TMI Blog2005 (8) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... n of panchnama totally irrelevant. It appears that the restraint order, however, was passed by the authorized officer u/s 132(3) wrongly and such order was utilized by the Assessing Officer to circumvent the provisions of section 132(1) read with section 158BE, which was not permissible as held by Hon'ble Bombay High Court in the case of Mrs. Sandhya P. Naik [ 2000 (12) TMI 21 - BOMBAY HIGH COURT] . As already observed, even in the letter dated 15-9-1998 issued by the ADIT (Inv.), Belgaum, it was clearly indicated by him that the search in the assessee's case was completed by him on 14-9-1998 just because he was called upon to do so and the panchnama was drawn as a mere formality without there being any seizure. In the case of Ananta N. Naik [ 1999 (6) TMI 65 - ITAT PUNE] held that a panchnama drawn on the last day without seizure but made for lifting the prohibitory order cannot be reckoned as the last panchnama in terms of Explanation 2 to section 158BE. In the case of Kuwer Industries Ltd. [ 2004 (8) TMI 722 - DELHI HIGH COURT] , held that a prohibitory order u/s 132(3) without there being a seizure could not be a valid panchnama so as to extend the time limit available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trawlers of the assessee company viz., Arats, Aries and Vega were searched and sealed. An order under section 132(3) was also passed in respect of the said fishing trawlers which was served on Capt. V.S. Gopinath, Deputy Conservator of Port Trust, Margaon, Goa. This restraint order under section 132(3) was subsequently stated to be lifted and the search was claimed to have been concluded on 14-9-1998 by drawing a panchnama. Meanwhile, a notice under section 158BC issued by the Assessing Officer was served on the assessee on 16-12-1997 requiring it to file a return of income for the block period in Form 2B. The assessee company, however did not comply with the said requirement despite sufficient opportunity having been afforded by the Assessing Officer. The assessee did not furnish even the information and documents sought by the Assessing Officer during the course of block assessment proceedings. After granting several adjournments during the course of assessment proceedings, the Assessing Officer afforded a final opportunity to the assessee 10 explain its stand on various issues by sending a detailed questionnaire along with a notice under section 142(1). In reply, a written submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, opposed to evidences on records and based on surmises and conjecture. 7. That determination and inclusion of income of Rs. 20,000 as alleged unexplained credit from Mr. Sanjeev Anand under section 68 of the Income-tax Act, 1961 is wrong, perverse, not based on evidences, opposed to evidences on records and based on surmises and conjecture. 8. That determination and inclusion of income of Rs. 15,250 as alleged unexplained credit from M/s. Pharmacia National in the books of account under section 69C of the Income-tax Act, 1961 is wrong, perverse, not based on evidences, opposed to evidences on records and based on surmises and conjecture. 9. That determination and inclusion of income of Rs. 7,47,350 as alleged unexplained expenditure under section 69C of the Income-tax Act, 1961 is wrong, perverse, not based on evidences, opposed to evidences on records and based on surmises and conjecture. 10. That determination and inclusion of income of Rs. 9,050 as alleged unexplained expenditure under section 69C of the Income-tax Act, 1961 is wrong, perverse, not based on evidences, opposed to evidences on records and based on surmises and conjecture. 11. That determination and inclusion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsider and decide the same. 5. The learned counsel for the assessee submitted that a search and seizure operation in the present case was initiated on 6-11-1996 i.e., after 30-6-1995 but before 1-1-1997 and therefore, the assessment for the block period ought to have been completed by the Assessing Officer within a period of one year from the end of the month in which the warrant of authorization was executed as specified in clause (a) of sub-section (1) of section 158BE. He submitted a panchnama was also drawn on the date of search i.e., 6-11-1996, but the search operation was stated to have been temporarily concluded in the said panchnama and order under section 132(3) was issued in respect of the three fishing vessels/trawlers searched despite the fact that it was not possible to seize the said vessels. According to him, it cannot therefore be said that the search warrant was not executed merely because an order under section 132(3) was passed. He submitted that no fresh warrant of authorization was issued in this case and as such, a warrant of authorization issued originally stood executed on 6-11-1996 despite the fact that search was stated to be temporarily concluded in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ama allegedly drawn on 14-9-1998 i.e., after a period of nearly two years was an arbitrary exercise of power just to gain time on frivolous and unsustainable basis to extend the period of limitation. In this regard, he relied on the decision of Hon'ble Kerala High Court in the case of Dr. C. Balakrishnan Nair v. CIT [1999] 237 ITR 70 wherein the search was recommenced and concluded on the fourteenth day alter the first day of search and their Lordships of Kerala High Court held that unless there is convincing reason for not resuming search immediately, the proceedings undertaken by the Department for second search after the gap of 14 days could not be held to be legal. He also relied on the decision of Hon'ble Delhi High Court in the case of B.K. Nowlakha v. Union of India [1991] 192 ITR 436 wherein it was held that power of section 132(3) cannot be exercised so as to circumvent the provisions of section 132(1) read with section 132(5). Reliance was also placed by him on the decision of Hon'ble Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik [2002] 253 ITR 534 wherein the decision of the Tribunal was upheld by the Hon'ble High Court holding that power