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TMI Blog2006 (8) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,36,397-being undisclosed income emanating, from alleged non-existing assets leased to Standard Oxygen (P.) Ltd. 3. On the facts and in the circumstances of the case the learned Dy. CIT erred in making an addition of Rs. 24,15,208-being undisclosed income emanating from alleged non-existing assets leased to Miga Gases (P.) Ltd. 4. On the facts and in the circumstances of the case the learned Dy. CIT erred in making an addition of Rs. 26,02,600-being undisclosed income emanating from alleged non-existing assets leased to Sri Ramakrishna Steel Inds. Ltd. 5. On the facts and in the circumstances of the case the learned Dy. CIT erred in making an addition of Rs. 8,94,027-being undisclosed income emanating from alleged non-existing assets leased to Bangalore Gases (P.) Ltd. 6. On the facts and in the circumstances of the case the learned Dy. CIT erred in making an addition of Rs. 35,90,000 being undisclosed of the appellant on account of alleged unexplained investment in purchase of property. 3. The assessee vide its letter dated 28-5-2004 had sought permission to file additional grounds of appeal for adjudication, which are as under: 7. Without prejudice to the other grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovindram Bros. (P.) Ltd. [1983] 141 ITR 626 (Bom.). 7. We have heard the rival submissions on the admission of additional grounds of appeal. Their Lordships of Hon'ble Supreme Court of in the case of Jute Corpn. of India Ltd. (supra) had observed as under : "Even otherwise, an appellate authority while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers, which the subordinate authority may have in the matter." [Emphasis supplied] 8. The Hon'ble Supreme Court following its decision in the case Jute Corpn. of India Ltd. (supra) in National Thermal Power Co. Ltd. (supra) had further held as under : "The view that the Tribunal is confined only to issues arising out of the appeal before the CIT(A) takes too narrow view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(3) was made by Mr. M.S. Ray in respect of bank account, fixed deposit lockers, etc. in the name of M/s. Bangalore Gas (P.) Ltd. and M/s. Bestow Agencies Ltd. Consequent to the Panchnama drawn on 20-7-1996, Panchnamas were drawn on 10-8-1996, 26-8-1996, 2-9-1996, 12-9-1996, 13-9-1996, 20-9-1996, 19-10-1996 and 25-10-1996. Accordingly, it was claimed by the authorities that the search and seizure was finally concluded on 24/25-10-1996. Along with the Panchnamas on different dates, orders under section 132(3) of the Income-tax Act were issued on each successive date. On 10-8-1996, the initial order under section 132(3) dated 19-7-1996 was revoked by Shri K.V. Narsimhachariya and another prohibitative order under section 132(3) in respect of fire safe vault was issued, which was revoked on 26-8-1996 by Shri Rajesh Menon. The said fire safe vault was again placed under restraint order by order under section 132(3) by Shri Rajesh Menon dated 26-8-1996 which was released on 2-9-1996 by Shri Rajesh Menon. Another order under section 132(3) was issued on 2-9-1996. It is revoked on 12-9-1996 by Shri Rajesh Menon. The fire safe vault was again placed under restraint by order under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perations. The assessee-company made a public issue in the month of February, 1996. The assessee-company is also having three fully owned subsidiaries viz., Goldcrest Capital Markets Ltd., Goldcrest Shelters India Ltd., and Goldcrest Share Services Ltd. 15. Prior to dealing with issues arising out of search operations and also the pre and post search operations, the issue of period of limitation for the completion of the block assessment proceedings under section 158BE(1)(a) of the IT Act was considered at length by the Assessing Officer. In respect of searches initiated after 30-6-1995 but before 1-1-1997, the provisions of section 158BE(1)(a) of the IT Act prescribe that the order under section 1533C determining the undisclosed income for the block period shall be passed within one year from the end of the month in which the last of the authorizations for search under section 132 or requisition under section 132A of the IT Act was executed. It was deliberated upon by the Assessing Officer that only one premises i.e., the office premises of the assessee-company was covered for search and seizure operations for which only one warrant of authorisation for search under section 132 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt precaution and in order to avoid any unfounded controversies as well as to set the matter at rest, the issue of limitation was raised vide order-sheet entry dated 12-6-1997 to the assessee-company. The