ACIT, Bangalore V. Shri. B.N. Reddy, Bangalore

ITSSA 58/BANG/2008

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8573 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-12-2012
• Assessment Year: misc
• Appeal Filed On: 22-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARAHAT HUSSAIN QURESHI CITII
• Assessee Lawyers: A SHANKAR
• Keywords: Search and seizure; Document seized; Period of limitation; Assessment record; Block assessment; Documents seized
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER IT(SS)A NO.58/BANG/2008 ASSESSMENT YEAR : BLOCK PERIOD 1991-92 TO 2001-02 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 14(1), BANGALORE. VS. SHRI B.N. REDDY, 570, 6 TH MAIN, III BLOCK, III STAGE, BASAVESHWARANAGAR, BANGALORE 560 079. PAN: AFGPR 5304F APPELLANT RESPONDENT APPELLANT BY : SHRI FARAHAT HUSSAIN QURESHI, CIT-II (DR) RESPONDENT BY : SHRI A. SHANKAR, ADVOCATE DATE OF HEARING : 06.12.2012 DATE OF PRONOUNCEMENT : 14.12.2012 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 19.05.2008 OF THE CIT(APPEALS)-V, BANGALORE RELATING TO THE BLOCK PERIOD 1991-92 TO 2001-02. ITA NO.58/BANG/2008 PAGE 2 OF 12 2. THOUGH THE REVENUE HAS RAISED MANY GROUNDS OF A PPEAL, WE WILL TAKE UP THE ISSUE RAISED BY THE REVENUE AGAINST THE ORDER OF CIT(A) WHEREBY THE CIT(A) HELD THAT THE ORDER OF ASSESSMEN T U/S. 158BC OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT] WAS INVALID AS IT WAS PASSED BEYOND THE PERIOD OF LIMIT ATION FOR PASSING ORDER IN TERMS OF SEC.158BE OF THE ACT. 3. THE MATERIAL FACTS WHICH ARE NECESSARY FOR REND ERING A DECISION ON THE AFORESAID GROUNDS OF APPEAL ARE AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL. HE WAS WORKING AS A BUSINESS MANAGER I N MAXWELL INDUSTRIES LTD., BANGALORE. THERE WAS A SEARCH AND SEIZURE OP ERATION CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 16.01.2 001. ON 16.01.2001 THE SEARCH WAS CONCLUDED FINALLY AS PER THE PANCHAN AMA, A COPY OF WHICH HAS BEEN FILED BEFORE US. THE WARRANT OF AUTHORISA TION WAS IN THE JOINT NAMES OF THE ASSESSEE AND ONE M/S. MAXWELL INDUSTRI ES. IN THE COURSE OF SEARCH, NO INCRIMINATING MATERIAL WHATSOEVER WAS FO UND, EXCEPT SOME LOOSE SHEETS (TWO SHEETS). 