Source: https://taxguru.in/income-tax/sec-153b2a-mere-panchnama-would-not-extend-period-of-limitation.html
Timestamp: 2019-04-18 18:34:16+00:00

Document:
It is seen that as far as Authorization E. No. 0069 is concerned, the search concluded on 22nd March, 2007 itself. The only question is whether because of Authorization E. No. 0068 where a second visit was made to the Ashok Vihar premises on 15th May, 2007 and only on that date was it noted in the panchnama that the period of limitation for completing the assessment would begin to commence from the last date of the financial year in which the search If this case of the Revenue were to be accepted, then the limitation period for completing the assessment stood extended up to 31st December, 2009. Factually, in the present case, the assessments were completed on 24th December/ 31st 2009 whereas if the Assessee’s case – that the search concluded on 22nd March, 2007 ± is correct, then the assessment had to be completed by 31st December, 2008.
What happened on 15th May, 2007 is apparent from the second panchnama relating to the search authorization E. No. 0068. In paragraph 5(b) of the panchnama, the title is “The following were found but not seized”. Under Sub-clause (ii) there under, it is stated “Item Nos. 1 to 13 of Ms. Preeti Jain (wife of Rajiv Jain) as per the valuation report in jewellery items dated 21st March, 2007 and S. Nos. 6, 7,9, 10,12,14,17, 21, 22, 23, 24 right up to 30, 33, 35 and on person items were released”. Therefore, all that happened on 15th May, 2007 was that the factum of valuation reports having been prepared already on the previous date i.e., 21st March, 2007 was noted and the jewellery items were released. Under paragraph 5(a) under the title “The following were found and seized”, under sub-clause (iv) it is stated that ‘jewellery, ornaments etc. which have been inventoried separately for each place from where recovered as per Annexure-J (4 sheets vide valuation report dated 21st March, 2007 Item Nos. 1, 2, 3, 4, 5, 8, 11, 13, 15, 16, 18, 19, 20, 25, 26, 31, 32, 34, 36 and 37 seized.”In fact, there was no seizure because nothing new was found. All the other items which were already valued on 21st March, 2007 and for which valuation report was already prepared were shown as seized but in fact were not seized. The net result is that on 15th May, 2007 nothing was found which had not already been found by the Department on the first day i.e., 21st March, 2007.
The Court is not prepared to accept the plea of the Revenue that merely because a panchnama was drawn up on 15thMay, 2007 showing that the search was ‘finally concluded’ on that date, it postponed the period of limitation in terms of Section 153B (2) (a) of the Act. It had to be the “last panchnama drawn in relation to any person in whose case the warrant of authorization has been issued”. The last panchnama, no doubt, is dated 15th May, 2007 but what it records is the seizure of the jewellery items not of any of the persons searched but the wives of one of the directors i.e., of Ms. Neena Jain who was not even a director of any of these entities. Therefore, even assuming that the jewellery of Ms. Neena Jain was seized under panchnama of 15th May, 2007, as far as the searched entities are concerned, the Revenue cannot take advantage of Section 153B (2) (a) to contend that the period of limitation in respect of them stands extended for completing of assessment up to 31st December, 2009.
1 .These appeals by the Revenue under Section 260A of the Income Tax Act, 1961 (‘the Act’) arise out of similar set of facts involving similar questions of law and are accordingly disposed of by this common judgment.
2. In five of these appeals i.e., ITA Nos. 605, 606, 607, 608 and 609 of 2016 for the Assessment Years (‘AYs’) 2001-02, 2002-03, 2004-05, 2006-07 and 2007-08, respectively, the Respondent/Assessee is Surya Vinayak These appeals are directed against the common impugned order dated 6th October, 2015 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA Nos. 3158-3162/Del ./2011.
(i) Whether the ITAT erred in law and on facts in holding that the assessment framed by the Assessing Officer (AO) under Section 153A is barred by limitation?
(ii) Whether the order passed by the ITAT is perverse and not sustainable under law?
In ITA No. 609/2016 there is slight change in question (i) above inasmuch as the order of the AO is under Section 143 (3) of the Act.
