TMI Blog2020 (8) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... VLS Finance Ltd. [ 2006 (12) TMI 77 - HIGH COURT, DELHI] the Revenue was scrutinising 5000 documents during the intervening period. It is, therefore, submitted that the facts before the Delhi High Court being totally different than the facts of the present assessee, limitation should start, even in the worst case, from 04-12-2000. Therefore, the assessment order dated 28-11-2003 is barred by limitation. Hence, we quash the block assessment order and on this jurisdictional issue and allow the appeal of the assessee. - IT(SS)A No. 94/Mum/2008 - - - Dated:- 10-8-2020 - Sri Mahavir Singh, VP And Sri M. Balaganesh, AM For the Appellant : Shri. Jitendra Jain, AR For the Respondent : Shri. Rahul Raman And Ms. Kavita P. Kaushik, DRs ORDER PER MAHAVIR SINGH, VP: This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-VIII, Mumbai, [in short CIT(A)], in ITA No. CIT(A)C-VIII/DCCC.36/IT-66/07-08 dated 24.03.2008. The assessment was framed by the Dy. Commissioner of Income Tax-36 (in short DCIT/ITO/ AO) for the block period from 01.04.90 to 07.11.2000 vide order dated 28.11.2003 under section 158C read with section 144 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings of serious nature and consequences. 3. From the above, learned Counsel for the assessee argued that as there was a litigation and dispute going on in the family members of the assessee group cases, one of the Directors refused to give permission despite acknowledging the above stated letter. When these facts were confronted to learned CIT-DR, he only objected for condonation of delay, but could not state much. In view of the reasons stated, we are of the view that the assessee has a good prima facie case and going by the fact of delay that the same has occurred due to dispute in the family, and that also for 84 days, hence we condone the delay and admit the appeal. 4. The first issue in this appeal of assessee is as regards the order of CIT(A) upholding the action of the AO treating the block assessment as valid and not barred by limitation. According to assessee, the block assessment framed by AO is barred by limitation. For this, assessee has raised the following ground No. 2: - 2. Validity of the Block Assessment : i) The ld. CIT(A) erred in holding that the impugned order dtd. 28.11.2003 was made within the time period as per the provisions of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same authorisation dated 10-11-2000 and the search commenced from 1:30 p.m. and continued upto 6:15p.m. (pgs 6-7). On 4-12-2000, i.e. after 10 days from above, the investigation team again visited the premises for conducting search under the same old authorisation dated 10-11-2000 (pgs 8-9) and passed prohibitory order u/s132(3) and the items were inventorised as detailed from pgs 10-28. On 7-11-2001, i.e. almost after a period of close to one year, the investigation team visited the premises of the Appellant under the same old authorisation dated 10-11-2000 (pgs 29-30) and stated that the search is finally concluded. On this day the prohibitory order passed on 4-12-2000 was converted into deemed seizure u/s 132(1)(iii) (pgs 31-43). There was nothing searched on this day except the passing of conversion order from section 132(3) to 132(1)(iii) of the Act. 6. The assessee also filed a chart of Panchnama issued by the Investigation Wing of the Department on various dates along with copies of Panchnama and the relevant chart read as under: - Sr. No. Panchnama Pg. Nos 1. Panchnama d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.11.2000 (which is enclosed at page 29-30 of the chart submitted before us), prohibitory order passed on 04.12.2000 was lifted and it was converted into deemed seizure under section 132(1)(iii) of the Act but on this date, there was nothing searched except the passing of the conversion order from section 132(3) to section 132(1)(iii) of the Act. The learned Counsel for the assessee stated that as per explanation to section 158BE of the Act, the provision of explanation 2 to section 158BE of the Act cannot be read in isolation to the main section 158BE of the Act but the same has to be read together with section 132 of the Act. He explained that the explanation cannot override the main section and explanation 2 refer to authorization and it further proves the point that Panchnama cannot be looked at in isolation but the same has to be read along with the authorization pursuant to which the panchnama is prepared. 7. He argued that the main provision for authorization is to be found in section 132(1) of the Act which provide for officers specified therein to obtain authorization from higher authorities to enter and search any premises etc. on a particular day and this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluable article or thing under section 132(1) of the Act. This is the provision concerning deemed seizure during the course of a Search action. This is invoked when the thing proposed to be seized are of a typical nature due to their physical characteristics such as that they cannot be put inside any box, or, sealed and taken away by the Department to be kept in their strong room or the strong room of a Bank. In such a situation, the Department places them under deemed seizure in the sense that these articles or things cannot be removed by the persons who is in the immediate control of such article or thing and if he does so, appropriate action shall be taken against him as per law. LD CIT-DR explained that the prohibitory order u/s.132(3) of the Act also prohibits the concerned persons from removing, parting with or otherwise deal with the particular documents as available except with the previous permission of such Officer. 9. Ld CIT-DR explained the reason for placing prohibitory order, that it is not practicable to seize the documents/valuables immediately but not due to their physical characteristics. It is different from deemed seizure in the sense that due to typical phys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded. A search cannot be said to have been completed, when the prohibitory order is still in operation. 10. Ld CIT-DR further argued that after having understood the concepts of prohibitory order and deemed seizure with the help of bank locker example, it can be seen easily that the interpretation and understanding of the Ld. Counsel of the entire situation is flawed. The earlier Panchnama was a prohibitory order. There was no Search. The last Panchnama dated 07-11-2001 with the deemed seizure is actually the conclusion of Search. A prohibitory order can never be a conclusion of a search because the search has not taken place at all. Only with the Panchnama of seizure or deemed seizure, it can be said that the Search has been finally concluded. Accordingly, the block assessment order passed is very much within the time limit. Now, section 158BE of the Act lays down that the order under section 158BC of the Act shall be passed within one year from the end of the month in which the last of the authorisations for Search under section 132 of the Act was executed. After some time, a dispute arose as to the meaning of the phrase execution of authorisation . That is why, an amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Search and the Search shall stand concluded only on the date on which the last Panchnama was drawn. Therefore, by this deeming provision, even an authorization which may not be otherwise the last authorisation, would become last authorization if that is executed and the Panchnama is drawn. The Ld. Counsel has also relied upon the decision of Apex Court in VLS Finance Ltd. Vs. CIT [2016] 384 ITR 1 (SC). However, after a careful reading of this order of the Hon'ble Apex Court, it is surprisingly found that the reliance placed by the assessee is completely misplaced. In fact, this order is in favour of Revenue. The Hon'ble Apex Court has interpreted Section 158 BE of the Act in this order. In this case also the Revenue had searched premises of the assessee on different dates on the basis of authorisation for first search. The main issue before the Apex Court was, whether as the assessee had not challenged validity of subsequent Searches by contending that the same was illegal in absence of any fresh and authorisation, the limitation period have to be counted from the last date of search only when the last panchnama was drawn. Thus, this decision is in fact in favour of Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2001 and therefore the panchnama dated 07-11-2001 is an attempt to extend the period of limitation which action cannot be permitted to overcome limitation provisions. He further stated that on 04-12-2000, the investigation team passed prohibitory order under section 132(3) of the Act. On a reading of section 132(3) of the Act it is clear that the said power can be exercised only for the reasons other than that specified in section 132(1)(iii) and section 132(1)(iii) of the Act empowers seizure if the items specified therein cannot be removed on account of volume, weight or other physical characteristics or dangerous nature. He argued that on 04-12-2000 when the prohibitory order is passed, the Revenue proceeded on admission that items for which prohibitory order is passed do not possess the qualities as specified in section 132(1)(iii)of the Act and therefore the deemed seizure order made on 07-11-2001 is illegal and therefore the said date cannot be the starting point of limitation in the absence of fresh authorisation coupled with the fact that deemed seizure order is illegal. 14. We have heard rival contentions and gone through the facts and circumstances of the case. We not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 132 of the Act is the surprise element to detect undisclosed income and hence the action has to be swift and fast. The department cannot keep the search action in abeyance for a long period of almost one year from the date of the last authorisation more so when after a period of one year nothing is searched but only the prohibitory order passed one year back is converted into deemed seizure. The Revenue has not explained the delay in revisiting the premises from time to time under the same old authorisation dated 10-11-2000 and therefore the subsequent visit after almost one year is an attempt to extend the limitation period. The fact that the panchanama drawn on 07-11-2001 based on authorisation dated 10-11-2000 and more over it is noted by us that the same contents are noted in the panchanama dated 07-11-2001 what was noted in the panchanama dated 04-12-2000 (this panchnama was drawn in lieu of authorisation freshly issued vide authorization dated 10-11-2000) and this is verified from the entry recorded (for example only) as under-: Sr. No. Description of Articles Mark of identification with seal and signature of DDIT, Unit I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the deemed seizure order made on 07-11-2001, the said date cannot be the starting point of limitation in the absence of fresh authorisation. 17. The present appeal is fully supported by the decision of the Karnataka High Court in the case of C. Ramaiah Reddy (Supra), and the relevant portion of the judgement reads as under: - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peditiously and the undisclosed income is to be unearthed and proceeding has to be initiated against such person and the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of any door, box, locker, safe, almirah, etc. ? (3) Searched any person as provided under clause (iia) of sub-section (1) of section 132 ? (4) Afford the authorised officer necessary facility to look into the electronic record as provided under clause (iib) of sub-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. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 search once commenced can be postponed. What can be postponed is only seizure of the articles. Therefore, once search commences it has to come to an end with the search party leaving the premises whether any seizure is made or not. The limitation for completion of block assessment is expressly provided under section 158BE which clearly declares that it is the execution of the last of authorisation which is to be taken i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been dealt with by the AO at pg 2 of the block assessment order and by the CIT(A) in para 2.2 of his order. Furthermore, it is also important to note the detailed facts of V.L.S Finance Ltd. as narrated in the Delhi High Court decision which is dealt in para 22 of this order, therefore, the decision of the Hon ble Supreme Court is not applicable to the assessee s case before the Tribunal. The Delhi High Court s decision in the case of V.L.S Finance Ltd. Vs. CIT [2007] 289 ITR 286 (Delhi) and the discussion of the High Court could be found in paras 22-29. In that case the difference between the last and the second last panchnama was less than 60 days during which period the prohibitory order was alive as per section 132(8A) of the Act whereas in the present case of the assessee the period between the second last panchnama and the last panchnama is almost one year for which there is no explanation given by the Revenue and as per section 132(8A) of the Act the said prohibitory order has come to an end around 04-12-2001. Even prohibitory order dated 04-12-2000 comes to an end after 60 days and there is no extension after the expiry of 60 days. Furthermore, in the case of VLS Finance Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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