ORDER
B.L. Chhibber, A.M.
1. A search under s. 132 of the IT Act, 1961 was conducted at the residential premises of the assessee ‘Thirtharupa’, Aquem, Margao, Goa from 16th October, 1996, onwards. During the search certain valuables were found which belonged to the assessee and his family members. In response to notice 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 December, 1997. Aggrieved by the order of the AO the assessee is in appeal before us.
2. As many as 32 grounds have been raised by the assessee. But the main issues agitated are as follows :
(1) That the assessing and authorised officers were biased and hostile to the appellant.
(2) That all rules of natural justice were flouted by the AO in the course of proceedings.
(3) That provisions of s. 132(9) were not complied with.
(4) That the approving authority reduced the function of approval to less than a formality.
(5) That the assessment extends to income disclosed in regular proceedings before AO.
(6) That the assessment is barred by limitation, the last date of completion being 31st October, 1997.
First we take up the last issue i.e. the impugned assessment order is barred by limitation because if the assessee succeeds on this vital issue the other issues will become only academic in nature.
3. As per the assessee, the search started on 16th October, 1996 and the same concluded on 20th October, 1996. The assessment ought to have been completed within one year i.e., on or before 31st October, 1997, but the same was completed on 31st December, 1997, and as such, the assessment is barred by limitation.
4. Shri D. E. Robinson, the learned counsel for the assessee submitted that by the terms of s. 158BE the block assessment is required to be completed within one year from the date of execution of last of the authorisation of search. By an amendment made by the Finance Act, 1998, it has been clarified that the last day of execution of the search would be reckoned from the date of the last of the Panchnama drawn up in execution of such search. There was only one search warrant issued which was executed between 16th October, 1996, and 20th October, 1996. On 20th October, 1996, after completion of the search an order was passed under s. 132(3) covering one cupboard in which all the silver articles found were placed and sealed (p. 300 of the paper book). On 26th October, 1996 6 kgs. of silver vessels from this cupboard were released and a further order passed under s. 132(3) of the Act, and the cupboard sealed again (p. 301 of the paper book). On the same day, a Panchnama was also drawn concluding the search and indicating in the Panchnama the fact that the cupboard containing silver articles had been sealed and an order under s. 132(3) passed in relation thereto (pp. 302 and 303 of the paper book). On 13th December, 1997, the Asstt. CIT, Circle-I, Margaon, Shri 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) releasing the said silver vessels and articles. According to the learned counsel, a copy of this order was not made available to the assessee despite many requests. According to the learned counsel, it is clear that a restraint order under s. 132(3) does not amount to seizure. By terms of r. 112(7) of the IT Rules, a Panchnama is required to be drawn only in case of seizure. The learned counsel submitted that under these circumstances, the order under s. 132(3) is not a Panchnama as referred to in s. 158BE. The last of the Panchnama, therefore, in execution of the search warrant was made on 26th October, 1996, and the assessment barred by limitation on 31st October, 1997. He drew our attention to the Panchnama made on 26th October, 1996, and the order passed under s. 132(3) on 26th October, 1996, which are annexed at pp. 301 and 302 of the paper book. The assessment was admittedly completed by the AO on 31st December, 1997, and as such the impugned assessment is barred by limitation. In support of his contentions, he relied upon the following decisions of the Bangalore Bench of the Tribunal.
(a) Microland Ltd. vs. Asstt. CIT (1999) 63 TTJ (Bang) 701 : (1998) 67 ITD 446 (Bang);
(b) Kirloskar Investments & Finance Ltd. vs. Asstt. CIT (1998) 67 ITD 504 (Bang);
(c) Jayalakshmi Leasing Co. [IT(SS)A No. 60/Bang/1997, dt. 26th November, 1998]; and
(d) Esanda Finanz & Leasing Ltd. [IT(SS)A No. 136/Bang/1997, dt. 17th March, 1999].
