TMI Blog2013 (11) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... even if we enlarge the period as per the provisions of section 132(8A) authorization ended on 18.06.2000. Therefore, the period of limitation for passing assessment order ended on 30.06.2002, whereas the assessment order had been passed on 30.08.2002 i.e. beyond the period of limitation provided in the Act - Therefore, in our considered opinion, the assessment order was bad in law and was set aside being barred by limitation. Validity of Assessment Order u/s 158BC - No seizure of any incriminating documents/evidence - Held that:- No incriminating evidence or document had been recovered against the assessee during the search, the addition made against the assessee was unsustainable - The properties do not form investment or the properties of the assessee - They have to be assessed in the hands of the respective registered owners - It was also not the case of the Revenue that the owners of the said properties have denied ownership of the properties alleged to be registered in their respective names - The Revenue had also not stated that in the income returned, the assessee had not included the properties registered in his name – the notice issued to the assessee company under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiated, therefore the second search is bad in law. (v) In case there is no seizure whether there can be a valid assessment order under section 158BC. 4. The assessee raised only technical issues before the CIT(A). The assessee did not argue the case on merits. The stand of the assessee before the CIT(A) was:- (i) the Department got all the information that were used for making the impugned assessment order from the sworn statement of the appellant dated 23.12.'99. Since the block assessment order is to be passed on the basis of incriminating documents seized during the course of search and since the additions made in this assessment order are based on the documents filed at the time of recording of sworn statement, the assessment made is not a valid assessment order: (ii) even presuming that the impugned assessment order is made on the basis of seizure made during the course of search, the seizure was made with the warrants issued in the name of Shri.V.R.Venkatachalam (hereinafter referred as first search) and since the Department cannot seize any documents pertaining to the appellant with the warrant issued in the name of Shri V.R.Venkatachalam, the seizure of do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment has to be completed "on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the A.O and relatable to such evidence". Now, the question is whether the evidence found while recording sworn statement from 19.7.'00 to 28.8.'00 can be taken as the basis for search assessments. It has been held in the case of N.R.Paper Boards Vs CIT 234 ITR 733 (Guj) that evidence collected by the authorized officer includes the statement recorded by the A.O during the course of search and seizure u/s.132(4) of the Act. Since the DDIT(lnv.) who recorded the sworn statement from 19.7.'00 to 28.8.'00 was also an authorized officer and since the sworn statement recorded can be treated as sworn statement recorded u/s.132(4) (even though the DDIT (Inv.) has mentioned the same as statement recorded u/s.131), I reject the contention of the appellant's AR that the block assessment order passed by the A.O is not valid in law. The Commissioner of Income Tax (Appeals) vide impugned order dated 28.12.2006 dismissed the appeal of the assessee. Aaggrieved against the order of the CIT(A), the assessee has come in second appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and only statements were recorded on 19.7.2000, 21.7.2000, 24.7.2000, 18.08.2000, 24.08.2000 and 28.08.2000. The counsel for the assessee further contended that merely for recording the statements, proceedings were unnecessarily prolonged against the assessee. The proceeding under section 158BC is not the correct course, when there is no seizure, the assessment under the said provisions cannot be held to be valid. 9. On the other hand, Dr. S.Moharana appearing on behalf of the Revenue submitted that the assessee did not file return of income for the years 1994-95, 1995-96 to 1999-2000 and this fact has been admitted by the assessee. The learned DR further stated that the oral evidence i.e. the statement recorded during search proceedings is part of evidence. The DR contended that since statements were recorded during the search proceedings, the last prohibitory order is valid and the assessment proceedings are not barred by limitation. The D.R. further contended that it was not possible to complete the search on one day and therefore prohibitory orders were issued from time to time and search was concluded on 28.8.2000. 10. We have heard the submissions made by both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c);] (d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; (e) where any order of settlement has been made under sub-section (4) of section 245D, on the basis of such order; (f) where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessment. Explanation.-For the purposes of determination of undisclosed income,- (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of [this Act] without giving effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 [section 144 and section 145] shall, so far as may be, apply; (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; [(d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B.] 158BE. Time Limit for completion of Block Assessment: [(1) The order under section 158BC shall be passed- (a) xxxxxxx (b) within two years from the end of the month in which the last of the authorisations for search under section 132 or for requisition under section 132A, as the case may be, was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997. 12. It is an admitted fact that search was conducted at the prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee or person in possession or control thereof. The relevant extract of sub-section (3) is reproduced herein below:- 132 (3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, [for reasons other than those mentioned in the second proviso to sub-section (1),] 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 officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section. [Explanation.-For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1).] 