IN THE INCOME TAX APPELLATE TRIBUNAL SPECIAL BENCH : JODHPUR

IN THE INCOME TAX APPELLATE TRIBUNAL SPECIAL BENCH : JODHPUR BEFORE SHRI H.L. KARWA, VICE PRESIDENT, SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI P.M. JAGTAP, ACCOUNTANT MEMBER IT (SS) A No. 27/Jodh/2006 Block Assessment Period : 1997-98 to 2003-04 Asstt. Commissioner of Income Tax, Central Circle-2, Jodhpur. Vs. M/s Shree Ram Lime Products Ltd., 39-A, Dharam Narayanji ka Hatta, Paota, Jodhpur. PAN : AABCS9160P C.O. No.37/Jodh/2006 (IT (SS) A No.27/Jodh/2006) Block Assessment Period : 1997-98 to 2003-04 M/s Shree Ram Lime Products Ltd., 39-A, Dharam Narayanji ka Hatta, Paota, Jodhpur. PAN : AABCS9160P (Appellant) Vs. Asstt. Commissioner of Income Tax, Central Circle-2, Jodhpur. (Respondent) Assessee by Revenue by : Shri Mahavir Jain : Shri M.N. Maurya, CIT, DR O R D E R PER I.P. BANSAL, JUDICIAL MEMBER: The appeal in the present case is filed by the revenue and the Cross Objections by the assessee and they are directed against order dated 15 th December, 2005 passed by CIT (A)-II, Jodhpur. The impugned assessment is framed vide order dated 31 st January, 2005

2 passed u/s 158BC/143(3) of the IT Act, 1961. The grounds of appeal filed by the revenue read as under:- The Ld. CIT (A) has erred in reducing the addition made on account of payment of salaries from Rs.5,03,867/- to Rs.1,19,333/- and thereby allowing a relief of Rs.3,84,534/-. 2. The Ld. CIT (A) has erred in deleting the addition of Rs.29,87,374/- made by the A.O. on account of mfg., salary and wages without any basis as the addition was made on the basis of loose papers and books of accounts found during the course of search. 3. The Ld. CIT (A) has erred in deleting the addition of Rs.3,00,000/- made by the A.O. on account of rejection of books of accounts without any basis when the provisions of section 145(3) were applicable. 1.1 The grounds of Cross Objections filed by the assessee read as under:- 1. That on the facts and in the circumstances of the case, the block assessment order for the block period i.e., asst. yrs 1997-98 to 2003-04 (upto the date of search), is bad in law and, therefore, the respondent-company appeals for its cancellation. 2. That without any prejudice to the first ground of crossobjection, the respondent-company appeals that the block assessment order in question was completed after expiry of the time limit provided in the Chapter XIV-B (Special procedure for assessment of search cases) of the IT Act, 1961. Therefore, the respondent-company appeals for the cancellation of the block assessment order. 3. That without any prejudice to the aforesaid grounds of cross-objections and on the facts and in the circumstances of the case, regarding the sustenance of disallowance of salary expenses to the extent of Rs.1,19,333/- by the learned CIT (Appeals), Jodhpur, the respondent company appeals that as the disallowance was not made in accordance with the provisions of the Chapter XIV-B of IT Act, 1961, the learned CIT (Appeals) did not justify in sustaining the same. 4. That without any prejudice to the aforesaid grounds of cross-objections, even in view of the facts and circumstances of the case, the learned CIT (Appeals), Jodhpur did not justify in sustaining the disallowance of salary expenses to the extent of

3 Rs.1,19,333/- and, therefore, the respondent-company appeals for allowing these expenses. 5. That without any prejudice to the aforesaid grounds of cross-objections and on the facts and in the circumstances of the case, regarding the sustenance of trading addition to the extent of Rs.1,86,090/- by the learned CIT (Appeals), Jodhpur, the respondent-company appeals that as the addition was not made in accordance with the provisions of the Chapter XIV-B of IT Act, 1961, the learned CIT (Appeals) did not justify in sustaining the same. 6. That without any prejudice to the aforesaid grounds of cross-objections even in view of the facts and circumstances of the case, the learned CIT (Appeals), Jodhpur did not justify in sustaining the trading addition to the extent of Rs.1,86,090/- and, therefore, the respondent-company appeals for deleting the same. 7. That the appellant appeals for consequential relief from the interest charged u/s 158BFA(1). 8. That the appellant craves opportunity for furnishing any other ground/s of appeal on or before the date of appeal hearing. 2. At the outset, it may be mentioned here that a reference u/s 255(3) was made by the Division Bench vide its order dated 25 th July, 2007 to Hon ble President for constitution of Special Bench. Following question was proposed to be referred. Whether on the facts and in the circumstances of the case, the period of limitation for completion of the block assessment as per Sec.158BE read with Explanation 2 is be reckoned from the end of the month in which last panchnama on the conclusion of search is drawn on the assessee or last Panchnama of the last authorization even when it is not last Panchnama drawn on the assessee and one or more valid Panchnama are drawn on the assessee thereafter in execution of any former authorization. 3. The Hon ble President vide order dated 14 th November, 2007 has constituted the Special Bench to decide the aforementioned question which inter alia, include the hearing of entire appeal. Later on

