Madras H.C : panchanama for the purpose of ascertaining the date of conclusion of the search

High Court Of Madras

Rakesh Sarin Vs. DCIT, Central Circle II(1), Chennai

Block Assessment Year : 1997-98 to 2002-03

Section : 158BE

K.B.K. Vasuki, J.

W.P. No. 25078 Of 2005

March 4, 2011

ORDER

1. The Writ Petition is filed against the order of the first respondent dated 30-6-2005 in No. 761R/ADXPRT7428R in respect of the block assessment years 1997-98 to 2002-03 and part of 2003-04, to quash the same and to consequently direct the respondents to drop the proceedings initiated against the petitioner for the block period.

2. The brief facts which are relevant for consideration herein are as follows :

The petitioner is engaged in the business of financing and he is assessed to Income-tax regularly. While so the department held search in the residential and official premises of the petitioner on 27-3-2003 and 28-3-2003 respectively on the strength of individual warrant of authorisations of even dated 26-3-2003 and in the course of such search documents reported to be incriminating in nature are found and few are seized and others not seized and at the end of search held on 27-3-2003 and 28-3-2003, separate panchanamas are prepared by the authorised officer in the presence of two witnesses and prohibitory orders dated 27-3-2003 and 28-3-2003 respectively are passed under section 132(3) of the Income-tax Act, from operating certain accounts, FD, RD, lockers etc., standing in the name of the assessee in City bank, Standard Chartered bank, State Bank of Indore, ABN Amro Bank, HDFC Bank, the particulars which are contained in the Prohibitory Order and also from tampering with the contents kept in the wooden alamirah in the bed room said to be belonging to mother of the assessee situated on the right side of the first floor of the residential premises and the steel cabinet placed at the assessee’s room situated in his business premises. The search was not concluded and was kept pending and the search was continued on 17-6-2003 in the residential premises and on 12-6-2003 and 14-6-2003 in the business premises on which dates the Prohibitory Orders dated 27-3-2003 and 28-3-2003 in respect of residential and business premises respectively are lifted keeping the Prohibitory Order in respect of the banks to be pending and the search in the residential and business premises was finally concluded on 17-6-2003 and 14-6-2003 respectively followed by three panchanamas dated 17-6-2003 in respect of residential premises and dated 12-6-2003 and 16-3-2003 in respect of business premises furnishing the particulars about the documents found and not seized and the documents found and seized from the wooden alamirah in the bedroom of the assessee’s mother in the residential premises and steel cabinet in the office room of the assessee in the business premises.

3. Thereafter, the second warrant of authorisation under section 132 of the Income-tax Act is issued for the search to be conducted in M/s. Standard Chartered Bank and in pursuance of the same the search was held in the Standard Chartered Bank premises in the presence of panchas and Senior Manager of the Bank and the search was commenced at 11.15 am and finally concluded at 12.05 pm on 28-8-2003 followed by panchanama in the course of such search RBI relief bonds are found and seized from OD account maintained by the assessee and others from the Standard Chartered Bank, the particulars are appended to panchanama. In the meanwhile, the prohibitory order in respect of the accounts above referred to in M/s. Standard Chartered Bank is removed on 9-4-2003 and 10-4-2003. Thereafter the assessee was issued notice for the assessment enquiry on 27-11-2003 and the assessee filed his reply on 14-9-2004 and he was issued with the questionnaire and in response to the hearing notice, the assessee furnished details as called for through his representative and the department has, after verifying all the documents and the reply given by the assessee through his representative, completed the assessment and passed the block assessment order on 30-6-2005. Aggrieved against the same, the petitioner filed statutory appeal before CIT (Appeal). The petitioner has also come forward with this writ petition thereby questioning the validity of the block assessment order mainly on the ground that the same, having been passed beyond two years from end of the month in which the last of authorisation is executed, is barred by limitation and is without jurisdiction.

