TMI Blog2006 (7) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... od of two years prescribed under section 158BE. It was submitted before the Ld. CIT(A) as per panchnama dated 4-8-2000 the authorisation warrant was issued on 4-8-2000. The search was completed on 4-8-2000 when the panchnama was prepared. It was further submitted that search was again commenced on 5-8-2000 in pursuance of warrant of authorisation of even date at assessee's Goregaon premises and after serving prohibitory order under section 132(3) in regard to stock found which was valued at ₹ 1,61,55,035 the contents kept in cupboard and seizure of various files containing loose paper, it was concluded for the day. It was further contended that on 31-8-2000, another set of officers, who were not authorised officers, vide panchnama dated 5-8-2000 in pursuance of warrant of authorisation visited Goregaon premises of the assessee and again issued prohibitory order under section 132(3) in respect of stock valued at ₹ 1,61,55,035 (which was held under the prohibitory order vide panchnama dated 5-8-2000) and nothing else happened on 31-8-2000. Lastly, on 20-9-2000 again the same officers who had visited the assessee's premises on 31-8-2000 visited assessee's premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 and lastly on 20-9-2000 are placed on record. It was further submitted that the search was completed in all respects on 5-8-2000 as stock inventory was prepared. Statement of the partner was recorded and panchnama was also prepared. It was further submitted that on 31-8-2000 when few officers of the department arrived at the premises of the assessee they were not the same officers who came on 5-8-2000 and prepared the panchnama on 5-8-2000 as per authorisation warrant. Therefore, by the visit of another set of officers who were not authorised, it cannot be said that the search continues. It is further stated that if it is taken that search was continued then nothing was mentioned in the panchnama that what they have done as whatever prohibitory order was passed on 5-8-2000, the same contents of the order were repeated in the panchnama prepared by the officer who visited on 31-8-2000. Attention of the Bench was drawn on relevant copies of the panchnama placed on record. It was further submitted that on 20-9-2000 again officer who visited on 31-8-2000 came to the premises of the assessee and prepared a panchnama mentioning the same stock value dated 5-8-2000 (as per prohibitory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason for continuance of search was again explained by the ld. Sr. DR that the answers of the questions given by the partner of the firm were incomplete and no finality could be attained regarding discrepancies. Therefore, on various dates search party came on the premises of the firm and prepared panchnama on every visit of the search party. It was further explained that on 31-8-2000 also there was a part seizure as the action was still pending in regard to estimation of the stocks etc. Accordingly, the last visit was made on 20-9-2000 and thereafter the panchnama was prepared on the same date. Therefore, this panchnama has to be taken into consideration for the purpose of limitation for completing assessment under section 158BC. Reliance was placed heavily on the decision of Special Bench in the case of Promain Ltd. v. Dy. CIT [2005] 95 ITD 489 (Delhi). The attention of the Bench was drawn on relevant portions of the order of the Special Bench. It was further submitted that if the contention of the assessee is taken into consideration that prohibitory order was lifted on 20-9-2000 in that case also it has to be treated that search was completed only on 20-9-2000. The attention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the departmental officers was for the purpose of extending the time limit for completion of the assessment and nothing else. Neither there is any evidence on record why they have visited on 31-8-2000 and again on 20-9-2000 and why they have prepared panchnamas on these dates. There is no requirement under law for preparing panchnama every time for the purpose of lifting the prohibition or making the inventory of stocks etc. A panchnama has to be prepared independently on the dates of search and prohibitory order can be passed even without preparing any panchnama. Whatever the stock inventory or other material found on 4/5-8-2000 the same was mentioned in the next two panchnamas prepared on 31-8-2000 and 20-9-2000. We have taken into consideration the decision relied upon by the Ld. AR and found that the facts are similar. A recent decision has been taken by the G Bench of the Mumbai Tribunal in the case of Mr. Shahrukh Khan decided in [IT(SS) Appeal No. 44 (Mum.) of 1998 vide order dated 17-5-2006]. In this case the search had taken place on 18-12-1996 and continued till 19-12-1996. On 10-1-1997 another statement of assessee was recorded under section 131 and at that time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned that the search was finally concluded. The question before us to be considered is when was the last of the authorisations for search issued under section 132 was executed, for the purpose of section 158BE. The relevant provision of section 158BE and Explanation 2 are reproduced below:- 158BE. The order under section 158BC shall be passed- (a) within one year from the end of the month in which the last of the authorizations 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 after 30-6-1995, but before 1-1-1997; Explanation 2. - For the removal of doubts, it is hereby declared that the authorization referred to in sub-section (1) shall be deemed to have been 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 authorization has been issued; (b) in the case requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer. 18. From b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 18-12-1996, 23-12-1996 and on 30-1-1997. The authorizations dated 23-12-1996 were in respect of two lockers and same could not have been used to enter the residence of the assessee on 23-12-1996 as such it is clear that the P.O. was clamped at the residence on 23-12-1996 in execution of authorization warrant on 17-12-1996. The copy of the authorizations dated 23-12-1996 clearly shows that the same were used only once for the purpose of searching the lockers on 23-12-1 996. 