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TMI Blog2012 (6) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts found during the course of search. 3. The Ld. CIT (A) has erred in deleting the addition of Rs.3,00,000/- made by the A.O. on account of rejection of books of accounts without any basis when the provisions of section 145(3) were applicable." 1.1 The grounds of Cross Objections filed by the assessee read as under:- "1. That on the facts and in the circumstances of the case, the block assessment order for the block period i.e., asst. yrs 1997-98 to 2003-04 (upto the date of search), is bad in law and, therefore, the respondent-company appeals for its cancellation. 2. That without any prejudice to the first ground of crossobjection, the respondent-company appeals that the block assessment order in question was completed after expiry of the time limit provided in the Chapter XIV-B (Special procedure for assessment of search cases) of the IT Act, 1961. Therefore, the respondent-company appeals for the cancellation of the block assessment order. 3. That without any prejudice to the aforesaid grounds of cross-objections and on the facts and in the circumstances of the case, regarding the sustenance of disallowance of salary expenses to the extent of Rs.1,19,333/- by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial Bench to decide the aforementioned question which inter alia, include the hearing of entire appeal. Later on constitution of Special Bench was revised vide order dated 23rd August, 2010. 4. In ground No.2 of the cross objection, the assessee has challenged the validity of impugned assessment on the ground that it is time barred. Therefore, it was considered proper to hear both the parties on this issue as if it is found that assessment itself is invalid on account of its being time barred then there will be no need to go into other issues. Both the parties have argued on this issue and their detailed contentions were heard on 4.05.2012. 5. To consider the above aspect, the following facts will be relevant. Two authorizations for search were issued. The first authorization is dated 17th December, 2002 and the second authorization is dated 20th December, 2002. The proceedings of these two authorizations are described in the following chart submitted by ld. Counsel at page 15 of the paper book and such course of events was not disputed by Ld. DR:- "Shree Ram Lime Products Ltd. Statement showing details regarding the dates of authorization, places of execution, dates of Panc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The period of limitation for completion of block assessment in the case of the other person referred to in section 158BD shall be- (a) one year from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997; and (b) two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997.] [Explanation 1.-In computing the period of limitation for the purposes of this section,- (i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (ii) the period 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; or (iii) the time taken in reopening the whole or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the Assessing Officer has passed the impugned assessment order u/s 158BC on 31st January, 2005 by considering that the panchnama drawn on 3rd January, 2003 was the last panchnama for the purposes of Section 158BE read with Explanation 2 thereof. He submitted that the entire case of Revenue rests upon the Panchnama drawn on 3rd January, 2003 as all other Panchnamas are drawn in the month of December, 2002. He submitted that it is the main case of the assessee that Panchnama dated 3rd January, 2003 is not a valid Panchnama for reckoning the time limit. He submitted the following sequence of date-wise operation/activities carried out by the search party in pursuance of first authorization dated 17th December, 2002. He submitted that the such detail is prepared on the basis of the facts available in all the three panchnamas, orders passed u/s 132(3) of the Act and the revocation orders. These details are furnished at pages 16-17 of the documents submitted by Ld. AR during the course of hearing and is reproduced below for the sake of convenience. "Statement showing date-wise operations/activities carried out by the search party, in pursuance of the first authorization dated 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oken in the presence of the panchas. The prohibitory order u/s 132(3) dated 21.12.2002 was vacated by passing "Revocation of the order u/s 132(3) of the IT Act, 1961." Dated 03.01.2003 (page no.41 of the paper book). 9. On the basis of the aforementioned facts, Ld. AR submitted the following arguments in respect of ground Nos.1 and 2 of the Cross Objections filed by the assessee:- i) Panchnama dated 3rd January, 2003 was neither a valid panchnama nor it was relevant for reckoning the limitation u/s 158BE read with Explanation thereto. ii) The panchnama dated 3rd January, 2003 was not the last panchnama as contemplated in Explanation 2 to Section 158BE. iii) The panchnama dated 3rd January, 2003 was not drawn in execution of the last of the authorizations and, hence, the same was not to be taken into consideration for the purpose of determining the limitation u/s 158BE read with Explanation 2 thereof. 10. Ld. AR has elaborated his arguments on all the aforementioned aspects to contend that the impugned assessment order passed by the Assessing Officer was not passed within the time limit prescribed under the provisions of Section 158BE read with Explanation 2 thereto. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec., 2002 (c) Order dated 3rd Jan, 2003. (d) The Panchnama dated 3rd Jan., 2003 (e) Revocation order dated 21st Dec., 2002 14. He submitted that upon noting the aforementioned documents, Hon'ble Rajasthan High Court has observed that after revoking the prohibitory order dated 21st December, 2002, there was nothing to show that any prohibitory order was clamped. He submitted that though in the said case the date of revocation has not been stated by Hon'ble High Court, yet, it can be inferred that document mentioned at Sl.No.3 i.e., order dated 3rd January, 2003 was the revocation order and, thus, the revocation of prohibitory order was done on 3rd January, 2003. He submitted that the facts of the present case are almost similar to the facts of the aforementioned case and these facts also can be gathered from the order of the Tribunal which has been confirmed by Hon'ble Rajasthan High Court. He submitted that on identical facts, it was concluded by Hon'ble Rajasthan High Court that the entire episode was over on 21st December, 2002, therefore, prohibitory order was revoked and there was no error in the findings recorded by the Tribunal. Ld. AR also referred to the observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by time. 17. The third argument of Ld. AR is that panchnama dated 3rd January, 2003 was not the last drawn in execution of the last authorization and, hence, it was not to be taken into consideration for the purpose of determining the limitation u/s 158BE read with Explanation 2 thereto. This contention of the Ld. AR is based on the language of the provisions of Section 158BE wherein in Section 158BE (1) the term used is "last of the authorizations." According to the submissions of Ld. AR the last authorization in the present case is an authorization dated 20th December, 2002 in respect of which last panchnama has been drawn on 20th December, 2002, therefore, the time limit within which the assessment could be completed should be 31st December, 2004 and as assessment has been framed on 31st January, 2005 the impugned assessment is barred by time limitation. For this purpose, Ld. AR relied upon the following decisions:- i) Shahrukh Khan vs. Asstt. CIT (2007) 107 TTJ (Mumbai) 252. ii) C. Ramaiah Reddy vs. ACIT (2011) 244 CTR (Kar) 126 18. He submitted that the decision of Hon'ble Karnataka High Court clearly laid down a proposition that when there are different places to be searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26th March, 2001 itself and the panchnama was drawn on the same date. The assessment was completed in April, 2003. The validity of the assessment was challenged on the ground of limitation. It was the contention of the assessee that limitation should be computed with reference to execution of panchnama in respect of second authorization i.e., on 26th March, 2001 was executed and the period of two years as provided u/s 158BE (1)(b) came to end by March, 2003 and the assessment order being passed in April, 2003 was not within time. As against that it was the case of the department that since the last panchnama though related to first authorization dated 13th March, 2003 was executed on 11th April, 2001, therefore, the period of limitation would commence from that date and their lordships of Delhi High Court, after considering the legal position, have held that the Tribunal was wrong in holding that assessment order was barred by limitation. It was observed that the purport of the Explanation-2 to section 158BE was to count the period of limitation of two years from the date when last panchnama was drawn in respect of any warrant or authorization. Any point of execution of the warran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case warrant of authorization was issued. 21. In this manner, Ld. DR pleaded that the assessment should be considered to be framed within time limit and the contentions of Ld. AR should be rejected. 22. We have carefully considered the rival submissions in the light of material placed before us. The facts have already been discussed in detail in the above part of this order. The first contention of Ld. AR, as recorded earlier, is rejected as after going through the authorization it was found that name of Shri SS Mantri was also described as an authorized officer. 23. The second contention of Ld. AR rests upon the argument that last panchnama dated 31.01.2003 is not a valid panchnama in the eyes of law as it had been executed only for the purpose of revocation of order passed u/s 132(3) dated 21st December, 2002. This contention of Ld AR based on the fact that on 3.1.2003 only revocation of the earlier order was done and this fact is clear from the time taken by the authorities on that date. It is the submission of Ld AR that the revocation proceeding on that date was started at 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat on 21.12.2002 itself the search was concluded when the first panchnama was drawn. The second panchnama drawn on 3.1.2003 was not a valid panchnama in the eyes of law, therefore, period of limitation could not be reckoned with reference to the panchnama drawn on 3.1.2003. It was shown that the proceedings on 3.1.2003 were conducted within 10 minutes only to lift prohibitory order which was merely a formality completed by ADIT and no search or seizure was done on that date. Considering all these facts, it was held by the Tribunal that the panchnama drawn on 3.1.2003, when no material was seized and only the prohibitory