TMI Blog2010 (9) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... ry order under section 132(3) is under law but the reasons for doing so has to be recorded in writing and are justiciable - (4) The period of limitation starts on the date on which the last of authorisation has been executed and not when the authorised officer states that the search is finally concluded. Putting a prohibitory order under section 132(3) does not elongate the starting point of limitation. In the light of the aforesaid discussion, as the Tribunal has declined to go into the jurisdictional aspect, the appropriate course would be to set aside the order and remit the entire matter back to the Tribunal for fresh consideration keeping in mind the observations made in this judgment and also consider the jurisdiction aspect which it had declined to consider while passing the impugned order. Therefore, the finding recorded by the Tribunal that action of the Income-tax authorities anterior to search cannot be the subject-matter of the appeal, the legality of the validity of the search proceedings cannot be gone into in the appeal against the order of block assessment and statute has not provided any right of appeal, against such an order cannot be sustained - substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity from the time, the search is started so as to determine as to at what point of time the search would said to have been come to a close, for the sole purpose of examining whether the assessment is in time or otherwise ?" Limitation "(ii) Whether the term 'within one year from the end of the period in which the last of the authorisation for search under section 132 was executed' has to be taken to mean the execution of the warrant resulting in seizure and not with reference to issuing of prohibitory order and successive visits that are claimed as search, which are so carried out on the basis of the only authorisation that was issued initially ?" Panchnama "(iii) Whether where a search is carried on the basis of the authorisation resulting in seizure of some items issue of prohibitory order on others, such search could be said to be genuine and comes to a close only when the authorising officer says that in writing and visits the premises and by seizing some items that are covered by prohibitory order which could have been seized by him even at the first instance and it is not the case of the Department especially when the item so seized finally is not one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emplated under section 132(3) is passed, it should be preceded by an order in writing setting out the reasons why such an order has become necessary failing which the prohibitory order would be illegal. The authorised officer has no power after commencing the search to adjourn such proceedings or fix a date for continuation of such proceedings and at any rate such adjourned date on which the panchnama is written cannot form the basis for calculating the period of limitation. Lastly, it was contended merely because in panchnamas written on subsequent visits or inspection it is recorded that the search is finally concluded that cannot be construed as the last panchnama and the date from which the period of limitation is to be computed. 6. Per contra, the learned senior counsel appearing for the Revenue submitted that search proceedings were conducted by an authorised officer and after the conclusion of such proceedings on the basis of the material collected during such search and on the basis of the returns filed in pursuance of the notice issued the Assessing Officer passes a block assessment order. In an appeal filed challenging the assessment order the legality of the validity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a fresh authorisation. The authorisation issued comes to an end only when a panchnama is written recording that the search is finally concluded or completed and, therefore, he submits that the finding recorded by the Tribunal are legal and valid and do not call for any interference. Points for consideration 8. In the light of the aforesaid submissions, the points that arise for consideration are : "(i) Whether the Tribunal is entitled in law to look into all the aspects of search in an appeal before it, in respect of a block assessment order passed under the provisions of Chapter XIV-B of the Income-tax Act, 1961 ? (ii) What is the starting point of limitation for the purpose of passing the block assessment year as per the provisions of section 158BE of the Income-tax Act, 1961 ?" Block assessment Chapter XIV-B 9. Chapter XIV-B of the Act deals with special procedure for assessment of search cases. This Chapter was inserted by the Finance Act, 1995, with effect from July 1, 1995. Section 158BE in the Act, which was inserted by the Finance Act, 2003, which came into effect from June 1, 2003, provides that the provisions of this Chapter, that is, Chapter XI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears, the said income shall not be included in the block period." 11. A reading of the aforesaid provision makes it clear that the condition precedent for the applicability of this provision is initiation of search under section 132 or requisition under section 132A after the 30th day of June, 1995. In such a search, if any undisclosed income is unearthed, then the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of Chapter XIV-B. The total undisclosed income relating to the block period shall be charged to taxation at the rate prescribed under section 113, that is, 60 per cent. under sub-section (2). The Explanation to the said subA-section clarifies that the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year including the block period. It further clarifies that the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period. Similarly, the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,- (A) The Director General or Director or the Chief Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) Such Additional Director or Additional Commissioner or Joint Director or Joint Commissioner, as the case may be, may authorise any Assistant Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the Chief Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the Revenue : Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii) : Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business : Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolves to proceed to make an appropriate order imposing tax liability or penalty, etc., and at that stage, all relevant materials from which the liability of the taxpayer is sought to be inferred shall have to be disclosed. At the initial stage of search and seizure, it is sufficient if the Revenue places the material before the court to examine whether the said material on which search and seizure is ordered was relevant to the exercise of the power under section 132(1) ; the material placed for the court's perusal cannot be disclosed to the petitioner." 