4 constitution of Special Bench was revised vide order dated 23 rd August, 2010. 4. In ground No.2 of the cross objection, the assessee has challenged the validity of impugned assessment on the ground that it is time barred. Therefore, it was considered proper to hear both the parties on this issue as if it is found that assessment itself is invalid on account of its being time barred then there will be no need to go into other issues. Both the parties have argued on this issue and their detailed contentions were heard on 4.05.2012. 5. To consider the above aspect, the following facts will be relevant. Two authorizations for search were issued. The first authorization is dated 17 th December, 2002 and the second authorization is dated 20 th December, 2002. The proceedings of these two authorizations are described in the following chart submitted by ld. Counsel at page 15 of the paper book and such course of events was not disputed by Ld. DR:- Shree Ram Lime Products Ltd. Statement showing details regarding the dates of authorization, places of execution, dates of Panchnamas, durations of proceedings & authorized officers as per panchnamas. Date of authorization 17/12/2002 (DIT, Jaipur) 17/12/2002 (DIT, Jaipur) 17/12/2002 (DIT, Jaipur) Place of execution Date of Panchnama Duration of proceedings Borunda 20/12/2002 8:20 am to (Site of 9:15 pm Bhattas, i.e., works) - do - 21/12/2002 2.30 pm to 8:00PM - Do- 03/01/2003 5:50 pm to 6:20 pm (Finally Concluded; Authorised officers as per panchnama. S.L. Mourya ADIT Hari Shankar ITO S.L. Mourya ADIT Hari Shankar ITO S.S. Mantri DDIT (Inv.I), Jodhpur.

5 20/12/2002 (Addl. DIT, Jodhpur) 20/12/2002 (Addl. DIT, Jodhpur) 20/12/2002 (Addl. DIT, Jodhpur) 20/12/2002 (Addl. DIT, Jodhpur) Jodhpur Office (Basement of 39A, Dharma Narayanji ka Hatta, Paota, Jodhpur) as per Panchnama) 20/12/2002 8:00 am to 10:45 pm - Do - 24/12/2002 4:00 pm to 9:00 pm - Do- 26/12/2002 3:10 pm to 7:50 pm - Do - 27/12/2002 3:15 pm to 8:15 pm (Finally Concluded; as per Panchnama) Raj Mehra, ADIT (Inv.3), Jaipur, D.C. Sharma, ITO K.V.C. Pillai, ITO S.S. Mantri, DDIT (Inv.I), Jodhpur. S.S. Mantri, DDIT (Inv.I), Jodhpur. S.S. Mantri, DDIT (Inv.I), Jodhpur. 6. Referring to the facts described in the above mentioned chart and also the provisions of Section 158BE, various contentions were raised by Ld. AR to contend that the impugned assessment is bad in law as the same has not been framed within the time limit prescribed in the aforementioned provisions. For better appreciation of the contentions raised by Ld. AR, it will be relevant to reproduce Section 158BE:- Time limit for completion of block assessment. 158BE. [(1) The order under section 158BC shall be passed (a) within one year 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 after the 30th day of June, 1995, but before the 1st day of January, 1997; (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

6 documents or any assets are requisitioned on or after the 1st day of January, 1997. (2) The period of limitation for completion of block assessment in the case of the other person referred to in section 158BD shall be (a) one year from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997; and (b) two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997.] [Explanation 1. In computing the period of 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) the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee to be reheard under the proviso to section 129; or (iv) in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded: Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in subsection (1) or sub-section (2) available to the Assessing Officer for making an order under clause (c) of section 158BC is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.] [Explanation 2. For the removal of doubts, it is hereby declared that the authorisation 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 authorisation has been issued;

7 (b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer.] 7. It was submitted that in the present case two authorizations were issued; one of 17 th December, 2002 (referred to as the first authorization) and the other on 20 th December, 2002 (referred to as the last authorization). He submitted that the first authorization was in respect of bhatta premises of the assessee and the last authorization was in respect of assessee s office at basement of the building. On the basis of the aforementioned two authorizations, proceedings u/s 132 took place on different dates and the aforementioned panchnamas were drawn. He submitted that from the aforementioned chart it will be apparent that the last panchnama was drawn on 3 rd January, 2003 (copy filed at page 38-40 of the paper book) which is in respect of execution of first authorization. So far as it relates to the last authorization dated 20 th December, 2002, the last panchnama was drawn on 27 th December, 2002 (copy placed at page 53-55 of the paper book). 8. Ld. AR submitted that the Assessing Officer has passed the impugned assessment order u/s 158BC on 31 st January, 2005 by considering that the panchnama drawn on 3 rd January, 2003 was the last panchnama for the purposes of Section 158BE read with Explanation 2 thereof. He submitted that the entire case of Revenue rests upon the Panchnama drawn on 3 rd January, 2003 as all other Panchnamas are drawn in the month of December, 2002. He submitted that it is the main case of the assessee that Panchnama dated 3 rd January, 2003 is not a valid Panchnama for reckoning the time limit. He submitted the following sequence of date-wise operation/activities carried out by the search party in pursuance of first authorization dated 17 th December, 2002. He submitted that the such