4. Two of the appeals i.e. ITA Nos. 637 and 638 of 2016 are against the Respondent/Assessee, Sanjay Jain, for AYs 2005-06 and 2007-08 arising out of the common order dated 6th October, 2015 passed by the ITAT in ITA 5325/Del/2013 and 4753/Del/2011, respectively. The question of law urged in these two appeals by the Revenue are identical to the questions raised in the appeals against Surya Vinayak Industries.
5. There are four appeals viz. ITA Nos. 610, 641, 640 and 639 of 2016 for the AYs 2001-02, 2004-05, 2005-06 and 2006-07, respectively, involving the Respondent/J.H. Business India Pvt. Ltd. These appeals are also directed against the common order dated 6th October, 2015 passed by the ITAT in ITA Nos. 3173-3176/Del/2011.
6. There is a fifth appeal filed by the Revenue (ITA 850/2016) against the same common order passed by the ITAT in ITA No. 3177/Del/2011 for AY 2007-08. However, that appeal is stated to be still lying in defect and has not been listed before the Court.
(iii) Whether the ITAT erred in law and on facts in holding that the assessment framed by AO under Section 153C read with Section 143(3) is barred by limitation as per Section 153B of the Act?
(iv) Whether the order passed by the ITAT is perverse and not sustainable under law?
(v) Whether learned ITAT erred in allowing the additional ground as raised by the Assessee in regard to the limitation of Assessment made under Section 153C ignoring the fact that same has not been raised before the Appellate Authority?
(vi) Whether the ITAT erred in allowing the additional ground raised by the Assessee in regard to limitation of assessment made under Section 153C of the Act by following its own finding the case of ACIT v. J.H. Invest P. Ltd. being ITA No. 1297-1297/Del/2011 by wrongly applying Section 153B (1) for the assessment under Section 153B (1) for assessment under section 153A ignoring the fact that the present case is related to Section 153C and the time limit for completion of Assessment is 31st December, 2009 which is within the time limit for the assessment order dated 24th December, 2009.
10. In the authorizations, both the premises were shown to be in possession of Mr. Sanjay Jain and Mr. Rajiv Jain, both being the directors of the above entities including J.H. Invest Pvt. Ltd. The copies of panchnamas produced before the Court relevant to both the above authorizations show that the search at the Pitam Pura premises commenced on 21st March, 2007 at 8:45 am and were closed on 22nd March, 2007 at 6:00 am as temporarily concluded for the day to be commenced subsequently for which purpose seals were placed.” The second panchnama in regard to the Authorization for search at Pitam Pura premises is dated 23rd March, 2007. It states that the search commenced on 23rd March, 2007 at 2:15 pm in the Pitam Pura premises and were finally concluded on the same day at 5:55 pm. The Authorization for search for the Pitam Pura premises bears the E. No. 0069.
11. What is also important to note is that both the panchnamas relevant to this authorization state that the warrant was in the case of the above entities e., Rim Zim Valley Products Pvt. Ltd., J.H. Invest Pvt. Ltd., Aakiriti International, J.H. Business and Products Pvt. Ltd., Surya Vinayak Industries Group, Mr. Sanjay Jain and Mr. Rajiv Jain.
12. Turning now to the Authorization for the search of Ashok Vihar premises, which bears the E. No. 0068, the first panchnama is dated 22nd March, 2007 and notes that the warrant was in the case of Sanjay Jain and Rajiv Jain. In para 8 of this panchnama, it is stated that the search commenced on 21st March, 2007 at 8:33 pm and closed on 22nd March, 2007 at 5:30 pm as ‘temporarily concluded. It is stated that the 4 + 2 seals were placed on the wooden cupboard in the bedroom of Mrs Shail Kumari Jain. A second panchnama in relation to the Authorization E. No. 0068 relating to the Ashok Vihar premises notes in para 8 that the search commenced on 15th May, 2007 at “…. pm” and closed on 15th May, 2007 at 6:45 pm as ‘finally concluded’. The se ond panchnama notes that the warrants having been issued in the case of all the above entities. There is an acknowledgment by Ms. Neena Jain of having received the second panchnama with annexures bearing the date of 15th May, 2007. She has also signed on this date. The warrant of authorization bears E. No. 0068. It appears that the jewellery belonging to Ms. Neena Jain at the Ashok Vihar Premises was valued on 21st March, 2007 itself. A copy of the valuation report is placed on the record.