order was lifted, was not a valid panchnama in the eyes of law. For holding so, reference inter alia was made to the decision of Hon'ble Delhi High Court in the case of CIT v. SK Katyal reported in 308 ITR 168 (Del) wherein it has been held that a panchnama is nothing but a document recording that what has happened in the presence of the witnesses "Panchas". A panchnama may document the search proceedings, with or without any seizure. A panchnama may also document the return of seized articles or the removal of seals. But, the panchnama that is mentioned in Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record by both the parties and reference can be made to pages 38-40 of paper book filed by Ld AR of the assessee. It is observed from the said panchnama that Shri S.S. Mantri, DIT (Inv.I), Jodhpur is the authorized officer who was assisted by Shri PN Mathew, Inspector, Shri RL Rathi, Inspector and Shri Pawan Kumar, Staff car Driver. It started at 5.50 P.M. and it is in respect of authorization dated 17th December, 2002. It is mentioned that the search was in continuation of the proceedings on 21st December, 2002 and the search party had inspected the seal which were placed on 21st December, 2002 and it was found that the seals were intact as narrated in the order passed u/s 132(3) dated 3.1.2003. In the column relating to assets or documents seized, all the columns are filled as nil. No statement of any person was recorded on that date. It is mentioned that on 3.1.2003, the proceedings were started at 5.50 PM and the proceedings were closed on 3.1.2003 at 6.20 PM and all other columns are nil. The perusal of the panchnama will reveal that except from passing the revocation order u/s 132(3) of the prohibitory order passed on 21st December, 2002 no other activity had taken place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all on the day which it relates, then, it would not be a panchnama relating to search and, consequently, it would not be a panchnama of the type which finds mention in Explanation 2 (a) to Section 158BE. 29. In view of above discussion, we hold that in the present case panchnama dated 3.1.2003 is not a panchnama which finds mentioned in Explanation 2 to section 158BE. Hence, the limitation cannot be governed by the said panchnama. The search essentially was concluded and completed vide panchnama dated 21st December, 2002, when order under the second proviso to section 132(1) was passed for deemed seizure of stock of goods of `.25,43,500/-; statement of one person was recorded and a restrain order u/s 132 was passed. Panchnama dated 21st December, 2002 was the last panchnama as described in Explanation 2 to section 158BE and, therefore, the limitation has to be commenced from the said panchnama. It is an undisputed position that if panchnama dated 21st December, 2002 is considered as last panchnama then the time limit to frame assessment u/s 158BC will be 31st December, 2004. As against that, the impugned assessment is passed on 31.1.2005 which is not passed within the limitation d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting point of the limitation is to be computed from the last of the authorizations. Explanation 2 to sub-section (2) of Section 158BE explains when "authorization" is deemed to have been executed. The authorization referred to in sub-section (1) shall be deemed to have been executed in the case of search on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorization has been issued. The words "last of the authorizations" used in Section 158BE imply that there can be more than one authorization for search u/s 132. Explanation 2 does not refer to such last of the authorizations. But, only refers to authorization and how it shall be deemed to have been executed. It is because when law provides for more than one authorization, the limitation is to be computed from the date of last of the authorizations which is executed. If the authorizations are executed and search is conducted on different dates, there will be panchnamas on different dates. A doubt may arise regarding the commencement of the day from which the limitation is to be computed. In order to remove the said doubt this explanation was added by the Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which may not be the last authorization would become last authorization if it is executed and if panchnama in respect thereof drawn last. Therefore, it was held that the point of time of issue of authorization will not have any relevance but it is a point of time when last panchnama is drawn in respect of authorization whether it is first authorization or it is last authorization. 32. When the facts of the present case are compared with aforementioned two decisions, it will be seen that on the facts of the present case, the decision of Hon'ble Delhi High Court will be applicable as compared to the facts in the case before Hon'ble Karnataka High Court. Therefore, it is not a case where two different opinions have been taken. Therefore, we find no force in the contention of Ld. AR that view taken by Hon'ble Karnataka High Court being favourable to assessee should be adopted. Finding no force in such contention, it has to be held that, reckoning point to compute the time limit will be drawing of last panchnama in respect of any authorization issued in a particular case. However, it has already been held that the "last panchnama" as relevant for Explanation 2 to Section 158BE will b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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