assessee-company was asked to verify on oath and affidavit as to why the period of limitation to complete the block assessment proceedings under section 158BC of the IT Act, should not be calculated as one year from the end of the month of October, 1996 i.e., the date of final conclusion of search operation in terms of section 158BE(1) of the IT Act. In reply, by way of an affidavit on a stamp paper of Rs. 20, the assessee had contended that the time-limit for completion of block assessment proceedings is one year from the end of the month in which the last of authorization for search under section 132 of the IT Act was executed, which is the 31-10-1996 in this case. An affidavit dated 25-6-1997 was deposed under the signature of Mr. Krishnamurthy N. Iyer, managing director of the assessee-company. Thereafter proceedings for block assessment were conducted on various dates of hearing and the undermentioned issues were confronted from the assessee-company : (A) Taxability of commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings initiated under section 158BC of the IT Act. The Assessing Officer had issued a notice under section 158BC dated 31-3-1997 which requisitioned the assessee to file the return for the block period in the prescribed Form No. 2B, duly verified and signed in accordance with the provisions of the Act and to be delivered within 15 days of the service of notice. 20. The learned Authorised Representative for the assessee vehemently argued that the proceedings initiated under section 158BC of the Act are without jurisdiction as the notice issued under section 158BC dated 31-3-1997 was an invalid notice as the notice provided a tune to furnish the return which was not in accordance with law, as statutorily provided under section 158BC of the IT Act. Reliance was placed on the undermentioned decisions : (i) CIT v. Braithwaite & Co. Ltd. [1993] 201 ITR 343 (SC); (ii) Neera Aggarwal v. Dy. CIT [IT(SS) Appeal Nos. 142 and 143 (Delhi) of 2003]; (iii) Vinod Kumar v. Asstt. CIT [IT(SS) Appeal Nos. 1 to 5 (Agra) of 2003] [reported at (2005) 98 TTJ (Agra) 769-Ed.]. (iv) N.K. Parwanda v. Dy. CIT [IT(SS) Appeal No. 129 (Delhi) of 2003] [reported at (2004) 89 TTJ (Delhi) 95-ED] sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued was not valid. The provisions of section 292B of the Act only provide that if there is any mistake, defect or omission in notice then it shall not be invalid on that account. Accordingly, in N.K. Parwanda's case (supra) it is held that the notice issued was valid but the service of notice was questioned and as the same was not served on the assessee, the proceedings were quashed. The learned Authorised Representative brought to our notice that this has been confirmed by the Hon'ble Delhi High Court in ITA No. 411 of 2004. 23. The learned Authorised Representative also placed reliance on various decisions for the proposition of validity of notice issued under section 148 of the Income-tax Act in conjunction with provisions of section 139(2) of the Income-tax Act, as it stood upto 31-3-1989, which required that a notice under section 148 should require the assessee to furnish a return within 30 days from the date of service of such notice. A notice under section 148, not allowing the time prescribed by the statute in section 139(2) of the Act was not valid. Reliance was placed on series of judgments for the aforesaid proposition during the course of hearing. Similarly a simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enged in case of non-service of notice on the assessee. The learned Authorised Representative further pointed out that so far as the issue involved in the present appeal is concerned, the same is entirely different. In the instant appeal, the issue is that the assessment framed is beyond jurisdiction and against any authority of law as the Assessing Officer had proceeded to assume jurisdiction to frame a jurisdiction.under Chapter XIV-B of the Act, when he requisitioned the assessee to furnish a return of undisclosed income within 15 days of the service of notice under section 158BC of the Act. It was contended by the assessee that as per the provisions of the Act, before assuming jurisdiction to frame the assessment, the Assessing Officer is statutorily required to provide a time of not less than 15 days and once the said period has been curtailed, he had no authority to do so and in any case it was nullity. It was further claimed by the assessee that the notice is not fulfilling the mandatory principal requisition of providing a time of not less than 15 days in any law and reliance was placed on the undermentioned decisions : (A)Anil & Smt. Neera Aggarwal's case (supra) and (B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in respect of whom searches were conducted after 1-1-1997 notice