4. It is contended by the learned counsel for the petitioner that as per section 158BE of Income-tax Act, time limit for completion of block assessment order is two years from the end of the month in which is the execution of the last of authorisation for search under section 132A and as per the Explanation 2(a) under section 158BE authorisation shall be deemed to have been executed on the date last panchanama was drawn in relation to any person in whose case the warrant of authorisation has been issued. According to the learned counsel for the petitioner, the search was concluded in the residential as well as business premises of the petitioner on 27-3-2003 and 28-3-2003 and the two years period for completion of block assessment year is to be reckoned only from the end of month of March during which the execution of the last of the warrant of authorisation is completed.

5. The learned counsel for the petitioner argued so for the following reasons; (1) the search conducted on bank premises on 28-8-2003 in pursuance of warrant of authorisation issued after the conclusion of the search in the residential as well as business premises cannot be treated as in continuation of the search commenced in pursuance of warrant of authorisation on 26-7-2003 and the same shall be taken into account separately for subsequent assessment. (2) Though as per the records the search is said to be held on 27-3-2003 and 17-6-2003 at the residential premises and on 28-3-2003, 12-6-2003 and 14-6-2003 at the business premises, the same was said to be finally concluded only on 17-6-2003 and 14-6-2003 respectively and there was no search held on 17-6-2003 and 12-6-2003 and 14-6-2003 in residential and as per the last panchanamas dated 17-6-2003 and 12-6-2003 and 14-6-2003, what was done on those days was only to lift the early Prohibitory Order passed on 27-3-2003 and 28-3-2003 in respect of wooden alamirah and steel cabinet in the residential and official premises respectively and to seize the documents from the same and no actual search was held on the days above mentioned, as such the Panchanama drawn on those three days cannot be treated as last panchanama evidencing the conclusion of search (3) the Prohibitory Orders passed on 27-3-2003 and 28-3-2003 are only under section 132(3) and as per section 132(8a) their validity period is only 60 days and they ceased to be in force after exceeding sixty days from the date of the order and as the Prohibitory Orders passed on 27-3-2003 and 28-3-2003 expired on 27-5-2003 and 28-5-2003 and the search and seizure followed by panchanama dated 17-6-2003, 12-6-2003 and 14-6-2003, cannot be treated as last panchanama for the purpose of ascertaining the date of conclusion of the search to reckon two years period for block assessment.

6. Such contention of the petitioner is seriously disputed on the side of the revenue both legally and factually and the legal objection raised is that the petitioner is not entitled to maintain two parallel proceedings one statutory against the assessment and another by way of writ petition against the validity of search and seizure. Factually it is contended that the delay in lifting the Prohibitory Orders dated 27-3-2003 and 28-3-2003 is only at the instance of the petitioner who requested to postpone the proceedings due to his convenience and the search held on 28-3-2003 in the bank premises is in pursuance of post search investigation leading to information of availability of FD, RBI relief funds and IDBI funds to the tune of Rs. 95,00,000 in the Standard Chartered bank, as such the search and seizure held on 28-8-2003 is in continuation of the search commenced on 26-3-2003 and as the conclusion of the search is on 28-8-2003, the block assessment order passed on 30-6-2005 is not hit by limitation.

7. I heard the rival submissions made on both sides in the light of the facts involved and documents made available herein and in the light of statutory and legal positions relied on both sides.

8.The point arises for consideration herein is as to what is the date of conclusion of the search held at both residential and business premises of the assessee whether it is 27-3-2003 and 28-3-2003 or 28-8-2003 so as to reckon the commencement of time limit of two years for completion of block assessment.

9. Before going into the factual issue raised herein, the legal objection raised against the maintainability of the writ petition is to be first appreciated. It is no doubt true that the petitioner has filed the statutory appeal as well as the present writ petition against the same block assessment order dated 30-6-2005. According to the petitioner, the statutory appeal is against the assessment order on merits and the writ jurisdiction is invoked to decide the validity of the assessment order on the point of jurisdiction and limitation. Both the counsel on record for the petitioner as well as revenue produced legal authorities in support of their respective contentions for and against the maintainability of the writ petition. The authorities cited on the side of the petitioner are Madras in (i) M.U.A. Armugaperumal & Sons v. Addl. CTO (FAC) [2008] 16 VST 188, (ii) K.S. Shivji & Co. v. Jt. CTO AIR 1967 Mad. 135 (iii) Kantilal Somehand Shah v. CC&CE[1982] 10 ELT 902 (Cal.), (iv) National Coal Co. Ltd. v. L.P. Dave AIR 1956 Pat. 294.