14. The provisions of sub-section (8A) of Section 132 makes it clear that an order passed under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks, documents, money and so on. The search is to be carried out at one stretch and completed. The search comes to an end when the search party leaves the premises after carrying with them the seized material. As soon as the search party leaves the premises, the authorisation for search is fully implemented upon and execution is complete. They had exhausted the power under the authorisation to carry out the search. Otherwise, it would lead to a situation where once a person is searched, his premises is continuously open for the officers to search despite the fact that the search party is unable to find item that represents undisclosed income. Then the word "search" used in the context loses its meaning. The search pre-supposes that the assessee is in possession of some undisclosed income or other material and the authorities want to lay their hand on such undisclosed income or other material. Once the search commences and if it is adjourned for a later date, without completing the search on the adjourned date if the search recommences, it ceases to be a search in the context in which the said word is used in section 132 of the Act. The second proviso to section 132(1) deals w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 132 of the Act. It is only because of paucity of time he has gone back and wants to come back and look into the matter leisurely. There is no provision in the Criminal Procedure Code or in the Incometax Act or the rules for postponing the search for a long period. Then, the concept of search as understood either under the provisions of the Criminal Procedure Code or the Act which are made applicable expressly, would lose its meaning. If such a course is attracted, it is open to an authorised officer to keep the authorisation in his pocket like a season ticket and go on visiting the premises according to his whims and fancies. It seriously affects the valuable right of the assessee conferred under the Constitution. To keep the affected parties in a suspended animation about the probable continuation of search would be agonising. It is invading the right and freedom of the petitioners for a period more than required or necessary. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trary manner. By passing a prohibitory order, the time limit available for framing of the order cannot be extended. The Department does not have unfettered powers to prolong the search without justification and issue panchanamas to extend the period of passing of assessment order. 18. As per the provisions of section 158BE, order under section 158BC has to be passed within a period of two years from the end of the month in which the last of the authorization for search ended under section 132 and for requisition under section 132A. If the law laid down by the Hon ble Karnataka High Court is applied in the present case, the limitation for passing the assessment order comes to an end on 31.05.2002 by taking into consideration the last valid panchanama dated 4.5.2000. The remaining two panchanams dated 30.06.2000 and 28.08.2000 are nothing but abuse of the process of law for enlarging the time of passing the order. A perusal of panchanama dated 30.06.2000 would show that search lasted for only one hour i.e. from 11.30 am to 12.30 pm and panchanama dated 28.08.2000 shows the duration of search as 55 minutes i.e. from 11.15 am to 12.10 pm. Thus, it can be safely concluded the last two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r document has been recovered against the assessee during the search, the addition made against the assessee is unsustainable. We, therefore, set aside the order of the CIT(A) and allow the appeal of the assessee. IT(SS)A Nos. 55 76/Mds/2007:- 21. Both these are cross appeals filed by the assessee company (ITA No.55/Mds/2007) and the Revenue (ITA No.76/Mds/2007) against the order passed by the CIT(A) dated 5.1.2007. Admittedly, protective assessment has been done against the assessee company. Search was conducted in the premises of Shri S.Subramanian and addition was made in the block assessment of the said assessee. The learned counsel for the assessee submitted that no material has been found during search and the Assessing Officer has not sent any information to the concerned Assessing Officer of the assessee company, there is no satisfaction note, therefore, the search and subsequent assessment in the hands of the assessee company is invalid. In order to support his contentions, the counsel for the assessee relied on the judgement of the Hon ble Supreme Court of India in the case of Manish Maheshwari Vs. ACIT reported as 289 ITR 341(SC), wherein the Hon ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction for taking action under section 158BD has to be recorded before completion of block assessment under section 158BC in the case of the person searched. A perusal of the satisfaction note which is placed at page 105 of the paper book clearly shows that satisfaction has been recorded after the completion of assessment in the case of Shri S.Subramanian. The para 2 of the Note is reproduced herein below:- 2. A search u/s.132 of Income Tax Act had been conducted in the case of Shri S.Subramanian (Chairman Managing Director of the company) which commenced on 4.5.2000 and was completed on 31.8.2000. The block assessment u/s.158BC of Income Tax Act had been completed in the case of Shri S.Subramanian on 31.8.2002. The chronology of events in the present case clearly show that the satisfaction note and the notice is beyond the period of limitation. 26. The Delhi Special Bench of the Tribunal in the case of Manoj Aggarwal Vs. DCIT reported as 310 ITR (AT) 99: 113 ITD 377 has held as under:- Section 158BD as said earlier begins with the expression where the Assessing Officer is satisfied and so the very section implies a recording of satisfaction. The satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t itself shows that both sections 158BC and 158BD are interlinked, interlaced and intertwined and both form part and parcel of the same chapter. 27. Similar view has been taken by the Hon ble Punjab Haryana High Court in the case of CIT Vs. Mirdula, Prop. Dhruv Fabrics reported as 335 ITR 266. The Hon ble High Court has held as under:- According to the plain reading of section 158BD ibid, the Assessing Officer, while framing the assessment of an assessee under section 158BC of the Act against whom action has been taken under section 132 or 132A of the Act is mandatorily required to record satisfaction before action can be initiated under section 158BD of the Act against such other person. In other words, the satisfaction by the Assessing Officer making assessment under section 158BC of the Act, in the case of the person searched, that there is certain undisclosed income as a result of examination of seized material which belongs to some other identified person, is essential for assuming jurisdiction under section 158BD of the Act. The satisfaction required to be recorded is prima facie satisfaction and is not firm or conclusive satisfaction at that stage. Section 158BE o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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