5. Shri Hari Krishan, the learned Departmental Representative submitted that the assessment was completed within one year of the execution of search warrant and as such the assessment framed was within the statutory time. He submitted that the search commenced on 16th October, 1996, and concluded on 13th December, 1996, when the last Panchnama was drawn. According to the learned Departmental Representative in between there was lull because 26th and 27th October, 1996, were holidays on account of Saturday and Sunday and then on 10th November it was Diwali and the Department did not want to disturb the peace of the assessee during the days of festivity near and around Diwali day. He referred to second proviso to s. 132(1) and submitted that on 20th/21st October, 1996, (at 2.30 a.m.) it was not possible to remove from the residence of the assessee 45 kgs of silverwares. All the silverwares were put in an almirah and a prohibitory order was placed as per the proviso 2 to s. 132(1) i.e. the assessee was directed not to remove, part with the contents of the almirah. Later on, in deference to the representation/wish of the assessee that some of the items placed under prohibitory order were of religious nature to be used in pooja, etc. 6 kgs. of silver articles were released to the assessee on 26th October, 1996, by Shri M. L. Karmarkar, the Asstt. Director of Income-tax, Investigation Circle, Belgaum. The original order under s. 132(3) imposed on 20th October, 1996, was lifted and fresh one was imposed by Shri Karmarkar on 26th October, 1996, in respect of balance of the silver articles. Then on 13th December, 1996, Shri Ashish Abrol who was the then Asstt. CIT, Circle I, Margaon on the directions of Dy. Director of Income-tax (Inv), Belgaum, visited the residence of the assessee and put a fresh prohibitory order on which date, a fresh Panchnama was drawn in continuation of the proceedings on 26th October, 1996. This Panchnama was signed by Mr. Ashish Abroal and Shri Pandurang Ananta Naik the son of the assessee. The seizure was as per Annexure ‘N’ to the Panchnama. He produced the Panchnama and the Annexure ‘N’ in original and a photo copy of the same has been placed on record. He submitted that there was a deemed seizure on 13th December, 1996, as per proviso (2) to s. 132(1). He admitted that there are many defects in the Panchnama – like it was got not signed from the assessee, no witnesses were called and the Panchnama does not bear the signatures of the witnesses. Annexure ‘N’ was not signed by the assessee or his son Pandurang Anant Naik and that it was drawn at Belgaum and not at Margaon. But according to him, such ‘insignificant’ defects in the Panchnama will not vitiate the search proceedings. He relied upon the judgment of the Allahabad High Court in the case of ITO ‘A’ Ward, Agra & Ors. vs. Firm Madan Mohan Damma Mal & Anr. (1968) 70 ITR 293 (All) and submitted that as held by the Allahabad High Court, the issue of search warrant by the CIT is not a judicial or quasi-judicial act and the fact that the witnesses who had signed the list of documents taken away at the time of search were not present and their signatures were obtained later on, would not invalidate the search. He submitted that the prohibitory order in respect of silver articles in the almirah on 13th December, 1996, is part of the Panchnama. He further relied upon the judgment of the Hon’ble Supreme Court in the case of ITO vs. Seth Bros. & Ors. (1969) 74 ITR 837 (SC), according to which :
“Any irregularity in the course of entry, search and seizure committed by an officer acting in pursuance of the authorisation, will not be sufficient to vitiate the action taken provided the officer has in executing the authorisation, acted bona fide.”
Further, relying upon the judgment of the Hon’ble Madhya Pradesh High Court in the case of Naraindas vs. CIT & Ors. (1998) 148 ITR 567 (MP), the learned Departmental Representative submitted that irregularities in the course of search and seizure do not vitiate the action. The learned Departmental Representative further submitted that drawing of a Panchnama is not necessary and even if no Panchnama is drawn, it will not vitiate the search. In support of this, he drew our attention to sub-s. (13) of s. 132 which states that the provisions of the Cr.PC 1973 relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-s. (1) or sub-s. (1A). In this connection, he relied upon the following observations of B. B. Mitra’s Code of Criminal Procedure Vol. 1 (15th Edn.) :
“12. Irregular search. – A search is irregular if it is conducted in violation of the police rules relating thereto, such as the omission to make at the time a note of the articles found and where found, the permitting of unauthorised persons to go in and out of the place searched, the omission to send up the articles found as soon as possible to the Magistrate, or the exclusion of the occupant of the place during the search. But the effect of such irregularities is only to necessitate a careful scrutiny of the evidence of search and if in spite of such irregularities it is found that no advantage was taken of them by the police, they have no further effect (i.e. the search does not become illegal). A search is not illegal when there is a failure to call respectable inhabitants of the locality of to witness the search. (Satgopalcharlu, 13 Cr. LJ 763, Raman 21 Mad 83, Abdullah, 27 Cr. LJ 73). A search made without the presence of any witness is irregular, but since irregularity does not entitle the occupants of the place to exercise their right of private defence by assaulting the police officer, when it was not shown that the officer was acting maliciously and otherwise than in good faith. (Pukot Kotu 19 Mad 349). Where the police officer made a search without a warrant and in the presence of only one witness, and a constable entered the house to be searched by scaling a wall, held that the search was grossly irregular, but the occupants had no right of private defence, and any assault committed by them on the police was punishable under s. 323 (though not under s. 332) IPC (Mukhtor Ahmed, 37 All 353). In a later Allahabad case, however, it has been held that a search without witness is absolutely illegal, and the occupant of the house is entitled to exercise his right of private defence by assaulting the police officer, so as to prevent him from entering the house. (Nirmal Singh, 42 All 67). The occupant is also not guilty under s. 332, IPC., when the attempts to enter into his house to be present during search and causes hurt to a police officer when the later officers physical resistance to him. (Bhikugur, 34 Cr. LJ 439).