4. ON THE DATE OF SEARCH THERE WAS ALSO AN ORDER U/ S. 132(3) OF THE ACT RESTRAINING THE ASSESSEE FROM OPENING OR OPERATING BANK ACCOUNT AND LOCKER. THE BANK LOCKER WAS OPENED ON 23.02.2001 A ND CASH OF Q 50,000 AND SMALL QUANTITY OF JEWELLERY WAS FOUND IN THE LO CKER AND THE SAME WAS RELEASED. IT IS THE CASE OF THE REVENUE THAT PANCH ANAMA HAD BEEN DRAWN ON 23.02.2001, BUT SUCH PANCHANAMA WAS NEITHER PROD UCED BEFORE THE CIT(APPEALS) NOR BEFORE THE TRIBUNAL. ITA NO.58/BANG/2008 PAGE 3 OF 12 5. SECTION 158BE PRESCRIBES THE PERIOD OF LIMITATI ON FOR COMPLETION OF BLOCK ASSESSMENT AND THE SAID SECTION READS AS FOLL OWS : 158BE TIME LIMIT FOR COMPLETION OF BLOCK ASSESSMEN T. (1) THE ORDER UNDER SECTION 158BC SHALL BE PASSED (A) WITHIN ONE YEAR FROM THE END OF THE MONTH IN W HICH 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 AC COUNT 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 AC COUNT OR OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED ON OR AFT ER THE 1ST DAY OF JANUARY, 1997. (2) .. EXPLANATION 1 : IN COMPUTING THE PERIOD OF LIMITATI ON FOR THE PURPOSES OF THIS SECTION, THE PERIOD (I) DURING WHICH THE ASSESSMENT PROCEEDING IS STAY ED BY AN ORDER OR INJUNCTION OF ANY COURT, OR (II) COMMENCING FROM THE DAY ON WHICH THE ASSESSIN G OFFICER DIRECTS THE ASSESSEE TO GET HIS ACCOUNTS AUDITED UN DER 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, SHALL BE EXCLUDED. EXPLANATION 2 : FOR THE REMOVAL OF DOUBTS, IT IS HE REBY 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 SE ARCH AS RECORDED IN THE LAST PANCHNAMA DRAWN IN RELATION TO ANY PERS ON IN WHOSE CASE THE WARRANT OF AUTHORISATION HAS BEEN ISSUED; (B) IN THE CASE OF REQUISITION UNDER SECTION 132A, ON THE ACTUAL RECEIPTS OF THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS BY THE AUTHORISED OFFICER. ITA NO.58/BANG/2008 PAGE 4 OF 12 6. IT IS NOT IN DISPUTE THAT THE PROVISIONS OF SECT ION 158BE(1)(B) APPLIES TO THE PRESENT CASE AS THE SEARCH WAS CONDUCTED ON 16.1.2001. AFTER THE SEARCH, THERE WAS NO ACTION TAKEN BY THE REVENUE AG AINST THE ASSESSEE. THE TIME LIMIT FOR PASSING THE BLOCK ASSESSMENT ORD ER IN TERMS OF SECTION 158BE(1)(B) OF THE ACT WHICH IS TWO YEARS FROM THE END OF THE MONTH IN WHICH THE LAST PANCHANAMA WAS DRAWN WOULD BE 31.1.2 003. WE HAVE ALREADY SEEN THAT A PROHIBITORY ORDER U/S. 132(3) W AS PASSED BY THE OFFICER CONDUCTING THE SEARCH RESTRAINING THE ASSESSEE FROM OPERATING THE BANK ACCOUNTS AND BANK LOCKERS. EVEN IF WE TAKE IT THAT THERE WAS A PANCHANAMA DRAWN ON 23.2.2001, WHEN THE BANK LOCKE R WAS OPENED, THEN THE PERIOD OF LIMITATION WOULD BE 28.2.2003. 7. ADMITTEDLY THE NOTICE U/S. 158BC WAS ISSUED BY T HE AO ONLY ON 31.01.2003. ON 30.01.2003, ONE DAY PRIOR TO THE IS SUE OF NOTICE U/S. 158BC OF THE ACT, THE AO REFERRED THE CASE FOR A SP ECIAL AUDIT U/S. 142(2A) OF THE ACT. 8. AS PER EXPLN.