16. In the case of Harikisandas Gulabdas and Sons v. State of Mysore [1971] 27 STC 434 (Mys) the court considered the scope of "inspection" and observed as follows (page 437) : "If his intention was to inspect and verify the accounts of the petitioner, he would have called for the required accounts and other registers. He did not even inform the petitioner that he would be visiting its premises. He gave a surprise visit, along with his staff, and there he searched and seized some accounts and other documents without following the procedure prescribed under the Code of Criminal Procedure. If his intention was only to ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such subordinate officer may thereupon search for such thing in such place. (4) The provisions of this Code as to search-warrants and the general provisions as to searches contained in section 100 shall, so far as may be, apply to a search made under this section. (5) Copies of any record made under sub-section (1) or sub-section (3) shall forthwith be sent to the nearest magistrate empowered to take cognizance of the offence, and the owner or occupier of the place searched shall, on application, be furnished, free of cost, with a copy of the same by the Magistrate." 19. A Constitution Bench of the apex court in the case of Commissioner of Commercial Taxes, Board of Revenue v. Ramkishan Shrikishan Jhaver reported in [1967] 66 ITR 664 (SC) ; [1967] 20 STC 453 ; AIR 1968 SC 59 dealing with searches conducted under the Madras General Sales Tax Act to which the provision of section 165 was made applicable as far as may be held, that when the proviso applies, the provisions under sub-section as far as may be possible, we see no reason why section 165 should not apply mutatis mutandis to search made under sub-section (2). At paragraph 17 of the judgment, it held as under (pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afeguards and other safeguards provided in Chapter VII of the Code of Criminal Procedure, which also apply so far as may be to searches made under sub-section (2), we can see no reason to hold that the restriction, if any, on the right to hold property and to carry on trade by the search provided in subA-section (2) is not a reasonable restriction keeping in view the object of the search, namely, prevention of evasion of tax." 20. The constitutional validity of section 132 was the subject-matter before the hon'ble Supreme Court in the case of Pooran Mal v. Director of Inspection (Investigation) reported in [1974] 93 ITR 505 (SC). The apex court upheld the constitutional validity of the aforesaid provision which provides for search and seizure when it is entrusted to income-tax authorities with a view to prevent a large tax evasion. However, thereafter, they have observed as under (pages 517 and 518) : "Indeed, the measure would be objectionable if its implementation is not accompanied by safeguards against its undue and improper exercise. As a broad proposition it is now possible to state that if the safeguards are generally on the lines adopted by the Criminal Proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficers mentioned in sub-section (1). Thirdly, the authorisation for the search cannot be in favour of any officer below the rank of an Income-tax Officer. Fourthly, the authorisation is for specific purposes enumerated in clauses (i) to (v) in sub-section (1), all of which are strictly limited to the object of the search. Fifthly, when money, bullion, etc., is seized the Income-tax Officer is to make a summary enquiry with a view to determine how much of what is seized will be retained by him to cover the estimated tax liability and how much will have to be returned forthwith. The object of the enquiry under sub-section (5) is to reduce the inconvenience to the assessee as much as possible so that within a reasonable time what is estimated due to the Government may be retained and what should be returned to the assessee may be immediately returned to him. Even with regard to the books of account and documents seized, their return is guaranteed after a reasonable time. In the meantime the person from whose custody they are seized is permitted to make copies and take extracts. Sixthly, where money, bullion, etc., is seized, it can also be immediately returned to the person concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny books of account or documents or assets. The section does not confer any arbitrary authority upon the revenue officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorisation in favour of a designated officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s seized are likely to be useful for or relevant to a proceeding under the Act. If he is unable to do so, the court may order that those documents be released. But the circumstance that a large number of documents have been seized is not a ground for holding that all documents seized are irrelevant or the action of the officer is mala fide. By the express terms of the Act and the Rules the Income-tax Officer may obtain the assistance of a police officer. By sub-section (13) of section 132, the provisions of the Code of Criminal Procedure, 1898, relating to searches apply, so far as may be, to searches under section 132. Thereby it is only intended that the officer concerned shall issue the necessary warrant, keep present respectable persons