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DCIT, CC-25, New Delhi Versus PPC Business and Products Pvt. Ltd.

Validity of assessment made u/s 153C - Held that:- Assessments u/s 153A and 153C have been framed in pursuance to search made. Thereafter no search relating to the assessees was made, only prohibitory orders have been revoked. We also note that in the authorization letter names and address of the assessees 'in question have not been mentioned but in Panchnama drawn in pursuance to the execution of the said authorization letter names of all these asses sees have been mentioned. Panchnama also sho .....

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For The Respondent : Shri Rajiv Saxena and Shri Sushant Bajpai, Adv. ORDER PER J. S. REDDY, AM: These are cross appeals filed by revenue and the assessee against the order of Ld. CIT(A) I, New Delhi dated 14.01.2011 for the Assessment Year 2006-07. 2. The brief facts of the case are that the main allegation against this group was that they had taken a large number of accommodation entries in various group companies by paying cash to the various entry operators. After recording satisfaction note .....

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issued on 15.09.2009 for 25.09.2009. On 25.09.2009 a questionnaire asking certain documents was issued fixing the case for 05.10.2009. A supplementary questionnaire along with notice u/s 142(1) was also issued on 6.11.2009 and the hearing was fixed hearing on 13.11.2009. In response to statutory notices u/s 142(1) & 143(2) and questionnaire, Sh. Kamal Kumar Aggarwal, Chartered Accountant, of the assessee attended the proceedings from time to time and filed the details. The case was discussed .....

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eved, the revenue is in appeal before us on the following grounds: M/s PPC Business and Product Pvt. Ltd.(A.Y.2006-07) Appeal No. 531/09-10 dt. 14.01.2011. The order of the Ld. CIT(Appeals) is not correct in law and facts. In the facts and circumstance of the case Id.CIT(A) has erred in law and on facts in deleting the addition of ₹ 2,50,00,0001- made u/s 68 of the 1. T. Act, 1961 by the AO in respect of share application money introduced during the year. 4. The assessee filed cross object .....

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nducted in Surya Vinayak Group and nothing adverse specifically relating to the assessee was found and referred to by the AO. 3. That the Ld. CIT (A) has erred in law as well on facts in confirming the disallowance of ₹ 2,31,295/- u/s 14 A r.w.r. 8D of IT Rules. It is, therefore, prayed that departmental appeal may kindly be dismissed. 5. During the course of hearing, assessee filed additional ground of cross objection which reads as follows: That assessment made u/s 153C is barred by limi .....

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dated 30.05.2014 wherein, in para 6 & 7 it is held as under: 6. Considering the above submission, we are of the view that it is now a well settled proposition of law that while adjudicating objections raised in the cross- objection, the same will be disposed of as an appeal.. Thus, it does not make difference as to whether an additional ground is raised in the appeal or the cross objection. The only requirement for permitting adjudication of an additional ground is that the issue raised is .....

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ct of that item. We do not see any reason to restrict the power of the Tribunal u/s 254 only to decide the ground which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. " 6.1 In its earlier decision in the case of Ju .....

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(Guj) [FB]). Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee". 6.2. The issue pertaining to limitation is a question of .....

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ase of CIT Vs. Md. Iqbal (Supra) has been pleased to hold that the question of limitation can be raised at any point of time because it goes to the root of the matter. Therefore, it is wrong to contend that the Tribunal should not have permitted the assessee to raise the additional plea of limitation for the first time. The Special Bench of the Tribunal in the case of Mahindra & Mahindra Ltd. Vs. DCIT (supra) has held as under:- "Be that as it may we find that the question of limitation .....

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that the assessee is very much entitled to raise the additional ground in question and since the issue of assessment being barred by time limitation, a legal issue goes to the root of the matter and adjudication of which does not require consideration of fresh material beyond record, we allow this additional ground for the adjudication of the Bench. The parties were permitted to proceed on merits of this additional ground. 7. Thus, the additional ground of cross objection is admitted. 8. After h .....

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ich lasts of the authorization was executed as per Seciton153B. As per this provision, the A.O. had to complete the assessment by 21.12.2008 in the present case, however, the assessment u/s 153A/153C have been completed on 24.12.2009/31.12/2009. It is thus apparent that the assessment u/s 153A or 153C on 24.12.2009 or 31.12.2009 have been framed beyond 21 months from the date from the end of the financial year in which last of the authorization was executed as per Section 153B. 10.1. Having gone .....

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cial years in which last of the authorizations for search u/s 132 or requisite u/s 132A was executed. 10.2. However, the first proviso to Section 153 B provides that assessment/reassessment in respect of person referred to in Section 153C has to be made within the period of two years as mentioned in the preceding paragraph or one year from the end of the financial year in which books of accounts or documents or assets seized or requisition are handed over U/S 153C to the AO having jurisdiction o .....

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The third proviso provides the period of limitation as 3 months where (i) last of the authorization U/S 132 or 132 A was executed on or after 1/4/2005 and (ii) during the course of assessment proceedings a reference U/S 92C A_(a) was made before 11612007 but an order U/S 92 CA (3) was not made before such date or (b) is made on or after 1/6/2007. That means where order U/S 92CA(3) has been made before 1/6/2007, the period of limitation would be as per the main provisions of sub section (1) or t .....