8 detail is prepared on the basis of the facts available in all the three panchnamas, orders passed u/s 132(3) of the Act and the revocation orders. These details are furnished at pages 16-17 of the documents submitted by Ld. AR during the course of hearing and is reproduced below for the sake of convenience. Statement showing date-wise operations/activities carried out by the search party, in pursuance of the first authorization dated 17.12.2002,a s noticed from the panchnamas, orders u/s 132(3) of the IT Act, 1961 and the revocation orders. 1. As per the panchnama dated 20.12.2002 (page nos.18 to 20 of the paper book): a. the books of accounts and documents as per inventories in annexure A-1, A-2 and A-3 (page nos.21 to 26 of the paper book), were found and seized. b. Cash as per Annexure C-1 and stock as per annexure A-4 (page nos.27 & 28 of the paper book) were found but not seized. c. Statements of six persons were recorded. d. An order u/s 132(3) of the IT Act, 1961 (page no.29 of the paper book) showing the following narration, was passed. Inner room of office containing books of A/cs, files, etc. duly sealed at window & door of the room. Two main gates of the factory premises duly locked & sealed. 2. As per the Panchnama dated 21.12.2002 (page nos.30 to 32 of the paper book): a. Order under the Second Proviso to sec.132(1) of the IT Act, 1961 was passed for deemed seizure of stock of goods of Rs.25,43,500/- as per annexure N (page nos.33 & 34 of the paper book). b. Stock as per Stock Inventory Annex. S (page no.35 of the paper book) was found but not seized. c. Statements of one person were recorded. d. Revocation of the aforesaid order u/s 132(3) of the IT Act, 1961 dated 20.12.2002 was made (page no.36 of the paper book).

9 e. An order u/s 132(3) of the IT Act, 1961 (page no.37 of the paper book) showing the following narration, was passed:- Inner room of office containing books of A/cs, files, etc. duly sealed at window & door of the room. 3. As per panchnama dated 03.01.2003 (page nos.38 to 40 of the paper book): A revocation of the aforesaid order u/s 132(3) of the IT Act, 1961 dated 21.12.2002, was made and for that purpose following activities were carried out within a period of 30 minutes i.e., from 5.50 pm to 6.20 pm. a. Two panchas were called by Sh. SS Mantri, DDIT (Inv.)-1, Jodhpur at 5.50 PM by issuing two orders u/r 112(6) of the IT Rules, 1962 r/w sec. 132 of the IT Act, 1961 dated 03.01.2003 (page nos.42 & 43 of the paper book). b. Panchas examined the seals(s) affixed at Inner Room of office containing books of accounts, files, etc. at window and door of the room on the base of the aforesaid prohibitory order u/s 132(3) dated 21.12.2002 and found the seal (s) intact and in order (page no.41 of the paper book). c. The seal(s) was/were broken in the presence of the panchas. The prohibitory order u/s 132(3) dated 21.12.2002 was vacated by passing Revocation of the order u/s 132(3) of the IT Act, 1961. Dated 03.01.2003 (page no.41 of the paper book). 9. On the basis of the aforementioned facts, Ld. AR submitted the following arguments in respect of ground Nos.1 and 2 of the Cross Objections filed by the assessee:- i) Panchnama dated 3 rd January, 2003 was neither a valid panchnama nor it was relevant for reckoning the limitation u/s 158BE read with Explanation thereto. ii) The panchnama dated 3 rd January, 2003 was not the last panchnama as contemplated in Explanation 2 to Section 158BE.

10 iii) The panchnama dated 3 rd January, 2003 was not drawn in execution of the last of the authorizations and, hence, the same was not to be taken into consideration for the purpose of determining the limitation u/s 158BE read with Explanation 2 thereof. 10. Ld. AR has elaborated his arguments on all the aforementioned aspects to contend that the impugned assessment order passed by the Assessing Officer was not passed within the time limit prescribed under the provisions of Section 158BE read with Explanation 2 thereto. 11. On the first aspect, it was submitted by Ld AR that these Panchnamas were drawn in respect of first authorization dated 17.12.2002, which are dated 20.12.2002, 21.12.2002 & 3.1.2003. He submitted that in first two Panchnamas dated 20.12.2002 & 21.12.2002, the authorized officer are named as Shri S.C. Maurya and Shri Hari Shankar, ITO. As against that in the third Panchnama dated 3.1.2003, the name of authorized officer is written as Shri S.S. Mantri DDIT (Inv.), Jodhpur. Ld AR submitted that Shri S.S. Mantri being not an authorized officer, the Panhnama is invalid. For this purpose Ld AR relied on following decisions:- i) CIT vs. Mrs. Sandhya P. Naik (2002) 253 ITR 534 (Bom); ii) Late DTS Rao through L/H D.S. Manjunath vs. ACIT (2007) 108 TTJ (Bang) 686; and iii) Javed Mohd. Peshimam vs. DCIT (2006) 100 TTJ (Mum) 434 12. To cut short this issue, it may be mentioned that Ld. DR has produced before us copy of authorization on which name of Shri S.S. Mantri is also described as authorized officer. Copy of the said authorization was also given to Ld AR. After perusing the copy of

