchnama also, it was clearly stated that the search was in continuance of the proceedings on12-3-1999. Paragraph S of this panchnama catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely on the basis of the affidavit filed by the assessees. If that were to be permitted the consequences may be grave. All that the assessee has to do, in order to dispute the regularity of an official act performed by an official of the Government, is to file an affidavit disputing the same without anything more. It has already been noticed that on12-3-1999, a panchnama was drawn up in which there was a clear averment that search was only temporarily concluded and would be re-commenced later. The purpose why the search was only temporarily concluded has also been stated in paragraph 8 of the panchnama. The assessee and the panchas have signed the same. The assessee did not protest at that time against the averment. The entire sequence of events, namely, the commencement of the search, the temporary conclusion thereof, the passing of the restraint order under section 132(3) on the same day on which the search was temporarily concluded, the second visit of the authorised officers on 16-4-1999, the revoking of the restraint order on that date for the purpose of seizing the documents found in the drawer, the drawing up of a panchnama on that day which recorded that the search concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vits. A statement by a deponent can be held to be unreliable by the Tribunal either on the basis of cross examination of the deponent or by a reference to other material on record leading to the inference that the statement made in the affidavit, cannot be held to be true." In the present case, there is other material on record, namely, the panchnamas, the signatures of the panchas and the assessees therein, the orders of restraint, their revocation, etc., all of which show that the official acts were regularly performed by the departmental authorities. In the light of this material, the averments in the affidavit cannot be relied upon and it cannot be said that the deponents not having been cross examined the affidavits have to be accepted. 56. It was then said that there was an unreasonable delay of 34 days between12-3-1999on which date the restraint order was passed and16-4-1999on which date the order was revoked. The judgment of the Kerala High Court in Dr. C. Balakrishnan Nair v. CIT [1999] 237 ITR 70 has been cited. This judgment of the Single Judge of the High Court has been reversed by a Division Bench and the judgment is reported as CIT v. Dr. C. Balakrishnan Nair [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it represents undisclosed income. This stage can be reached only if the items have been examined by the search party and they have formed an opinion that they represent concealed income of the assessee. But where, as in the present case, the materials have not been examined at all due to various reasons, it cannot be said that the search party have reached a stage where they are in a position to form an opinion that the materials represent undisclosed income of the assessee. What seems to have happened in the present case is that the documents in the drawer in the ground floor of the premises were not examined by the authorised officers and that is the reason why they resorted to section 132(3) so that they can be seized at a later point of time to find out whether they represent any undisclosed income. In the judgment of the Bombay High Court (Panaji Bench) cited supra the emphasis appears to be on this, namely, that once the materials have been examined and are found to represent concealed income then they have to be seized and the authorised officers cannot, by passing a restraint order under section 132(3), seek to extend the time-limit for making an assessment. This position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prohibitory order, did not assume possession of the assets; they remained where they were. With reference to the lockers, it was held that the mere taking over of the keys of the locker did not amount to dispossession of the contents of the locker from the assessee. It was held that the order of the authorised officer did have the effect of disabling the assessee from dealing with the contents of the locker, but it did not have the effect of the contents being taken over by the authorised officer on behalf of the department. It was however cautioned that the authorised officer did not have an unfettered discretion in the matter and to keep indefinitely under seal the detained goods found during a search by resort to section 132(3). The other judgment of the Delhi High Court is the case of M.B. Lal which has also been cited on behalf of the department. The contention before the High Court on behalf of the assessee was that by merely passing an order under section 132(3) in regard to the contents of the almirah and cupboard, the search cannot be artificially prolonged and that there was no practical difficulty in seizing the items liable to be seized nor can the authorised officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch cannot be taken to be14-9-1998and the assessment order passed on30-9-1998was barred by limitation. Significantly, the High Court also observed that the subsequent search on14-9-1998of the trawlers and panchnama drawn up on that day took place when there was no restraint order in operation. The facts of the cases before us are different, the significant distinction being firstly that the restraint order was effective for a period of only 34 days (12-3-1999 to 16-4-1999) and secondly that the search resumed on 16-4-1999 during the operation of the restraint order. It is no doubt true that the Delhi High Court has observed that a search should be continuous but at the same time it has also been observed that "if it is discontinued and thereafter resumed, then there must be valid explanation for the gap". These observations show that there could be reasons justifying the discontinuance and resumption of the search. In the cases before us, we are unable to put the department in a situation where they are bound to explain the reasons why there was a gap of 34 days because section 132(8A), as it stood at the relevant time provided that the restraint order could be operative for a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the last of the authorizations for search under section 132 was executed has to be taken to mean the execution of the warrant resulting in seizure and not with reference to issue of prohibitory orders and successive visits that were claimed as searches which were so carried out on the basis of the only authorization that was issued initially; and (3) Whether where a search is carried on the basis of an authorization, resulting in seizure of some items, issue of prohibitory orders on others, search can be said to be continuing and comes to a close only when the authorized officer says that he is no longer going to visit the premises by issuing a panchnama and by seizing some items that are covered by the prohibitory order which could have been seized by him even at the first instance." Answering the second and third questions, Special Bench of the Tribunal held as under: "The second quest ion pertained to the commencement of time-limit prescribed under section 158BE. When a search is conducted under section 132, the Assessing Officer can take any of the actions specified in section 132(1)(i) to section 132(1)(v). As mentioned earlier, during the course of search, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words means, only when search is concluded, notice under section 158BC(a) can be issued. Now it is not the intention of Legislature to suggest that though the material or valuables are under a P.O. at the premises of the assessee, the assessee can be asked to file a return in respect of the undisclosed income. Hence, it will be counter to the scheme of Act that even though notice under section 158BC(a) is not issued, time-limit for completion of assessment will commence. It is also clear that for a subsequent visit, either to revoke the P.O. or renew the same, no fresh authorization is required. The search is deemed to be continuing so long as all the materials and valuables are either not seized or released but in respect of which certain P.O. is clamped at the premises searched. Each time a panchnama is required to be prepared. This also suggest that the time-limit will not commence so long as the panchnama declaring the conclusion of search is not drawn. What the Explanation to section 158BE(1) says is that time-limit will start from last of the panchnama and it cannot be interpreted to mean that the time-limit will not commence till order under section 132(3) is in opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not the administrative act of passing a P.O./R.O., seizing or releasing certain materials, valuables etc. There may be variety of reasons for temporarily suspending the search by passing a P.O. and mentioning the same in the panchnama as per law. What is to be seen in the date of last valid panchnama. Seizure or absence of seizure will not determine validity of panchnama. What section 132(13) suggests is that the Code of Criminal Procedure, 1973 relating to search and seizure shall apply, so far as may be, to searches under section 132(1). Thus as per the Criminal Procedure Code, what is to be seen is valid panchnama only and not seizure resulting from such search. It is not the intention of Legislature to suggest that if there is no final seizure, the panchnama releasing the material from P.O. is to be ignored. An action under sections 132(1) and 132(3) is purely an administrative act and not a quasi-judicial order. Thus, we are of consider opinion that if an order under section 132(3) is passed, which is indicated in a valid panchnama drawn (whether such material under P.O. is seized or not) such panchnama is to be considered as valid for the purpose of calculating the time-li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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