Block assessment in Search Proceedings - How to determine the time limit and date of last panchnama for the purpose of completion of assessment proceedings:

In the present case:

Case for the assessee

A search under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as the "said Act") was conducted as per warrant dated 31.10.2000. In view of the provisions of Section 158BE (1)(b), the block assessment under Section 158 BC ought to have been completed on or before 31.10.2002. However, it was completed on 27.12.2002. The assessee's stand was that this was beyond the time prescribed under Section 158 BE (1) and, therefore, the assessment was bad.

Case for the Revenue (Appellant)

The stand of the Department, on the other hand, was that there was another panchnama, which had been drawn on 23.12.2000 and that this was the last panchnama and, therefore, the two-year period has to be reckoned from the end of the month in which this panchnama was drawn and executed. In other words, the period of limitation would begin to run from 31.10.2000 and, consequently, time was available for completion of the assessment up to 31.12.2002.

Findings and Decision of the honorable High court:

In the present case the gap between the search on 31.10.2000 and the purported last search on 23.12.2000 is approximately 53 days. There is no explanation whatsoever with regard to this period between the two intervening dates. In fact, the revocation order does give an indication that the prohibitory order was passed merely for continuing the search possibly for the purposes of extending the limitation.

Honorable high court has confirmed the order of the ITAT in which ITAT had held that the Assessment Order is time barred.

(For full text of judgment - visit 2008 -TMI - 30460 - HIGH COURT DELHI)