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S 153C to the AO having jurisdiction over such other person, whichever is later. 10.3. The 'authorization' mentioned in Section 153B shall be deemed to have been executed when the last panchnama is drawn in the case of search or on the date when the books of accounts/ other documents/ assets are actually received in the case of requisite u/s 132A as per Explanation (2) to Section 153 B. The provisions of Section 153B are more or less similar to the provisions of Section 158 BE of the Act .....

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n 132 of the Act by virtue of sub-section (13) of section 132. Even the relevant provisions relating to searches and seizure in Cr.P.C do not define the word "Panchnama". Only a format is provided in which panchnama is to be prepared. The said format has been adopted by the Income-tax Department for preparing the panchnama. "Panchnama" is also not a word of English language. However, in India, "Panchnama" is a word of judicial recognition. "Panchnama" comp .....

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premises have been searched and to curb the misuse of the powers of search party. That means the requirement of-the presence of witnesses is a sine qua non for conducting of a valid search in respect of which panchnama is to be prepared. Further, the object behind this requirement is that, anything found and seized is truly recorded in the panchnama. If nothing is found, then such fact must be mentioned in the panchanma. On the other hand, if something is found, then it must be duly inventorise .....

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ether the prohibitory order U/S 132(3) would extend the period of limitation U/S 158 BE. The Court decided against the revenue by observing as under: "Action U/S 132(3) of the Income-tax Act can be restored 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 U/S 132(3) of .....

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the search was conducted on 11/2/91 in the course of which certain unexplained assets including antique pieces were found. No seizure was made on that date but order of restraint was passed u/s 132(3) of the Act which was lifted on 9/4/91. The question before the court was whether such order was valid one so that period of limitation could be extended for the purpose of section l32(5) of the Act. The Hon'ble Court answered the question in favour of the assessee by observing as under: "C .....

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lled and renewed from time to time and, in the present circumstances, we do not think that this was validly done." "Section U/S 132(3) can be restored to if there is any practical difficulty in seizing the item which is liable to be seized. If there is no practical difficulty, then an authorized officer has the jurisdiction and duty to seize the books of account, other documents, money, bullion, valuable articles, etc., which are found as a result of the search, if no explanation is co .....

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t the period of limitation in as much the validity of last panchnama would depend on the validity of the order U/S 132(3). In the case of Nand Lal Gandhi-Vs. ACIT 115 ITD l(Mum) (TM), search was conducted on 28/7/97 in the course of which certain incriminating materials including shares and jewellery were found which were inventorised. Valuation of jewellery was also made. A Panchnama was prepared in which it was mentioned that only books of account and documents were being seized and the search .....

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itation was to be counted from the end of the month of July 97. Hence, the assessment was time barred. The reason given by the Tribunal as that every act of search was completed on 28/7/97 and nothing remained to be done with reference to the shares & jewellery since the same had alre3ady been inventorised and valued. Further nothing was done on 8/9/97 except lifting the order. Therefore, the order u/s 132(3) was invalid LT1 view of Bombay High Court judgment in the case of Sandhya Naik (sup .....

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142(2A) was passed which was allegedly not received by the assessee by 30/6/2000. The assessee challenged the said order in the writ petition before the Hon 'ble Delhi High Court. Later on, the petition was amended to contend that assessment proceedings had become time barred U/S 158BE of the Act since period of limitation should be counted from the end of the month of June 98 in as much as search could not be validly continued till 5/8/98 on the basis of single authorization. The court foun .....

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and consequently any panchnama prepared on the date of lifting the order u/s 132(3) would be of no consequence for the purpose of computing the limitation period u/s 153B. However an interesting question arose about the scope of the expression "last of the authorizations" mentioned in Section 158BE before the Tribunal in the case of Shah Rukh Khan Vs. ACIT 104 ITD 221 (Mum). In that case, one authorization was issued in respect of residence on 17112/96 while two authorizations were iss .....

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"16. From 'bare reading of Section 158BE it is clear that the assessment has to be concluded U/S 158BC, in cases where the search is initiated after 30/611996 but before 1/6/1997, within one year from the end of the month in which the last of the authorizations for the search U/S l32 was executed. The Explanation 2 of Section 158BC was inserted by Finance (No.2) Act, 1998 with retrospective effect from 11711995, which makes it clear that the authorization referred to sub-section (1) of .....

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respect of same authorization The curx of the matter remains that the limitation shall start from the end of the month in which last of the authorization is executed. We do not agree with the contentions of the Ld. CIT DR that all the authorizations are to be treated as common kitty and the last date of any of the authorizations should be taken as starting point for the purpose of limitation. The section 158BE clearly stated that the limitation will start from the end of the month in which la t .....

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ation which is executed at the end should be considered for the purpose of limitation." 1 0.4 It would, thus, be clear that where various authorizations are issued and various panchnamas are prepared, it is not the last panchnama of any authorization but it is the last panchnama prepared in respect of last authorization which is the relevant for computing the limitation period. Similar view has been expressed in the following cited decisions :- ⦁ DCIT Vs. Adolf Patrie Pinto 284 ITR ( .....

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