of the locality to witness the search, and generally carry out the search in the manner provided by the Code of Criminal Procedure. But sub-section (13) of section 132 does not imply that the limitations prescribed by section 165 of the Code of Criminal Proce-dure are also incorporated therein. In ITO v. Firm Madan Mohan Damma Mal [1968] 70 ITR 293 it was observed that the issue of a search warrant by the Commissioner is not a judicial or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person is in possession of assets which has not been or would not be disclosed. Having received information, the authorising officer has to satisfy himself that a particular person is in possession of undisclosed assets. The empowered authority in consequence of information in possession, only when he has reason to believe that any of the conditions mentioned in clauses (a), (b) and (c) of sub-section (1) of section 132 exists, then only he may authorise an officer mentioned in clause (A), clause (B) of sub-section (1) of section 132 to enter and search as provided under clauses (i), (ii), (iia), (iib), (iii), (iv) and (v). No warrant will be issued merely on the basis of suspicion or to make a roving or fishing enquiry to unearth the concealed assets. It is only when the authorising officer is fully satisfied that the information would lead to the discovery of undisclosed assets, that the warrant of search will be issued. Therefore, it is obligatory on the part of the empowered officer to record in writing the grounds of search as set out in the aforesaid provision and then only he can authorise an authorised officer to enter and search as provided under the said provision. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be regarded as adequate and render the temporary restrictions imposed by the measure reasonable. These safe-guards are : (i) the empowered officer must have reasonable grounds for believing that anything necessary for the purpose of recovery of tax may be found in any place within his jurisdiction, (ii) he must be of the opinion that such thing cannot be otherwise got without undue delay, (iii) he must record in writing the grounds of his belief, and (iv) he must specify in such writing so far as possible the thing for which search is to be made. These safeguards apply to searches under sub-section (2). 24. It clearly shows that the power to search under sub-section (2) is not arbitrary. In the first place, it must be noted that the power to order search and seizure is vested in the highest officers of the Department. Secondly, the exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in section 132(1) (a), (b) and (c) exists. In this connection, it may be further pointed out that under sub-rule (2) of rule 112, the Director of Inspection or the Commissioner, as the case may be, has to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provision, whether those grounds are adequate or not is not a matter for the court to be investigated. It is of course open for the assessee to contend that the authorised officer did not have an intention to hold. The expression "reason to believe" does not mean purely a subjective satisfaction on the part of the Income-tax Officer, it is open to the court to examine the question. To that extent the action of the empowered officer in initiating the proceedings under section 132(1) of the Act is open to challenge in a court of law. Seizure 27. According to Strouds Judicial Dictionary, the word "seizure" in its ordinary and natural sense means" forcible taking possession". According to Webster's Dictionary, the word "seized" means "to effect legal possession". In Shorter Oxford English Dictionary, the said word means "to put in possession". 28. The moment the act of discovery of unearthing of what is lying undisclosed or concealed is concluded, it would mark the conclusion of search and then what will follow is the seizure or performance of other functions as envisaged in clauses (iii), (iv) and (v) of sub-section (1) of section 132 of the Act. 29. Clause (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le or thing and remove it to a safe place or volume, weight or other physical characteristics for the reasons set out in the said proviso, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof not to remove or part with or otherwise deal with it except with the previous permission of the authorised officer when such an order is made such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii). 34. However, if the said order to be valid, not only an order in writing is required but the said order should also disclose why it is not possible to take physical possession of the article or things. The said proviso recognizes three circumstances under which such a seizure is not possible, firstly, due to its volume, secondly, due to its weight, thirdly, other physical characteristics and, fourthly, due to which of its dangerous nature. 35. A discretion is vested with the authorised officer not to seize as aforesaid by sub-section (3) of section 132 of the Act. It provides where it is not practicable to seize any books of account, other documents, money, bull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer can have recourse to the provisions contained in sub-section (3) of section 132. In the case in hand, the stand taken up by the respondents has been that they did not seize ornaments, etc., found on search and opted to attach the same under sub-section (3) of section 132, because they could not make up their mind as to whether the same were undisclosed property without verification of the statement of Shri Om Parkash Jindal recorded on June 6, 1974. That means that on June 6, 1974, and also on July 12, 1974, the authorised officers felt reluctance in believing that the aforesaid ornaments, etc., were undisclosed property. When that was their view, they could not, in my opinion, for the reasons already recorded above, legally attach those ornaments, etc., under sub-section (3) of section 132. It is pertinent to note that Sri Om Parkash Jindal had disclosed in his statement recorded on June 6, 1974, that 32 ornaments of annexure 'D-I' belonged to his wife and 4 