If for any reason the officer making the search is unable to get two or more respectable inhabitants of the locality, and a search is effected in the presence of one or more men available at the time, leading to the discovery of an excisable article, the accused who is found in possession of that article can all the same be convicted under the Excise Act if the Court is satisfied from the evidence that an offence has been committed. The irregularity in the search would not mitigate the offence or operate as a bar to the conviction of the accused. [Abdul Hafiz, AIR 1926 All 188, Bachcha, 36 Cr. LJ 362. See also Bana Mali (1939) Cal 210].
What would otherwise be relevant does not become irrelevant because it was discovered in the course of a search in which provisions of the Code were disregarded. [Barindra, 37 Cal 467 (500)].
The presence of witnesses at a search is always desirable and their absence will weaken and may sometimes destroy the acceptance of the evidence as to the finding of the articles, but the attendance at the search is not always essential in order to enable evidence as to the search to be given [Malak Khan, AIR 1946 PC 16 (19)].”
6. Replying to the contention of the learned counsel, the learned Departmental Representative submitted it was not practicable for the authorised officers to have affected the seizure earlier than 13th December, 1996, when the seizure had been actually made. The learned Departmental Representative relying on the Madras High Court’s judgment in the case of Punamchand R. Shah vs. ITO (1975) 101 ITR 373 (Mad) argued that it is the authorised officer who has to take a decision at the material time taking various things into consideration, whether or not it was practicable to make seizure and that in such matters, the Court should not substitute its judgment for the judgment of the authorised officers. He made a particular reference to the following observations of the Hon’ble Madras High Court judgment from p. No. 382 of 101 ITR.
“Sec. 132(3) contemplates an order being made thereunder only where it is not practicable to seize any books of accounts, documents, money, bullion, jewellery or other valuable articles. It is for the concerned authority to determine whether it is practicable to seize the books of account, jewellery, valuable articles, etc. It is not possible for this Court to go into the practicability of the seizure of the relevant items and substitute its own judgment for that of the authorised officer. In other words, the discretion of the authorised officer would have to be allowed full play in determining a question of this nature.”
Coming to the four judgment of the Bangalore Bench of the Tribunal (supra), relied upon by the learned counsel for the assessee, the learned Departmental Representative submitted that all these judgments are from Bangalore Bench and that these do not lay the correct position of law as the conclusions drawn up are not correct. The learned Departmental Representative therefore, concluded that the assessment framed was not barred by limitation.
7. In rejoinder, Shri D. E. Robinson, the learned counsel for the assessee submitted that on 20th October, 1996, on conclusion of the search as indicated by the authorised officer at the time of leaving the premises searched, the silver vessels of 45.67 kgs found in the premises were placed in an empty almirah after ensuring that nothing else was in the said almirah and sealed. The restraint order dt. 19th October, 1996, clearly confirms this position (p. 5 of the compilation of the Departmental Representative). The restraint order under s. 132(3) addressed to Mr. Anant N. Naik dt. 19th October, 1996, was made over to the assessee’s son Mr. Pandurang A. Naik on 20th October, 1996. On 26th October, 1996, one authorised officer Mr. Karmarkar arrived at the premises which was searched, released 6 kgs of utensils from the said almirah made a restraint order addressed to Mr. Ananta N. Naik and left. The authorised officers were fully aware that there was nothing in the said almirah except the silver vessels placed by them in the almirah both on 20th October, 1996, and 26th October, 1996 (p. 5 of the compilation of the Departmental Representative). There was nothing that needed to be searched in the almirah. On 13th December, 1996, Mr. Ashish Abrol who was not an authorised officer arrived at the premises, did not show any warrant of search, and he (Mr. Ashish Abrol) did not state that he had come for a search or seizure and that he had come to the premises to release the silver vessels from the almirah. On 12th December, 1996, the authorised officer Mr. Karmarkar in the presence of Mr. Pandurang A. Naik had handed over the key of the said almirah to Mr. Ashish Abrol at Belgaum and had asked him to release the silver vessels from the said almirah on this day, sworn statement of said Mr. Pandurang A. Naik was also recorded at Belgaum by Mr. Karmarkar (p. 103 of Vol. II of the paper book). The learned counsel further submitted that said Mr. Pandurang A. Naik, one of the assessees in the appeals (22 to 28 before the Tribunal) was present at the residence of the assessee on 13th December, 1996. Mr. Ashish Abrol had arrived in the premises searched as stated earlier, only to release the silver vessels. Mr. Abrol required two witnesses one of whom Mrs. Karangate was a neighbour and other a female employee of the assessee Miss Bhimi Naik who was an illetrate. The release order was made which was witnessed by