is to be served requisitioning the person to furnish the return within a period being not less than 15 days but not more than 45 days as per specification in the notice. It has been further provided by way of proviso that no notice under section 148 is required to be issued for the purpose of proceeding under this chapter. Further provided that a person who has furnished a return under this clause shall not be entitled to file any revised return. Under clause (b) the Assessing Officer is empowered to determine the undisclosed income of the block period in the manner laid down in section 158BB and provisions of sections 142(2), 143, 144 and 145 shall so far as may be applied. Under clause (c) the Assessing Officer is empowered to pass such orders and determine the tax payable on the basis of such block assessments. Clause (d) to section 158BC empowers the Assessing Officer to deal with the assets seized under sections 132 or 132A of the Act in accordance with the provisions of section 132B of the Income-tax Act. Section 158BD of the Act is relatable to the determination of undisclosed income of any other person in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal No. 147 (Mum.) of 1998] relating to block period 1-4-1986 to 19-7-1996 wherein also notice under section 158BC was issued to file the return of income for the block period within 15 days of service of notice and it was held as per AM and while doing so the Tribunal has held as under : "We have considered the rival submissions vis-a-vis the relevant facts of the case and have gone through the precedents cited before us. The notice issued under section 158BC came up for consideration before the Tribunal, Special Bench in the context of certain defects in the said notice. The defects were that the block period was not correctly mentioned and it was served on the advocate of the assessee. For the detailed reasons recorded in the order, the Tribunal, Special Bench came up to the conclusion that these defects are rectifiable under section 292B of the Income-tax Act, as the provisions of section 158BG are procedural in nature. It was observed by the Tribunal that any defect in the notice or with regard to its issue cannot render the block assessment proceedings to be null and void. After very carefully going through the Tribunal, Special Bench decision, we are of the view that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period within 15 days of service of notice. In addition to the judicial precedents referred by my learned Brother, similar issue was considered by Delhi Bench of Tribunal in Navin Verma v. Asstt. CIT [2006] 105 TTJ (Del) 952 : (2006) 283 ITR 83 (Del)(AT), wherein after taking note of various judicial pronouncements of several High Courts and various decisions of Tribunals and distinguishing the decision of Amritsar Special Bench in Smt. Mahesh Kumar Batra v. Jt. CIT [2005] 95 TTJ (Asr)(SB) 461 : [2006] 280 ITR 34 (Asr)(SB)(AT) and it has been held that a notice under section 158BC of the Act which did not provide clear period of 15 days for filing the return does not satisfy the basic and pre-requisite condition of law, that the mandatory requirement of the legal provisions was not satisfied and hence such a notice was illegal and void. Relying also on the aforesaid decision of Delhi Tribunal in the case of Navin Verma v. Asstt. CIT (supra ), I concur with the decision of my learned Brother that the impugned notice issued in this case is invalid and such a defect is not curable under section 292B of the Income-tax Act. Therefore the block assessment proceedings completed in pursuan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rors are rectifiable by section 292B of the Act. 33. The learned Authorised Representative for the assessee during the course of his arguments has pointed out that the abovesaid decision of Hon'ble Tribunal is not in confirmity with the decision of Special Bench of Lucknow Tribunal in the case of Nawal Kishore & Sons Jewellers case (supra), wherein it has been held as under: "In view of the legal position mentioned above, we are of the considered view that non-issuance of notice under section 143(2) cannot render the block assessment as a nullity since foundation of such assessment is validly laid by issue of notice by the Assessing Officer under section 158BC(a) asking the assessee to file the return. It is settled legal position that assessment proceedings are validly initiated either by filing of the return or by issuance of notice for filing of the return in view of Supreme Court judgment in the case of Ghanshyamdas v. Regional Asstt. CST [1964] 51 ITR 557 (SC). There is no provision under Chapter XIV-B for filing of voluntary return. The only provision under which such return can be filed is section 158BC. Therefore, assessment proceedings can be said to be validly initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f jurisdiction. The learned Authorised Representative placing further reliance on the judgment of Hon'ble Apex Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 and Gujarat Electricity Board v. CIT 266 ITR 273 (sic) for the proposition that in case two views are possible on the same issue, argued that it is settled law that a view which has been expressed in favour of the assessee should be followed and adopted. 