13. The Court has also been shown two other authorizations bearing E. Nos. 0070 and 0071 both dated 21stMarch, 2007. The authorization having E. No. 0070 pertains to the search of the Locker No. 71 (Key No. 40) with the Federal Bank at Pitam Pura in the name of Ms. Neena Jain. This has two panchnamas – the first one dated 21stMarch, 2007 shows that the warrant was in the case of Sanjay Jain, Rajiv Jain and Neena Jain and that the raids commenced on 21st March, 2007 at 3:30 pm and concluded at 3:50 pm on the same date as “temporarily concluded for the day to be commenced subsequently for which purposes four seals were placed on locker No. 71…” The second panchnama is dated 15th May, 2007 which shows that the searches commenced at 1:55 pm on that date and were finally concluded at 2:25 pm on the same date. The second panchnama also bears the signatures of Ms. Neena Jain by way of acknowledgment of having received a copy thereof.
14. The Authorization bearing E. No. 0071 was for the search at Locker No. 344 (Key No. 24) with the Oriental Bank of Commerce, Pitam Pura in the name of Ms. Neena Jain, Mr. Rajiv Jain and Mr. Sanjay Jain. Here again, there are two panchnamas – one dated 21stMarch, 2007 which shows that the search commenced at 4:25 pm and concluded at 5:15 pm on the same date i.e., 21st March, 2007; the second panchnama is dated 15th May, 2007 which shows that the search commenced on that date at 2:45 pm and concluded on the same date at 4:30 pm. The second panchnama again bears the signatures of Ms. Neena Jain.
15. In each of these instances, on the first day of search a restraint order was passed under Section 132 (3) of the Act in respect of the jewellery items of Neena Jain and Ms. Shail Kumari Jain kept in some wooden cupboard in the premises. There were also a restraint order communicated to the managers of some of the banks in respect of the lockers and bank accounts of the Respondents herein. At the time of the second visit, the aforementioned restrain order was lifted.
16. A careful perusal of the panchnamas in respect of the authorization bearing E. No. 0068 and 0069 shows that no fresh material as such was found during the second visit on 15th May, 2007. A formal seizure of the jewellery of Ms. Neena Jain was recorded in the second panchnama which also notes that there was already a valuation report dated 21st March, 2007 in respect of those very jewellery items. No de facto seizure actually took place on that date i.e., 15th May, 2007. For all practical purposes, therefore, the search concluded on 22nd March, 2007 at 6:00 am as far as Authorization E. No. 0069 is concerned and 22nd March, 2007 at 5:30 am as far as Authorization E. No. 0068 is concerned.
“153B. Time limit for completion of assessment under section 153A.
18. The above provisions require the Assessing Officer (‘AO’) to frame the assessment within 21 months from the date from the end of the financial year in which the last of the authorizations was executed as per Section 132 of the Act. The authorization mentioned in Section 153B is deemed to have been executed when the last panchnama is drawn in relation to any person in whose case the warrant of authorization has been issued. This is in terms of Section 153B (2) (a) of the Act.
19. The word ‘panchnama’ is not defined in the Act. Even the Code of Criminal Procedure, 1973, the provisions of which relating to search and seizure have been made applicable to the searches and seizures under Section 132 of the Act, does not define the said word. It, however, prescribes the format in which the panchnama is required to be drawn up.
Similarly, the Gujarat High Court in the case of Valibhai Omarji v. The State AIR 1963 Guj 145 noted that 3La) panchnama is essentially a document recording certain things which occur in the presence of Panchas and which are seen and heard by them.’ Again, in The State of Maharashtra v. Kacharadas D. Bhalgar (1978) 80 Bom LR 396, a panchnama was stated to be a memorandum of what happens in the presence of the panchas as seen by them and of what they heard.
20.2. In the above case, CIT v. S.K. Katyal (supra), the first of the searches pursuant to the authorization issued on 16th November 2000 under Section 132 of the Act, commenced on 17th November, 2000 at 8:00 am was ‘temporarily concluded’ at 7:00 pm on the same date. Seven seals were placed on the cash box in one of the rooms of the Assessee. It was an admitted position that the contents of the sealed cash box “were nothing but the jewellery listed and valued as per Annexure- 5 to the panchnama”. A restraint order was passed on that date in respect of the sealed cash box. Subsequently, on 3rd January, 2001, the restraint order was revoked and the keys of the almirah and safe (cash box) were returned to the Assessee. Another panchnama was drawn up on that date.