ornaments of annexure 'D-II' belonged to his son and daughter-in-law, and it was only 17 ornaments of annexure 'D-III' which belonged to Bajrang Lal and 5 ornaments, G. C. notes and silver coins of annexure 'D-IV' that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same as he pleases and thereby it is infraction of his liberty to the free use of the said ornaments. There-fore, it is desirable that the authorised officer should decide the matter one way or the other and lift the attachment, effected by him under sub-section (3) of section 132, at the earliest. In the case in hand, the ornaments, etc., were attached on June 6, 1974. No decision had been taken to seize the same for about six months, i.e., till December 3, 1974, when the present writ petition was filed. There-fore, in these circumstances, continuation of the attachment allegedly made by the authorised officers of the ornaments, etc., of annexures 'D-I', 'D-II', 'D-III' and 'D-IV', especially when I am of the view that the same was not sanctioned by the provisions of sub-section (3) of section 132, will not be permissible. It is indisputable that this court can while exercising the powers under article 226 of the Constitution, mould the remedy as it suits to the facts of a particular case. So, when it had been found that the attachment of ornaments, etc., referred to above, was not countenanced by the provisions of sub-section (3) of section 132, and had been directed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons which make it impracticable to seize documents and valuable things. The word 'practicable' indicates that, for some good and valid reason, it is not possible to seize the valuable articles or the books of account. 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 reason stated in the sec- ond proviso to section 132(1), a restraint order would be regarded as a deemed 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." Again, at pages 444 and 445, it has held as under : "In our opinion, the power under section 132(3) cannot be so exercised as to circumvent the provisions of section 132(1) read with sub-section (5) thereof. When a search is conducted and valuable movable articles are found which are liable for seizure, then they should be seized. Because such seizure was not effected due to their physical characteristics, Parliamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on April 9, 1991, and a fresh order in respect of the same goods was again passed on April 9, 1991. This exercise was repeated on June 6, 1991. In our opinion, it is not permissible to do so. The orders which are passed under section 132(3) may have a very far-reaching 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 must not be continued indefinitely, sub-section (8A) of section 132 provides that the restraint order can be continued only if, before the expiry of 60 days, and for reasons to be recorded, the Commissioner 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 date. On February 11, 1991, an order under section 132(3) has been passed. The 60 days would expire on or about April 10, 1991. If the order under section 132(3) was to be continued, then the Commissioner should have granted approval under sub-section (8A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation has been received, is in possession of undisclosed income or property, may seize such assets under clause (iii). The word 'such' occurring in clause (iii) of sub-section (1) clearly shows that the assets as mentioned in clause (iii) refer to undisclosed assets as mentioned in clause (c). Thus, what can be seized under clause (iii) is the asset as mentioned in clause (c) which has not been or would not be disclosed for the purpose of the Income-tax Act. Some courts took the view that 'seizure' means taking physical possession of any valuable article or thing. To overcome this, the Legislature has amended section 132(1) by the Finance Act, 1988. The effect of this amendment is that a second proviso shall be inserted with effect from April 1, 1989, in sub-section (1) of section 132. The second proviso, which is not relevant for the instant petition, because that would be inserted only with effect from April 1, 1989, enables the authorised officer to serve an attachment order on the owner, or the person, who is in immediate possession or control thereof, in respect of an asset where it is not possible or practicable to take physical possession of any valuable article or thing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposing tax. Under the scheme of the block assessment as is clear from the wordings in each and every section, the block assessment is based on search and seizure. This order is made appealable under section 253(1)(b). Scope of appeal 43. The contention of the Revenue is that the Tribunal cannot look into the validity of the search as conducted under the provisions of section 132 of the Act as the Tribunal has no jurisdiction or competence to look into this aspect. Right of appeal to the assessee would not include assailing any action of the income-tax authority prior to initiation of search. The appeal lies against an assessment order passed by the Assessing Officer under clause (c) of section 158BC. The right of appeal to the assessee as well as the powers of the Tribunal to hear the appeal are limited to the actions of the Assessing Officer and not beyond that whereas the conditions to be satisfied as prescribed in clauses (a) to (c) of section 132(1) are prior to initiation of the search. According to the legal connotation, the word "initiate" means to begin or to commence. A search is a physical act of the party making search and, therefore, a search can be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263 or an order passed by a Chief Commissioner or a Director General or a Director under section 272A ; or" 46. Section 254 deals with orders which could be passed by the Appellate Tribunal. Sub-section (1) of section 254 provides that the Appellate Tribunal may after giving both the parties to the appeal an opportunity of being heard "pass such orders thereon as it thinks fit". Section 255 deals with the procedure of the Appellate