ORDER
Hari Om Maratha, J.M.
1. This is an appeal of the assessee pertaining to block period consisting of asst. yrs, 1987-88 to 1997-98 and arises out of the order dt. 20th Dec., 2005 of the learned CIT(A), Jodhpur.
2. Briefly stated, the facts of the case are that the assessee was carrying on the business of job-work of manufacturing of gold and silver ornaments and also derived income from interest on moneylending and income from sale of gold and silver ornaments, utensils etc., manufactured by him with the assistance of other artisans. A search was carried out under Section 132(1) of the IT Act, 1961 (hereinafter referred to as ‘the Act’ for short) at residential and business premises of the assessee on 3rd Jan., 1997. Numerous incriminating documents were found during the course of search. Consequently, a notice under Section 158BC of the Act was issued to the assessee and in compliance thereof he filed return, for the block period 1st April, 1986 to 3rd Jan., 1997, declaring undisclosed income of Rs. 6,43,820. The AO passed the assessment order under Section 158BC(c) of the Act on 28th Jan., 1999 by computing undisclosed income at Rs. 70,74,170 as against shown at Rs. 6,43,820 on the basis of accretion of assets. In the first appeal, on merits, the assessee got a relief of Rs. 54,99,513. Against the order of the learned CIT(A), both the parties filed respective appeals, before the Tribunal. The appeal of the Revenue was dismissed and the appeal of the assessee was partly allowed. The AO gave effect to the Tribunal order but the assessee filed a petition under Section 154 of the Act stating therein that the AO has not acted according to direction of the Tribunal but the same was dismissed, vide order dt. 24th Dec., 2002. Thereafter, a notice under Section 158BFA(2) of the Act was issued to the assessee for imposing a penalty and consequently a penalty of Rs. 4,35,103 was imposed on the assessee under Section 158BFA(2) vide order dt. 26th Dec., 2002.
3. The assessee filed an appeal before the learned CIT(A) by taking many grounds. One such ground was that the provisions of Section 158BFA(2) were not applicable in the case of the assessee because this provision came into effect on 1st Jan., 1997 and does not relate to a case where search was initiated before 1st Jan., 1997 and does not relate to a case where search was initiated before 1st Jan., 1997. But the learned CIT(A) confirmed the penalty order by not accepting the legal plea raised by the assessee. Again, the assessee has taken various grounds before this Bench in its second appeal, but concentrated on the legal ground, which goes to the very root the matter. Therefore, we heard both the parties on the above legal issue at length, and came to the conclusion that the impugned penalty is not sustainable and thus there was no need to decide other ancillary grounds taken by the assessee. Both the parties also agreed to above proposition.
4. The claim of the assessee is that the search was initiated in this case before 1st Jan., 1997, the date on which Section 158BFA came into effect and thus the penalty cannot be levied under this section. According to the learned Authorised Representative Shri U.C. Jain, the search under Section 132(1) was authorised by Director of Investigation, Jaipur, on 30th Dec., 1996 and was executed on 3rd Jan., 1997 and therefore, the provisions of Section 158BFA(2) with regard to levy of penalty and interest is not leviable because under Section 132, the search was ‘initiated’ on 30th Dec., 1996. The sum total of the submission of the learned Authorised Representative is that the provisions of Section 158BFA are applicable to those cases in which search was ‘initiated’ under Section 132, on or after first day of January, 1997 and it does not apply to cases where search is initiated before the first day of January, 1997.
5. On the other hand, the learned Departmental Representative Shri N.S. Jangpangi has vehemently contended that the provisions of Section 158BFA(2) are very much applicable to the case of the assessee, because the search was actually ‘initiated’ on 3rd Jan., 1997. Let us mention that there is no dispute with regard to above stated legal position that in case the search was ‘initiated’ prior to 1st Jan., 1997 when the provisions of Section 158BFA(2) was not in the IT Act, a penalty under the section is not leviable. Now the limited controversy, which we are required to adjudicate upon, is with regard to the date of “initiation” of the search. According to the learned Authorised Representative, the search in this case was initiated on 30th Dec., 1996, the date on which the Director of the Investigation so authorised and this search was executed on 3rd Jan., 1997 when the search was actually commenced at the residential and business premises of the assessee. On the contrary, the Department’s view is that it is the date of commencement of search, i.e., 3rd Jan., 1997, on which the search was ‘initiated’. Now the controversy hinges on the answer to the question as to when the search was actually “initiated”.
