Second visit in the name of concluding search without without finding anything new for being seized could not validate second panchnama for limitation period u/s 153B(2)(a) – Delhi High Court
ABCAUS Case Law Citation:
ABCAUS 1297 (2017) (07) HC
All the appeals were directed against the order of the ITAT in holding that the assessment framed u/s 153C read with Section 143(3) of the Income Tax Act, 1961 (the Act) was barred by limitation as per Section 153B of the Act.
Important Case Laws Cited/relied upon:
CIT v. S.K. Katyal (2009) 308 ITR 168 (Del)
Ramaiah Reddy v. Assistant Commissioner of Income Tax (2011) 339 ITR 201 (Kar.)
Brief Facts of the Case:
The Revenue had filed thirteen appeals against four assesses. All appeals arised out of similar set of facts involving similar questions of law and were disposed of by a common judgment.
On the basis of authorisation dated 20th March, 2007, a search u/s 132(1) was conducted at two office premises of five business entities/groups. However in both the cases, copies of panchnama disclosed that the search was temporarily concluded for the relevant day to be commenced subsequently for which purpose seals were placed. The searches were resumed in subsequent days and the gap even travelled to nearly two months.
The only question was whether because of Authorization where a second visit was made 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.
In the instant case, the assessments were completed on 24th December/31st December, 2009 According to the Revenue, the limitation period for completing the assessment stood extended up to 31st December, 2009. Whereas according to the assessee, the search stood concluded on 22nd March, 2007 and therefore the assessment had to be completed by 31st December, 2008.
Observations made by the High Court:
The Hon’ble High Court observed that section 153B deals with the time limit for completion of assessment under section 153A. The relevant 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.
It was further observed that 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 Hon’ble High Court observed that the panchnamas showed that no fresh material as such was found during the second visit of the serach party. A formal seizure of the jewellery of wife of the director of one of the company was recorded in the second panchnama but which also noted 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 the second search.
The Hon’ble High Court did not accept the plea of the Revenue that merely because a panchnama was drawn up 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.
The Hon’ble High Court opined that 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 was dated 15th May, 2007 but what it recorded was the seizure of the jewellery items not of any of the persons searched but the wives of one of the directors who was not even a director of any of these entities. Therefore, even assuming that the jewellery was seized under panchnama of 15th May, 2007, as far as the searched entities are concerned, the Revenue could not 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 Hon’ble High Court opined that it is 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 could not give rise to a second panchnama. In such event, there would be no occasion to draw up a panchnama at all.
The Hon’ble High Court opined that in the present case, it was satisfied that the second visit by the search party to 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 could not lead to postponement of the period for completion of assessment with reference to Section 153B (2) (a) of the Act.
All the appeal were dismissed.