Tribunal. It provides for constitution of the Benches in all circumstances, a member or president sitting singly can dispose of the matter in such a manner and the appeal shall be decided according to the opinion of the majority. If there is a majority but if the members are equally divided, the said dispute is to be resolved. Sub-section (5) provides that subject to the provisions of this Act. the Appellate Tribunal shall have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings. In so far as the powers of the Appellate Tribunal is concerned, sub-section (6) mandate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed party. If no right of appeal is conferred against any action of the tax authorities, then such an action can only be challenged before the hon'ble High Court by way of writ petition under article 226/227 of the Constitution of India . . . the Assessing Officer is only required to satisfy himself that search was conducted in the case of an assessee and initiated after June 30, 1995, and nothing more. Another aspect of search which is to be seen by the Assessing Officer is the execution of the last authorisation as provided in section 158BE. This is relevant only for the purpose of ascertaining the period of limitation for making the block assessment. The last aspect of the search which is to be seen by the Assessing Officer is with reference to the evidence found as a result of the search as provided in section 158BB. This is because the Assessing Officer can use only that evidence which is found as a result of search and such other material which is relatable to such evidence. Apart from these requirements, the Assessing Officer is not required to see any other aspect of the search . . . a valid search is the foundation for assuming jurisdiction to make the block assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Act. Further, they have said that the right of appeal is a right, which has to be conferred by a specific provision under the statute, when a statute does not provide for an appeal against the action under section 132(1). The assessee not only has the right of appeal but an appeal filed against the assessment order he cannot challenge the validity of a search. 50. Reliance is also placed by the Revenue on the judgment of the Delhi High Court in the case of M. B. Lal v. CIT reported in [2005] 279 ITR 298 (Delhi). Following the impugned judgment in this case, they have held in the light of this decision, it is no longer open to the petitioner to reagitate the question of validity of the authorisation and the legality of the search proceedings either before the Commissioner of Income-tax or before the Tribunal for that matter. 51. In order to appreciate the scope of appeal it is necessary to know the meaning of assessment, as used in the Indian Income-tax Act. 52. The apex court in the case of C. A. Abraham v. ITO reported in [1961] 41 ITR 425 (SC) dealing with the word "assessment" used in the Indian Income-tax Act, 1922, has explained the meaning as under (page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing of appeals and for reviewing assessment and section 34 deals with assessment of incomes which have escaped assessment. The expression 'assessment' used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding that when by section 44, it is declared that the partners or members of the association shall be jointly and severally liable to assessment, it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, 'all the provisions of Chapter IV shall so far as may be apply to such assessment' a restricted content : in terms it says that all the provisions of Chapter IV shall apply so far as may be to assessment of firms which have discontinued their business. By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. It is true that this liability arises only if the Income-tax Officer is satisfied about the existence of the conditions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature qua a certain class will not be lightly made." 53. Therefore, the word "assessment" has been used in its widest connotation. It is used as meaning some times the computation of income, some times determination of the amount of tax payable, and some times the whole procedure laid down in the Act imposing liability upon the tax-payees. Therefore, the word "assessment" encompasses the determination of liability, machinery for imposing liability and the procedure in that behalf. It is against such order of assessment an appeal lies. 54. The apex court in the case of CIT v. Ashoka Engineering Co. reported in [1992] 194 ITR 645 (SC), explaining how appeal provision should be construed, held as under (page 649) : "We have heard counsel for both the parties. The question at issue is regarding a right of appeal. It is true that there is no inherent right of appeal to any assessee and that it has to be spelt from the words of the statute, if any, providing for an appeal. But it is an equally wellsettled proposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under (page 214) : " . . . in a case where certain grounds concerning the same matter are interlinked, they should be considered together and the scope of the subject-matter before the Tribunal should be construed accordingly. The position might be different where different grounds of appeal are dealt with by the Appellate Assistant Commissioner, which have no real inter-connection with each other though naturally they all bear upon particular assessment and though they may all broadly relate to the computation of income from the same head of source. But in a case where there are inter-connected grounds of appeal and they have impact on the same subject-matter, the scope of the appeal should be broadly considered in the correct perspective. While the appellant should not be made to suffer and be deprived of the benefit given to him by the lower authority where the other side has not appealed, equally the procedural rules should not be interpreted or applied so as to confer on an appellant a relief to which he cannot be entitled if the points decided in his favour on the same matter by the lower court are also considered as requested by the respondent." 