both the aforesaid witnesses, said Miss Bhimi Naik having affixed her thumb impression on the said order. After the vessels were released the key was made over to Mr. Pandurang A. Naik and he was told that the residents are free to deal with the articles, though repeated requests were made, the copy of this order has not been given to the assessee. Mr. Abrol had not stated anything concerning seizure of the silver articles at any time even when repeated requests were being made for a copy of the order. According to the learned counsel, xerox copies of Panchnama and order allegedly made under s. 132(1) (pp. 8 and 9 of the compilation filed by the Departmental Representative) were not given to the assessee at any time. There is no evidence on record of this having been given to the assessee or Mr. Pandurang A. Naik at any time. On the other hand, there is evidence to show that the assessee made repeated requests for the copy of the release order and that there was no response from Mr. Abrol. The learned counsel further submitted that the restraint order under s. 132(3) made on 20th October, 1996, or on 26th October, 1996, could not extend the execution of search beyond 20th October, 1996, and in no case beyond 26th October, 1996. The authorised officers knew that the silver vessels found in the residence were placed by the authorised officer after ensuring that the almirah was empty and therefore, there was nothing to search after 20th October, 1996. According to the learned counsel, it is clearly evidenced by contents of restraint order dt. 19th October, 1996 (p. 5 of the compilation of the Departmental Representative). A mere recording of Panchnama that search is not finally concluded on the face of facts clearly indicating the conclusion cannot keep the search in operation. According to the learned counsel, the justification for a restraint order on 20th October, 1996 and 21st October, 1996, was totally absent. It is clear that the authorised officer seized and removed on the same day at the same time when leaving the premises 5,729 gms. of gold ornaments, Rs. 1,61,000 of cash and seized books of accounts. This was at 2.30 a.m. on 20th October, 1996. The reason given by the learned Departmental Representative that silver was not seized and taken because of the odd hours of conclusion of search is not sustainable. If there was any intention to seize the silver an appropriate order could have been made on 20th October, 1996, or even on 26th October, 1996, which was not done and no sustainable reasons given for not doing so. According to the learned counsel, it is therefore, abundantly clear from the facts on record that the restraint order was made without any grounds whatsoever. Since there was no other order in force after 26th October, 1996, it is also clear that the search was concluded latest by 26th October, 1996.
8. Coming to the cases relied upon by the learned Departmental Representative, the learned counsel for the assessee submitted that in these cases involve crime committed under the Penal Code, Customs Act, Opium Act and Conservation of Forest Acts and reliance on all these cases was primarily placed on decisions involving interpretation of Cr. PC. These cases would not be regular for the case before the Tribunal for the reason that the IT Act and Rules clearly prescribe the procedure for the search and seizure.
9. As regards reliance placed by the learned Departmental Representative on the decision of the Supreme Court in the case of Seth Bros. (supra), the learned counsel submitted that whatever is seriously being questioned by the assessee are facts of what happened on 13th December, 1996, and that, in relation to time-limit imposed by the Act. The provisions of limitation are liable to be interpreted strictly. It is not merely a case of irregular Panchnama, and accordingly the reliance placed by the learned Departmental Representative on the decision of the Supreme Court in the aforesaid case does not apply to the facts of the case before us.
10. On 4th February, 1999, when both sides had concluded their arguments, the learned Departmental Representative. Shri Hari Krishan wanted that he should be allowed to file an affidavit of the authorised officer explaining the circumstances in which the search was postponed from 26th October, 1996, to 13th December, 1996, and he also submitted that if given time, he will produce the authorisation warrant in favour of Mr. Ashish Abrol. We granted this request of the learned Departmental Representative. Consequently, the affidavit of Mr. M. L. Karmarkar, the authorised officer was filed on 23rd March, 1999. The affidavit reads as under :
“Affidavit of Shri M. L. Karmarkar, then Asstt. Director of Income-tax (Inv), Belgaum :
I Shri M. L. Karmarkar, aged 38, Indian resident of Pune, do hereby solemnly affirm and state as under :
(1) I was the Asstt. Director of Income-tax (Inv), Belgaum from 6th June, 1996, to 4th July, 1997.
(2) In pursuant of warrant of authorisation issued by the Director of Income-tax (Inv), Bangalore under s. 132 of the IT Act, a search of the residential and business premises of A. N. Naik group, Margao was conducted by me along with certain other authorised officers.
(3) The search began on 16th October, 1996, and was finally concluded on 14th December, 1996, by preparing final Panchnama and placing silver articles under deemed seizure under the 2nd proviso to s. 132(1).
(4) In between the search was concluded – temporarily on various dates.
