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2015 (5) TMI 622 - CALCUTTA HIGH COURT

2015 (5) TMI 622 - CALCUTTA HIGH COURT - [2015] 375 ITR 541 (Cal) - Validity of assessment under Section 158BC - whether barred by limitation and is therefore illegal, invalid and without jurisdiction? - Held that:- The period of limitation for the purposes of Income Tax Act under Section 158BE is dependent on the conclusion of search and not on the conclusion of the investigation. Investigation includes examination of witnesses which can be done under Section 131 of the Income Tax Act. The Asse .....

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est stage before the assessing officer? The assessee by his letter dated 28th January, 2002 addressed to the assessing officer contended that due to his preoccupation he was unable to appear before the latter to record his deposition. When the case of the assessee is that the time prescribed for assessment had expired on 31st December, 2001, he should have raised the point in his letter dated 28th January, 2002 which he did not do. Therefore prolongation of the search did not cause any prejudice .....

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aforesaid reasons, we are of the opinion that the period of limitation has to be reckoned from 31st January, 2000. Decided in favour of the Revenue. - ITA No. 11 of 2005 - Dated:- 12-5-2015 - Girish Chandra Gupta And Arindam Sinha,JJ. For the Petitioner : Mr R N Bajoria, Sr.Adv. and Mr A Gupta, Adv. For the Respondent : Mr P Dhudhoria, Adv. JUDGMENT Girish Chandra Gupta,J. The subject matter of challenge in this appeal is a judgment and order dated 3rd September, 2004 pertaining to the block a .....

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ion dated 2nd December, 1999, the assessment which has been made under Section 158BC of the Act on 31st January, 2002 is barred by limitation in view of Section 158BE (b) of the Act? II) Whether on a true and proper interpretation of Section 132(3) of the Act the prohibitory order made under Section 132(3) in respect of jewelleries which have been found in the course of search and which has been valued by the departmental valuer on the very day in the course of search when the authorized officer .....

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to conduct any search in respect of said very articles in respect of which the prohibitory order is still operative? IV) Whether in view of the authorization dated 2nd December, 1999 and in the absence of any further authorization the order passed under Section 158BC (c) on 31st January, 2002 is barred by limitation and is therefore illegal, invalid and without jurisdiction?" The facts and circumstances of the case appearing from the assessment order which do not appear to have been disput .....

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search, cash to the tune of ₹ 1,06,700/- was found, of which ₹ 80,000/- were seized. Jewellery and paintings worth ₹ 15,57,021/- and ₹ 29,07,000/- respectively were found and there was no seizure. Mr. Ramesh Kr. Patodia, FCA and A/R of the assessee started effective compliance only w.e.f. 14.12.01. Mr. Patodia was requested to file some details e.g. Cash found and explanation with reference to bank Statement, if any, paintings found, jewellery, silver utensils, value add .....

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due to work pressure (preoccupied too) it is not at all possible for his client to come all the way to Kolkata for attending the summon. Here it may be mentioned that vide notice u/s/131 dt.26.12.2001 opportunities for personal appearance were provided on 4.1.02, 21.1.02 and 28.1.02. The notice u/s 131 dt.26.12.01 was served on 27.12.01 and since then the assessee failed to pay any importance to the said notice till 28.1.02. It is improbable that the assessee could not come to Kolkata in a month .....

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rder was passed within the time limit prescribed under Section 158BE of the Income Tax Act, and the matter was restored to the file of the CIT (A) with the direction to decide the matter on merits. Challenging the aforesaid order the present appeal was preferred by the assessee. Mr. Bajoria, learned Senior advocate has confined his arguments to the sole question as to whether the assessment order dated 31st January, 2002 is barred by limitation? He contended that on 31st January, 2000 nothing re .....

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rch dated 31st January, 2000 was only for the purpose of revocation of the restraint order dated 8th December, 1999 passed under Section 132 (3) of the Income Tax Act. He, therefore, contended that the period of limitation has to be reckoned from the search dated 8th December, 1999. Thus the period of limitation expired on 31st December, 2001, whereas the assessment order was passed on 31st January, 2002 which is clearly out of the prescribed period of limitation. He in support of his submission .....

