T. Krishna Murthy, Bangalore V. DCIT, Bangalore

ITSSA 1/BANG/2010

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7823 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-01-2012
• Assessment Year: misc
• Appeal Filed On: 08-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Period of limitation; Retrospective amendment; Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER IT(SS)A NO.78/BANG/2002 ASSESSMENT YEAR : BLOCK A.Y. 1987-88 TO 1997-98 LATE SHRI T. KRISHNAMURTHY, L/R BY SMT. N. SHASHIKALA, NO.54, TIMBER YARD LAYOUT, MYSORE ROAD, BANGALORE. PAN/GIR : K-1 VS. THE DEPUTY COMMISSIONER OF INCOME TAX (INV.), COMPANY CIRCLE IV(1), BANGALORE. APPELLANT RESPONDENT IT(SS)A NO.1/BANG/2010 ASSESSMENT YEAR : BLOCK PERIOD 01.04.1986 TO 27.04 .1997 LATE SHRI T. KRISHNAMURTHY, L/R BY SMT. N. SHASHIKALA, NO.54, TIMBER YARD LAYOUT, MYSORE ROAD, BANGALORE. PAN/GIR : K-1 VS. THE DEPUTY COMMISSIONER OF INCOME TAX , CIRCLE 2(1), BANGALORE. APPELLANT RESPONDENT IT(SS)A NOS.78/BANG/02 & 01 & 02/BANG/10 PAGE 2 OF 8 IT(SS)A NO.2/BANG/2010 ASSESSMENT YEAR : BLOCK PERIOD 01.04.1986 TO 27.04 .1997 THE DEPUTY COMMISSIONER OF INCOME TAX , CIRCLE 2(1), BANGALORE. VS. LATE SHRI T. KRISHNAMURTHY, L/R BY SMT. N. SHASHIKALA, NO.54, TIMBER YARD LAYOUT, MYSORE ROAD, BANGALORE. PAN/GIR : K-1 APPELLANT RESPONDENT ASSESSEE BY : SHRI A. SHANKAR, ADVOCATE REVENUE BY : SHRI SMT. ARCHANA CHOWDHRY, CIT-II(D R) DATE OF HEARING : 11.01.2012 DATE OF PRONOUNCEMENT : 20.01.2012 O R D E R PER BENCH THE APPEAL IN IT(SS)A NO.78/BANG/2002 BY THE ASSE SSEE IS DIRECTED AGAINST THE ORDER DATED 22.02.2002 OF THE CIT(APPEA LS)-II, BANGALORE, WHILE THE CROSS APPEALS BY THE ASSESSEE AND THE DEPARTMEN T IN IT(SS)A NOS. 1 & 2/BANG/2010 ARE DIRECTED AGAINST THE ORDER DATED 12 .10.2009 OF THE CIT(APPEALS)-I, BANGALORE. 2. THE APPEAL BY THE ASSESSEE IN IT(SS)A NO.78/BANG /2002 WAS EARLIER DISPOSED OF BY THIS BENCH OF THE TRIBUNAL V IDE ORDER DATED 08.03.2005, WHILE DISPOSING OF THE APPEAL ON VARIOU S ISSUES RAISED BY THE IT(SS)A NOS.78/BANG/02 & 01 & 02/BANG/10 PAGE 3 OF 8 ASSESSEE ON THE MERITS, THE CASE WAS SET ASIDE TO T HE ASSESSING OFFICER. HOWEVER, NO FINDINGS WERE GIVEN ON THE LEGAL ISSUE RELATING TO THE LIMITATION. AGAINST THE SAID ORDER OF THE TRIBUNAL, THE ASSESSE E PREFERRED AN APPEAL TO THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO.282 8/2005, WHEREIN VIDE ORDER DATED 12.4.2010 A DIRECTION HAS BEEN GIVEN TO THE I.T.A.T. TO CONSIDER THE QUESTION OF LIMITATION I.E., TO CONSIDER WHETHE R THE ORDER OF ASSESSMENT WAS WITHIN TIME OR NOT. TO COMPLY WITH THE SAID DI RECTION OF THE HONBLE JURISDICTIONAL HIGH COURT , THE APPEAL IN THE CASE IN IT(SS)A 78/BANG/2002 FOR THE BLOCK A.Y. 1987-88 TO 1997-98 WAS FIXED. 3. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE AT THE VERY OUTSET STATED THAT THE BLOCK ASSESSMENT FRAMED BY THE ASSESSING OFFICER WAS BARRED BY LIMITATION SINCE THE WARRANT OF AUTHORISATION WAS ISSUED ON 13.02.1997 AND PANCHANAMA WAS DRAWN ON TH E SAID DATE. THEREFORE THE ASSESSMENT SHOULD HAVE BEEN FRAMED ON OR BEFORE 28.02.1999, WHEREAS IN THIS CASE THE ASSESSMENT HAS BEEN FRAMED BY THE AO U/S. 158BC OF THE INCOME-TAX ACT, 1961 [HEREINAF TER REFERRED TO AS THE ACT IN SHORT] ON 26.04.1999, WHICH WAS BEYOND THE TIME LIMIT PRESCRIBED, HENCE THE ASSESSMENT FRAMED WAS VOID AB INITIO. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF C. RAMAIAH REDDY V. ACIT [2011] 339 ITR 210 . 4. IN HER RIVAL SUBMISSIONS, THE LD. CIT(DR) STRONG LY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AND FURTHER SUBMITTE D THAT THE DATE OF LIMITATION SHOULD BE TAKEN FROM THE LAST PANCHANAMA DRAWN AS PROVIDED IN EXPLANATION 2(A) TO SECTION 158BE OF THE ACT. IT W AS FURTHER SUBMITTED THAT THE LAST PANCHANAMA WAS DRAWN ON 27.04.1999, THEREF ORE THE ASSESSMENT IT(SS)A NOS.78/BANG/02 & 01 & 02/BANG/10 PAGE 4 OF 8 FRAMED ON 26.04.1999 WAS WITHIN TIME LIMIT PRESCRIB ED IN SECTION 158BE(1)(B) OF THE ACT. SHE SUBMITTED THAT THE LD. CIT(APPEALS) WAS FULLY JUSTIFIED IN HOLDING THAT THE ASSESSMENT FRAMED WAS WITHIN THE TIME. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE WARRANT OF AU THORISATION DATED 13.02.1997 WAS ISSUED AND SEARCH COMMENCED ON THE S AME DAY I.E., 13.02.1997 AT 5.30 P.M. WHICH WAS CLOSED AT 11.45 P .M. ON THE SAME DAY AND PANCHANAMA WAS DRAWN, THAT SEARCH WAS TEMPORARI LY CONCLUDED. AGAIN SEARCH TOOK PLACED ON 27.02.1997 IN CONTINUAT ION OF EARLIER SEARCH DATED 13.02.1997, THAT WAS ALSO TEMPORARILY CONCLUD ED. THEREAFTER, ON 01.03.1997, THE SEARCH AGAIN TOOK PLACE WHICH WAS A LSO TEMPORARILY CONCLUDED, FINALLY THE SEARCH WAS CONCLUDED ON 27.0 4.1997 AND FINAL PANCHANAMA WAS DRAWN, COPY OF WHICH IS PLACED AT PA GE 11 OF THE ASSESSEES PAPERBOOK FILED ON 20.12.2011. IN THE S AID PANCHANAMA AT PARA 9, IT IS MENTIONED THAT WARRANT OF AUTHORISATI ON DATED 13.02.1997 WAS ISSUED U/S. 132 OF THE ACT, THEREFORE IT IS CLEAR T HAT THE SEARCH TOOK PLACE ON THE BASIS OF WARRANT OF AUTHORISATION DATED 13.02.1 997, APART FROM THE AFORESAID WARRANT OF AUTHORISATION, NO OTHER WARRAN T OF AUTHORISATION WAS ISSUED. RECENTLY THE HONBLE JURISDICTIONAL HIGH C OURT SETTLED A SIMILAR CONTROVERSY IN THE CASE OF C. RAMAIAH REDDY V. ACIT [2011] 339 ITR 210 WHEREIN IT HAS BEEN HELD AS UNDER: MATERIALS SEIZED DURING AN INVALID SEARCH CANNOT BE USED IN BLOCK ASSESSMENT PROCEEDINGS BUT CAN BE USED IN OTH ER ASSESSMENT PROCEEDINGS UNDER THE ACT. IT(SS)A NOS.78/BANG/02 & 01 & 02/BANG/10 PAGE 5 OF 8 THE INCOME-TAX AUTHORITIES HAVE POWER TO MAKE A PROHIBITORY ORDER UNDER SECTION 132(3) BUT THE