“This makes it evident that nothing was found on 03.01 .2001, because the jewellery shown to be found on 03.01.2001 had already been found on 17.11.2000 and had even been valued as per Annexure-5 to the panchnama of 17.11.2000.
This discussion leads us to the question – was the panchnama of 03.01.2001 of the type mentioned in the said Explanation 2(a)? From the facts narrated above, it is clear that the panchnama of 03.01.2001 itself reveals that nothing was seized on that date. Nor was anything found on that date. In fact, no search was conducted. The jewellery that was put in the cash box of the almirah had already been searched, found, inventorised and valued by the DVO on 17.11.2000 itself. Nothing remained to be searched thereafter. And, in fact, no further search was conducted after 17.11.2000. Obviously, nothing else could be found. All that was done on 03.01.2001, in the presence of the witnesses (panchas), was that the seals were removed from the cash box and the almirah and the keys were handed back to the assessee. Essentially, the revocation of the restraint order was given effect to. This is exactly what the Tribunal found as a fact and meant when it concluded that the panchnama dated 03.01.2001 was merely a release order and could not extend the period of limitation.
26. These decisions clearly establish (i) a search is essentially an invasion of the privacy of the person whose property or person is subjected to search; (ii) normally, a search must be continuous; (iii) if it cannot be continuous for some plausible reason, the hiatus in the search must be explained; (iv) if no cogent or plausible reason is shown for the hiatus in the search, the second or resumed search would be illegal; (v) by merely mentioning in the panchnama that a search has been temporarily suspended does not, ipso facto, continue the search. It would have to be seen as a fact as to whether the search continued or had concluded; (vi) merely because a panchnama is drawn up on a particular date, it does not mean that a search was conducted and/or concluded on that date; (vii) the panchnama must be a record of a search or seizure for it to qualify as the panchnama mentioned in Explanation 2(a) to section 158BE of the said Act.
21. Incidentally, Explanation 2(a) to Section 158 is in pari materia with clause 2(a) of Section 153B.
22. In light of the above decision, if the facts of the present case are examined, it is seen that as far as Authorization E. No. 0069 is concerned, the search concluded on 22nd March, 2007 itself. The only question is whether because of Authorization E. No. 0068 where a second visit was made to the Ashok Vihar premises on 15th May, 2007 and only on that date was it noted in the panchnama that the period of limitation for completing the assessment would begin to commence from the last date of the financial year in which the search If this case of the Revenue were to be accepted, then the limitation period for completing the assessment stood extended up to 31st December, 2009. Factually, in the present case, the assessments were completed on 24th December/ 31st 2009 whereas if the Assessee’s case – that the search concluded on 22nd March, 2007 ± is correct, then the assessment had to be completed by 31st December, 2008.
23. What happened on 15th May, 2007 is apparent from the second panchnama relating to the search authorization E. No. 0068. In paragraph 5(b) of the panchnama, the title is “The following were found but not seized”. Under Sub-clause (ii) there under, it is stated “Item Nos. 1 to 13 of Ms. Preeti Jain (wife of Rajiv Jain) as per the valuation report in jewellery items dated 21st March, 2007 and S. Nos. 6, 7,9, 10,12,14,17, 21, 22, 23, 24 right up to 30, 33, 35 and on person items were released”. Therefore, all that happened on 15th May, 2007 was that the factum of valuation reports having been prepared already on the previous date i.e., 21st March, 2007 was noted and the jewellery items were released. Under paragraph 5(a) under the title “The following were found and seized”, under sub-clause (iv) it is stated that ‘jewellery, ornaments etc. which have been inventoried separately for each place from where recovered as per Annexure-J (4 sheets vide valuation report dated 21st March, 2007 Item Nos. 1, 2, 3, 4, 5, 8, 11, 13, 15, 16, 18, 19, 20, 25, 26, 31, 32, 34, 36 and 37 seized.”In fact, there was no seizure because nothing new was found. All the other items which were already valued on 21st March, 2007 and for which valuation report was already prepared were shown as seized but in fact were not seized. The net result is that on 15th May, 2007 nothing was found which had not already been found by the Department on the first day i.e., 21st March, 2007.