21. 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 states that the limitation will start from the end of the month in which last of the authorizations was executed. It presupposes that there can be a situation where more than one authorizations for search under section 132 are issued and the execution of the last of the such authorizations is to be considered as the starting point for the purpose of limitation. It clearly refers to the last authorization in case where more than one authorizations are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended or not. In the present case the last panchnama was prepared on 20-9-2000 and on this date nothing was done except repeating the prohibitory order passed on earlier date i.e. 4/5-8-2000, therefore, in view of the judgment of Hon'ble Bombay High Court by merely preparing fresh panchnama does not tantamount to continuity of search, therefore the time limit available for completion of assessment cannot be extended. In the case of Adolf Patric Pinto (supra) has held as under:' Section 158BE(1)provides limitation for completion of assessment as limitation is to start from the end of the month in which the last of the authorisation for search under section 132 was executed. Explanation 2 to section 158BE provides that the last authorisation referred to in section 132 shall be deemed to have been executed in the case of search on the conclusion of search as recorded in the last panchnama. The search party visited twice at the residential premises of the assessee on 19-6-1998 and again on 1-8-1998. On the first visit itself the house was searched and the shares and debentures found were inventorised and kept in the steel cupboard in the bed-room and prohibitory order was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to validity of search conducted under section 132 while disposing off the appeal against block assessment. Further, while holding so the Special Bench of the Tribunal has held that the Tribunal has power to question about the further happening of the search. In paras 77 78 the Special Bench has observed as under:- 77. To sum up, we hold that the Income-tax Appellate Tribunal has no powers, either express or incidental/implied, to adjudicate upon the issue relating to the validity of the search conducted under section 132 while disposing of the appeal against block assessment. As already discussed in paragraph No. 41, the search action under section 132 has three limbs, i.e., initiation of search, conduct of search and conclusion of search. Insofar as the validity of search is concerned, the first limb, i.e., initiation of search, which includes all the actions culminating into issue of warrant of authorization assumes significance and relevance and the same, in our opinion, are not justiciable in an appeal before the Tribunal. The only remedy in this matter lies in the form of seeking issue of a writ from the Hon'ble High Court. We, therefore, answer the question referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Though we have cancelled the assessment however, the arguments were advanced on merits also therefore, we feel that the grounds should also be disposed of on merits. Accordingly we take up the grounds on merit in the following manner. 9. The ground No. 3 in appeal of the assessee is against sustaining the addition of ₹ 11,05,364 on account of alleged variation in value of stock found at the time of search. This addition was made by the Assessing Officer on account of difference between the value of excess stock disclosed in the return at ₹ 1,50,49,671 and assessee's disclosure under section 132(4) of ₹ 1,61,55,035 was not acceptable to the Assessing Officer. It was submitted before the CIT(A) that valuation of stock for the purpose of disclosure under section 132(4) of the Act was done on the date of search i.e. 5-8-2000 itself purely on the basis of working hurriedly made out by the authorised officer. It was further submitted that, the stock inventory was prepared by the department authorities on the date of search was accepted by the assessee however, on a later stage the stock was reconciled and the difference was explained to the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit in Corporation Bank account No. 11736 as hawala transaction were made by the Assessing Officer. The assessee has declared under section 132(4) a sum of ₹ 3 lakhs as income from the above account however in the block return the assessee declared ₹ 6,46,446 being 10 per cent of ₹ 61,41,733 and interest thereon in respect of the total credits in the bank account in the name of Shri U.C. Bhandari, the brother-in-law of Shri Jayant S. Jain. On admission by Shri U.C. Bhandari in the statement under section 131 of the Act that he had operated this bank account at the instance of Shri Jayant S. Jain and that the beneficial ownership of the income belongs to the appellant which has not been offered to tax. The Assessing Officer found that the peak credit in this account as on 27-3-1999 was 15,70,368 and the same is liable to tax in the hands of the assessee. Thus after deducting the amount of ₹ 6,46,446 declared by the assessee, the Assessing Officer assessed the difference of ₹ 9,56,295 as assessee's income from undisclosed sources. The ld. Counsel who appeared before the CIT(A) filed copies of bank statement and submitted that it, clearly reveals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 