11 authorization dated 17 th December, 2002, Ld. AR did not further argue on this aspect, therefore, this contention of the assessee is rejected. 13. On second aspect it was submitted by ld AR that Panchnama dated 3.1.2003 is executed only for the purpose of revocation of the order passed u/s 132(3) dated 21.12.2002. He submitted that except passing revocation order, nothing was done on 3.1.2003 as the period mentioned on Panchnama is 5.50 pm to 6.20 pm. Neither search was carried out on that date nor there was any seizure. He submitted that search and seizure was already completed on 20 th December, 2002 (between 8.20 AM to 9.50 PM) & on 21 st December, 2002 (between 2.30 PM to 9.00PM). Therefore, Ld AR submitted that the Panchnama dated 3.1.2003 is not a Panchnama as contemplated in Explanation-2 to Section 158BE. Reliance was placed by Ld AR on the decision of Hon ble Rajasthan High Court (jurisdictional High Court) in the case of CIT v. White and White Mineral (P) Ltd. (2011) 239 CTR (Raj.) 330 vide which the decision of ITAT in the said case reported as 114 ITR TTJ (Jd.) 405 was affirmed. He submitted that Hon ble Rajasthan High Court in their decision had taken note of the following documents:- (a) The Panchnama dated 20 th, 21 st Dec., 2002 (b) The Prohibitory order dated 21 st Dec., 2002 (c) Order dated 3 rd Jan, 2003. (d) The Panchnama dated 3 rd Jan., 2003 (e) Revocation order dated 21 st Dec., 2002 14. He submitted that upon noting the aforementioned documents, Hon ble Rajasthan High Court has observed that after revoking the prohibitory order dated 21 st December, 2002, there was nothing to show that any prohibitory order was clamped. He submitted that though in the said case the date of revocation has not been stated by

12 Hon ble High Court, yet, it can be inferred that document mentioned at Sl.No.3 i.e., order dated 3 rd January, 2003 was the revocation order and, thus, the revocation of prohibitory order was done on 3 rd January, 2003. He submitted that the facts of the present case are almost similar to the facts of the aforementioned case and these facts also can be gathered from the order of the Tribunal which has been confirmed by Hon ble Rajasthan High Court. He submitted that on identical facts, it was concluded by Hon ble Rajasthan High Court that the entire episode was over on 21 st December, 2002, therefore, prohibitory order was revoked and there was no error in the findings recorded by the Tribunal. Ld. AR also referred to the observations of the Tribunal from the said decision to contend that the facts of the present case are similar to the facts of the present case as in that case also it was noted that block assessment order was passed on 31 st January, 2005. The books of account and cash found during the search were inventorised on 20 th December, 2002. The office room situated near the main gate of the factory premises in which documents, lose papers and books of account were lying was put under prohibitory order under section 132(3) of the Act. On 21 st December, 2002 the requisite investigation regarding stock of goods as per Annexure G was taken. However, the said room was again put under prohibitory order and was released on 3 rd January, 2003 at 5.05 pm within ten minutes without making any seizure verification, etc. Lifting of prohibitory order on 3 rd January, 2003 was merely a formality completed by the ADIT within ten minutes. On these facts it was held that on 3 rd January, 2003 there was no execution of the authorization dated 17 th December, 2002. Therefore, the panchnama dated 3 rd January, 2003 was not the last panchnama as contemplated in Explanation 2 to Section 158BE and it was held that assessment order dated 31 st January, 2005 passed u/s 158BC was a time barred assessment. The last panchnama for such execution was panchnama

13 dated 21 st December, 2002, therefore, the assessment order was required to be passed by 31 st December, 2004. Thus, Ld. AR contended that the facts of the present case are identical to the facts in that case, therefore, the issue is squarely covered by the aforementioned decision of Hon ble Rajasthan High Court. 15. He further placed reliance on the decision in the case of CIT vs. Mrs. Sandhya P. Naik (2002) 253 ITR 534 (Bom) wherein it was held by Hon ble High Court that by simply stating in the panchnama that search is temporarily suspended, the authorized officer cannot keep the search proceedings in operation by passing a restraint order u/s 132 (3) and it was further held that, by passing a restraint order, the time limit available for framing the order cannot be extended. 16. Ld. AR also referred to the decision of ITAT in the case of M. Sivaramakrishnaiah & Co. vs. ACIT (2005) 93 TTJ (Visakha) 1035 wherein the similar proposition has been laid down and, thus, it was submitted by him that the assessment in the present case should be held to be barred by time. 17. The third argument of Ld. AR is that panchnama dated 3 rd January, 2003 was not the last drawn in execution of the last authorization and, hence, it was not to be taken into consideration for the purpose of determining the limitation u/s 158BE read with Explanation 2 thereto. This contention of the Ld. AR is based on the language of the provisions of Section 158BE wherein in Section 158BE (1) the term used is last of the authorizations. According to the submissions of Ld. AR the last authorization in the present case is an authorization dated 20 th December, 2002 in respect of which last panchnama has been drawn on 20 th December, 2002, therefore, the time limit within which the assessment could be completed should be

