By TIOL News Service

NEW DELHI, DEC 11, 2015: THE issue is - Whether mere passing of a restraint order would extend the time limit available for completion of the assessment pursuant to the search. NO is the answer.

Facts of the case

On the basis of authorizations u/s 132 (1), a search was commenced in the office premises of the assessees as well as the other Assessees, including Rim Zim Valley Products Pvt. Ltd, Aakriti International, apart from the residences of Mr.Sanjay Jain and Mr. Rajeev Jain, Directors of J.H. Finvest Pvt. Ltd. The search apparently continued for two days, during which, the jewellery items of Mrs. Neena Jain, wife of Mr.Sanjay Jain were seized and some part of the jewellery was released to her after preparing a valuation report. The counsel for the assessees had placed before the Court a compilation of documents containing, the panchnamas drawn up in the course of the search. It had stated that these documents were part of the record of the case before the ITAT. As far as the panchnama prepared was concerned, it was in respect of the authorizations issued for search of the above assessees. It noted that "The search commenced on 23/3/07 at 2.15 pm. The proceedings were closed on 23/3/07 at 5.55 pm as finally concluded". It must be noted that para 8 is a pre-printed clause with blanks for the date and time. There is an option to choose one of the expressions:

"as finally concluded/as temporarily concluded". In this particular para the words "as temporarily concluded" have been omitted and there was a tick mark on the words "as finally concluded". On the same day, a restraint order was passed u/s 132(3), in respect of the jewellery items of Mrs. Neena Jain and Mrs. Shail Kumar Jain kept in some wooden cupboards in their residential premises. There were also restraint orders, communicated to the Managers of some of the banks, in respect of lockers and bank accounts of the said persons. Restraint orders were also issued in respect of certain small safes in which there were materials/documents and for which keys were not available. The search purportedly continued thereafter when another panchnama was drawn up. In para (A) of the said panchnama it was mentioned that the warrants of authorization were issued in the case of the above assessees apart from Mr. Sanjay Jain and Mr. Rajeev Jain, Rim Zim Valley Products Ltd. In para 2, it was stated that the search "was in continuance of the proceedings on 22/3/07.......".

Para 8 then states that "The search commenced on 15/5/07 at ....../pm . The proceedings were closed on 15/5/07 at 6.45 pm as finally concluded". It was not in dispute that the assessment orders pursuant to the said searches were passed on 24/31st December 2009.

The assessee contended that the assessment ought to have been completed by 31st December 2008, but was completed on 31st December 2009, i.e., beyond the period of twenty one months from the end of the financial year in which the last authorisation for the search u/s 132(3) was issued. This was in terms of Clause (i) of the second proviso to Section 153B (1). It was pointed out that the names of the assessees were included in the panchnama drawn up on 15th May 2007 although no fresh search authorisations qua any of them were issued. The case of the Revenue had been that the search did not conclude on 23rd March 2007 but on 15th May 2007. This was on account of the restraint orders claimed to had been validly passed on 23rd March 2007 in peculiar circumstances where either the person searched was not present or the witnesses were not present or the keys of some of the cupboards were not available. The ITAT noted that mere passing of a restraint order would not extend the time limit available for completion of the assessment pursuant to the search. It has been noted that Section 132(3) for passing a restraint order can be only resorted to if there was any practical difficulty in seizing the item which is liable to be seized. If all actions of the search were completed and nothing was left to be done by the search party, then the action of the authorized officer u/s 132(3) would be illegal and consequently any panchnama prepared on the extended date of search, after lifting the restraint, would be of no consequence, for the purposes of computation of limitation u/s 153B. In particular, the ITAT referred to the decision of this Court in V.L.S. Finance Ltd. Vs. CIT 2006-TIOL-394-HC-DEL-IT. The ITAT correctly concluded that where there are various authorisations issued and various panchnama prepared, it would be the last panchnama prepared in respect of the last authorisation which would be relevant for computing the limitation period.

Held that,

++ in the present case, as noted by the ITAT, there is only one authorisation which was issued on 20th March 2007. Although, the ITAT in para 10.5 of the impugned order noted that "in the authorization letter dated 20/3/2007, names and address of the assesses in question have not been mentioned but in Panchnama dated 15/5/2007 drawn in pursuance to the executive of the said authorization letter dated 20/03/2007 names of all these assessees have been mentioned", the original authorisation letters issued on 20th March 2007 are not before the Court. The Court, therefore, proceeds on the basis that such authorisation had indeed been issued in the names of each of the Assessees. The panchnama drawn up on 23rd March 2007 shows that the search that commenced on that date i.e., 23rd March 2007 stood finally concluded on that date itself. It appears that no further authorisation had been issued for the search of the Assessees who are the Respondents in these appeals. Consequently, the Revenue cannot take advantage of the restraint orders passed in respect of other persons in order to seek extension of the time period for completion of the assessment proceedings in terms of Section 153B qua the assessees herein;

++ even assuming that the restraint orders were validly passed, once the search stood concluded on 23rd March 2007 in respect of these Assessees, in the absence of a fresh authorisation for another search, the time period for conclusion of the assessment in terms of clause (i) of the second proviso to Section 153 B (1) of the Act does not get extended only because their names were included in the panchnama drawn up on 15th May 2007. It is possible that their names were included in the said panchnama drawn up on 15th May 2007 in order to avoid the consequence of expiry of the period of limitation which, as far as these Assessees are concerned, commenced on 23rd March 2007, when the search "finally concluded". Consequently, the impugned order of the ITAT, holding that the assessments in question were barred by limitation, and therefore liable to be quashed, does not call for any interference. The second ground on which the ITAT has invalidated the assessments is that there was no incriminating material found in the course of the search against any of the Respondents/Assessees in these appeals. In this context, reference only need be made to a recent decision of this Court in CIT v. Kabul Chawla 2015-TIOL-2006-HC-DEL-IT, which holds that in the absence of any incriminating material found in the course of search the framing of assessment under Section 153A or 153 C of the Act, as the case may be, would not be valid. It may be mentioned here that in the case of J.H.Finvest Pvt. Ltd., the Revenue has not even urged a question regarding the absence of any incriminating material having been found against the said Assessee invalidating the assessment. No substantial question of law arises from the impugned order of the ITAT in these cases. The appeals are accordingly dismissed.

(See 2015-TIOL-2758-HC-DEL-IT)