35. We agree that, as rightly pointed by the learned counsel, a judgment has to be read in the light of the questions before the Judges and some observations made by the Judges cannot be taken out of the context in which these observations are made and treated as complete exposition of law by itself. The Hon'ble Supreme Court has, in the case of Sun Engineering Works (P.) Ltd. case (supra), observed as follows : "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38. In the light of the above, we cannot construe the Special Bench decision as an authority for the proposition that assumption of jurisdiction by issuance of notice is a procedural matter. This issue of notice providing time less than 15 days for furnishing the return of block period under section 158BC was considered at length by Delhi Bench of Tribunal in Navin Verma v. Asstt. CIT [2006] 283 ITR 83, wherein various judicial pronouncements of several High Courts and various decisions of Tribunals were considered at length and after distinguishing the decision of Special Bench in Smt. Mahesh Kumar Batra (supra), it has been held that a notice under section 158BC of the Act which did not provide clear period of 15 days for filing the return does not satisfy the basic and pre-requisite condition of law and such a notice was invalid. 39. In view of the above legal position and on the facts and circumstances of the case, we hold that the impugned notice issued under section 158BC of the Act not allowing the assessee the minimum period of 15 days prescribed to furnish the return of income for the block period is invalid and liable to be quashed. 40. The second issue for our consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 18-7-1996. The learned Authorised Representative for the assessee submitted that once an order under section 132(3) is passed in respect of certain assets by the authorized officers then the revocation of the said order is to be made by the same officers who executed it initially unless and until another warrant of authorisation is made. The other Panchnamas (were) issued on various dates as a consequence of section 132(3) and not as a result of any fresh warrant of authorization under section 132(1) of the Income-tax Act. Subsequent orders under section 132(3) made on 10-8-1996 and thereafter as mentioned in paras above were not withdrawn by authorized officer. In view of the foregoing it was contended by the learned Authorised Representative for the assessee that the search conducted on 19-7-1996 on which date the restraint order under section 132(3) was passed, which was vacated on 10-8-1996 implies that the search was concluded on 10-8-1996. Accordingly the assessment in the case had to be completed by 30-8-1997, which in fact was completed on 23-10-1997 i.e., beyond the period of one year prescribed under the provisions of section 158BE of the Act. Reliance was placed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (a), (b ) and (c) to section 132(1) of the Income-tax Act, then, he may authorize such officers to enter and search any building, place, vehicle etc. of the person and seize any books of account, other documents, money, bullion, jewellery or other valuable articles or things found as a result of search. It has been provided further under the section 132(1) of the Income-tax Act that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a place due to its characteristics, the authorized officer may serve an order on the owner, or the person in possession or control that he should not remove, part with or otherwise (dealing) except with the previous permission of such authorized officer. Such action of the authorized officer shall be deemed to be seizure of such valuable article or thing under clause (iii ) to section 132(1) of the Income-tax Act. The provisions of section 132(3) of the Income-tax act empower the authorized officer to serve an order on such owner or the person who is in possession or control of such assets which could not be seized, restraining him from removing, parting or otherwise dealing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 132(8A) for extension of the restraint order. Their Lordships held as under : ...