6. After considering the relevant material, we are of the considered opinion that ‘initiation’ means the very beginning of a process or to take the first step. The very first act, in the series of acts is the ‘initiation’ of the main action. The warrant of authorisation is such initiation of taking proceedings under Section 132 of the Act. Whether, the warrant is actually executed or not, and the date on which the possession of asset was taken by the Revenue under the section, is entirety immaterial. The terms “initiation” and “execution” are two different words having different meanings and are not synonymous. The word “execution” means starting or commencing the order or direction or intention by putting into action. Therefore, the initiation is something different from commencement of search. The Kolkata Bench of the Tribunal in the case of Nirmal Gosh Bag v. Dy. CIT (2002) 77 TTJ (Kol) 869 : (2002) 82 TTD 788 (Kol) has observed that:
In this case admittedly the warrant of authorisation under Section 132A was signed on 4th Dec., 1991 and this was an action for initiating proceedings under Section 132A with the meaning of provision of Section 158BFA. Whether the warrant is actually executed or not and the date on which the possession of the asset is taken by the Revenue under this section, is immaterial. What the section requires is search is initiated or the assets taken. It is not the end result of the action taken thereunder…what was material for invoking the special provision was initiation of the search or requisition of books of accounts or other assets and it would be immaterial whether it was executed, or dropped or not executed for whatever reason.
7. Dealing with the similar issue, the Bangalore Bench of the Tribunal in IT(SS) A No. 183/Bang/2002 for block asst. yrs. 1991-92 to 1996-97, while deciding the case of Wipro Finance Ltd. v. Dy. CIT (2003) 80 TTJ (Bang) 571 : (2003) 133 Taxman 158 (Bang)(Mag), wherein one of us (JM) was a party to that order, held that the “initiation” of search commences with issue of authorization by the DIT. This view finds support from the decision of the Hon’ble Madras High Court given in the case of Artisian Press Ltd. v. ITAT and Anr. (1958) 33 ITR 670 (Mad) wherein it has been held that “to initiate” means “to originate” or “to take the first step”. Likewise, the Hon’ble Calcutta High Court while dealing with similar situation in the case of Nilesh Hemani v. CIT and Ors. gave a finding that “search proceedings was initiated when the search warrant was signed”. In yet another case, the Hon’ble Kerala High Court observed, in the cases of T.O. Abraham & Co. and Anr. v. Asstt. Director of IT (Inv.) , that the “execution” means the completion, conclusion or implementation of the authorization and not the date of issue of authorization.
8. All the above decisions cumulatively support the view canvassed by the learned Counsel Shri U.C. Jain that “initiation” commences with the issue of authorization by the Director of Investigation. The learned Departmental Representative could not bring to our notice, any contradictory decision to support the contention of the Department. Resultantly, we come to the conclusion that “initiation of search” commences with the issue of authorization by the authorities. Having come to the above conclusion, now it is for certain that the search in this case was initiated on 30th Dec., 1996. Further, it is a well-recognized fact that the penal provision 158BFA(2) came into operation only on 1st Jan., 1997, meaning thereby that on the day when the search was initiated in the given case, the above said penal provision was not in vogue. Now, let us examine as to what is the position of law with regard to penal provisions of an enactment. The trite position of law in this regard is that the provision dealing with penalty must be strictly construed. These provisions have to be interpreted in its natural meaning and in case of doubt the view favourable to the taxpayer has to be adopted.
9. In view of the above, the very assumption of jurisdiction under Section 158BFA(2) is void ab initio. Hence, in the given facts and the circumstances of this case no penalty can be levied in this case under Section 158BFA(2). Since, we have decided the legal issue in favour of the assessee, there is no need to decide other grounds of appeal.
10. In the result, the impugned penalty is hereby cancelled and the appeal of the assessee is allowed.