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or, no quest for something hidden. All that was done was that the seals were inspected. After they were found to be intact, they were removed and the keys were handed back to the assessee. These circumstances clearly show that no search was conducted on January 3, 2001. For a search to conclude at a particular time and date, it must have continued till that time and date. Nothing was searched for after November 17, 2000. Thus, the search was concluded on that date. It did not continue any furthe .....

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2001." We have not been impressed by the submissions advanced by Mr. Bajoria. The judgement, with respect, does not in our opinion, lay down the correct law. In two earlier judgements of the Delhi High Court itself contrary views were taken. In the case of M. B. Lal -Vs- CIT reported in (2005) 279 ITR 298 (Delhi), the following views were expressed:- "Section 158BE(1) (b) and Explanation 2 which are relevant for our purposes may be extracted: "158BE. (1) The order under Section 1 .....

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executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; (b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the authorised officer. " From a plain reading of Explanation 2(a), it is evident that an authorisation referred to in sub-section (1) is deemed to have been executed on the .....

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ents were seized. The Tribunal has recorded a finding to the effect that there was no delay in executing the search inasmuch as various lockers and steel almirah and cupboard were required to be searched. There was, therefore, no artificial extension of the search proceedings as argued by the appellants. If that be so, the search would end only upon revocation of the order passed under Section 132(3) which, in the instant case, was revoked only on June 29; 2000. The period of limitation for maki .....

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beyond the period of limitation prescribed for the same. In the light of what has been stated above, these appeals fail and are hereby dismissed but in the circumstances without any order as to costs." In the case of VLS Finance Ltd. and Another -Vs- CIT and Another Reported in (2007) 289 ITR 286 (Delhi) the following views were expressed:- "The respondents could have, on the very first day of the search, seized all relevant and irrelevant documents and books of the petitioners, but t .....

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opinion that the respondents did not complete the search on June 22, 1998, as alleged by the petitioners, nor did they unduly prolong it. The search concluded on August 5, 1998, and so in terms of Explanation 2 to section 158BE of the Act the period of limitation would begin from the end of August, 1998, that is, August 31, 1998 onwards. The second issue raised by learned counsel for the petitioners would stand answered accordingly. " In the case of CIT -Vs- S. K. Katyal (supra) the Divisi .....

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was prepared solely for the purpose of removing the seals and making over the keys. Another reason, advanced by the Division Bench for the purpose of distinguishing both the judgements in the case of M. B. Lal and VLS Finance Limited is that the contention that the search ends upon revocation of a restraint order under Section 132(3) is illogical. The Division Bench expressed itself in the following words:- "the learned counsel for the Revenue sought to derive the proposition that a search .....

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to an end where there is no restraint order, but did not answer the same. An answer to that question is to be found in Explanation 2(a) quoted above. Ordinarily an authorization for search is valid until the same has been executed. In order to avoid any controversy as to when was the authorization executed the legislature has provided in the aforesaid explanation that the authorization shall be deemed to have been executed on conclusion of search as recorded in the last panchnama. Therefore, th .....

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ursuant to a written authorization may be kept in suspended animation so long as the same is not formally brought to an end in writing in the presence of witnesses by drawing a panchnama which is bound to be the last panchnama. Another line of reasoning may be as follows:- Section 70 of the Code of Criminal Procedure provides as follows:- "70. Form of warrant of arrest and duration. - (1) Every warrant of arrest issued by a Court under this Code shall be in writing, signed by the presiding .....

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may be, apply to all search-warrants issued under section 93, section 94, section 95 or section 97." Sub-section 13 of Section 132 makes all the provisions relating to search and seizure contained in the Code of Criminal Procedure to the searches and seizures under Sub-section (1) or Sub-Section (1A) of Section 132 of the Income Tax Act. To be precise Sub-section 13 of Section 132 of the Income Tax Act provides as follows:- "(13) The provisions of the Code of Criminal Procedure, 1973 ( .....

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ed, in that regard are in paragraph 26 of the judgement which read as follows:- "These decisions clearly establish (i) a search is essentially an invasion of the privacy of the person whose property or person is subject to search; (ii) normally, a search must be continuous; (iii) if it cannot be continuous for some plausible reason, the hiatus in the search must be explained; (iv) if no cogent or plausible reason is shown for the hiatus in the search, the second or "resumed " sear .....

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2(a) to section 158BE of the said Act." The basis for the aforesaid views has not been disclosed. It is, though, true that a search is an invasion of privacy. But such invasion is permissible in appropriate cases. The legality of search was not in question either in the case of S. K. Katyal or before us. Therefore any observation in that regard was uncalled for. The Division Bench has, in paragraph 26 of its judgement stressed upon the illegality of search where a search is unduly prolonge .....

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ection 465 of the Code of Criminal Procedure which provides as follows:- "465. Finding or sentence when reversible by reason of error, omission or irregularity. - (1) Subject to the provisions hereinbefore contained, no finding, sentence or order passed by a Court of competent jurisdiction shall be reversed or altered by a Court of appeal, confirmation or revision on account of any error, omission or irregularity in the complaint, summons, warrant, proclamation, order, judgment or other pro .....

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he objection could and should have been raised at an earlier stage in the proceedings." There can be no denial that by virtue of Section 132(13) quoted above the provisions contained in Section 465 of the Code of Criminal Procedure shall also become applicable. Reference may also be made to Section 461 of the Code which provides, inter alia, that if a search warrant is issued by a Magistrate in good faith though not empowered by law to do so, the proceedings shall not be set aside. Construi .....

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The scope of clause (b) could be best understood, if a brief historical background necessitating the amendment was noticed. The Judicial Committee in Subrahmanya Ayyar v. King emperor, ILR 25 Mad 61: 28 Ind App 257 (PC) held that the disregard of an express provision of law as to the mode of trial was not a mere irregularity such as could be remedied by S.537 of the Criminal Procedure Code. There the trial was held in contravention of the provisions of Ss.233 and 234 of the Code of Criminal Pro .....

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PC 44) considered that a violation of the provisions of S.360 of the Code which provides that the depositions should be read over to the witnesses before they sign, was only an irregularity curable under S.537 of the Code. Adverting to Subrahmanya Ayyar s case, ILR 25 Mad 61:28 Ind APP 257 (PC) it pointed out that the procedure adopted in that case was one which the Code positively prohibited and it was possible that it might have worked actual injustice to the accused. The question again came .....

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The Board did not think it was necessary to discuss the precise scope of what was decided in Subrahmanya Ayyar s case, ILR 25 Mad 61: 28 Ind App 257 because in their understanding of S.239 (d) of the Code that question did not arise in that case. The point was again mooted by the Board in Pulukuri Kotayya v. Emperor, ILR (1948) Mad 1: (AIR 1947 PC 67). In that case there had been a breach of the proviso to S.162 of the Code. It was held that in the circumstances of the case the said breach did n .....

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such conduct, the irregularity can be cured under S. 537, and none-the-less so because the irregularity involves, as must nearly always be the case, a breach of one or more of the very comprehensive provisions of the Code. The distinction drawn in many of the cases in India between an illegality and an irregularity is one of degree rather than of kind." It will be seen from the said observations that the Judicial Committee left to the courts to ascertain in each case whether an infringement .....

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of Hyderabad, 1951 SCR 344 : (AIR 1951 SC 217) left open the question for future decision. In this state of law, the Parliament has intervened to set at rest the conflict by passing Act XXVI of 1955 making a separate provision in respect of errors, omissions or irregularities in a charge and also enlarging the meaning of the expression such errors etc. so as to include a mis-joinder of charges. After the amendment there is no scope for contending that mis-joinder of charges is not saved by S.537 .....

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y and arrest of the suspected offender, (4) Collection of evidence relating to the commission of the offence which may consist of (a) the examination of various persons (including the accused) and the reduction of their statements into writing, if the officer thinks fit, (b) the search of places or seizure of things considered necessary for the investigation and to be produced at the trial, and (5) Formation of the opinion as to whether on the material collected there is a case to place the accu .....

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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 subsection (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. [Expl .....

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oncluded. The admitted fact that the keys were made over and the restraint order under Section 132(3) was lifted corroborates the fact that the search finally came to an end. The search could not have been at an end on any day prior to 31st January, 2000. The object of withholding the keys was to resume the search if and when it was felt necessary. The return of the keys manifested the intention that the search was at an end. Since the law required formal recording of conclusion of search the pa .....

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