8,76,482 being the estimated profit component on the alleged estimated suppressed sale. The Assessing Officer made addition of ₹ 35 lakhs on the ground that assessee itself has admitted the default by filing revised return before the Sales Tax Authorities and the Sales Tax liability has been paid by the assessee. The Assessing Officer held that suppression of sales as detected by the Sales Tax Department should be used as an evidence for estimating assessee's income out of suppressed sales. The suppression of sales detected by the sales-tax authorities is net sales i.e. without considering sales-tax supposed to be legally collectible from the purchases. It was seen by the Assessing Officer that assessee has paid sales-tax department of ₹ 14,79,062 in assessment year 1998-99. Thus the Assessing Officer find that on one hand the assessee has claimed the deduction and on the other hand no corresponding income arising out of such income is offered for taxation. The Assessing Officer estimated the net income after considering the purchase cost and incidental expenses at ₹ 35,00,000 which was treated as undisclosed income for the block period. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusing other material on record, we find that the assessee deserves to succeed in this ground. Undisputedly, there was no material was found during the course of search that the assessee has suppressed its sales. Only on the basis of estimation made by the Sales Tax Authorities, the department has taken a view that the assessee has suppressed its sales. The assessee has categorically stated that just to buy piece, we have accepted the estimation of sales and whatever the sales tax amount was payable on the estimation of sales made by the sales tax authorities, we have paid the same. There was no other material to show that the assessee has suppressed its sales. Nothing was found over and above which was declared or recorded by the assessee in its books of account. Therefore, merely on the basis of estimation made by the sales tax authorities in the past, the estimation of sales made for subsequent years cannot be a ground for making addition in the hands of the assessee. Therefore, in view of these facts and circumstances, we delete the addition of ₹ 8,76,482 being the estimated profit of components on estimated suppressed sales. 16. The remaining ground in appeal of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,00,000.00 Jewellery (subject to objections protests) 15,00,000.00 Writing found and seized 87,000.00 Other discrepancies deficiencies (if any) 21,40,445.00 2,10,00,000.00 19. It was further submitted that a tentative figure for the purpose of disclosure was worked out. However, item-wise break-up with regard to aforementioned amount of disclosure was to be submitted only after the receipt of the copies of seized material, which was never made available to the assessee or any other person of the group. It was further submitted that though the disclosure of ₹ 2.10 crores was for whole group of assessee and not in regard to assessee only. There was no commitment was made that in disclosure of ₹ 2.10 crores will be made in the hands of the assessee. It was further submitted that the assessee firm and its group members eventually filed their returns for the block period showing following income/investment in their respective hands totalling to ₹ 1,82,68,096. That the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven in para 5.5. at pages-11 12 of his order which are as under:- I have carefully considered the appellant's submissions. I find merits in the appellant's submissions that in making the addition of ₹ 27,73,908 on account of the difference between the appellant's disclosure under section 132(4) and the income declared in the block return (₹ 2,10,00,000 - ₹ 1,82,68,096), the Assessing Officer has wrongly added twice a sum of ₹ 11,05,364. This amount was once added on account of variation in the value of stock (₹ 1,61,55,035 - ₹ 1,50,49,671) which has been discussed in the ground No. 2 and it was also added once again when a sum of ₹ 27,73,908 was added on account of the difference on the amount declared under section 132(4) and the amount disclosed in the block period as mentioned above. That being the case, since I have already confirmed the addition of ₹ 11,05,364 in the 2nd ground of appeal, this amount is hereby deleted since the same amount cannot be taxed twice. As regards the balance amount (₹ 27,31,908 - ₹ 11,05,364) of ₹ 16,26,544. I also find considerable force in the appellant's submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an addition of the same amount. It was submitted before the ld. CIT(A) that the assessee was not concerned or related any manner insofar as the alleged payment of ₹ 5,13,953. It was also submitted that there was nothing on record to show that the alleged amount was made by the assessee. On careful consideration of the facts and submission, the ld. CIT(A) was of the view that there was no basis to make the addition in the hands of the assessee. 25. After considering the order of the Assessing Officer and Ld. CIT(A), we do not find any infirmity in the order of the Ld. CIT(A). Nothing was brought on record by the Assessing Officer that assessee has paid the amount of penalty, even the name of the assessee was not mentioned in the show-cause notice found from the premises of one of the partner of the firm. Therefore, we confirm the findings of the Ld. CIT in this regard. 26. Next ground relates to deletion of addition of ₹ 8,14,978 on account of deposits appearing in the bank account added on protective basis. The Assessing Officer made protective addition on account of deposits in the Account No. 10639 and 11120 with Corporation Bank in the name of Ms. Manisha Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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