(5) On 20th October, 1996, certain jewellery items, FDRs, and other valuable were seized, while about 45 kgs of silver articles were placed in a steel almirah and a prohibitory order under s. 132(3) of the IT Act was issued to the assessee requiring him not to part or dispose of the said assets.
(6) Subsequently on various dates, the assessee represented before me in Belgaum that some of the silver articles placed in the almirah were pooja items and were required by him for the purpose of Diwali Pooja. He therefore, pressed for release of the same.
(7) The deference of the fact that the reasons cited were religious in nature, 6 kgs of the silver articles were released to him on 26th October, 1996, by me. The original order under s. 132(3) imposed on 20th October, 1996, was lifted and a fresh one imposed by me on 26th October, 1996, in respect of the balance of the silver articles.
(8) Subsequently on 13th December, 1996, the said silver articles were placed under deemed seizure under the second proviso to s. 132(1). This was done after conducting due inquiries with the assessee. Statements were recorded on various dates after 26th October, 1996, and only after the assessee could not explain the source of these assets (during the statement on 12th December, 1996) were the silver articles seized. Sec. 132(8A) gives the Addl. Director of Income-tax (Inv), 60 days within which to lift a particular order under s. 132(3). In the present case, this has been done within the 60 days time-limit.
(9) I say that what is stated in the foregoing paras 1 to 8 are true to my knowledge.
Solemnly affirmed at Pune on 8th day of March, 1999.
Sd/-
(M. L. KARMAKAR)
Jt. Commr. of IT, Audit-II, Pune”
On 5th April, 1999 Shri M. L. Karmakar appeared before us. He confirmed the contents of his affidavit and also produced before us the original Panchnama drawn on 13th December, 1996. He also filed two photocopies of the same for our record. On 5th May, 1999, a sworn affidavit of Shri Ashish Abrol was filed, the contents of which are as follows :
“I, the undersigned solemnly affirm and declare as under :
(1) When I was Asstt. CIT, Cir. I, Margaon, I was instructed by the then Dy. Director of Income-tax (Inv) Belgaum, Shri K. Ramesh on the 12th December, 1996, that I was authorised as a consequential action to enter on the residential premises of Shri Anant N. Naik to lift prohibitory order on a cupboard and place certain silver articles therein under deemed seizure. Cupboard key and papers were sent to me through special messenger. I carried out the instructions as directed in the presence of Shri Pandurang son of Shri Anant N. Naik and Smt. Yashodhara Kharangate. I did the needful and sent the documents to Shri M. L. Karmakar the then Asstt. Director of Income-tax (Inv) Belgaum, concluding my duty as authorised officer. After this there was no communication from either the assessee or the investigation unit regarding the action which I have carried out. Therefore, my role as authorised officer in this matter ended. The assertion of Shri D. E. Robinson, Advocate authorised representative for Anant N. Naik group before the Hon’ble Tribunal Bench, Pune, states that copy of Panchnama was not given to Anant N. Naik group and that the assessee repeatedly requested for the same, orally. The assertion of Shri D. E. Robinson is incorrect as the Panchnama is duly signed by Shri Pandurang A. Naik, no communication has been made with the undersigned in this matter in almost two years.
(2) I have been maintaining a visitor’s book from 26th July, 1995, and representatives or assessees appearing or seeking to appeal before me have to enter certain details in this visitor’s book. No entry in the visitor’s book to suggest that either Shri D. E. Robinson or anybody from Shri A. N. Naik group appeared or sought to appear before me.
(3) The letter which the assessee claimed to have written was written almost two years after the search proceedings and since I had no locus standi in the matter there is no way I could reply to the same as no records were available with me either. Thus, I have to state that A. N. Naik group has made no submissions after the proceedings on 13th December, 1996, or during the course of assessment proceedings or even during the writ petition before the Hon’ble High Court regarding the alleged irregularity during the proceedings carried out by me on 13th December, 1996.
What is stated above is true and correct to the best of my knowledge and belief, so I have signed hereunder :
Place : Pune in person.
Date : 4th May, 1999.
Sd/-
Affiant Shri Ashish Abrol,
Dy. CIT Cir. I"
On the same day, Shri Ashish Abrol appeared before us and confirmed the contents of his affidavit. He submitted that on 13th December, 1996, he was the only officer available in Goa (other officers were on leave) and he was directed to go to the assessee’s house and lift the prohibitory order and then put deemed seizure. This was a limited role and he did the same. Thereafter, he had no role to play. We may state that both Shri M. L. Karmarkar and Shri Ashish Abrol were examined by us in the presence of the learned counsel for the assessee and the learned Departmental Representative.
