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2016 (4) TMI 1133

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..... he first time on 22nd June, 1998. In the panchnama drawn on that date, it was remarked 'temporarily concluded', meaning thereby, according to the revenue authorities, search had not been concluded. For this reason, the respondent authorities visited many times on subsequent occasions and every time panchnama was drawn with the same remarks, i.e. 'temporarily concluded'. It is only on 5th August, 1998 when the premises were searched last, the panchnama drawn on that date recorded the remarks that the search was 'finally concluded'. Thus, according to the respondents, the search had finally been completed only on 5th August, 1998 and panchnama was duly drawn on the said date as well. The appellants, in the writ petition filed, had no where challenged the validity of searches on the subsequent dates raising a plea that the same was illegal in the absence of any fresh and valid authorisation. On the contrary, the appellants proceeded on the basis that search was conduced from 22nd June, 1998 and finally concluded on 5th August, 1998. On the aforesaid facts and in the absence of any challenge laid by the appellants to the subsequent searches, we cannot countenance the arguments of th .....

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..... wherein a challenge was laid to the aforesaid order dated 29th June, 2000 issued by respondent no. 2 directing a special audit in respect of appellants under Section 142(2A) of the Act. In the said writ petition, the appellants also challenged the clarificatory order dated 10th August, 2000 issued by respondent no. 2 with regard to special audit in respect of appellant no. 1 for the period from the Assessment Year 1994-95 to Assessment Year 1998-99 and insofar as appellant no. 2-the period for Assessment Year 1994-95 to Assessment Year 1996-97. 6) During the pendency of the writ petition, as amendment application was filed being CM No. 9305/2006, seeking to add additional ground that the Block Assessment Proceedings under Section 158BC(c) of the Act were time barred. The appellants submitted that the time limit for completion of Block Assessment expired on 30th June, 2000 in terms of Section 158BE of the Act, since 2 years period expired on that date. It was further submitted that the authorization executed on 22nd June, 1998 could not have been utilized for conducting further search till August, 1998. it was also contended that the order under Section 142(2A) of the Act was is .....

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..... er setting aside the direction for special audit, be excluded in counting limitation for concluding block assessment. 12) The appellants contended before the High Court that since there was no stay on block assessment proceedings in terms of interim order dated 24th August, 2000, the direction to exclude the period between 24th August, 2000 to 15th December, 2006 was beyond its jurisdiction. It was alternatively contended before the High Court that the limitation for passing the block assessment having expired on 30th June, 2000 in terms of Section 158BE(1) of the Act, the direction to exclude the limitation period between 24th August, 2000 to 15th December, 2006 would not, in any case, save limitation. While rejecting the aforesaid contentions raised by the appellants, the High Court held that since special audit was an important and integral step in the assessment proceedings, once the direction for special audit was stayed by the High Court, assessment proceedings ipso facto could not go on. The High Court rejected the assessee's second alternative argument holding that limitation period of two years was to be calculated from 5th August, 1998, on which date last panchnama .....

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..... limitation for the purposes of this section, - (i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (ii) the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section; or (iii) (iv) xxx xxx xxx shall be excluded: Provided xxx xxx xxx 16) The plea of the appellants is that only that period can be excluded in computing the period of limitation, during which assessment proceedings were stayed. A certain distinction was tried to be drawn in the instant case by referring to the interim order which was passed by the High Court on 24th August, 2000 which has stayed the order of the Department directing compulsory audit. It was, thus, argued that stay was limited only to conducting compulsory audit and there was no stay of the assessment proceedings. 17) M/s. Ganesh and Vohra, learned senior counsel appearing for the appellants made a fervent plea to the effect that in the absence of any stay of .....

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..... lear from the reading of this provision that the period that is to be excluded while computing the period of limitation for completion of Block Assessments is the period during which assessment proceedings are stayed by an order of a court and this provision shall not apply if the stay of some other kind, i.e, other than staying the assessment proceedings, is passed. The counsel for the appellants are justified in their contention that the provision relating to limitation need to be strictly construed. In the case of K.M. Sharma Vs. ITO (2002) 254 ITR 772 (SC), this principle is laid down in the following words: 13. Fiscal statute, more particularly a provision such as the present one regulating period of limitation must receive strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which h .....

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..... provision was interpreted in the following manner: Sub-section (1) of section 153 prescribed the period of limitation within which an order of assessment could be passed. For the assessment years in question the last date for making the order of assessment under the said provision was March 31, 1972. By Explanation 1 to section 153 the period of limitation prescribed under sub-section (1) for making the order of assessment was extended by the period during which the assessment proceeding was stayed by an order or injunction of any court. The object of the Explanation seems to be that if the Assessing Officer was unable to complete the assessment on account of an order or injunction staying the assessment proceeding passed by a court the period during which such order or injunction was in operation should be excluded for the purpose of computing the period of limitation for making the assessment order. The process of assessment thus commences with the filing of the return or where the return is not filed, by the issuance by the Assessing Officer of notice to file the return under section 142 (1) and it culminates with the issuance of the notice of demand under section 156. The .....

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..... l audit was necessary for carrying out the assessment. Once such an opinion was formed, naturally, the assessing officer would not proceed with the assessment till the time the special audit report is received, inasmuch as in his opinion, report of the special audit was necessary. Take a situation where the order of special audit is not challenged. The assessing officer would naturally wait for this report before proceeding further. Order of special audit followed by conducting special audit and report thereof, thus, become part of assessment proceedings. If the order directing special audit is challenged and an interim order is granted staying the making of a special report, the assessing officer would not proceed with the assessment in the absence of the audit as he thought, in his wisdom, that special audit report is needed. That would be the normal and natural approach of the assessing officer at that time. It is stated at the cost of repetition that in the estimation of the assessing officer special audit was essential for passing proper assessment order. If the court, while undertaking judicial review of such an order of the assessing officer directing special audit ultimatel .....

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..... argued that for subsequent visits, fresh authorisation was required and no such authorisation was taken and, therefore, subsequent searches are illegal and no benefit thereof should enure to be respondent. 27) We may point out that the appellants never challenged subsequent visits and searches of their premises by the respondents on the ground that in the absence of a fresh authorisation those searches were illegal, null and void. Notwithstanding the same, it was argued that at least for the purpose of limitation the subsequent searches could not be taken into consideration, as according to the learned counsel, the legal position was that the authorisation dated 19th June, 1998, was executed on 22nd June, 1998 and the search came to an end with that when the search party left the premises on 23rd June, 1998 after making seizure of certain documents etc and issuing restraint order under Section 132(3) of the Act in respect of certain items which they allegedly could not seize due to impracticability on that day. Some judgments of various High Courts are relied upon to support this proposition. It was also argued that there was no concept of 'revalidation of authorisation' .....

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