57. In answering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly, consequent upon information in his possession, with the competent authority is the matter which can definitely be looked into by the Tribunal so also by this court as the absence would vitiate the entire action." 58. Yet another Division Bench of the Rajasthan High Court in the case of Kusum Lata v. CIT reported in [1989] 180 ITR 365 (Raj) has held as under : "The court cannot go into the sufficiency of the information or the material. All that has to be seen is as to whether some material in fact existed or not for coming to the opinion and to have the reason to believe that any person is in possession of any undisclosed income or property. Obviously, as to whether the circumstances contemplated by clauses (a) to (c) existed or not." 59. There is no inherent right of appeal to any assessee and that it has to be spelt out from the words of the statute, if any, providing for an appeal. But it is an equally well-settled proposition of law that, if there is a provision conferring a right of appeal. It should be read in a reasonable, practical and liberal manner. The Tribunal's powers in dealing with appeals are of the widest amplitude and have in some cases been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consequent to search initiated under section 132 of the Act. In interpreting fiscal statute, the court cannot proceed to make good deficiencies, if there be any, the court must interpret the statute as it stands, and in case of doubt, in a manner favourable to the taxpayer. When the statute expressly refers to "a search initiated under section 132 of the Act", while interpreting the said provision it cannot be ignored. The expression used is capable of comprehensive impact. The words used are "a search initiated". There-fore, the subject-matter of appeal under the provision is not only the assessment order by the Assessing Officer but also "a search initiated" under section 132 of the Act. Therefore, the necessary corollary is, if the assessee contends that the search initiated under section 132 of the Act is not in accordance with law, it would not satisfy the legal requirements as contemplated under section 132(1)(a), (b), (e), then the said contention has to be considered and adjudicated upon by the Tribunal, in an appeal filed against the assessment order. Since this action of the Assessing Officer is inextricably linked with the initiation of assessment proceedings the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiation of the proceedings is void. Those materials secured in the illegal search and seizure would certainly be made use of in the assessment proceedings under the Act other than the block assessment proceedings and, therefore, the contention that the assessment order would not get vitiated because of illegal search and seizure as it is based on the returns filed and the materials secured during the illegal search and seizure is, without any substance. Re : Limitation 63. Section I58BC prescribes the procedure for block assessment. Section 158BE of the Act prescribes the time limit for completion of block assessment. According to the said section, the commencement of the period of limitation is within one year from the end of the month in which the last of the authorisation for search under section 132 was executed. Therefore, it implies there could be more than one authorisation under section 132(1) of the Act. If there are more than one authorisation, the starting point of limitation is to be computed from the last of the authorisations. Explanation 2 to sub-section (2) of section 158BE explains when "authorisation" is deemed to have been executed. The authorisation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. A panchnama may also document the return of the seized articles or the removal of seals. But, the panchnama that is mentioned in Explanation 2(a) to section 158BE is a panchnama which documents the conclusion of a search. Clearly, if a panchnama does not, from the facts recorded therein, reveal that a search was carried out at all on the day to which it relates, then it would not be a panchnarna relating to a search and, consequently, it would not be a panchnama of the type which finds mention in the said Explanation 2(a) to section 158BE. 65. Interpreting rule 112 of the Income-tax Rules which deals with search and seizure, the Delhi High Court in the case of CIT v. S. K. Katyal reported in [2009] 308 ITR 168 (Delhi) has held as under (page 179) : "These provisions demonstrate that a search and seizure under the said Act has to be carried out in the presence of at least two respectable inhabitants of the locality where the search and seizure is con-ducted. These respectable inhabitants are witnesses to the search and seizure and are known as 'panchas'. The documentation of what they witness is known as the panchnama. The word 'nama', refers to a written document. Its t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panchnama is that the search is concluded and not that it was the last search because the panchas of the subsequent panchnama may not be aware of any earlier panchnama as they may not be the panchas who witnesses the search and seizure on that date. Once such conclusion of search is recorded, it is proof of execution of the warrant of authorisation. It is the last panchnama recording conclusion of search, if there are more than one authorisation and more than one panchnama in relation to such authorisation, which is to be taken into consideration for the purpose of computing the limitation. 67. The next question for consideration is, when once the authorised officer in pursuance of the authorisation enters the premises and starts searching, when exactly the said search comes to an end. It is contended on behalf of the Revenue that a discretion is vested with such authorised officer to complete the search, draw a panchnama stating that the search is completed on the day he begins the search or if for any reasons it is not possible to complete such search, he can pass a restraint order, prohibitory order and then fix another date for continuing such search. Thereafter, at his conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is the life of the authorisation ?', is of importance. Authorisation may be prepared but it was decided not to act on it, in which case, it had died a natural death. Authorisation issued for a specific person and the officials act on it and perform what all they could do under section 132 of the Act including seizure of books, etc., the purpose of the authorisation is served. Therefore, it could be concluded that the life of the authorisation starts with its issue and ends with its implementation or action by the officials resulting in seizure of books, documents, money and so on. As had been observed earlier, the purpose of search is to locate the undisclosed income with power to seize books, documents, money, bullion, etc., that represent wholly or partly the undisclosed income, it has to be concluded that the search is complete with the seizure of the items for which the officials are on the look out . . . 56. The counsel for the Revenue that once the search had started and the officials authorised for search seize some items and after a gap of few days re-enter the premises and carry on the search, and repeat this after gaps and finally decide that no more search is cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the opinion that as soon as the search party leaves the premises carrying with them the seized material, the authorisation for search is fully implemented upon and execution is complete." 69. The Kerala High Court in the case of Dr. C. Balakrishnan Nair v. CIT reported in [1999] 237 ITR 70 (Ker) held as under (page 77) : "The second undisputed fact is that the search was discontinued on October 27, 1995, and resumed only on November 10, 1995. The reasons stated for the gap of 14 days is hardly convincing. There is no provision in the Criminal Procedure Code or in the Income-tax Act or the rules for postponing the search for such a long period. N. Subramanian in his book Search and Seizure stated at page 108 that when once the search starts it can go on continuously day or night, rain or shine. To keep the affected parties in a suspended animation about the probable continuation of search would be agonising. In this case, considering the nature of the allegations and the materials seized there is no reason why it could not be closed on October 27, 1995, and even if it is provisionally concluded why it could not be continued immediately. There is no bar for the oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical difficulty in seizing the item which is liable to be seized. When there is no such practical difficulty the officer is left with no other alternative but to seize the item, if he is of the view that it represented undisclosed income. Power under section 132(3) of the Income-tax Act thus cannot be exercised so as to circumvent the provisions of section 132(3) read with section 132(5) of the Income-tax Act. The position has become much more clear after the insertion of the Explanation to section 132(3) effective from July 1, 1995, that a restraint order does not amount to seizure. Therefore, by passing a restraint order, the time limit available for framing of the order cannot be extended." 71. A search is a thorough inspection of a man's house, building or premises or of his person, with the object of discovering some material which would furnish evidence of guilt for some offence with which he is charged. It implies a prying into hidden places for that which is concealed. When once the search starts it can go on continuously day or night, rain, or shine. There is no bar for the operation to continue on holidays. It is possible, in a given case, due to the volume of the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he articles, books and other material which he could not take physical possession of, i.e., by making an inventory and leaving it to the custody of the assessee and directing him not to part with the same without his permission. 75. Similarly, in circumstances not covered under those provisions, it is open for him to pass a prohibitory order under sub-section (3) not amounting to seizure which order will be in force for a period of 60 days after securing the possession of the materials, articles, etc., in the aforesaid manner. Action under section 132(3) of the Income-tax Act can be resorted to only if there is any practical difficulty in seizing the item which is liable to be seized. When there is no such practical difficulty the officer is left with no other alternative but to seize the item, if he is of the view that it represented undisclosed income. Power under section 132(1)(iii) of the Income-tax Act thus cannot be exercised, so as to circumvent the provisions of section 132(1)(iii) read with section 132(1)(v) of the Income-tax Act. It is open for the authorised officer to visit the place for the purpose of investigation securing further particulars. Under the scheme, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax legitimately due to the Government is to be recovered. There cannot be any laxity on the part of the authorised officer in this regard. Any other interpretation would run counter to the scheme of search provision under the Act. Therefore, by passing a restraint order, the time limit available for framing of the order cannot be extended. Once an order under section 132(3) has been passed, then the limitation period commences and such order cannot be continued unless and until the provisions of section 132(8A) are satisfied. 