14 31 st December, 2004 and as assessment has been framed on 31 st January, 2005 the impugned assessment is barred by time limitation. For this purpose, Ld. AR relied upon the following decisions:- i) Shahrukh Khan vs. Asstt. CIT (2007) 107 TTJ (Mumbai) 252. ii) C. Ramaiah Reddy vs. ACIT (2011) 244 CTR (Kar) 126 18. He submitted that the decision of Hon ble Karnataka High Court clearly laid down a proposition that when there are different places to be searched, separate search authorization should be drawn w.r.t the places of search. The said authorizations may be issued on different dates in which case the last of such authorizations is to be looked into for the purpose of limitation. Ld. AR submitted that he is aware of the contrary view taken by Hon ble Delhi High Court in the case of CIT vs. Anil Minda & Ors. (2010) 328 ITR 320 (Del) wherein it has been held that what is relevant is the last panchnama and not the last authorization. He submitted that even in a case where two reasonable constructions are permissible, the construction which favours the assessee must be adopted and, for this contention Ld AR relied upon the decision of Hon ble Supreme Court in the case of Hon ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. 88 ITR 192 (SC). He also submitted that according to the decision of Hon ble Madras High Court in the case of Visvas Promoters (P) Ltd. vs. ITAT & Anr. (2009) 226 CTR (Mad) 628, the decision of High Court of different jurisdiction is not binding on the Tribunal. 19. In this manner, Ld. AR concluded his arguments. 20. On the other hand, Ld. DR pleaded that according to the plain language of the provisions what is relevant to be seen is that on which date last panchnama has been drawn. Referring to the

15 aforementioned chart, it was submitted by Ld. DR that the last panchnama in the present case has been drawn on 3 rd January, 2003. He submitted that the last panchnama can be in respect of any authorization whether it is the first or last. The date of issue of authorization has no relevance to determine the time limit. He submitted that Ld. AR is incorrect in contending that the first authorization dated 17 th December, 2002 was not relevant as only authorization which was to be considered was the second authorization dated 20 th December, 2002 in respect of which last panchnama was drawn on 27 th December, 2002. He submitted that this proposition of law has been made clear in the decision of Hon ble Delhi High Court in the case of CIT vs. Anil Minda & Ors. (supra) wherein on almost identical facts it was held that assessment framed is within limitation. He submitted that in that case a search warrant dated 13 th March, 2001 was executed at the office and residence of the assessee. On 26 th March, 2001 a second authorization was issued for searching the locker which was executed on 26 th March, 2001 itself and the panchnama was drawn on the same date. The assessment was completed in April, 2003. The validity of the assessment was challenged on the ground of limitation. It was the contention of the assessee that limitation should be computed with reference to execution of panchnama in respect of second authorization i.e., on 26 th March, 2001 was executed and the period of two years as provided u/s 158BE (1)(b) came to end by March, 2003 and the assessment order being passed in April, 2003 was not within time. As against that it was the case of the department that since the last panchnama though related to first authorization dated 13 th March, 2003 was executed on 11 th April, 2001, therefore, the period of limitation would commence from that date and their lordships of Delhi High Court, after considering the legal position, have held that the Tribunal was wrong in holding that assessment order was barred by limitation. It was observed that

16 the purport of the Explanation-2 to section 158BE was to count the period of limitation of two years from the date when last panchnama was drawn in respect of any warrant or authorization. Any point of execution of the warrant on the last panchnama shall be the starting point of the time of limitation because at that point of time the search party had in its custody the complete material and was in a position to evaluate the disclosed and undisclosed material/income and not before. He submitted that from the aforementioned decision two things are very clear. First is that the date of authorization has no relevancy and what will be relevant is the last panchnama drawn in respect of that authorization. Secondly, the starting point of the limitation is the point of time when search party had in its custody the complete material and would be in a position to evaluate the disclosed and undisclosed material/income. He submitted that from the aforementioned chart it is clear that before 3 rd January, 2003, the department was not in a position to commence the assessment proceedings as it would not have the custody of the complete material, therefore, it was not in a position to evaluate the disclosed/undisclosed material/income. He submitted that the similar proposition has been laid down in the following decisions:- i) CIT vs. Durga Shankar Kansara (2008) 305 ITR 249 (Raj) wherein referring to the provisions of Explanation 2 to Section 158BE inserted w.e.f. 1 st July, 1995, it was observed that since the assets were received by the IT authorities on 5 th June, 1997, the period of one year was to be computed from that date the assessment order being passed on 13 th November, 1997 was clearly within the limitation. ii) VLS Finance Ltd. and Another vs. CIT and Another (2007) 289 ITR 286 (Del) wherein it has been held that a search u/s 132 of the Income Tax Act, 1961 will conclude on the day of the

17 last panchnama is drawn. The time limit for making of an order u/s 158BC read with Section 158BE (1) will start from the last of panchnamas. iii) Smt. Krishna Verma vs. ACIT 113 ITD 655 (Del) (SB) wherein it is held that Section 158BE provides for the time limit for completion of the block assessment. Clause (b) of Subsection (1) of Section 158 BE provides the limit of two years from the end of the month in which last of the authorizations for search u/s 132 was executed, for passing block assessment order, where the search was initiated on or after 1 st January, 1997. Clause (a) of Explanation 2 below the Section provides that authorization for the search shall be deemed to have been executed on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case warrant of authorization was issued. 21. In this manner, Ld. DR pleaded that the assessment should be considered to be framed within time limit and the contentions of Ld. AR should be rejected. 22. We have carefully considered the rival submissions in the light of material placed before us. The facts have already been discussed in detail in the above part of this order. The first contention of Ld. AR, as recorded earlier, is rejected as after going through the authorization it was found that name of Shri SS Mantri was also described as an authorized officer. 23. The second contention of Ld. AR rests upon the argument that last panchnama dated 31.01.2003 is not a valid panchnama in the eyes of law as it had been executed only for the purpose of revocation