-1 (II) TO SEC.158BE OF THE ACT, TH E PERIOD THAT IS THE DAY FROM WHICH THE ASSESSING OFFICER DIRECTS THE AS SESSEE 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, SHALL BE EXCLUDED. NOW WE S HALL REFER TO THE PROVISIONS OF SECTION 142 IN SO FAR AS THEY ARE MAT ERIAL FOR THE PRESENT CASE. 142 ENQUIRY BEFORE ASSESSMENT. (1) . (2) ITA NO.58/BANG/2008 PAGE 5 OF 12 (2A) IF, AT ANY STAGE OF THE PROCEEDINGS BEFORE HIM , THE ASSESSING OFFICER, HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE AND THE INTEREST OF THE RE VENUE, IS OF THE OPINION THAT IT IS NECESSARY SO TO DO, HE MAY, WITH THE PREVIOUS APPROVAL OF THE CHIEF COMMISSIONER OR COMMISSIONER, DIRECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED BY AN ACCOUNTA NT, AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288, NOMINATED BY THE CHIEF COMMISSIONER OR COMMISSIONER IN THIS BEHALF AND TO FURNISH A REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SET TING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED AND SUCH OTHE R PARTICULARS AS THE ASSESSING OFFICER MAY REQUIRE. 9. IT SHOULD BE MENTIONED HERE THAT REFERENCE FOR SPECIAL AUDIT OF THE ACCOUNTS OF AN ASSESSEE U/S. 142(2A) IS CONDITIONAL UPON THE SATISFACTION OF THE AO REGARDING THE NATURE AND COMPLEXITY OF THE A CCOUNTS OF THE ASSESSEE AND THE SATISFACTION OF THE AO THAT THE IN TEREST OF THE REVENUE DEMANDS THAT THE ACCOUNTS SHOULD BE AUDITED BY A SP ECIAL AUDITOR. WE HAVE ALREADY SEEN THAT IN THE COURSE OF SEARCH, EXC EPT TWO SHEETS OF PAPER, NO OTHER DOCUMENTS WERE SEIZED. WE HAVE ALSO SEEN THAT THOUGH THE SEARCH WAS CONDUCTED ON 16.01.2001, NO ACTION WAS T AKEN BY THE REVENUE TILL 30.01.2003, WHEN THE DIRECTION FOR A SPECIAL A UDIT WAS ISSUED TO THE ASSESSEE. IT IS RELEVANT TO MENTION HERE THAT IF A SPECIAL AUDIT IS ORDERED, THEN THE PERIOD OF LIMITATION GETS EXTENDED FROM TH E DATE OF DIRECTION TO GET A SPECIAL AUDIT TILL THE ASSESSEE OBTAINS A REPORT OF THE SPECIAL AUDIT. THIS IS, HOWEVER, SUBJECT TO AN UPPER CEILING LIMIT OF 1 80 DAYS. 10. IT IS THE STAND OF THE ASSESSEE THAT THE DIRECT ION FOR SPECIAL AUDIT WAS GIVEN ONLY FOR THE PURPOSE OF GETTING AN EXTENDED P ERIOD OF LIMITATION FOR PASSING THE ORDER OF ASSESSMENT U/S. 158BC OF THE A CT. IT IS THE STAND OF THE ASSESSEE THAT REFERENCE TO SPECIAL AUDIT IS ILL EGAL AND HAS TO BE HELD TO ITA NO.58/BANG/2008 PAGE 6 OF 12 BE BAD IN LAW. IF IT IS HELD TO BE BAD IN LAW, THE N THE PERIOD OF LIMITATION FOR PASSING OF THE ASSESSMENT ORDER WOULD BE 31.01.2003 . THE ORDER OF ASSESSMENT WAS PASSED ON 25.07.2003 AND THEREFORE, THE ORDER OF ASSESSMENT IS BARRED BY LIMITATION. THE AO PASSED THE ORDER U/S. 158BC OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSE SSEE AT Q 41,64,387. THE ASSESSEE DID NOT FILE ANY BLOCK RETURN. THERE IS A DISPUTE WITH REGARD TO THE SERVICES OF NOTICE U/S. 158BC OF THE ACT. WE WILL NOT GO INTO THIS ISSUE AT THIS STAGE. 