24. The Court is not prepared to accept the plea of the Revenue that merely because a panchnama was drawn up on 15thMay, 2007 showing that the search was ‘finally concluded’ on that date, it postponed the period of limitation in terms of Section 153B (2) (a) of the Act. It had to be the “last panchnama drawn in relation to any person in whose case the warrant of authorization has been issued”. The last panchnama, no doubt, is dated 15th May, 2007 but what it records is the seizure of the jewellery items not of any of the persons searched but the wives of one of the directors i.e., of Ms. Neena Jain who was not even a director of any of these entities. Therefore, even assuming that the jewellery of Ms. Neena Jain was seized under panchnama of 15th May, 2007, as far as the searched entities are concerned, the Revenue cannot take advantage of Section 153B (2) (a) to contend that the period of limitation in respect of them stands extended for completing of assessment up to 31st December, 2009.
The next question for consideration is, when once the authorized officer in pursuance of the authorization enters the premises and starts searching, when exactly the said search comes to an end. It is contended on behalf of the Revenue that a discretion is vested with such authorized officer to complete the search, draw a panchnama stating that the search is completed on the day he begins the search or if for any reason it is not possible to complete such search, he can pass a restraint order, prohibitory order and when fix another date for continuing such search. Thereafter, at his convenience and discretion, he can visit the premises again and continue the search in respect of the subject matter of the restraint order and prohibitory order and he can also make a fresh search. Every visit made by the authorized officer for inspection is a search under the Act and such a search comes to an end only when the panchnama is written and in the panchnama it is expressly stated that it is finally concluded. It is in the light of the said contentions it is necessary to consider when the search begins and when the search ends in law. This aspect has drawn attention of the various courts in this country and the law point is well settled.
The law does not contemplate the authorized officer to set out in any of the Panchnamas that he has finally concluded the search. If for any reason the authorized officer wants to search the premises again, it could be done by obtaining a fresh authorization. There is no prohibition in respect of the same premises. It is open to the empowered authority to issue authorization, but when the authorization is issued once, the authorized officer cannot go on visiting the premises under the guise of search. Therefore, it is clear once in pursuance of an authorization issued the search commences, it comes to an end with the drawing of a Panchnama. When the authorized officer enters the premises, normally, the Panchnama is written when he comes out of premises after completing the job entrusted to him. Even if after such search he visits the premises again for investigation or inspection of the subject-matter of restraint order or prohibitory order, if a Panchnama is written, that would not be the Panchnama which has to be looked into for the purpose of computing the period of limitation. But, such a Panchnama would only record what transpires on a re-visit to the premises and the incriminating material seized would become part of the search conducted in pursuance of the authorisation and would become the subject-matter of block assessment proceedings. But, such a Panchnama would not extend the period of limitation. It is because the limitation is prescribed under the statute. If proceedings are not initiated within the time prescribed, the remedy is lost. The assessee would acquire a valuable right. Such a right cannot be at the mercy of the officials, who do not discharge their duties In accordance with law. The procedure prescribed under Section 132 of the Act is elaborate and exhaustive. The said substantive provision expressly provides for search and seizure. In the entire provision, there is no indication of that search once commenced can be postponed. What can be postponed is only seizure of the articles. Therefore, once search commences it has to come to an end with the search party leaving the premises whether any seizure is made or not. The limitation for completion of block assessment is expressly provided under section 158BE which clearly declares that it is the execution of the last of authorizations which is to be taken into consideration. The word “seizure” is conspicuously missing in the said section. The same cannot be read into the section for the purpose of limitation. Then, it amounts to rewriting the section by the Court, which is impermissible in law.
“The question arises as to whether execution of a warrant of authorization or requisition refers to the conclusion of the proceedings under Section 132 and/or s. 132A or it refers only to the execution of the warrant even though as a result of such execution the proceedings under Section 132 or 132A are yet to be completed. The latter situation will include a case in which a restraint order under Section 132 (3) is passed. In such a case it can be said that though the warrant of authorization has been executed, proceedings under Section 132 (3) are pending. Since the word, “execute”, also means “to complete” one has to wait for conclusion of the proceedings under Section 132 (3) for the purpose of computation of limitation under Section 158BE (1) and the period of the one year has to be computed from the end of the month in which the proceedings under Section 132 (3) are concluded. If there is more than one warrant, limitation will be counted from the execution of the last one.