18 of order passed u/s 132(3) dated 21 st December, 2002. This contention of Ld AR based on the fact that on 3.1.2003 only revocation of the earlier order was done and this fact is clear from the time taken by the authorities on that date. It is the submission of Ld AR that the revocation proceeding on that date was started at 5.50 PM and closed at 6.20 PM. There was neither any search nor any seizure. Search & seizure proceedings were already completed on 20 th December, 2002 (during 8.20 AM to 9.50 PM) and 21 st December, 2002 (during 2.30 PM to 8.00 PM). It is the submission of Ld AR that panchnama is not a mere formality and the actual event to reckon the time limit will be effective steps taken by the Department to have the material in its possession on the basis of which assessment could be completed. As against these contentions of Ld AR, it is the contention of the Ld DR that panchnama executed on 03.01.2003 was not a mere a formality as the prohibitory order was lifted on the said date and the language of provision is clear according to which the reckoning of time limit will be the point of time when last panchnama is drawn. 24. We have carefully considered these contentions of both the parties. We have also carefully considered the facts found in the case of White & White Minerals Pvt. Ltd. (supra) in which under almost identical facts and circumstances, it was held by the Tribunal that last panchnama drawn on 3.1.2003 was only to lift the prohibitory order and thus was a mere formality not having the effect of extending the limitation and therefore, the assessment order passed on 31.1.2005 was barred by limitation. Briefly discussed the facts of that case was that a search & seizure operation was conducted on 20 th December, 2002 at the factory premises of M/s white & White Minerals Pvt. Ltd. Jodhpur and simultaneously a survey u/s 133A was also conducted at the premises of that assessee in Jodhpur Tower, Jodhpur situated at Barunda which was started on 20 th December, 2002 when inventory of

19 stock was prepared after physical verification. Statement of employees were recorded and books of accounts were seized as per the inventory. Out of cash found at `.1,46,000/-, sum of `.1,46,000/- was also seized. One panchnama was drawn on 21 st December, 2002 on which date search was actually concluded and prohibitory order u/s 132(3) was clamped in relation to the same office room from which prohibition was lifted/revoked on 3.1.2003 at 5.50 PM. It was the contention of the revenue that last panchnama was issued on 3.1.2003 therefore, the time limit to complete assessment u/s 158BC as described in section 158BE would be 31.01.2005. As against that it was the contention of the assessee that on 21.12.2002 itself the search was concluded when the first panchnama was drawn. The second panchnama drawn on 3.1.2003 was not a valid panchnama in the eyes of law, therefore, period of limitation could not be reckoned with reference to the panchnama drawn on 3.1.2003. It was shown that the proceedings on 3.1.2003 were conducted within 10 minutes only to lift prohibitory order which was merely a formality completed by ADIT and no search or seizure was done on that date. Considering all these facts, it was held by the Tribunal that the panchnama drawn on 3.1.2003, when no material was seized and only the prohibitory order was lifted, was not a valid panchnama in the eyes of law. For holding so, reference inter alia was made to the decision of Hon'ble Delhi High Court in the case of CIT v. SK Katyal reported in 308 ITR 168 (Del) wherein it has been held that a panchnama is nothing but a document recording that what has happened in the presence of the witnesses Panchas. A panchnama may document the search proceedings, with or without any seizure. A panchnama may also document the return of seized articles or the removal of seals. But, the panchnama that is mentioned in Explanation-2 (a) to section 158BE is a panchnama which documents the conclusion of a search. If a panchnama does not, from the facts, recorded therein, reveal that a search was at all carried out on the day

20 to which it relates, then it would not be a panchnama relating to a search and, consequently, it would not be a panchnama of the type which finds mentioned in Explanation-2(a) to section 158BE. Finding that on 3.1.2003, there was no conclusion of search but it was only lifting of prohibitory order, the Tribunal in the case of White & White Minerals Pvt. Ltd. (supra) had held that for the purpose of computing limitation as described in section 158BE, Panchnama dated 3 rd January, 2003 did not have any relevance and the only panchnama from which the limitation was to be computed was panchnama dated 21 st December, 2002 when actually search and seizure operation took place. 25. The Department had preferred an appeal against the aforementioned order of the Tribunal which was decided by the Hon'ble Rajasthan High Court vide its decision dated 15.5.2009 reported at 239 CTR Raj. 330 wherein the order of Tribunal was upheld. 26. The facts of the aforementioned case are almost resembling with the facts of the present case. The real question involved in the present appeal is that whether or not panchnama drawn on 3.1.1.2003 is relevant for the purpose of computing time limit described in section 158BE. As it has already been pointed out that the document known as panchnama by its nature is nothing but a document recording the proceedings which have happened in the presence of the witnesses. At the same time, the panchnama which is described in section 158BE should be a panchnama which reveal that a search was carried out on the day to which it relates. If it is found that the panchnama does not reveal that a search was at all carried out on the date to which it relates then it would not be a panchnama relating to a search and consequently it would not be a panchnama which finds mentioned in Explanation-2 to section 158BE. It is this proposition which has been