11. AGAINST THE ORDER OF ASSESSMENT, THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT(APPEALS). WHEN THE APPEAL BEFORE TH E CIT(A) WAS PENDING, THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER IN DIRECTING THE ASSESSEE TO GET A SPECIAL AUDIT OF ITS ACCOUNTS BY EXERCISING POWERS U/S. 142(2A) OF THE ACT. THE HONBLE KARNATAKA HIGH COU RT IN A WRIT APPEAL FILED BY THE RESPONDENT, SHRI B.N. REDDY IN W.P. NO .897/2006 (T-IT) BEFORE THE DIVISION BENCH, HAS PASSED A JUDGMENT DATED 11. 09.2007. AT PARAS 6 & 7 OF THE JUDGMENT, THE HONBLE HIGH COURT HAS GIV EN ITS FINDING WHICH IS REPRODUCED, BELOW FOR IMMEDIATE REFERENCE:- PARA-6 : WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE L EARNED COUNSEL FOR THE APPELLANT. SECTION 142(2-A) OF THE ACT STATES, THAT IF AT ANY STAGE OF THE PROCEEDINGS BEFORE HIM, THE ASSESSING OFFICER, HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE AND THE INTERESTS OF THE R EVENUE, IS OF THE OPINION THAT IT IS NECESSARY SO TO DO, HE MAY, WITH A PREVIOUS APPROVAL OF THE CHIEF COMMISSIONER OR COMMISSIONER, DIRECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED BY AN ACCOUNTA NT, AS DEFINED IN THE EXPLANATION BELOW SUBSECTION (2) OF SECTION 288 OF THE ACT, NOMINATED BY THE CHIEF COMMISSIONER OR COMMISS IONER IN THIS BEHALF AND TO FURNISH A REPORT OF SUCH AUDIT I N THE PRESCRIBED ITA NO.58/BANG/2008 PAGE 7 OF 12 FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AN D SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED AND SUC H OTHER PARTICULARS AS THE ASSESSING OFFICER MAY REQUIRE. I T IS NO DOUBT CLEAR THAT IN ORDER TO INVOKE SECTION 142(2-A) OF T HE ACT, THEN PROCEEDINGS SHOULD BE PENDING BEFORE THE ASSESSING OFFICER. FURTHER, THERE MUST BE APPLICATION OF MIND ON THE P ART OF THE ASSESSING OFFICER FOR AN EVENTUALITY, WHICH NECESSI TATES EXERCISE OF POWER UNDER SUB-SECTION (2-A) OF SECTION 142 HAV ING REGARD TO THE NATURE AND COMPLEXITY OF ACCOUNTS OF THE ASSESS EE AND IN THE INTERESTS OF THE REVENUE. PARA-7 IT IS AN ADMITTED FACT THAT THE APPELLANTS PREMISE S WAS SEARCHED ON 16-1-2001 AND CERTAIN INCRIMINATING DOCUMENTS WE RE RECOVERED FROM THE SAID PREMISES. EVEN THEN PREMISE S OF M/S.MAXWELL