Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
 
Open DEMAT Account with in 24 Hrs and start investing now!
« From the Courts »
Open DEMAT Account in 24 hrs
 Inordinate delay in income tax appeal hearings
 Income Tax leviable on Tuition Fee in the Year of Rendering of Services: ITAT
 Supreme Court invoked its power under Article 142 of Constitution to validate notices issued under section 148 as notices issued under section 148A. However the same shall be subject to amended provisions of section 149.
 ITAT refuses to stay tax demand on former owner of Raw Pressery brand
 Bombay HC sets aside rejection of refund claims by GST authorities
 [Income Tax Act] Faceless Assessment Scheme does not take away right to personal hearing: Delhi High Court
 Rajasthan High Court directs GST Authority to Unblock Input Tax Credit availed in Electronic Credit Ledger
 Sebi-taxman fight over service tax dues reaches Supreme Court
 Delhi High Court Seeks Status Report from Centre for Appointments of Chairperson & Members in Adjudicating Authority Under PMLA
 Delhi High Court allows Income Tax Exemption to Charitable Society running Printing Press and uses Profit so generated for Charitable Purposes
 ITAT accepts Lease Income as Business Income as Business Investments were mostly in nature of Properties

Pr. Commissioner Of Income Tax Central-3 Vs. Surya Vinayak Industires Ltd.
July, 18th 2017
$~
*       IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                  Judgment reserved on: 4th July, 2017
                                                      Pronounced on: 17th July 2017

+                                       ITA 290/2016
        PR. COMMISSIONER OF INCOME TAX CENTRAL-3
                                                                    .....Appellant
                        Versus
        PPC BUSINESS AND PRODUCTS PVT. LTD.                          ..... Respondent

+                                       ITA 605/2016
        PR. COMMISSIONER OF INCOME TAX CENTRAL-3
                                                                    ..... Appellant
                        Versus
        SURYA VINAYAK INDUSTIRES LTD.                                ..... Respondent

+                                       ITA 606/2016
        PR. COMMISSIONER OF INCOME TAX CENTRAL-3
                                                                    ..... Appellant
                                Versus

        SURYA VINAYAK INDUSTRIES LTD.                                ..... Respondent

+                                       ITA 607/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant

                                Versus

        SURYA VINAYAK INDUSTRIES LTD.                                ..... Respondent


ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016             Page 1 of 23
+                                       ITA 608/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant

                                Versus
        SURYA VINAYAK INDUSTRIAL LTD.                           ..... Respondent



+                                       ITA 609/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant

                                Versus

        SURYA VINAYAK INDUSTRIES LTD.                           ..... Respondent

+                                       ITA 610/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant

                                Versus
        J.H. BUSINESS INDIA PVT. LTD.                           ..... Respondent

+                                       ITA 637/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant
                                Versus

        SANJAY JAIN                                             ..... Respondent

+                                       ITA 638/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant
                                Versus

        SANJAY JAIN                                             ..... Respondent


ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016        Page 2 of 23
+                                       ITA 639/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant

                                Versus

        J.H. BUSINESS INDIA PVT. LTD.                           ..... Respondent



+                                       ITA 640/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant

                                Versus

        J.H. BUSINESS INDIA PVT. LTD.                           ..... Respondent

+                                       ITA 641/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant

                                Versus
        J.H. BUSINESS INDIA PVT. LTD.                           ..... Respondent



+                                       ITA 850/2016
      PR. COMMISSIONER OF INCOME TAX CENTRAL-3 ..... Appellant

                                Versus
        J.H. BUSINESS INDIA PVT. LTD.                  ..... Respondent
        Through: Mr.Rahul Chaudhary, Sr.Standing Counsel with
                  Ms.Lakshmi Gurung, Advocate for the Appellants.
                  Mr. Shashwat Bajpai and Mr. Sharad Agarwal,
                  Advocates for the Respondent.




ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016        Page 3 of 23
        CORAM:
        JUSTICE S.MURALIDHAR
        JUSTICE PRATHIBA M. SINGH

                                JUDGMENT
%                                17.07.2017
Dr. S. Muralidhar
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
Industries. 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.

Questions urged
3. In ITA Nos. 605-608 of 2016, the questions of law that are sought to be
urged by the Revenue are as under:
        (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.

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016    Page 4 of 23
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
Nos. 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.

7. The common questions of law urged by the Revenue in these four appeals
involving J.H. Business India Pvt. Ltd. read as under:
        (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?

8. ITA No. 290/2016 filed by the Revenue against the Assessee, PPC

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016     Page 5 of 23
Business and Products Pvt. Ltd., is directed against the order dated 14th
August, 2015 passed by the ITAT in ITA No. 226/Del/2012 for AY 2006-
07. The questions of law urged by the Revenue in these appeals read as
under:
         (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.