76. Once the authorised officer enters into the premises and conducts search, the search gets concluded when he comes out of the premises as evidenced by the panchnama. In the course of the said search he may seize any books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of search. In the course of search he has been vested with the power to break open any room in the premises, any locker in the premises, any almirah or where it is not possible or practicable to take physical possession, the second proviso to sub-section (1) of section 132 applies and pass a prohibitory order which amounts to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of section 132 ? (4) Afford the authorised officer necessary facility to look into the electronic record as provided under clause (iib) of subA-section (1) of section 132 ? (5) Seized any book of account, other documents, money, bullion, jewellery, etc. ? (6) Placed any marks of identification, on any books of account, other documents, etc. ? (7) Made a note of or an inventory of any such money, bullion, jewellery, other valuables, etc. ? (8) Whether any prohibitory order made under the second proviso to sub-section (1) of section 132 amounting to deemed seizure ? (9) Whether any restraint order passed under sub-section (3) of section 132 ? (10) Whether nothing incriminating material is found and no seizure is made ? 77. The panchnama referred to in Explanation 2 to the said section specifically refers to search under section 132 and section 132 specifically refers to authorisation to enter and search and it has no reference to entering and searching the premises which are the subject-matter of prohibitory order or restraint order. No authorisation is required to enter the premises and inspect the materials which are the subject-matter of prohibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso. Then the doubt would arise regarding which authorisation to be looked into for the purpose of limitation as all of them are last authorisation. It is for removal of that doubts that the Explanation is inserted. For the purpose of computing the limitation, it is the one year from the end of the month in which the last of the authorisations was executed. If there are more than one authorisation issued on the same day, then the last panchnama drawn in relation to the warrant of authorisation issued on the same day. As the period commences from the end of the month of the execution of the authorisation, the law has provided for the authorised officer to visit the premises for the purpose of inspection regarding the material which is the subject-matter of prohibitory order or the restraint order, even after search. However, the said exercise has to be done expeditiously, as the period of limitation starts from the date of search was concluded as evidenced by the panchnama, as otherwise the very object with which these provisions was introduced would be defeated. 79. Circular No. 772, dated 23rd December, 1998, issued by Central Board of Direct Taxes explains this position as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises after completing the job entrusted to him. Even if after such search he visits the premises again, for investigation or inspection of the subject-matter of restraint order or prohibitory order, if a panchnama is written, that would not be the panchnama which has to be looked into for the purpose of computing the period of limitation. But, such a panchnama would only record what transpires on a re-visit to the premises and the incriminating material seized would become part of the search conducted in pursuance of the authorisation and would become the subject-matter of block assessment proceedings. But, such a panchnama would not extend the period of limitation. It is because the limitation is prescribed under the statute. If proceedings are not initiated within the time prescribed, the remedy is lost. The assessee would acquire a valuable right. Such a right cannot be at the mercy of the officials, who do not discharge their duties in accordance with law. The procedure prescribed under section 132 of the Act is elaborate and exhaustive. The said substantive provision expressly provides for search and seizure. In the entire provision there is no indication of that sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A or it refers only to the execution of the warrant even though as a result of such execution the proceedings under section 132 or 132A are yet to he completed. The latter situation will include a case in which a restraint order under section 132(3) is passed. In such a case, it can be said that though the warrant of authorisation has been executed, proceedings under section 132(3) are pending. Since the word 'execute', also means 'to complete', one has to wait for conclusion of the proceedings under section 132(3) for the purpose of computation of limitation under section 158BE(1) and the period of one year has to be computed from the end of the month in which the proceeding under section 132(3) are concluded. If there are more than one warrant limitation will be counted from the execution of the last one. A contrary view is as much possible if one were to consider the spirit of the scheme which envisages expeditious disposal of the search cases and it would be reasonable to interpret that execution of warrant is not tantamount to completion of proceedings under section 132 or 132A the period during which the proceedings under section 132(3) remained pending has to be excluded for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int of limitation. 83. In the light of the aforesaid discussion, as the Tribunal has declined to go into the jurisdictional aspect, the appropriate course would be to set aside the order and remit the entire matter back to the Tribunal for fresh consideration keeping in mind the observations made in this judgment and also consider the jurisdiction aspect which it had declined to consider while passing the impugned order. 84. Therefore, the finding recorded by the Tribunal that action of the Income-tax authorities anterior to search cannot be the subject-matter of the appeal, the legality of the validity of the search proceedings cannot be gone into in the appeal against the order of block assessment and statute has not provided any right of appeal, against such an order cannot be sustained. Accordingly, the said findings are set aside. Consequently, the entire matter is now remitted back to the Tribunal to consider the appeal afresh, on the merits, including the question of the validity and legality of the search, in the light of the law laid down in this decision. Hence, we pass the following : Order (1) Appeal is allowed. (2) The substantial questions of law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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