TMI Blog2021 (3) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... nt process would thus be dependent upon the principles of natural justice being observed and proper sequence of procedure being followed. Time limits set out under Section 132 (9A) are not only for the purposes of Section 132 (8) (9) but also to facilitate reasonable time to the AO to complete the assessment where the identity of the IO and AO is different. The undisputed position in this case is that the IO and AO are not one and the same. The last of the authorisations in this case is on 04.09.2018 and the seized materials ought to have been handed over, in terms of Section 132(9A) on or before 03.11.2018. Admittedly, the handing over has been only on 20.08.2019, more than nine months beyond the stipulated date. Though this constitutes a gross procedural irregularity, it does not, in my considered view, vitiate the notices issued, as assuming a situation where the handover had been within time, the notices might still have been issued only on 01.11.2019. Thus, the jurisdiction assumed cannot be faulted on this score. - W.P. Nos.35076, 13209, 13218, 13368, 35082, 35084, 35086, 35088 & 35090 of 2019 - - - Dated:- 17-3-2021 - W.P. Nos.35076, 13209, 13218, 13368, 35082, 3508 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties in the manner of conduct of search. Statements were recorded in the course of search and several documents seized. R2, the Deputy Commissioner of Income tax (Investigation), Circle 3(2), Chennai, (in short, IO) has filed a counter objecting to the allegations made and denying the accusations levelled in regard to violation of human rights and ill-treatment meted out to the petitioner as well as its employees by the investigating team. The allegations are, no doubt, serious, and have been refuted by the respondent, thus leading to a situation where I would have to contend with facts disputed by both sides. However, the aforesaid allegations were not seriously pursued or emphasized upon in the course of the hearing by learned Senior counsel. Thus, I choose not to interfere or render findings on such disputed matters, but confine the scope of this order solely to the legal issues raised. An issue common to both the writs of Declaration as well as the writs of Certiorari, and one that is stressed upon as forming the substratum of the petitioner s case, is the bar set out in Section 132(9A) of the Act and to this issue, I will advert shortly. W.P.No.13209 of 2019 is closed, as are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners. 7. List on 12.06.2019. 5. Pursuant thereto, the petitioner appears to have reiterated its request for documents and there was exchange of communication in this regard. Suffice it to state that the petitioner continues to allege that the documents sought for by it have not been supplied whereas the respondent, in typed set dated 17.07.2020, has placed on record material to the effect that the documents sought had been sent to the petitioner under cover of letters dated 30.05.2019 and 12.06.2019, but had been returned unclaimed. Be that as it may, neither party very seriously pursues the allegations levelled against each other in regard to the supply of documents, but prefer to be amiable, agreeing that what remains to be supplied would be furnished by the revenue and duly collected by the petitioner. This is recorded and this issue is laid to rest permitting the petitioner to approach the respondent with the list of documents required and directing the respondent to positively furnish the same to the petitioner within four (4) from date of receipt of the petitioner s request. W.P.No.13218 of 2019 is closed in the aforesaid terms. At this juncture, I expressly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from referring to the details thereof as being unnecessary to the adjudication of the legal issue arising in the matters. Suffice it to say that, according to the revenue, substantial assets have been found, hitherto undisclosed in the income tax returns of the petitioner. Statements appear to have been recorded and investigations carried out by the Income Tax Authorities in other countries to further the investigation process. 10. The Department officials deny that the search was conducted unfairly or that statements were recorded under threat and reiterate that the conduct of the proceedings was proper and in line with the prescription of statute and connected rules and regulations. The counter also gives details of summons issued both under the Income Tax as well as BM Acts on several dates to various persons in connection with the proceedings, stating that there had either been requests for adjournments or non-appearance by the persons summoned. R2 confirms that some material, in regard to the transactions with T.S.Kuamaraswamy of Christy Friedgram Industry, who had ultimately purchased immovable properties from the petitioner, have been supplied. Both proceedings, under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years : . . . . 13.The above provision should be read in conjunction with the provisions of Section 132 to understand the scheme of search and seizure operation under the Act in the context of a Block assessment. The provisions of Section 132, in so far as they are relevant to this matter, are extracted below: Section 132: Search and seizure. 132. (1) Where the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date of the order of assessment under section 153A or clause (c) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director for such retention is obtained : Provided that the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. (8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order (9) The person from whose custody any books of account or other documents are seized under sub-section (1) or sub-section (1A) may make copies thereof, or take extracts therefrom, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account or other documents, money, bullion, jewellery or other valuable article or thing or assets seized shall be handed over by the IO to the AO having jurisdiction over the assessee within a period of sixty days from the date on which the last of the authorisations for search was executed and thereupon the powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable by such AO. The last of the search authorisations is dated 04.09.2018 and the period of sixty days expires on 03.11.2018 as against which, as per the counter, 28.02.2019 is, admittedly when the seized materials were handed over to R1. Since the handover of assets by IO to AO is admittedly beyond the time permitted under Section 132(9A), the process of assessment is itself vitiated and the notices issued in terms of Section 153A commencing the process of assessment, liable to be quashed. The petitioner relies on a decision of this Court in the case of K. V. Krishnaswamy Naidu and Co Vs. CIT and Others [166 ITR 244], confirmed by the Supreme Court in CIT Vs. K. V. Krishnaswamy Naidu and Co. [249 ITR 749] arguing that timeline set out in Section 132 (9A) is mandatory. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 18.In the interim, the IO had made an application to his superior seeking approval to retain the seized documents beyond the period stipulated under Section 132(9A) that came to be granted under Section 132(8). The order granting extension came to be challenged by the petitioner on the grounds that the IO was not his assessing officer and hence the IO ought to have handed over the seized records to his AO who, was the officer competent to have sought an extension in terms of Section 132(8). 19.It was in the context of the above facts that the Bench considered the interplay between the provisions of Section 132(5), (8) and (9A). Section 132(5) provides for the ITO to, after hearing the assessee and making such enquiry as may be prescribed, pass an order within 120 days of the seizure with the previous approval of the Inspecting Assistant Commissioner taking note of the seized material and appraisal reports. Section 132(8) stipulates that the documents seized in the course of the search shall not be retained by the authorised officer for a period exceeding 180 days from the date of seizure except for reasons to be recorded in writing shown to and approved by the CIT. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 288(5), that Income-tax Officer also can ask for approval of the Commissioner for such retention. If the authorised officer happens to be an officer other than an Income-tax Officer having jurisdiction over the person to make an order under sub-section (5), that authorised officer shall hand over the documents and assets to the Income-tax Officer having jurisdiction over the person and once that is done, the Income-tax Officer gets jurisdiction not only to make an order under subsection (5) but also to exercise the powers of an authorised officer under subsection (8) or sub-section (9) of that section. Thus, though under section 132(1), the Director of Inspection may authorise a Deputy Director of Inspection or an Inspecting Assistant Commissioner or Assistant Director of Inspection or Income-tax Officer and the officer so authorised is referred to as the authorised officer, the provisions of sub-section (8) could not be invoked by such officer unless the happens to be an Income-tax Officer having jurisdiction over the person and who can make an order under subsection (5). The authorisation given to such officer by the Director of Inspection in turn also only enables suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the petitioner since the challenge therein was altogether different. 23.Substantial changes have been made to the scheme of Section 132 in 2002, vide Finance Act 2002. The scheme of search and seizure under the Income Tax Act as set out in Section 132 is that sub-section (1) authorises the search of a premises, sub-sections (2) to (7) provide for the modalities of the search itself, the manner of conduct of the search, the requirement for panchas and other formalities to be observed in the course of a search in order to ensure that the same is valid. 24.Section 132(8) provides for the retention by the authorised officer of seized records and assets for a period of 30 days from the date of order of assessment under Section 153A or Section 158BC(c) or within such extended period as may be authorised and granted by the officers stipulated. Section 132(8A) says that an order under sub-section (3) shall not be in force for a period exceeding 60 days from the date of the order and relates to an order served on the owner or the searched person who is in possession or control of assets or other records to the effect that such owner or person in possession shall not remove part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under that Sub-section shall be handed over by the authorised officer to the Income-tax Officer having jurisdiction over such person within a period of 15 days and thereupon, the powers exercisable by the authorised officer under Sub-section (8) or Sub-section (9) shall be exercisable by such Income-tax Officer. In the instant case, the petitioner was being assessed at Panipat. Authorizing Officer therefore ought to have complied the provisions of the said statute. The submission of Mr. Khanna, however, is that the Madras High Court in K.V. Krishnaswamy Naidu and Co. v. Commissioner of Income-tax and Ors., (1987) 166 ITR 244 has held that the said provision is for the benefit of the Revenue to enable an assessing officer to pass order under Section 132(5) within statutory period but as the said provision is not applicable for searches after 1st July 1995, the object of the said provision has to be examined in the light of new provisions, in terms whereof, the provisions for block assessments have been made. The submission of the learned counsel cannot be accepted for more than one reason. The seized documents are required to be handed over to the Incometax Officer for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delays in handing over the seized material, there is no bar to the Officer taking the same into account. The period fixed under Section 132(9A) is not mandatory but directory and must be construed as a reasonable period to aid the process of assessment. This was an appeal under Section 260 A of the Act and the question was whether an assessment under Section 158BD would be valid if the time limit under Section 132(9A) had not been adhered to. The judgment in K.V.Krishnasamy Naidu (supra) was not cited before the Bench. 31. In Sambhu Prasad Agrawal Vs. Director of Income Tax [254 ITR 498], a learned Single Judge of the Calcutta High Court considered the same issue as well as reliance by that assessee in the case of K.V.Krishnaswamy Naidu. The Court records the argument of the revenue counsel to the effect that the ratio of the judgment in K.V.Krishnaswamy Naidu would be valid only qua the legal position prior to amendment of the Act, and that by interpretation of chapter XIVB bringing into vogue block assessments, with effect from 01.06.2001, the earlier legal position was virtually given a go-bye. According to the revenue, the aforesaid judgment is no longer good law. 32. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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