Background facts
9. The background facts in these appeals are that on the basis of
Authorization dated 20th March, 2007 issued under Section 132(1) of the
Act, a search was commenced on 21st March, 2007 in the office premises of
Rim Zim Valley Products Pvt. Ltd., J.H. Invest Pvt. Ltd., Aakriti
International; M/s JH Business and Products Pvt. Ltd. and Surya Vinayak
Industries Group. The Court has been shown two of the authorisations, both
dated 20th March, 2007 in regard to the above entities which were to be
searched. One authorisation was for the search to be undertaken at Zone H -
4/5, Plot No. 53-55, Suvidha Kunj, Pitam Pura, Delhi-110034 (hereinafter
referred to as `Pitam Pura premises') and the other for the premises at I-42,
Ashok Vihar, Phase- I, New Delhi (hereinafter referred to as `Ashok Vihar
ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016    Page 6 of 23
premises').

The authorisations and panchnamas
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
i.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
ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016     Page 7 of 23
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 second 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 21st March, 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 21st March, 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

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016   Page 8 of 23
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 21st March, 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
Ms. 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
ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016      Page 9 of 23
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.

Section 153B
17. The assessment in each of these cases pursuant to the searches was
concluded on 31st December, 2009. Clause (ii) of the second proviso to
Section 153B (1) which provides for time limit for completion of the
assessment under Section 153A. The relevant portions prior to the
amendment of Section 153B read thus:
        "153B. Time limit for completion of assessment under section
        153A.

        (1) Notwithstanding anything contained in section 153, the Assessing
        Officer shall make an order of assessment or reassessment,--

        (a) in respect of each assessment year falling within six assessment
        years referred to in clause (b) of sub-section (1) of section 153A,
        within a period of two years from the end of the financial year in
        which the last of the authorisations for search under section 132 or for
        requisition under section 132A was executed;

        (b) in respect of the assessment year relevant to the previous year in
        which search is conducted under section 132 or requisition is made
        under section 132A, within a period of two years from the end of the
        financial year in which the last of the authorisations for search under
        section 132 or for requisition under section 132A was executed:

        Provided that in case of other person referred to in section 153C, the
        period of limitation for making the assessment or reassessment shall
        be the period as referred to in clause (a) or clause (b) of this sub-
        section or one year from the end of the financial year in which books

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016      Page 10 of 23
        of account or documents or assets seized or requisitioned are handed
        over under section 153C to the Assessing Officer having jurisdiction
        over such other person, whichever is later:

        Provided further that in case where the last of the authorisations for
        search under section 132 or for requisition under section 132A was
        executed during the financial year commencing on or after the 1st day
        of April, 2004 but before the Ist day of April, 2010,-

        (i) The provisions of clause (a) or clause (b) of this sub-section shall
        have effect as if for the words "two years" the words "twenty-one
        months" had been substituted;

        (ii) The period of limitation for making the assessment or
        reassessment in case of other person referred to in Section 153C, shall
        be the period of twenty-one months from the end of the financial year
        in which the last of the authorizations for search under Section 132 or
        for requisition under Section 132A was executed or nine months from
        the end of the financial year in which books of account or documents
        or assets seized or requisitioned are handed over under section 153C
        to the Assessing Officer having jurisdiction over such other person,
        whichever is later:

        ...


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.



ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016      Page 11 of 23
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.

The decision in S. K. Katyal's case
20.1 In the context of the search leading to a block AY under Section 158BE
of the Act, this Court in CIT v. S.K. Katyal (2009) 308 ITR 168 (Del) made
the following observations:
        These provisions demonstrate that a search and seizure under the said
        Act has to be carried out in the presence of at least two respectable
        inhabitants of the locality where the search and seizure is conducted.
        These respectable inhabitants are witnesses to the search and seizure
        and are known as panchas. The documentation of what they witness is
        known as the panchnama. The word panchnama, refers to a written
        document. Its type is usually determined by the word which is
        combined with it as a suffix. Examples being, nikah-nama (the written
        muslim marriage contract), hiba-nama (gift deed, the word `hiba'
        meaning - gift), wasiyat-nama (written will) and so on. So a
        panchnama is a written record of what the panch has witnessed. In
        Mohan Lal v. Emperor: AIR 1941 Bombay 149, it was observed that
        the panchnama is merely a record of what a panch sees...

        Similarly, the Gujarat High Court in the case of Valibhai Omarji v.
        The State AIR 1963 Guj 145 noted that "(a) 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.

        We have examined the meaning of the word "panchnama" in some
        detail because it is used in Explanation 2(a) to Section 158BE of the
ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016    Page 12 of 23
        said Act although it has not been defined in the Act. A panchnama, as
        we have seen is nothing but a document recording what has happened
        in the presence of the witnesses (panchas). A panchnama may
        document the search proceedings, with or without any seizure. A
        panchnama may also document the return of the seized articles or the
        removal of seals. But, the panchnama that is mentioned in
        Explanation 2(a) to Section 158BE is a panchnama which documents
        the conclusion of a search. Clearly, if a panchnama does not, from the
        facts recorded therein, reveal that a search was at all carried out on the
        day to which it relates, then it would not be a panchnama relating to a
        search and, consequently, it would not be a panchnama of the type
        which finds mention in the said Explanation 2(a) to Section 158 BE."

