TMI Blog2006 (8) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 24,36,397 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 prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom.) (FB); ( f ) Inaroo Ltd. v. CIT [1993] 204 ITR 312 (Bom.); ( g ) CIT v. Govindram 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32(3) was made in respect of fire safe vault which was located inside the office premises of the assessee-company. Another order under section 132(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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed firm M/s. Tanna Trading Corporation till 1-3-1993. Thereafter, the assessee-company was actively engaged in the activities of finance and capital market operations. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch last of such consequential operations were concluded." 16. During the course of proceedings relating to block assessment, the Assessing Officer as a matter of abundant 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. Thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny surcharge is leviable under section 113 of the IT Act for searches conducted prior to amendment with effect from 1-1-2002? 19. The first issue raised by the assessee is with regard to the validity of 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 ) Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is made without serving of such notice then such assessment would be without jurisdiction and null and void." 22. Before concluding, the Tribunal also held that the provisions of section 292B have no application to the facts of that case as the notice 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Amritsar Special Bench of Tribunal is inapplicable to the facts of the present case. Since in that case although valid notice under section 158BC was issued to the assessee, there was a mistake in mentioning the block period and further issue was whether the validity of proceedings could be challenged 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the block period. For searches conducted between 30th day of June, 1995 to 1st day of January, 1997, sub-clause ( i ) of section 158BC( a ) provided that such notice shall be served on the person requiring him to furnish within such time, not being less than 15 days, the return for the block period. Under sub-clause ( ii ) to section 158BC( a ), the person 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... block period within such time not less than 15 days (as applicable, at the relevant time). In the present case the Assessing Officer issued a notice requiring the assessee to furnish the return for the block period within 15 days from the service of this notice. 32. Similar issue arose before the Mumbai Bench of Tribunal in Vasparr Containers Ltd. v. Asstt. CIT [IT(SS) Appeal 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by the Assessing Officer." The JM gave a concurring view holding as under : "I have gone through the order proposed by my learned Brother and would like to add the following : 1. The assessee had raised additional ground of appeal against the issue of notice under section 158BC of the Income-tax Act, wherein the assessee was required to furnish the return of income for the block 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h action cannot render the whole assessment a nullity and that such errors are rectifiable by section 292B of the Act; ( f )The Assessing Officer can and has to activate his power only on the completion of search; ( g )Since the action of issuing notice under section 158BC is within the jurisdiction and, not of assuming jurisdiction, any error committed in such action cannot render the whole assessment a nullity and that such errors 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act arises once only when satisfaction is recorded by the Assessing Officer. Similar view was reiterated by the Hon ble Delhi High Court in the case of Karan Engg. Ltd. Janki Exports International through S.P Gupta v. Union of India [2005] 193 CTR (Delhi) and 730 and decisions of various Benches of Tribunal. Reliance was also placed on Special Bench decision in the case of Y. Subbaraju Co. v. Asstt. CIT [2004] 91 ITD 118 (Bang.)(SB) for the assumption of 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty but is of ratio-wise luminosity within the edifice of facts where the judicial lamps play the legal flame. Beyond those walls and de hors the milieu we cannot impart the eternal vernal value to the decision, exalting the doctrine of precedents into prison house of bigotry, regardless of varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting those matters which may lurk in the dark." 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the completion of the search proceedings Panchnamas were made and restraint order under section 132(3) was made in respect of the fire safe vault. The aforesaid authorised officers as per warrant of authorization issued by Director of Investigation completed the search on 20-7-1996 except the restraint order on the fire safe vault. On 10-8-1996, the restraint order was revoked by Shri K.V. Narsimhachariya, who according to the assessee was not the same officer who was initially authorized vide warrant of authorization dated 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 offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs kept inside the above vault were found and seized from the office premises of the assessee-company. The search which commenced on 19-7-1996 was temporarily concluded on 20-7-1996. 44. The issue before us is whether the continuation of the restraint order which was finally lifted on 24-10-1996 extends the time-limit for working out the period of limitation for completing the block assessment under section 158BC of the Act. 45. Under the provisions of section 132 of the Income-tax Act where the officers have information in their possession that any person shall not comply with the condition in 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the two provisions held as under : "Sub-section (3) of section 132 would apply only in those cases where the second proviso to section 132(1) does not apply. Where it is not practicable to seize the account books and valuable articles for the reasons stated in the second proviso to section 132(1), a restraint order would be regarded as a deem seizure but where it is not practicable to do so for any other reason, then a restraint order will be regarded as having been validly passed under section 132(3) and the restraint order will continue till a formal seizure is effected vis-a-vis the invoking of sections 132(3) and 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 exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime-limit under section 158BE of the Act. 49. In the facts of the present case, search and seizure operations were carried out by the authorized officers as per the warrant of authorization dated 18-7-1996. The search and seizure operations were started on 19-7-1996 by the said authorized officer and the same was temporarily concluded on 20-71996 as mentioned, in the Panchnama dated 20-7-1996. Certain loose paper files were found and seized on the date of the search. In addition a fire safe vault was found in the office premises of the assessee-company on, which restraint order under section 132(3) was passed on 20-7-1996 and the keys pertaining to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .S. Ray, Shri A.Z. Vaz and Shri Vishnu Gangurde by the Director of Investigation. The seizure of loose paper files, cash and keys of fire safe vault was inventoried by Shri Vishnu Gangurde, the order under section 132(3) restraining the fixed deposits lockers standing in the name of M/s. Bangalore Gases (P.) Ltd., and M/s. Best. Agencies was issued by Shri M.S. Ray. Similarly another order under section 132(3) in respect of the safe, vault inside the office premises was made by Mr. M.S. Ray. This order was revoked on 10-8-1996. As it is clear from the inventory of seizure of contents of fire safe vault made, the articles in the said fire safe vault were shares and debentures 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is assailable before the appellate authority." 54. It has been concluded by Special Bench in Promain Ltd. s case ( supra ) "therefore the Tribunal as an appellate authority can also examine as to when last warrant of authorization was executed." 55. The Special Bench also took into consideration the situation where prohibitory orders were issued under section 132(3) of the Act and held as under : "However, the situation would be different where prohibitory order under section 132(3) is issued because such order, unlike restraint order, does not amount to seizure as per sub-section (3) of section 132. Such orders are issued where it is not practicable to seize. So an act of seizure 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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