INDUSTRIES LTD., WHERE THE PETITIONER W AS WORKING DURING THE RELEVANT POINT OF TIME WAS ALSO SEARCHED ON 16-1-2001. ALL THE SEIZED MATERIALS DISCLOSING THE UNDISCLOSED INCOME OF THE APPELLANT WERE HANDED OVER TO THE ASSESSING OFFICER ON 27-1-2003. THE ASSESSING OFFICER IN HIS REPORT HAS OBSERVED TH AT THE APPELLANT HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS. IN THE ABSENCE OF UP-TO-DATE STATEMENTS OF ACCOUNTS FOR VARIOUS YEARS , IT WOULD BE DIFFICULT TO PASS ASSESSMENT ORDER. THERE ARE SEVER AL BANK TRANSACTIONS OF WHICH THE POSITION AS TO WHETHER TH E ASSESSEE HAS ACCOUNTED IN HIS BOOKS OR NOT, IS NOT KNOWN. KEEPIN G IN VIEW THE COMPLEX NATURE OF ACCOUNTS INVOLVED AND ALSO IN THE INTEREST OF REVENUE, HE HAS PROPOSED TO GET THE ACCOUNTS OF THE ASSESSEE AUDITED UNDER SECTION 142(2A) OF THE ACT. ANY HOW THE APPELLANT HAS ADMITTEDLY FILED AN APPEAL AGAINST TH E ORDER OF ASSESSMENT. WHETHER THE ACCOUNTS ARE COMPLEX IN NAT URE OR NOT IS A QUESTION OF FACT. THE APPELLATE AUTHORITY HAS TO CONSIDER THIS ASPECT OF THE MATTER HAVING REGARD TO THE MATERIALS THAT MAY BE PLACED ON RECORD. THEREFORE, WE EXPRESS NO OPINION ON THIS ASPECT OF THE MATTER, SI NCE AN APPEAL IS ALREADY PENDING. (EMPHASIS SUPPLIED) 12. FROM THE ABOVE TWO PARAS, IT IS VERY CLEAR THAT THE HONBLE HIGH COURT OF KARNATAKA HAS DIRECTED THE APPELLATE AUTHO RITY TO CONSIDER THE ASPECTS WITH REGARD TO DIRECTION TO GET SPECIAL AUD IT OF ACCOUNTS AND NO OPINION ON THIS ISSUE WAS GIVEN BY THE HONBLE HIGH COURT. ITA NO.58/BANG/2008 PAGE 8 OF 12 13. AGAINST THE ORDER OF ASSESSMENT, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(APPEALS). IN THE IMPUGNED ORDER, TH E CIT(APPEALS) DEALT WITH THE ISSUE OF LIMITATION AND HE HELD AS FOLLOWS :- A. THE LEGAL ISSUE: 1. THE APPELLANT HAS QUESTIONED THE VERY ISSUE OF NOTICE U/S 158BC AS BARRED BY LIMITATION FOR THE REASON THAT T HE LAST DATE FOR COMPLETION OF THE BLOCK ASSESSMENT WAS 31ST JANUARY 2003 WHEREAS THE NOTICE WAS ISSUED ONLY ON 31 ST JANUARY 2003. THE APPELLANT SUBMITS THAT THE ASSESSING AUTHORITY OUGH T TO HAVE GIVEN MINIMUM OF 15 DAYS TIME BEFORE COMPLETING THE ASSESSMENT U/S 158 BC, WHERE AS THE PROVISIONS OF S ECTION 158BE(1)(B) CLEARLY STATES THAT THE ASSESSMENT SHOU LD BE COMPLETED WITHIN TWO YEARS FROM THE END OF THE MONT H IN WHICH THE LAST OF THE AUTHORIZATIONS FOR SEARCH U/S 132 O R FOR REQUISITIONS U/S 132A, AS THE CASE MAY BE. IN THIS CONNECTION, I T IS NECESSARY TO MENTION THE LETTER OF THE ADDL.CIT,RANGE-14, BAN GALORES LETTER ADDRESSED TO THE CIT-V, BANGALORE