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.

20.3 Under the heading "The following were found but were not seized" in
the printed format panchnama, it was written in hand:
        "Jewellery worth Rs. 6,05,731/- as per page 1 of Annexure-5 of
        Panchnama dated November 17 2000."

20.4 In this regard, the Court in CIT v. S.K. Katyal (supra) observed as

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016        Page 13 of 23
under:
         "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.

20.5 The Court in para 16 then observed as under:
         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.

20.6 The Court in CIT v. S.K. Katyal (supra) then undertook a detailed
discussion of the law on the subject including the decisions in G.M. Agadi v.
The Commercial Tax Officer, Belgaum [1973] 32 STC 243 (Kar.); C.
Balakrishnan Nair (Dr.) v. CIT (1999) 237 ITR 70 (Ker); CIT v. Mrs
Sandhya P. Naik (2002) 253 ITR 534 (Bom); CIT v. Sarb Consulate
Marine Products P. Ltd. (2007) 294 ITR 444; CIT v. Deepak Aggarwal
(2009) 308 ITR 116 (Del.) as well as VLS Finance Ltd v. CIT (2007)289
ITR 286 (Del). The conclusions drawn by the Court in CIT v. S.K. Katyal
(supra) were as under:

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016      Page 14 of 23
        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.

Analysis and reasons
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 search was "finally concluded", the
period of limitation for completing the assessment would begin to
commence from the last date of the financial year in which the search
concluded. 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 December, 2009 whereas if the Assessee's

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016       Page 15 of 23
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) thereunder, 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 15th May, 2007 showing that the

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016    Page 16 of 23
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 decision in C Ramaiah Reddy
25.1 In this context, the Court would like to refer to the decision of the
Karnataka High Court in C. Ramaiah Reddy v. Assistant Commissioner of
Income Tax (2011) 339 ITR 201 (Kar.) where these very provisions were
examined in extenso. There the Court took note of the decision of this Court
in CIT v. S.K. Katyal (supra) and observed as under:
        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

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016      Page 17 of 23
        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.

25.2 The Court in C. Ramaiah Reddy v. Assistant Commissioner of Income
Tax (supra) then proceeded to discuss the case law and held as under:
        The law does not contemplate the authorised officer to set out in any
        of the Panchnamas that he has finally concluded the search. If for any
        reason the authorised officer wants to search the premises again, it
        could be done by obtaining a fresh authorisation. There is no
        prohibition in respect of the same premises. It is open to the
        empowered authority to issue authorisation, but when the
        authorisation is issued once, the authorised 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,

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016        Page 18 of 23
        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
        authorisations 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.

25.3 The Karnataka High Court in C. Ramaiah Reddy (supra) also took note
of the Circular No.772 dated 23rd December, 1998 in relation to the
definition of the word `execute' and then observed as under:
        "The question arises as to whether execution of a warrant of
        authorisation 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 authorisation 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
ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016      Page 19 of 23
        cases and it would be reasonable to interpret that execution of warrant
        is not tantamount to completion of proceedings under Section 132 or
        132A. 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.

        Therefore, the Explanation added to remove a doubt cannot be
        construed as a provision providing a longer period of limitation than
        the one prescribed in the main section. When under the scheme of the
        section there is no indication of a second search on the basis of the
        same authorisation issued under the said provision, the legislative
        intention is clear and plain and the interpretation to be placed by the
        courts should be in harmony with such an intention. Therefore, one
        authorisation is to be issued in respect of one premises in pursuance of
        which there can be only one search and such a search is concluded,
        when the searching party comes out of the premises, which is
        evidenced by drawing up a panchnama. When there are multiple
        places to search and when multiple authorisations are issued, on
        different dates or on the same date or in respect of the same premises
        more than one authorisation is issued on different dates, the last
        panchnama drawn in proof of conclusion of search in respect of the
        authorisation is to be taken into consideration for the purpose of
        limitation for block assessment."

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

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016      Page 20 of 23
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.

The decision in JH Finvest
27. Mr. Shashwat Bajpai, learned counsel appearing for the Assessees,
pointed out that this Court by an order dated 30th November, 2015 in the
batch of ITA 27/2015 (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 hereinbefore, 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

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016    Page 21 of 23
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 22 nd 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.

Conclusions
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 J.H. Business India
Pvt. Ltd. on 22nd March, 2007 itself. This, also, therefore, has to lead to the
dismissal of the Revenue's Appeal even as regards PPC Business Pvt. Ltd.

ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016     Page 22 of 23
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.



                                                                S.MURALIDHAR, J.



                                                            PRATHIBA M. SINGH, J.
JULY 17, 2017
rd




ITA Nos.290/2016, 605 ­ 610 /2016, 637 ­ 641 /2016 & 850/2016           Page 23 of 23

Home | About Us | Terms and Conditions | Contact Us
Copyright 2024 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting