COMMISSIONER OF INCOME TAX Vs. VINAY A NAIK

JUDGEMENT

(1.) ALL these appeals can be disposed of by a common order as the facts and questions of law involved in all these tax appeals are common.

(2.) ALL these tax appeals are directed against a common judgment and order dt. 7th June, 1999, passed by the Tribunal, Pune Bench, Pune [reported as Late Ananta N. Naik through LR vS.Dy. CIT (2000) 68 TTJ (Pune) 533 Ed.]. The block assessment period relevant is the period from 1st April, 1986, to 18th Oct., 1996. A few facts which are required to be stated are as follows : A search under S. 132 of the IT Act, 1961, was conducted at the residential premises of the assessee at "Thirtharupa", Aquem, Margao, Goa, from October, 1996, onwardS.During the search operation, certain valuables were found which belonged to the assessee and his family memberS. In response to the notice issued under S. 158BC of the IT Act, the assessee filed a return showing income of RS.11,05,374. Against this income, the assessment was completed at RS.44,20,643, vide order dt. 31st Dec., 1997. Aggrieved by this order of the AO, the assessee filed appeal before the Tribunal. While assailing the order dt. 31st Dec., 1997, the assessee raised as many as 32 groundS.It was contended, inter alia, that the assessing and the authorised officers were biased and hostile to the appellants, that the rules of natural justice were not followed during the course of the proceedings, that the provisions of S. 132(9) were not complied with, etc. The main ground apart from the merits was that the assessment was barred by limitation, the last date of completion being 31st Oct., 1997. The Tribunal thought it fit to take up this ground about the impugned assessment being barred by limitation first inasmuch as it felt that if the assessee succeeded on this vital issue, the other issues would become only academic in nature. Accordingly, the parties were heard on this point only. The case of the assessee was that the search started on 16th Oct., 1996, and the same concluded on 20th Oct., 1996. Since the assessment ought to have been concluded within a period of one year, i.e., on or before 31st Oct., 1997, and since it was completed on 31st Dec., 1997, the assessment was barred by limitation. It was contended by learned counsel appearing for the assessee, that as per the provisions of S. 158BE of the IT Act, the block assessment was required to be completed within a period of one year from the date of the execution of the last of the authorisations of search. By an amendment made by the Finance (No. 2) Act, 1998, it has been further clarified that the last date of the execution of the search would be reckoned from the date of the last of the Panchanamas drawn up in the execution of such search. It was contended on behalf of the assessee that there was only one search warrant issued which was executed between 16th Oct., 1996, and 20th Oct., 1996. According to the assessee, after completion of the search on 20th Oct., 1996, an order under S. 132(3) of the IT Act was passed covering one cupboard in which all the silver articles which were found were placed and sealed. On 26th Oct., 1996, 6 kgS.of silver vessels from this cupboard were released and a further order came to be passed under S. 132(3) of the IT Act and the cupboard was sealed once again. On the same day, a Panchanama was also drawn concluding the search and indicating in the said Panchanama the fact that the cupboard containing silver articles had been sealed and an order under S. 132(3) of the IT Act passed in relation thereto. On 13th Dec., 1997, the Asstt. CIT, Circle I, Margao, Mr. Ashish Abrol, who was not one of the authorised officers mentioned in the search warrant, removed the seal and made a further order under S. 132(3) of the IT Act, releasing the said silver vessels and articleS.According to the counsel appearing for the assessee, a copy of this order was not made available to the assessee despite repeated requestS. The contention of the assessee is that it was clear that the restraint order under S. 132(3) of the IT Act does not amount to seizure. It is contended that by terms of r. 112(7) of the IT Rules, 1962, a Panchanama is required to be drawn only in case of seizure and that an order under S. 132(3) is not a Panchanama as referred to in S. 158BE of the IT Act. As per the contention of the assessee, the last of the Panchanamas in the execution of the search warrant was made on 16th Oct., 1996, and hence, the assessment was barred by limitation on 31st Oct., 1997. On behalf of the Department, it was