REAS ONS FOR DOING SO HAVE TO BE RECORDED IN WRITING AND ARE JUSTICIAB LE. SECTION 158BE OF THE ACT PRESCRIBES THE TIME LIMIT FOR COMPLETION OF BLOCK ASSESSMENT. ACCORDING TO THE S ECTION, THE PERIOD OF LIMITATION IS WITHIN ONE YEAR FROM THE EN D OF THE MONTH IN WHICH THE LAST OF THE AUTHORISATION FOR SEARCH U NDER SECTION 132 WAS EXECUTED. A DOUBT MAY ARISE REGARDING THE COMM ENCEMENT OF THE DAY FROM WHICH LIMITATION IS TO BE COMPUTED. IN ORDER TO REMOVE THE DOUBT AN EXPLANATION WAS ADDED BY THE FI NANCE (NO.2) ACT, 1998, WITH RETROSPECTIVE EFFECT FROM JU LY 1, 1995. THE EXPRESSION USED IS 'LAST PANCHNAMA' AND NOT 'LA ST OF THE PANCHNAMA'. THEREFORE, THERE CANNOT BE A PLURALITY OF PANCHNAMAS IN RESPECT OF THE AUTHORISATION. THIS IN TENTION COULD BE GATHERED FROM THE WORD 'LAST OF THE AUTHORISATIO N' USED IN THE MAIN SECTION. THE WORD USED IS 'PANCHNAMA' AND NOT 'PANCHNAMAS'. THE PANCHNAMA THAT IS MENTIONED IN EX PLANATION 2(A) TO SECTION 158BE IS A PANCHNAMA WHICH DOCUMENT S THE CONCLUSION OF A SEARCH. THE STARTING POINT OF LIMIT ATION IS THE 'END OF THE MONTH' IN WHICH THE LAST OF THE AUTHORISATIO NS IS EXECUTED AS RECORDED IN THE LAST PANCHNAMA. THE AUTHORISED OFFICER HAS BEEN GIVEN A DISCRETION FOR REASONS TO BE RECORDED IN WRITING TO PASS A RESTRAI NT ORDER IN RESPECT OF THE ARTICLES, BOOKS AND OTHER MATERIAL W HICH HE COULD NOT TAKE PHYSICAL POSSESSION OF, I.E., BY MAKING AN INVENTORY AND LEAVING THEM IN THE CUSTODY OF THE ASSESSEE AND DIR ECTING HIM NOT TO PART WITH THEM WITHOUT HIS PERMISSION. SIMILARLY , IN CIRCUMSTANCES NOT COVERED UNDER THOSE PROVISIONS, I T IS OPEN FOR HIM TO PASS A PROHIBITORY ORDER UNDER SUB-SECTION ( 3) NOT AMOUNTING TO SEIZURE WHICH ORDER WILL BE IN FORCE F OR A PERIOD OF 60 DAYS AFTER SECURING THE POSSESSION OF THE MATERI ALS, ARTICLES, ETC., IN THE AFORESAID MANNER. BY PASSING A RESTRAINT ORDER, THE TIME LIMIT AVAI LABLE FOR FRAMING OF THE ORDER CANNOT BE EXTENDED. ONCE AN OR DER UNDER SECTION 132(3) HAS BEEN PASSED, THE LIMITATION PERI OD COMMENCES. THE PERIOD OF LIMITATION STARTS ON THE DATE ON WHIC H THE LAST OF AUTHORISATIONS HAS BEEN EXECUTED AND NOT WHEN THE A UTHORISED OFFICER STATES THAT THE SEARCH IS FINALLY CONCLUDED . MAKING A PROHIBITORY ORDER UNDER SECTION 132(3) DOES NOT EXT END THE STARTING POINT OF LIMITATION. IT(SS)A NOS.78/BANG/02 & 01 & 02/BANG/10 PAGE 6 OF 8 6. IN THE PRESENT CASE, THE SEARCH U/S. 132 OF THE ACT TOOK PLACE ON 13.02.1997 ON THE BASIS OF WARRANT OF AUTHORISATION DATED 13.02.1997 AND PANCHANAMA WAS DRAWN. THE AUTHORISED OFFICER IN VI EW OF DISCRETIONARY POWERS GIVEN TO HIM, PASSED PROHIBITORY ORDERS ON D IFFERENT DATES AND THE SEARCH WAS SUSPENDED FROM 13.02.1997 TO 27.02.1997, FROM 27.02.1997 TO 01.03.1997 AND ULTIMATELY FROM 01.03.1997 TO 27.04. 