WHILE FORW ARDING THE LETTER OF ACIT, RANGEL4(1), BANGALORE VIDE NO. ADDL . CIT / R14/S&S/02-03, DT.29-01-03, WHICH STATED AS UNDER: IN THIS CASE, SEARCH WAS CONDUCTED ON 16.01.2001 AN D HENCE TIME FOR COMPLETION OF BLOCK ASSESSMENT IN TH IS CASE IS EXPIRING ON 31.01.2003. SINCE THE AO RECEIV ED THE COPIES OF SEIZED MATERIAL AND APPRAISAL REPORT FROM THE DCIT, CENTRAL CIRCLE-42, MUMBAI ONLY ON 27.01.03, SHE IS NOT IN A POSITION TO INITIATE BLOC K ASSESSMENT PROCEEDINGS AS TIME FOR GIVING STATUTORY NOTICE U/S 158BC(A)(II) IS NOT AVAILABLE. THE ACIT, RANGE 14(1) ALSO STATED IN HER LETTER ADDRESSED TO THE CIT THROUGH THE ADDL.CIT THAT SHE RECEIVED THE APPRAISAL REPORT ALONG WITH SEIZED MAT ERIAL FROM DCIT, CENTRAL CIRCLE-2(1),BANGALORE ON 27.01.0 3 AND THE BLOCK ASSESSMENT GETS TIME BARRED BY 31-01- 03. SHE ALSO MENTIONED THAT TO SERVE A NOTICE U/S 158BC A TIME NOT LESS THAN 15 DAYS BUT NOT MORE THA N 45 DAYS IS REQUIRED. AS IT IS NOT POSSIBLE TO GRANT EVEN 15 DAYS TIME TO THE ASSESSEE, SHE REQUESTED FOR FUR THER DIRECTIONS/INSTRUCTIONS REGARDING THE FUTURE COURSE OF ACTION. ITA NO.58/BANG/2008 PAGE 9 OF 12 2. AS PER THE DETAILS AVAILABLE ON THE ASSESSMENT RECORDS/FILES, THE LAST AUTHORIZATION WAS CARRIED O UT ON 16TH JANUARY 2001 AND THE PANCHANAMA WAS ALSO DRAWN ON T HE SAME DAY. HOWEVER THE LOCKERS WERE KEPT UNDER RESTRAINT. AS PER EXPLANATION TO SECTION 132(3) INSERTED WITH EFFECT FROM 01.04.1989, IT HAS BEEN DECLARED, FOR THE REMOVAL O F DOUBTS, THAT AN ORDER OF RESTRAINT U/S 132(3) SHALL NOT BE DEEM ED TO BE SEIZURE U/S 132(1)(III). THEREFORE, ARTICLES RESTR AINED U/S 132(3) DO NOT CONSTITUTE SEIZURE. FURTHER IN CONTINUATION TO THE APPELLANTS REQUEST LETTER, THE LOCKERS WERE OPENED ON 23.02.2001 AND CASH OF RS.50,000/- AND SMALL VALUE OF JEWELLER Y FOUND IN THE LOCKERS WERE RELEASED. IN SPITE OF SEVERAL REMINDER S THE REVENUE HAS NOT BEEN ABLE TO SHOW ANY MATERIAL THAT THERE W AS ANOTHER PANCHANAMA ON THE 23.02.01. IN FACT THE ASSESSING O FFICER COULD NOT PRODUCE ANY DOCUMENT TO INDICATE THAT THE SEARC H HAS BEEN CONCLUDED ON 23.02.01. THE ITAT IN THE CASE OF RAMA IAH REDDY 87 LTD 439 (BANG.) (SB) HAS CLEARLY HELD THAT THAT THE TRIBUNAL HAS POWERS TO LOOK INTO THE SEARCH RECORDS AND FIND OUT THE LAST DATE OF PANCHANAM. IN THE INSTANT CASE, THE RECORD S PRODUCED BEFORE ME BY THE OFFICER ONLY INDICATE THAT THE SEA RCH HAS BEEN CONCLUDED ON 16.01.01. THERE IS NO OTHER MATERIAL A VAILABLE ON RECORD TO SHOW THAT THE LAST PANCHANAMA WAS DRAWN O N 23.02.2001. 5.1. THIS ISSUE IS ALSO LINKED WITH THE APPROVAL OF THE CIT FOR AUDITING THE ACCOUNTS OF THE APPELLANT. IN CASE THE APPOINTMENT OF AUDITOR IS VALID THEN THE DEPARTMENT WILL GET FURTH ER SIX MONTHS TIME BUT I HAVE HELD IN THE PARAS BELOW THAT THE AP POINTMENT OF AUDITOR IS NOT IN ORDER AND THEREFORE IN SUCH CIRCU MSTANCES THERE IS NO QUESTION OF ISSUING NOTICE ON THE LAST DAY OF AS SESSMENT GETTING TIME BARRED WHEN A MINIMUM TIME LIMIT OF 15 DAYS HA S TO BE GIVEN. IN CIT VS BAJRANG TEXTILES (2006) 205 CTR(RA J) 287, IT HELD THAT DIRECTION OF THE AO FOR SPECIAL AUDIT OF THE ASSESSEES ACCOUNTS U/S 142(2A) ONE DAY BEFORE THE EXPIRY OF L IMITATION FOR COMPLETING THE BLOCK ASSESSMENT BEING MERELY TO GET EXTENSION OF TIME AND AO HAVING ASKED FOR THE SPECIAL AUDITOR TO PREPARE THE BOOKS OF ACCOUNTS IN THE FORM OF CASH BOOK AND LEDG ER ON THE BASIS OF SEIZED DOCUMENTS/PAPERS AND ALSO TRADING A ND P&L A/C WHICH IS APPARENTLY BEYOND THE SCOPE OF THE PROVISI ONS OF SEC.142(2A), THE DIRECTION FOR SPECIAL AUDIT WAS IL LEGAL AND CONSEQUENTLY, THE ASSESSMENT WAS BARRED BY TIME. IN THE INSTANT CASE, THE COMMISSIONER OF INCOME TAX-V ORDERED THE SPECIAL AUDIT ON 30-01-2003, ONE DAY BEFORE EXPIRY OF LIMIT ATION FOR COMPLETION OF ASSESSMENT. THE DECISION OF BAJRANG T EXTILES (SUPRA) SQUARELY COVERS THE INSTANT CASE. AS SUCH, I AM OF THE ITA NO.58/BANG/2008 PAGE 10 OF 12 CONSIDERED OPINION THAT ON THE FACTS OF THE CASE TH E ASSESSMENT IS BARRED BY LIMITATION AND DOES NOT STAND THE TEST OF LAW. 14. THE CIT(A) THUS HELD THAT REFERENCE FOR SPECIAL AUDIT OF THE ACCOUNTS U/S.142(2A) OF THE ACT WAS ILLEGAL AND THE REFORE THE ORDER PASSED BY THE AO ON 27.1.2003 WAS BARRED BY LIMITATION. A GGRIEVED BY THE AFORESAID FINDINGS OF THE LD. CIT(APPEALS), HAS RAI SED GROUND NO.2 BEFORE THE TRIBUNAL IN WHICH THE REVENUE HAS URGED THAT TH E FINDINGS OF CIT(A) ON THE ABOVE ISSUE ARE NOT CORRECT. 15. THE LD. DR SUBMITTED BEFORE US THAT THERE WAS A PANCHANAMA DRAWN ON 23.02.2001, WHEN THE BANK LOCKERS WERE OPENED. WE FIND THAT THIS PANCHANAMA COULD NOT BE PRODUCED BY THE REVENUE DES PITE SEVERAL ADJOURNMENTS GRANTED IN THE PAST. EVEN ASSUMING TH ERE WAS SUCH A PANCHANAMA, THEN THE PERIOD OF LIMITATION WOULD STI LL BE 22.03.2003 FOR PASSING THE ORDER U/S. 158BC, BUT THE ORDER HAS BEE N PASSED ONLY ON 25.07.2003, WHICH IS CLEARLY BEYOND THE PERIOD OF L IMITATION. 