10. The authority cited on the side of the respondents is in Delhi Gate Auto Service Station v. Bharat Petroleum Corpn. Ltd. [2009] 16 SCC 766. While the Division Bench of our High Court and other High Courts have in the authorities cited on the side of the petitioner observed that ordinarily submission to jurisdiction and pendency of statutory appeal would be a bar to the entertainment of writ petition, but when the proceedings was without jurisdiction and against the principles of natural justice the High Court cannot be denied the power to interfere under Article 226 of the Constitution, whereas the Supreme Court has in the judgment cited on the side of the revenue observed that two parallel remedies could not be pursued by the petitioner at one and the same time. Though this Court is bound by the law laid down by Apex Court, the observations of Division Bench of our High Court and other High Courts as cited by the petitioner is more applicable to the facts of the present case for the following reasons. The Apex Court has in the judgment not gone into the question whether the High Court can exercise its jurisdiction under Article 226 Constitution of India under the circumstances as discussed in the judgment of our High Court and other High Courts. In the case decided by the Supreme Court no issue regarding want of jurisdiction or statutory bar is raised as such the Apex Court is of the view that the petitioner cannot be permitted to resort to two parallel proceedings at one and the same time. Our High Court and other High Courts have in the authorities cited on the side of the petitioner dealt with identical circumstances and decided the maintainability of the writ petition in favour of the writ petitioner. Applying the same ratio and by considering the different ground on which the block assessment order is challenged before the appellate tribunal and before this court, this Court is inclined to uphold the maintainability of the writ petition.

11. Further the respondents cannot also be allowed to question the maintainability of the writ petition in view of the order passed by this court, on earlier occasion. While disposing of the stay petition herein, our High Court has specifically ordered that the appeal proceedings against the assessment order may go on, however, giving effect to the order of the appellate authority alone is stayed and it will be depending on the outcome of the present writ petition. In view of such order, the writ petitioner and the revenue contested the statutory appeal on merits leaving the question of jurisdiction and limitation to be decided in this writ petition and the appeal is also disposed of on factual issues leaving the two legal issues and the revenue has also preferred further appeal before the board against the order passed against the assessment on merits. That being the conduct of the parties in subjecting themselves to the jurisdiction of the appellate authority as well as to the writ jurisdiction and the manner of disposal of the appeal, the writ petition cannot be at this length of time now thrown away on the ground of maintainability.

12. As already referred to the core issue involved herein is what is the date of conclusion of the search? In order to appreciate this aspect the relevant section 158BE and Explanation 2(a) under section 158BE of Income-tax Act is extracted hereunder :

“158BE. Time limit for completion of block assessment.—(b) within two years from the end of the month in which the last of the authorisations 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 on or after the 1st day of January, 1997.

Explanation 2.— ** ** **

(a)in the case of search, on the conclusion of search as recorded in the last panchanama drawn in relation to any person in whose case the warrant of authorisation has been issued.”

The combined appreciation of section 158BE and Explanation 2(a) would lead to an irresistible conclusion that the warrant is deemed to be executed on the conclusion of search as recorded in the last panchanama.