11. Commencing upon para 8 of the affidavit filed by the authorised officer Mr. Karmarkar, the learned counsel for the assessee submitted that it is averred that it was only from the enquiry conducted after 20th October, 1996, that it was noted that the assessee could not explain the source of the assets (silver articles) and therefore, the silver articles were seized on 13th December, 1996. The learned counsel submitted that it would be seen from the inventory of the seized articles that the FDRs and the gold ornaments which were disclosed in the WT returns had been seized after recording the statement concerning the same between 16th October, 1996, and 20th October, 1996. On 18th October, 1996, after verification of the wealth-tax records of the assessee, the authorised officer had specifically questioned about jewellery disclosed and not disclosed in the said returns (p. 68 of the Vol. II of the compilation containing sworn statements recorded). Obviously the authorised officers were fully aware that the silver articles were not disclosed in the WT returns even as far as back as 18th October, 1996. Whatever circumstances governed and motivated seizure of the jewellery equally hold good for seizure of the silver articles. In the circumstances, the averment that the authorised officer became aware of non-disclosure and absence of explanation of sources for the silver articles only on 12th December, 1996, cannot be correct.
12. We have considered the rival submissions and perused the facts on record. The vital issue before us is whether the execution of the warrant in search was concluded on 26th October, 1996, or on 13th December, 1996. By terms of s. 158BE the block assessment is required to be completed within one year from the date of execution of last of the authorisations of search. By an amendment made by the Finance Act, 1998, it has been clarified that the last day of execution of the search would be reckoned from the date of the last of the Panchnama drawn up in execution of such search. It is noted that there was only one search warrant in the case of the assessee which was issued on 7th October, 1996, by the Director of Income-tax (Inv.). From the perusal of the authorisation search warrant in original (photo copy placed on record) it is noted that the following officers were authorised to conduct the search :
(1) Shri K. Ramesh, Dy. Director of Income-tax (Inv), Belgaum;
(2) Shri M. L. Karmarkar, Asstt. Director of Income-tax (Inv), Belgaum;
(3) Shri Amol S. Kamat, Asstt. CIT, Panaji; and
(4) Shri J. B. Chavan, ITO W-2, Belgaum.
The search warrant was executed between 16th October, 1996, and 20th October, 1996. From the perusal of search warrant in original (photo copy placed on record), it is further noted that Mr. Amol S. Kamat, Asstt. CIT, Panaji who was one of the authorised officers put the words “executed” and below it put the signature and date as 16th October, 1996. It is further noted that on 20th October, 1996, at about 2.30 a.m. the authorised officer seized and removed while leaving the premises 5,729 gms. of gold ornaments, cash of Rs. 1,69,000 and books of accounts weighing nearly 500 kgs. Further, on the same day i.e., 20th October, 1996, after completion of search, an order was passed under s. 132(3) covering one cupboard in which all the silver articles found (45.67 kgs) were placed and sealed. On 26th October, 1996, 6 kgs of silver vessels from this cupboard were released and a further order passed under s. 132(3) of the Act, in respect of remaining silver articles and the cupboard sealed again. On the same day, the Panchnama was also drawn indicating in the Panchnama the fact that the cupboard containing silver articles had been sealed and an order under s. 132(3) passed in relation thereto (pp. 302 and 303 of the paper book). On 13th December, 1997, the Asstt. CIT Mr. Ashish Abrol whose name does not appear in the search warrant removed the seal and made a further order under s. 132(3) releasing all the said silver vessels and articles.
13. A warrant of authorisation for search can only be issued where the authority empowered to issue such warrant believes that the person in respect of whom such warrant is issued would fail to produce material relevant and useful for purpose of this Act or that the person is in possession of valuables which represents income not disclosed to the Department. A warrant so issued has to be executed with the purpose for which it is issued namely to locate and seize material or valuables useful for the purpose of assessment under the IT Act. As stated above, in the case of the assessee, the warrant was issued on 7th October, 1996, and the search was conducted continuously between 16th October, 1996, and 20th October, 1996. In between the search was suspended only during late hours of night. On 20th October, 1996, having seized all the relevant materials and valuables the search party obviously had come to a conclusion that there was no further material to be seized and no further search to be conducted and the search had ended on that day.