(ii)The orders which are passed under section 132(3) may have a very foreshowing effect on the business of an assessee. The order of restraint may adversely affect the business and, therefore, adequate safeguards are sought to be provided in the Act by the insertion of the provisions of sub-section (8A) in section 132. In order that the restraint order may-not be continued indefinitely, sub-section (8A) provides that the restraint order can be continued only if, before the expire of 60 days, and for reasons to be recorded, the CIT grants an extension. The provisions of sub-section (8A) cannot be bypassed or rendered nugatory by revoking an order under section 132(3) and thereafter passing another order on the same day. (iii)Even when an order under section 132(3) has been passed, the Departmental officials are not restrained from examining the goods. An order under section 132(3) only restrains the owner or the person in possession of the goods from removing them, parting with their possession or dealing with them. The order is not aimed at the Department itself." 47. Their Lordships of Bombay Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid fire safe vault along with the keys to the almirahs kept inside the above vault were seized. Thereafter on 10-8-1996, the prohibitory order was revoked. But no seizure was made out of the said fire safe vault. Thereafter the restraint order under section 132(3) in respect of the said fire safe vault was revoked and reimposed on various dates by officers other than the officers who were authorized under the warrant of authorization. On final revocation of the prohibitory orders, under section 132(3) of the Act, shares of different companies were found totalling item Nos. 1 to 15 as per the inventory prepared on 20-9-1996 and were seized on the date itself. The perusal of the order for the block period reveals that the shares worth Rs. 3,04,02,710 were found and released on 20-9-1996 as per Annexs B1 to B4. Similarly shares and debentures in Vols. I, II and III were found and released on 20-9-1996. Share and debentures worth Rs. 2,79,940 were found and seized on 25-10-1996. Cash of Rs. 27,387 was seized on 19-7-1996 i.e., the date of the search along with papers and documents relating to lease transactions, hire-purchase transactions and also four bunches of miscellane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebentures of different companies. Though the initial restraint order under section 132(3) was revoked on 10-9-1996, the said fire safe vault was further restrained on several dates upto 25-10-1996 by officers who were not authorized officers as they were not the persons authorized in the warrant of authorization issued, against the assessee. The prohibitory order under section 132 of the Act placed on 9-7-1996 is a valid prohibitory order, which was released on 10-10-1996 and all the prohibitory orders placed thereafter by officers other than authorized officers are not valid prohibitory orders. In any case, it is not permissible under law to extend the time of completion of search by passing restraint orders under section 132(3) of the Income-tax Act. The contents of the fire safe vaults were not such which could not have been physically verified and taken possession of and the act of revoking and placing the said documents under prohibition cannot help the case of the revenue. 52. Under Chapter XIV-B of the Income-tax Act special procedure for assessment of search cases is provided. The undisclosed income relatable to the block period is to be computed under section 158BB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re remains to be performed and, therefore, search cannot be said to be concluded. Hence, in such case, search would be concluded when prohibitory order is lifted and the books of account valuable articles are actually seized and Panchnama is prepared. In such case, it is that Panchnama (if it is the last one) which is relevant for calculating the period of limitation. Accordingly, the Tribunal can examine the record of search with a view to find out the factum of last Panchnama as discussed above." 56. In the facts of the present case, the warrant of authorization was issued on 18-7-1996, which was acted upon by the authorized officers on 19-7-1996, along with restraint order being issued under section 132(3) of the Income-tax Act which was revoked on 10-8-1996, as all the subsequent prohibitory orders being placed and revoked by officers other than the authorized officer not valid. The exercise of placing and revoking prohibitory orders which are not valid cannot extend the period of limitation. As per the provisions of section 158BE(1)(a) of the Income-tax Act the block assessment in the case had to be completed within one year from the exercise of last authorization of search. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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