21 upheld by Hon'ble jurisdictional High Court in the aforementioned case of CIT v. White & White Minerals Pvt. Ltd. (supra). 27. Therefore, to determine the real nature of panchnama drawn on 3.1.2003 it will be necessary to go into the facts recorded in the said panchnama. A copy of the said panchnama has been placed on record by both the parties and reference can be made to pages 38-40 of paper book filed by Ld AR of the assessee. It is observed from the said panchnama that Shri S.S. Mantri, DIT (Inv.I), Jodhpur is the authorized officer who was assisted by Shri PN Mathew, Inspector, Shri RL Rathi, Inspector and Shri Pawan Kumar, Staff car Driver. It started at 5.50 P.M. and it is in respect of authorization dated 17 th December, 2002. It is mentioned that the search was in continuation of the proceedings on 21 st December, 2002 and the search party had inspected the seal which were placed on 21 st December, 2002 and it was found that the seals were intact as narrated in the order passed u/s 132(3) dated 3.1.2003. In the column relating to assets or documents seized, all the columns are filled as nil. No statement of any person was recorded on that date. It is mentioned that on 3.1.2003, the proceedings were started at 5.50 PM and the proceedings were closed on 3.1.2003 at 6.20 PM and all other columns are nil. The perusal of the panchnama will reveal that except from passing the revocation order u/s 132(3) of the prohibitory order passed on 21 st December, 2002 no other activity had taken place. Therefore, from the perusal of the panchnama it is clear that there was no conclusion of search. Whatever material was required to be seized or impounded was already seized/impounded by the Department. The proceedings on 3.1.2003 are only a formality completed within a very short span of time and was only to lift the prohibitory order. The same was the factual condition in the case of White & White Minerals Pvt. Ltd. (supra). The search itself in the present case was completed on 21 st December, 2002. The details of

22 proceedings happened on 03.01.2003 and already described in the details submitted by the Ld AR which have been reproduced above. The above conclusion is also supported by the decision of Hon'ble Delhi High Court in the case of CIT v., SK Katyal (supra) which was later on followed by Hon'ble Delhi High Court in the case of CIT v,. D.D. Axles Pvt. Ltd. reported at 323 ITR 558 wherein a search was conducted at the premises of the assessee on 29 th August, 1996 which was concluded on 30 th August, 1996. A panchnama was drawn on 29 th August, 1996 when books of accounts and other documents were seized and on the same day a restrain order was also passed with regard to an almirah that has been seized. The restrain order was extended till 18 th November, 1996 on which date a panchnama was drawn and nothing was seized from the premises of the assessee. On 18 th November, 1996 by an order, the restrain placed on the almirah was vacated. The assessment was passed on 28 th November, 1997 and on these facts it was held that the search in itself was completed on 30 th August, 1996 and till 18 th November, 1996 when last panchnama was drawn and the restrain order was vacated, nothing else was found, and, in fact, no further search was conducted. Therefore, the last panchnama dated 18.11.1996 was merely a release order and could not extend the period of limitation. 28. The above proposition of law has also been laid down by the decision of Hon ble Karnataka High Court in the case of C. Ramaiah Reddy (supra), upon which Ld. AR has placed reliance. While interpreting the word Panchnama, their lordships in para 48 have observed that the Panchnama which is mentioned in Explanation 2 (a) to Section 158BE is a panchnama which authorize a conclusion of the search. Clearly, if a panchdnama does not, from the facts recorded therein, reveal that a search was carried out at all on the day which it relates, then, it would not be a panchnama relating to search and,

23 consequently, it would not be a panchnama of the type which finds mention in Explanation 2 (a) to Section 158BE. 29. In view of above discussion, we hold that in the present case panchnama dated 3.1.2003 is not a panchnama which finds mentioned in Explanation 2 to section 158BE. Hence, the limitation cannot be governed by the said panchnama. The search essentially was concluded and completed vide panchnama dated 21 st December, 2002, when order under the second proviso to section 132(1) was passed for deemed seizure of stock of goods of `.25,43,500/-; statement of one person was recorded and a restrain order u/s 132 was passed. Panchnama dated 21 st December, 2002 was the last panchnama as described in Explanation 2 to section 158BE and, therefore, the limitation has to be commenced from the said panchnama. It is an undisputed position that if panchnama dated 21 st December, 2002 is considered as last panchnama then the time limit to frame assessment u/s 158BC will be 31 st December, 2004. As against that, the impugned assessment is passed on 31.1.2005 which is not passed within the limitation described in section 158BE. The assessment, therefore, is bad in law and has to be quashed. 30. Though we have held that the assessment in the present case is bad in law and has to be quashed, but, for the sake of completeness we also proceed to discuss the third contention of Ld. AR according to which the term used in section 158BE (1) Last authorization indicates the last authorization issued in the case of the assessee which in the present case is 20 th December, 2002. According to the submission of Ld AR, the last panchnama drawn in respect of last authorization dated 20 th December, 2002 being 20 th December, 2002, the assessment framed in the month of January, 2005 will be barred by limitation. For raising such contention, Ld AR has relied upon