The search comes to an end when search party leaves premises after carrying with them seized material and thus authorisation for search is fully implemented upon and execution is complete. For this proposition, we are supported by the decision of the Bangalore Bench in the case of Kirloskar Investments & Finance Ltd. vs. Asstt. CIT (supra). The cupboard in which 45 kgs of silver articles were kept was sealed by making an order under s. 132(3) of the Act. It is obvious that the authorised officer was very much aware of the contents of the cupboard and the nature of the articles in view of the inventory made of such silver as in p. 308 of the compilation (Vol. I). He had also come to the conclusion that the said 45 kgs of silver articles need not be seized. There was also no practical impediment to seizure of the said 45 kgs of silver if it was considered by the authorised officer as necessary. The contention of the learned Departmental Representative that it was not practical/wise to seize huge quantity of silver at odd hours (2.30 a.m.) is untenable, because on the same odd hours the search party seized and removed from the premises of the assessee 5,729 gms. of gold ornaments, cash of Rs. 1,69,000 and books of accounts weighing nearly 500 kgs. On 26th October, 1996, 6 kgs of silver articles in the said cupboard were released, a Panchnama made and a further order under s. 132(3) passed with respect to the said sealed cupboard and the seal was placed again. The proceedings on 26th October, 1996, cannot be considered as part of execution of the search proceedings which concluded on 20th October, 1996. By stating in the Panchnama that the search is temporarily suspended, the authorised officer cannot keep the search proceedings in operation continuously by passing restraint orders under s. 132(3). After 20th October, 1996, the authorised officer had nothing to search or seize and could not have lawfully conducted any search. Even a fresh warrant under s. 132(1) could not have been issued thereafter, since the basic requirements for issue of such a warrant ceased to exist after 20th October, 1996. Without such a warrant, any ingress into the search premises itself is unlawful. The life terms of the search warrant issued on 7th October, 1996, executed between 16th October, 1996, and 20th October, 1996, expired on 20th October, 1996. The final revocation of the order under s. 132(3) on 13th December, 1996, is wholly irrelevant for purposes of determining the limitation under s. 158BE. All that was done on this day was removal of the seal on the cupboard containing silver articles and revocation of 132(3) order, by Shri Ashish Abrol. The Asstt. CIT, Margaon, who was not one of the authorised officer to conduct any search. We have produced the affidavit of Mr. Ashish Abrol on p. 12 of the this order. As stated on p. 13 of our order above, on 5th May, 1999, Shri Ashish Abrol appeared before us and confirmed that he was directed to go to assessee’s house and lift the prohibitory order and then put deemed seizure, and that this was a limited role and he did the same. It is not understood how Mr. Ashish Abrol, who was not authorised officer was first directed to lift the prohibitory order and then put “deemed seizure”. In fact, neither any deemed seizure was called for as no new information came in possession of the authorised officer nor any deemed seizure was put. In fact, after verification of the contents, the key was handed over to the assessee. If there was a seizure, how could the key of the cupboard could be given to the assessee. In view of the affidavit of Shri Ashish Abrol and his statement recorded before us, the averment of Mr. M. L. Karmarkar in para (8) of his affidavit that “subsequently on 13th December, 1996, the said silver articles were placed under deemed seizure under the second proviso to s. 132(1)” is patently wrong and without any basis. We have seen the original of the so-called Panchnama drawn on 13th December, 1996, by Shri Ashish Abrol (photo copy of the same has been placed on record). A perusal of this Panchnama revealed that against column (vii) of cl. 5(a), it has been mentioned “other valuables or articles deemed to have been seized under second proviso to s. 132(1) of the IT Act as per Annexure ‘N’ (1 sheet)”. On perusal of Annexure ‘N’ (one sheet), it is noted that under particulars of valuable articles or things, the following notings have been made :
1. “Silver articles valued on 18th October, 1996, weighing 45.578 kgs (gross weight), 38.740 gms. (net weight) 6 kgs of silver utensils, released on 26th October, 1996, i.e. 32.740 kgs (net weight) of value Rs. 2,29,183 approximately of value (Rs. two lakhs twenty-nine thousand one hundred eight-three only approximately).”
Though it has been stated that it is order under second proviso to s. 132(1) of the Act, for all practical purposes, it is only a prohibitory order under s. 132(3) of the Act. It is noted that this Panchnama is not signed by any witness. Secondly, it is signed not by the assessee but by the son of the assessee Mr. Pandurang A. Naik. Annexure ‘N’ which is from the point of view of the Department is vital document, has not been got signed by the assessee or any of his representative. Such a document cannot be called as a Panchnama purporting to be deemed seizure under second proviso to s. 132(1). At best, it can be called yet another restraint order under s. 132(3) of the Act and restraint order under s. 132(3) does not amount to seizure in view of Expln. (2) to s. 132(3) which was brought on the statute book w.e.f. 1st July, 1995, and which is reproduced as under :
“Explanation : For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under cl. (iii) of sub-s. (1).”
By terms of r. 112(7) of the IT Rules, a Panchnama is required to be drawn only in case of seizure of any material and that by the authorised officer only. In the circumstances, the order under s. 132(3) is not a Panchnama as referred to in s. 158BE. The last of the valid Panchnama therefore, in execution of the search warrant was made on 20th October, 1996, and the assessment barred by limitation on 31st October, 1997.
14. In the background of such provisions of the statute, we may now proceed to quote few judgments which further clarify the position on the issue before us.