u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch, the assessment completed in the present case on 30-9-1998 was clearly barred by limitation. His contention, therefore, was that the same is liable to be annulled being invalid in the eye of law. 8. The learned DR, on the other hand, submitted that the time limit specified in section 158BE for completion of block assessment has to be reckoned from the date of execution of warrant of authorization and as specifically provided in Explanation 2 to section 158BE(1), such authorization is deemed to have been executed in the case of search, on the conclusion of the search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorization has been issued. His contention, therefore, was that for the purpose of ascertaining the date of execution of warrant of authorization, what is relevant to be seen is the last panchnama drawn in a given case and in the present case, such panchnama having been drawn on 14-9-1998, the period of limitation of one year for completing the block assessment has to be reckoned from September 1998. He contended that the assessment for the block period in the present case was admittedly completed on 30-9-1998 and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dispute that the search operation stated to be temporarily concluded on 6-11-1996 was not commenced upto 14-9-1998 i.e., for a period of about two years when the last panchnama came to be drawn by the Department. In the case of Dr. C. Balakrishnan Nair, the search discontinued was resumed by the Department after a gap of 14 days and in the absence of any convincing reasons put forth by the Revenue for not resuming the search immediately, Hon'ble Kerala High Court held that the proceedings undertaken by the department for a second search could not be held to be legal. In the present case, no reason much less a convincing reason has been advanced on behalf of the Revenue to explain the inordinate delay of nearly two years for keeping the search proceedings suspended and for not commencing the same immediately and this being so, the panchnama stated to be finally drawn on 14-9-1998 cannot be held to be legal keeping in view the ratio of the decision of Hon'ble Kerala High Court in the case of Dr. C. Balakrishnan Nair. 10. It is also observed that on 6-11-1996, when the search proceedings were stated to be temporarily concluded, an order under section 132(3) was passed restra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (3) of section 132 that the reasons making it impracticable to seize such things should be other than those mentioned in the second proviso to sub-section (1) of section 132. On the other hand, the proviso to section 132(1) is little more specific in the sense that the reasons making it impossible and impracticable to take physical possession of such things and to remove the same to a safe place are specified therein being due to its volume, weight or other physical characteristics or due to its being of a dangerous nature. In these circumstances specified in the second proviso to section 132(1), the authorized officer can serve an order on the owner or the person who is in immediate possession or control thereof restraining him from removing, parting with or otherwise dealing with it except with the previous permission of such authorized officer. The provisions contained in the said proviso also makes it specifically clear that when the restraint order is passed with reference to the said proviso, the same is treated as deemed seizure of the relevant article or thing and this aspect assumes vital significance to understand and appreciate the distinction between the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the purpose of limitation under section 158BE and the panchnama stated to be finally drawn on such revocation was not only invalid but also uncalled for in view of rule 112(7) of Income-tax Rules. The Tribunal, therefore, held that the last valid panchnama in execution of search warrant was the one which was drawn initially and the subsequent revocation of the order under section 132(3) as well as the panchnama stated to be drawn on such revocation was wholly irrelevant for the purpose of determining the limitation under section 158BE. 13. In the present case, the three fisheries trawlers were found during the course of search on 6-11-1996 itself and the restraint order was passed in respect of the same mainly because it was not possible or practicable to take physical possession thereof and to remove the same to a safe place due to its volume, weight or other physical characteristics. In these circumstances, we are inclined to agree with the contention of the learned counsel for the assessee that the restraint order ought to have been passed under second proviso to section 132(1) and not under section 132(3) and that there was a deemed seizure of the said trawlers making the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998 just because he was called upon to do so and the panchnama was drawn as a mere formality without there being any seizure. In the case of Ananta N. Naik, the Pune Bench of ITAT has held that a panchnama drawn on the last day without seizure but made for lifting the prohibitory order cannot be reckoned as the last panchnama in terms of Explanation 2 to section 158BE. In the case of Kuwer Industries Ltd., Hon'ble Delhi High Court has held that a prohibitory order under section 132(3) without there being a seizure could not be a valid panchnama so as to extend the time limit available for the completion of the assessment under section 158BC read with section 158BE. Even rule 112 of the Income-tax Rules is very specific in this regard wherein it has been stipulated that a panchnama is required to be drawn only in the case of seizure of any material and that too by the authorized officer. In the present case, nothing was seized by the panchnama stated to be prepared on14-9-1998and this being the undisputed position, we hold that the panchnama so prepared was not a valid panchnama in terms of Explanation 2 to section 158BE. 16. In the present case, the only panchnama validly draw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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