A contrary view is as much possible if one were to consider the spirit of the scheme which envisages expeditious disposal of the search cases and it would be reasonable to interpret that execution of warrant is not tantamount to completion of proceedings under Section 132 or 1 32A. The period during which the proceedings under Section 132 (3) remained pending has to be excluded for the purpose of counting limitation of one or two years under Section 158BE. Otherwise, it may lead to absurd results as it may take several years before restraint under Section 132 (3) is lifted and it may, thus, extend the period of one or two years by all those years during which proceedings under Section 132 (3) remained pending. It may be agreed against this view that S. 132 (8A) takes care that there is no extension of proceedings under Section 132 (3) and that the view cannot be taken without doing violence to the language of the Act.
26. In the considered view of the Court, the above decision in C. Ramaiah Reddy (supra) puts it beyond the pale of doubt that merely visiting the premises on the pretext of concluding the search but not actually finding anything new for being seized cannot give rise to a second panchnama. In such event, there would be no occasion to draw up a panchnama at all. In the present case, the Court is satisfied that the second visit by the search party to the Ashok Vihar premises on 15th May, 2007 did not result in anything new being found that belonged to any of the searched parties. The second visit and the panchnama drawn up on that date cannot lead to postponement of the period for completion of assessment with reference to Section 153B (2) (a) of the Act.
27. Shashwat Bajpai, learned counsel appearing for the Assessees, pointed out that this Court by an order dated 30thNovember, 2015 in the batch of ITA 27/20 15 (CIT v. J.H. Finvest Pvt. Ltd.) which involved an identical set of authorizations in relation to the same searches which had commenced on 21st March, 2007 in respect of three of three entities, namely, J.H. Finvest Pvt. Ltd., Texefx Marble Industries (formerly known as J.H. Business & Products Pvt. Ltd.) and SVIL Mines Ltd., dismissed the appeal of the Revenue. He, accordingly, submitted that the above order should automatically result in the dismissal of the present appeals as well. However, the above order of this Court was sought to be distinguished by Mr. Chaudhary appearing for the Revenue by pointing out that the said decision did not take note of the fact that there were two authorizations for two premises: at Ashok Vihar and at Pitam Pura and that the second panchnama dated 15th May, 2007 was in fact in relation to the Ashok Vihar premises. As already discussed herein before, the above distinction is to no avail as far as the case of the Revenue is concerned.
28 Finally, it was contended by Mr Chaudhary that the decision in VLS Finance Ltd. v CIT (supra) supports the case of the Revenue and, therefore, the period of limitation for passing the assessment order should be calculated from 15th May, 2007. In its order in the case of CIT v. JH Invest Pvt. Ltd. (supra), this Court took note of the above decision. In any event, the Court has again examined it in detail. The Court notes that there were as many as 16 searches conducted in VLS Finance within a span of two months. The search and seizure operations commenced on 22nd June, 1998 and continued till 5th August, 1998. Sixteen panchnamas were drawn up in respect of the visits made. There was no occasion when a panchnama did not record a seizure. Therefore, the said decision being distinguishable on facts is of no assistance to the Revenue.
29. For the aforementioned reasons, the Court finds that the decision of the ITAT in the appeals involving Surya Vinayak Group companies does not suffer from any legal infirmity. Since the ITAT has only applied the earlier decisions of this Court, no substantial question of law arises from the impugned order of the ITAT.
30. As regards the appeals involving J.H. Business India Pvt. Ltd., where proceedings were sought to be initiated under Section 153C of the Act, it is plain that in view of the above conclusion in the Surya Vinayak cases, the assessment framed by the AO under Section 153C read with Section 143(3) is barred by limitation. The search stood concluded qua H. Business India Pvt. Ltd. on 22ndMarch, 2007 itself. This, also, therefore, has to lead to the dismissal of the Revenue’s Appeal even as regards PPC Business Pvt. Ltd. where Section 153C of the Act was involved.
31. All the appeals are, accordingly, dismissed but in the circumstances, with no orders as to costs.

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