1997 I.E., THE DATE ON WHICH THE SEARCH WAS CONCLUDED. VARIOUS PANCHANAMA S WERE DRAWN ON 13.02.1997, 27.02.1997, 01.03.1997 AND 27.04.1997. BUT THE DATE ON WHICH THE LAST OF AUTHORISATION HAS BEEN EXECUTED W AS 13.02.1997, THEREFORE, BY KEEPING IN VIEW THE RATIO LAID DOWN B Y THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C. RAMAIAH REDDY. V. ACIT (SUPRA), THE SAID DATE I.E., 13.02.1997 IS TO BE TAKEN INTO CONSIDERATION TO DETERMINE THE PERIOD OF LIMITATION AND NOT THE DATE I.E., 27. 04.1997 I.E., THE DATE ON WHICH SEARCH WAS FINALLY CONCLUDED. IN THE PRESENT CASE, ALTHOUGH THE AUTHORISED OFFICER MADE PROHIBITORY ORDERS U/S. 132 (3) OF THE ACT ON VARIOUS DATES, BUT THOSE WERE NOT SUFFICIENT TO EXTEND THE PERIOD OF LIMITATION. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT IN THE PRESENT CASE, THE PERIOD OF LIMITATION STARTED ON 13.02.199 7 I.E., THE DATE ON WHICH THE LAST OF THE AUTHORISATION HAD BEEN EXECUTED AND AS PER THE PROVISIONS CONTAINED IN SECTION 158BE(1)(B) OF THE ACT, THE OR DER U/S. 158BC IN THE INSTANT CASE SHOULD HAVE BEEN PASSED ON OR BEFORE 2 8.02.1999, HOWEVER THE ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER ON 26.04.1999, THEREFORE THE ASSESSMENT ORDER PASSED BY THE AO WAS BEYOND THE TIME PRESCRIBED U/S. 158BE(1)(B) OF THE ACT. WE, THEREF ORE, CONSIDERING THE IT(SS)A NOS.78/BANG/02 & 01 & 02/BANG/10 PAGE 7 OF 8 TOTALITY OF THE FACTS AND KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C. RAMAIAH REDDY V. ACIT [2011] 339 ITR 210 (KARN) (SUPRA), ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS BEYOND THE TIME LIMIT PRESCRIB ED IN SECTION 158BE(1)(B) OF THE ACT TO PASS SUCH ORDER. ACCORDI NGLY, THE SAID BLOCK ASSESSMENT ORDER DATED 26.04.1999 BEING BARRED BY L IMITATION IS QUASHED. 7. THE OTHER CROSS APPEALS I.E. IN IT(SS)A NOS. 1 & 2/BANG/2010 BY THE DEPARTMENT AND THE ASSESSEE ARE ON MERITS AND ARE O UTCOME OF THE DIRECTIONS GIVEN TO THE AO BY THE ITAT B BENCH, B ANGALORE VIDE ORDER DATED 08.03.2005 TO DECIDE THE VARIOUS ISSUES ON ME RIT WHICH WERE RESTORED TO HIS FILE. SINCE WE HAVE QUASHED THE O RIGINAL BLOCK ASSESSMENT ORDER DATED 26.04.1999, SO THESE CROSS APPEALS IN I T(SS)A NOS. 1 & 2/BANG/2010 BECOME INFRUCTUOUS, SO THESE ARE DISMIS SED AS INFRUCTUOUS. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT( SS)A NO.78/BANG/2002 IS ALLOWED AS DISCUSSED ABOVE, WHIL E THE APPEAL BY THE ASSESSEE IN IT(SS)A NO. 1/BANG/2010 AND THE DEPARTM ENT IN IT(SS)A NO. 2/BANG/2010 ARE DISMISSED AS INFRUCTUOUS. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JANUARY, 2012. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 20 TH JANUARY, 2012. DS/- IT(SS)A NOS.78/BANG/02 & 01 & 02/BANG/10 PAGE 8 OF 8 COPY TO: 1. ASSESSEE 2. REVENUE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.