submitted that the assessment was completed within one year of the execution of the search warrant and, as such, the assessment framed was within the statutory time. It was submitted that the search commenced on 20th Oct., 1996, and concluded on 13th Dec., 1996, when the last Panchanama was drawn. According to learned counsel appearing for the Department, in between there was a lull because of the invervening holidays and Diwali dayS.Learned counsel referred to the second proviso to S. 132(1) of the IT Act and submitted that on 20th/21st Oct., 1996, at 2.30 a.m. it was not possible to remove from the residence of the assessee 45 kgS.of silverware. It was contended by him that all the silverware was put in the almirah and a prohibitory order was placed as per the second proviso to S. 132(1) of the IT Act and the assessee was directed not to remove/part with the contents of the almirah. He contended that later on, in deference to the representation/wish of the assessee that some of the items placed under the prohibitory order were of religious nature and were required to be used for Pooja, etc., 6 kgS.of silver articles were released to the assessee on 26th Oct., 1996, by Mr. M.L. Karmarkar, Asstt. Director of Income tax, Investigation Circle, Belgaum. The contention of the Department is that the original order under S. 132(3) of the IT Act, which was imposed on 20th Oct., 1996, was lifted and a fresh one was imposed by Mr. Karmarkar on 26th Oct., 1996, in respect of the balance of the silver articleS. It was then contended by learned counsel appearing for the Department, that on 13th Dec., 1996, Mr. Ashish Abrol, who was the then Asstt. CIT, Circle I, Margao, visited the residence of the assessee on the directions of the DDI Investigation, Belgaum, and put a fresh prohibitory order on which date a fresh Panchanama was drawn, which was in continuation of the proceedings on 26th Oct., 1996. This Panchanama was signed by Mr. Ashish Abrol himself and the son of the assessee, though there were no Panchas to sign the said Panchanama. According to the Department, there was a deemed seizure on 13th Dec., 1996, as per the second proviso to S. 132(1) of the IT Act. He admitted that there were many defects in the said Panchanama like it was not signed by the assessee and no witnesses were called to sign the same and, hence, the Panchanama does not bear the signature of the witnesseS.It is also admitted that the said Panchanama was drawn at Belgaum and not at Margao, i.e., at the place of alleged seizure. Learned counsel, however, submitted that these defects were "insignificant" defects and would not vitiate the search proceedingS.He submitted that even though the signatures were obtained later on, that would not invalidate the search. He also submitted that the prohibitory order in respect of the silver articles in the almirah on 13th Dec., 1996, was part of the Panchanama. After hearing both the sides at length and after perusing the relevant documents, specially the affidavit of Mr. Karmarkar, the then ADIT, Investigation Circle, Belgaum, and the affidavit of Mr. Abrol, Asstt. CIT, Circle I, Margao, the Tribunal came to the conclusion that the search in this case was concluded on 20th Oct., 1996, when the seizure of cash, jewellery and books of account was made and a valid Panchanama was drawn and that the proceedings thereafter were only with regard to the restraint order under S. 132(3) which did not amount to seizure in view of the Explanation to S. 132 of the IT Act. The Tribunal accordingly held that the assessment stood barred by limitation on 31st Oct.,1997. It also held that it was invalid. It further observed that since the assessee had succeeded on the preliminary ground that the assessment was barred by limitation, the other grounds were academic in nature and, therefore, it did not feel it necessary to adjudicate upon the same in view of the judgment of the Nagpur Special Bench in the case of Rahul Kumar Bajaj vS.ITO (1999) 64 TTJ (Nag)(SB) 200 : (1998) 64 ITD 73 (Nag)(SB). Thus, the appeal filed by the assessee in each case was allowed. Being aggrieved by the same, the Department, has now approached this Court by way of filing these tax appealS.

(3.) WE have heard Mr. Rivonkar at length. We also made specific enquiries from Mr. Rivonkar whether he could show to the Court the authorisation warrant in the name of Mr. Abrol, who on 13th Dec., 1996, went to the assessee's place and passed further restraint order. Mr. Rivonkar, however, expressed his helplessness and could not produce any such authorisation warrant.