C RAMAIAH REDDY VIBUTHIPURA BASAVANAGAR MARATHALLI (P.O.) BANGALORE - 560037 Vs. THE ASSISTANT COMMISSIONER OF INCOME TAX (IMV) CIRCLE 5(1) C R BUILDING BANGALORE

JUDGEMENT

(1.) THIS appeal is by the assessee challenging the order passed by the Tribunal on various grounds, including the findings recorded by the appellate Tribunal that the appellate Tribunal has no jurisdiction to examine the legality of the action of the authorizing officer anterior to the assessment officer, commencing the assessment proceedings.

(2.) ON 05.12.1995, search operations were carried out in the assessee's premises. On the conclusion of the search operations on 05.12.1995, the authorized officer clamped prohibitory order under Section 132 in respect of certain jewelleries, books of accounts, etc., found at the time of search. Later on 24.01.1996, the authorized officer prepared one more panchanama in which the prohibitory order passed under Section 132(3) on 05.12.1995 was lifted. The books of accounts, jewelleries, etc., which were earlier kept under the prohibitory order were released. There was no seizure effected on 24.01.1996 when the search proceedings were stated to be concluded in the panchanama. It states, the prohibitory order was passed on 05.12.1995 itself. Thereafter, an order of block assessment under Section 158(B)(C) of the Income Tax Act 1961 (for short, hereinafter referred to as, 'the Act') was passed by the assessment officer on 28.01.1997. Aggrieved by the said order of assessment, the assessee preferred an appeal before the Tribunal in accordance with the provisions of the law, as was prevailing at the relevant point of time. The assessee contended before the Tribunal among other grounds that the block assessment was barred by limitation under Section 158(B) (E)(i) of the Act. When the matter was pending before the appellate Tribunal, the Revenue filed an application for referring the matter to a Special Bench, in view of the conflicting decisions rendered by various Tribunals in respect of the issues involved in the appeal. Accordingly, the Tribunal framed the following three questions for consideration by the Special Bench. The three points that were referred for consideration by the Special Bench are as under: Scope of Appeal (i) Whether the Tribunal could examine the search activity from the time, the search is started so as to determine as to at what point of time the search would said to have been come to a close, for the sole purpose of examining whether the assessment is in time or otherwise? Limitation (ii) Whether the term within one year from the end of the period in which the last of the authorization for search under Section 132 was executed has to be taken to mean the execution of the warrant resulting in seizure and not with reference to issuing of prohibitory order and successive visits that are claimed as search, which are so carried out on the basis of the only authorization that was issued initially? Panchanama (iii) Whether, where a search is carried on the basis of the authorization resulting in seizure of some items, issue of prohibitory order on others, such search could be said to be genuine and comes to a close only when the authorizing officer says that in writing and visits the premises and by seizing some items that are covered by prohibitory order which could have been seized by him even at the first instance and it is not the case of the Department especially when the item so seized finally is not one of those items that are covered by Sections 132. 132(1) and 132(3) of the Act.

(3.) THE learned counsel for the assessee assailing the impugned order of the Tribunal contended under the Scheme of the Act, the Tribunal being the last fact finding authority has to look into all aspects of search and adjudicate from its initiations to its conclusion, which includes looking into the validity of search proceedings. The Tribunal has to look into the jurisdictional aspect of the validity of search from the date of search till the completion of the block assessment proceedings. It can look into whether the officer who had authorized the search has reason to believe that the search should be authorised, which is the first jurisdictional fact, which is the basis for further proceedings. If this jurisdictional aspect fails, all the following steps culminating in the assessment order would fail. Therefore, in coming to the said conclusion, it has to satisfy itself that all the procedural aspects and requirements have been complied with. A valid search is a sine -quo -non for initiating proceedings in a block assessment and unless the Tribunal records a finding that there was a valid search, when it is disputed, there cannot be issue of any notice under Section 158BC of the Act. He further contended that the starting point of limitation is the day on which the first panchanama is made in respect of last authorization for search. The authorities conducting the search are not entitled to visit the premises for searching again and again based on authorization. The subsequent visit is not a continuation of search but only inspection of the articles and books within the prohibitory order. If any panchanamas are recorded during these visits/inspection, they could not be considered as panchanamas of search for the purpose of computation of the commencement of the period of limitation. Before a prohibitory order as contemplated under Section 132(3) is passed, it should be preceded by an order in writing setting out the reasons why such an order has become necessary felling which the prohibitory order would be illegal. The authorized officer has no power after commencing the search to adjourn such proceedings or fix a date for continuation of such proceedings and at any rate, such adjourned date on which the panchanama is written cannot form the basis for calculating the period of limitation. Lastly, it was contended, merely because in panchanamas written on subsequent visits or inspection, it is recorded that the search is finally concluded that cannot be construed as the last panchanama and the date from which the period of limitation is to be computed.