24 mainly on the decision of Hon'ble Karnataka High Court in the case of C. Ramaiah Reddy v. ACIT (supra). Ld AR has also submitted that he is aware of the contrary decision of Hon'ble Delhi High Court in the case of CIT v. Anil Minda & others (supra) in which a view has been taken that what is relevant is the last Panchnama and not the last authorization. It is also the case of Ld AR that in any case, according to well settled principle of law, as discussed in the decision of Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. (supra), the view favourable to the assessee has to be adopted. To examine such contentions of Ld. AR we have to see the facts of the assessee s case as well as of the decisions relied upon by the Ld AR. In the case of C. Ramaiah Reddy (supra) the fact was that a search was carried out at the premises of the assessee on 5 th December, 1995. The authorized officer clamped prohibitory order u/s 132 in respect of certain jewellery, books of accounts etc. Later on, on 24.1.1996 the authorized officer prepared one more panchnama in which prohibitory order u/s 132(3) passed on 5 th December, 1995 was lifted. The books of accounts, jewellery etc. which were earlier kept in prohibitory orders were released. There was no seizure effected on 24.1.1996 when the search proceedings were stated to be concluded in the panchnamas. Thereafter, order of block assessment u/s 158BC of the Act was passed by the Assessing Officer on 28.1.1997 and on these facts. It was held that Section 132 (1) implies that there could be more than one authorization. If there are more than one authorization, the starting point of the limitation is to be computed from the last of the authorizations. Explanation 2 to sub-section (2) of Section 158BE explains when authorization is deemed to have been executed. The authorization referred to in sub-section (1) shall be deemed to have been executed 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. The words

25 last of the authorizations used in Section 158BE imply that there can be more than one authorization for search u/s 132. Explanation 2 does not refer to such last of the authorizations. But, only refers to authorization and how it shall be deemed to have been executed. It is because when law provides for more than one authorization, the limitation is to be computed from the date of last of the authorizations which is executed. If the authorizations are executed and search is conducted on different dates, there will be panchnamas on different dates. A doubt may arise regarding the commencement of the day from which the limitation is to be computed. In order to remove the said doubt this explanation was added by the Finance (No.2) Act, 1998 with retrospective effect from 1 st July, 1995. The expression used is last panchnama and not last of the panchnamas. Therefore, there cannot be plurality in respect of the authorizations. The intention could be gathered from the word used in panchnama and not panchnama. It can be noted from the facts involved before the Hon ble Karnata High Court that only one authorization was issued in that case whereas in the case of the present assessee two authorizations have been issued. According to well settled principle of law, as described in the decision of Hon'ble Supreme Court in the case of CIT v. Sun Engineering Works Pvt. Ltd. reported in 198 ITR 297 (SC), a decision of Court takes it colour from the question involved in the case in which decision is rendered. While applying the decision to a later case, the court must carefully try to ascertain the true principle laid down in the decision and not to pick out words or sentences from the judgment, divorced from the context of the question considered by the Court to support their reasoning. Therefore, solely relying upon the aforementioned decision of Hon'ble Karnataka High Court, on the facts of the present case, it cannot be held that the last authorization in the present case having been executed in the month of December itself,

26 the same will be considered as reckoning point for computing the time limit. 31. Here it will be relevant to mention that in the decision rendered by the Hon'ble Delhi High Court in the case of CIT v. Anil Minda & Others (supra) this issue was considered at length in which two authorizations were issued which were dated 13 th March, 2001 and 26 th March, 2001. The first authorization was executed on various dates which extended upto 11 th April, 2001 whereas the second authorization dated 26 th March, 2001 was executed on 26 th March, 2001 itself. It was the contention of the assessee that last authorization issued on 26.3.2001 was to be considered for the purpose of computing the time limit. Their Lordships of Delhi High Court after considering the provisions have held that in view of Explanation-2 to section 158BE, the period of limitation of two years is to be counted from the date when the last panchnama was drawn in respect of any warrant of authorization, if there were more than one warrant of authorization; in view of deeming provision even an authorization which may not be the last authorization would become last authorization if it is executed and if panchnama in respect thereof drawn last. Therefore, it was held that the point of time of issue of authorization will not have any relevance but it is a point of time when last panchnama is drawn in respect of authorization whether it is first authorization or it is last authorization. 32. When the facts of the present case are compared with aforementioned two decisions, it will be seen that on the facts of the present case, the decision of Hon'ble Delhi High Court will be applicable as compared to the facts in the case before Hon ble Karnataka High Court. Therefore, it is not a case where two different opinions have been taken. Therefore, we find no force in the contention of Ld. AR that view taken by Hon ble Karnataka High Court

27 being favourable to assessee should be adopted. Finding no force in such contention, it has to be held that, reckoning point to compute the time limit will be drawing of last panchnama in respect of any authorization issued in a particular case. However, it has already been held that the last panchnama as relevant for Explanation 2 to Section 158BE will be the panchnama which show the conclusion of the search. It has already been concluded that panchnama dated 3 rd January, 2003 in the present case has not recorded the conclusion of search, but, it was a mere formality to revoke prohibitory order passed on 21 st December, 2002. Therefore, the limitation was to be reckoned from 21 st December, 2002. 33. Since it is held that an assessment is barred by limitation and is not a valid assessment in the eyes of law, the other grounds have become academic. 34. In the result, the appeal filed by the revenue is dismissed and cross objection filed by the assessee is allowed in the manner aforesaid. The order pronounced in the open court on 11/06/2012. Sd/- Sd/- Sd/- [P.M. JAGTAP] [H.L. KARWA] [I.P. BANSAL] ACCOUNTANT MEMBER VICE PRESIDENT JUDICIAL MEMBER Dated: - 11/06/2012. dk