13. The next dispute arose between the parties herein is as to which is the last panchanama. While it is the case of the petitioner, the last of panachanamas are dated 27-3-2003 and 28-3-2003, according to the respondent, it is dated 28-8-2003 on the basis of the grounds as already referred to in the foregoing paragraphs. This court is on the basis of the available records inclined to reject the stand of the department that the last panchanama is the one dated 28-8-2003 and the date of conclusion of the search is 28-8-2003 as recorded in the same. It is to be concluded so mainly on the basis of the report recorded by the searching party in that panchanama dated 17-6-2003 in respect of residential premises and the panchanamas dated 12-6-2003 and 14-6-2003 in respect of business premises. It is definitely recorded in the panchanamas that search in respect of both residential and business premises is finally concluded on 17-6-2003 and 14-6-2003. If that is so, the search held on 28-8-2003 in the premises of Standard Chartered bank is to be necessarily treated as fresh search held on the strength of fresh warrant authorisation. The Division Bench of Delhi High Court in CIT v. Deepak Aggarwal [2008] 175 Taxman 1 following the earlier judgment of Kerala High Court (i) CIT v. Dr. C. Balakrishnan Nair [2006] 282 ITR 158/[2005] 148 Taxman 172 (Ker.) (ii) CIT v. Mrs. Sandhya P. Naik [2002] 253 ITR 534/124 Taxman 384 (Bom.) observed that the search under section 132 of the Act should be continuous and if there is gap, there must be a valid explanation for the gap. In the absence of one such valid and acceptable explanation, the search held on three occasions cannot be treated as continuation of the search commenced on 27-3-2003. Having recorded that the search is finally concluded on 17-6-2003 and 14-6-2003 respectively, the respondents cannot be permitted to introduce a new theory as if the search held on 28-8-2003 is in continuation of the earlier search initiated on 26-3-2003. That being the factual and legal position, the search held on 28-8-2003 and the panchanama dated 28-8-2003 cannot be treated as the last panchanama for the purpose of reckoning commencement of time limit of two years.

14. It is no doubt true that the search commenced on 26-3-2003 in both residential and business premises is recorded as search continues’ in panchanamas dated 27-3-2003 and 28-3-2003 and is recorded as finally concluded only in the panchanamas dated 17-6-2003 and 14-6-2003. The learned counsel for the petitioner would then seriously contend that the last panchanamas dated 17-6-2003, 12-6-2003 and 14-6-2003 cannot be treated as the last panchanama as there was no search held on those days and what is done by the authorised officer on those days are only to lift Prohibitory Order dated 26-3-2003 passed under section 132(3) and seizure of the documents contained in the wooden alamirah and steel cabinet covered under the Prohibitory Orders. It is further argued that as the Prohibitory Orders passed under section 132(3) shall be under section 132-8A valid for 60 days, the Prohibitory Orders dated 27-3-2003 and 28-3-2003 becomes ineffective after 27 and 28-5-2003 and the seizure following the lifting of panchanamas dated 17-6-2003 and 12-6-2003 and 14-6-2003 are not in continuation of the search commenced on 27 & 28-3-2003 and are without jurisdiction.

15. The learned counsel for the respondent would seek to defend the validity of those Prohibitory Orders on the ground that lifting of the Prohibitory Order is postponed only at the instance of the petitioner for his own convenience and the time limit prescribed under section 132-8A is only directory and not mandatory. It is further argued by the learned counsel for the respondents, that the Prohibitory Orders passed on 27-3-2003 and 28-3-2003 are not under section 132(3) but only under section 132(1) and the time limit prescribed under section 132-8A is hence inapplicable to the same. In my considered view, the contentions so raised have no legal or factual basis. It is noteworthy to mention that the provision of law referred to in the Prohibitory Orders is section 132(3) of the Act and the contents of the wooden alamirah and steel cabinet which are the subject matter of Prohibitory Orders are not such in its volume, weight or other physical characteristics and not such dangerous in nature that it is not possible or practicable to take physical possession of the same and to remove it from the said place. Once the Prohibitory Orders above referred to are to be treated as the orders passed under section 132(3), the same shall have no force beyond 60 days and no authority is vested upon the officials concerned to extend the same beyond 60 days for any of the reasons mentioned by the revenue. Though the authority concerned is empowered to extend the time beyond 60 days, after obtaining approval of the Director or Commissioner for the reason recorded in writing before 2002 amendment, such power is removed by the Amendment Finance Act 2002 with effect from 1-6-2002. As such, it cannot be contended by the revenue that it is only directory and not mandatory. The revenue cannot also permitted to argue that lifting of the order is postponed at the instance of the petitioner for his own convenience. The fact remains undisputed are the Prohibitory Orders dated 27-3-2003 and 28-3-2003 had force of law only till 27-5-2003 and 28-5-2003, as such any search, purported to be held in pursuance of lifting of the Prohibitory Orders on 17-6-2003, 12-6-2003 and 14-6-2003 cannot be treated as search and seizure in the eye of law. Even otherwise, what is done on 17-6-2003, 12-6-2003 and 14-6-2003 is only lifting the Prohibitory Orders and the documents seized are already found in the course of earlier search kept in the wooden alamirah and steel cabinet and it cannot be disputed that the seizure of the documents from the wooden alamirah and steel cabinet after lifting the Prohibitory Orders is not in pursuance of any fresh and further search actually held on 17-6-2003 and 12-6-2003 and 14-6-2003. If that is so, though the search is as per the records said to be finally concluded on 17-6-2003, 12-6-2003 and 14-6-2003, search is concluded on 27-3-2003 and 28-3-2003 respectively, as such the panchanamas drawn on 27-3-2003 and 28-3-2003 in respect of both residential and business premises are the last panchanamas and the date of the same is the date of conclusion of the search as referred to in Explanation 2(a) under section 158BE for reckoning the time limit of two years for completion of block assessment.