16. THE LD. DR, HOWEVER, SUBMITTED THAT REFERENCE T O SPECIAL AUDIT U/S. 142(2A) STILL GAVE AN EXTENDED PERIOD OF LIMITATION BY SIX MONTHS IN VIEW OF THE PROVISIONS OF SUB-CLAUSE (II) OF EXPLANATION 1 TO SECTION 158BE OF THE ACT. WE HAVE CONSIDERED THIS SUBMISSION OF THE LD. DR AND ARE OF THE VIEW THAT THE SAME CANNOT BE ACCEPTED. IN THIS REGARD, WE FIND THAT THE DIRECTION FOR ORDERING A SPECIAL AUDIT HAS BEEN DONE SOLELY F OR THE PURPOSE OF EXTENDING THE PERIOD OF LIMITATION FOR PASSING THE ORDER OF ASSESSMENT. THIS IS CLEAR FROM THE LETTER OF ACIT, RANGE L4(1), BAN GALORE VIDE NO. ADDL. CIT / R14/S&S/02-03, DT.29-01-03, WHEREIN THE ADDL. CIT, RANGE 14, BANGALORE ITA NO.58/BANG/2008 PAGE 11 OF 12 WHICH HAS BEEN EXTRACTED BY THE CIT(A) IN HIS ORDER AND REPRODUCED IN THE EARLIER PARAGRAPH OF THIS ORDER, WHEREIN HE HAS CLE ARLY MENTIONED THAT THE ASSESSMENT WAS GETTING TIME BARRED AND IT WAS NOT P OSSIBLE TO PASS THE ORDER OF ASSESSMENT WITHIN TIME. THEREAFTER ON 30. 1.2003 HE GAVE THE DIRECTION FOR SPECIAL AUDIT. AS WE HAVE ALREADY SE EN, THE DIRECTION FOR A SPECIAL AUDIT U/S. 142(2A) OF THE ACT CAN BE GIVEN BY THE AO ONLY IF HE IS SATISFIED THAT THE NATURE AND COMPLEXITY OF THE ACC OUNTS OF THE ASSESSEE AND INTERESTS OF THE REVENUE DEMAND A SPECIAL AUDIT OF THE ACCOUNTS OF THE ASSESSEE. WE HAVE ALREADY SEEN THAT EXCEPT FOR TWO SHEETS OF PAPER SEIZED AT THE TIME OF SEARCH, THERE WAS NON OCCASIO N FOR THE AO TO HAVE SEEN ANY ACCOUNTS OF THE ASSESSEE. ON 30.01.2003, WHEN THE AO GAVE DIRECTIONS FOR SPECIAL AUDIT, HE WAS TOTALLY IN DAR K ABOUT THE AFFAIRS OF THE ASSESSEE. IN SUCH CIRCUMSTANCES, WE FAIL TO SEE AS TO HOW THE MANDATORY CONDITIONS FOR MAKING A REFERENCE TO SPECIAL AUDIT U/S. 142(2A) EXISTS. THE REFERENCE TO SPECIAL AUDIT IS THEREFORE HELD TO BE INVALID AND OF NO EFFECT. THE SAME CANNOT EXTEND THE PERIOD OF LIMITATION U/S . 158BE OF THE ACT. IN FACT, THE HONBLE KARNATAKA HIGH COURT HAS LEFT THI S QUESTION OPEN FOR DETERMINATION BY THE APPELLATE AUTHORITIES UNDER TH E ACT. WE ARE THEREFORE OF THE VIEW THAT THE FINDINGS OF THE LD. CIT(APPEAL S) ON THE ASPECT OF LIMITATION IN THE LIGHT OF OUR ABOVE DISCUSSION, AR E CORRECT AND DO NOT CALL FOR INTERFERENCE. SINCE THE ORDER OF ASSESSMENT IS HEL D TO BE INVALID, BECAUSE IT WAS PASSED BEYOND THE PERIOD OF LIMITATION, THE ORDER OF ASSESSMENT IS ANNULLED. 17. IN VIEW OF THE ABOVE CONCLUSIONS, WE ARE OF THE VIEW THAT THE OTHER ISSUES RAISED BY THE REVENUE IN ITS APPEAL DO NOT R EQUIRE ANY CONSIDERATION. ITA NO.58/BANG/2008 PAGE 12 OF 12 18. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF DECEMBER 2012. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 14 TH DECEMBER , 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.