16. The same reasoning can be applied to the search and seizure held on 28-8-2003 in the bank premises. There again the documents, RD, relief bonds recovered from the bank is already found in the search held on 27-3-2003 and inventory is also taken in respect of the same and the same is also the subject matter of Prohibitory Order dated 27-8-2003 and the Prohibitory Order in respect of the banks where the accounts in question held is admittedly removed on 10-4-2003. The seizure of the bonds from the bank on 28-8-2003 is not in pursuance of any search, as such the panchanama dated 28-8-2003 cannot be hence treated as the last panchanama evidencing any search. Viewing from any angle, the conclusion of actual search is on 27-3-2003 and 28-3-2003 in both the premises of the assessee respectively and the same is the date to be reckoned as the date of execution of the last of warrant of authorisations. Therefore, the limitation for completing block assessment order would end on 30-3-2005 being two years from the end of month in which the search was concluded and the impugned assessment order dated 30-6-2005 is hopelessly barred by limitation.

17. The conclusion so arrived at by this court is also supported by the decisions of Delhi and Bombay High Court and Income-tax tribunals of different states in the following judgments (i) Bangalore in DTS Rao v. Asstt. CIT [2007] 106 ITD 569 (ii) Nandlal M. Gandhi v. Asstt. CIT [2008] 115 ITD 1 (Mum.)(TM) (iii ) Delhi Sarb Consulate Marine Products (P.) Ltd. v. Asstt. CIT [2005] 97 ITD 333 (Delhi) (iv) CIT v. Mrs. Sandhya P. Naik’s case (supra) (v ) Shahrukh Khan v. Asstt. CIT [2007] 104 ITD 221 (Mum.) (vi) Dy. CIT v. Adolf Patric Pinto [2006] 100 ITD 191 (Mum.) (vii) Javed Mohd. Peshimam v. Dy. CIT [2007] 12 SOT 34 (Mum.) (viii) Dr. C. Balakrishnan Nair v. CIT [1999] 237 ITR 70 (Ker.) (ix) Deepak Aggarwal’s case (supra).

18. In all these cases, the Income-tax Benches of different High Courts and Tribunal/Board have, on identical circumstances, held that the Prohibitory Order passed under section 132(3) shall be in force for 60 days and any search and seizure by lifting Prohibitory Order after 60 days does not amount to actual search and seizure, and any search and seizure after lifting the expired Prohibitory Order cannot be regarded as continuation of search commenced and cannot be taken into account for ascertaining the date of execution of the last of warrant of authorisation and the search shall be treated as continuous only when there is no unexplained gap between the commencement and completion of the search and the search once completed cannot be resumed without valid reason and the last panchanama is the document evidencing conclusion of actual search and the date of such panchanama is to be regarded as the date of conclusion of search and execution of the warrant, and the block assessment shall be within two years from such date and any assessment beyond two years from such date is barred by limitation. The legal and factual aspects involved herein as discussed above will only establish that the impugned block assessment order dated 30-6-2005 is barred by limitation and is without jurisdiction and cannot be enforced against the assessee and the assessee is entitled to get the reliefs as sought for herein.

19. In the result, the writ petition is allowed as prayed for. No costs.

[Citation : 333 ITR 451]

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