(i) K. Choyi, ITO vs. Syed Abdulla Bafakkii Tangal (1973) 91 ITR 144 (Ker) :
The Kerala High Court held that the power conferred under sub-s. (3) of s. 132 can be exercised only when there is a practical difficulty experienced in the seizure of documents, etc. which have been found as the result of the search conducted by the authorised officer of the building or place where the documents, etc. were lying.
(This particular judgment of the Kerala High Court was affirmed, by the Supreme Court, however, on a different ground reported at as K. Choyi vs. Syed Abdulla Bafakky Thangal & Ors. (1980) 123 ITR 435 (SC).
(ii) I. Devarajan vs. Tamil Nadu Farmers Service Co-operative Federation (1981) 131 ITR 506 (Mad)
In the case of seized assets, there is a specific provision made for seeing that the assets are not retained beyond the period of 90 days after seizure. However, in case of sub-s. (3) there is no such time-limit. But the non-specification of time-limit cannot be construed as showing that the authorised officer can subject the assets to attachment for an indefinite period of time. It is not possible to read the time-limit in sub-s. (5) into sub-s. (3) as Parliament has not imposed any such time-limit with respect to sub-s. (3) for good and valid reasons. But the provisions of sub-s. (3) cannot be utilised so as to continue the attachment indefinitely.
(iii) B. K. Nowlakha vs. Union of India (1991) 192 ITR 436 (Del)
The Delhi High Court held that s. 132(3) could be resorted to only if there was any practical difficulty in seizing the item which was liable to be seized. The Delhi High Court furthermore stated in that connection that if there were no practical difficulties then the authorised officer has the jurisdiction and duty to seize the books of account, other documents. money, bullion, valuable articles, etc. found as a result of the search if no explanation was coming forward in respect thereof. The Delhi High Court furthermore commended in that case that the power under s. 132(3) cannot be so exercised as to circumvent the provision of s. 132(1) r/w s. 132(5).
(iv) Omprakash Jindal vs. Union of India (1976) 104 ITR 389 (P&H)
Though the word ‘practicable’ has a number of significances, yet its meaning depends largely on the context. Ordinarily, it means that which may be practised or performed, capable of being put into practice, done or accomplished. The word ‘practicable’ when read in that context, would relate to those ornaments, etc. found on a search, which can be reasonably believed to be undisclosed property. So, it is only when the nature or the location of the particular ornaments, etc. found on a search, which are reasonably believed to be undisclosed property, does not allow, or the circumstances of a given case do not permit the immediate seizure of the same, that the provisions of sub-s. (3) may be resorted to. But when the authorised officer is not satisfied or he has doubts as to whether the particular ornaments found on search are undisclosed property, he cannot have recourse to provisions of s. 132(3).”
The Hon’ble Allahabad High Court in the case of Sriram Jaiswal vs. Union of India (1989) 176 ITR 261 (All) : 42 Taxman 83, had considered the provisions of s. 132(3) and 132(5) of the Act. In this case consequent to the search, the officer concerned passed a restraint order on stocks of articles available in the premises. After about 2 months, the concerned officer lifted the restraint order by visiting the premises and passed a fresh restraint order on the same day. The said lifting of restrain order and imposing the same was repeated once again in the months of April and June, 1991, when the officer visited the premises. Towards the end of June, 1991, the CIT passed an order granting extension of the restrain order till 30th September, 1991. The said order of the CIT was challenged along with the very search that was conducted. The plea raised by the petitioners was that the search was not justified because the stocks were found at the premises along with the explanation of the source and the value. The High Court held that passing of the restraint order was invalid because it could not be said to practicable to effect the seizure of the stocks. They further held that restraint order could not be cancelled and renewed from time to time as was done in this case beyond 60 days. They further held that for the extension of restraint order beyond 60 days, the approval of the CIT should have been obtained. They further held that considering that they were large items which the petitioner could not identify or correlate with the purchase vouchers may be a good reason for seizure but not a valid ground for exercising jurisdiction under s. 132(3) of the Act. They concluded that action under s. 132(3) of the Act could be resorted to only if there was any practical difficulty in seizing the item which was liable to be seized. Where there is no such practical difficulty, the officer is left with no other alternative but to seize the item if he was of the view that it represented undisclosed income. It was accordingly held that the officer who carried out the search at the first instance, finding that the assessee’s were not in a position to give a valid explanation should have exercised the power of seizure. They further held that the power under s. 132(3) of the Act could not be so exercised so as to circumvent the provisions of s. 132(3) r/w s. 132(5) of the Act.
15. The above orders of the Hon’ble High Courts lay down the proposition that the time-limit for framing of the order runs from the date of search done and the examination made by the officials with reference to the materials covered by the restraint order does not in anyway lead to the conclusion that the search continued. It is also clear from these decisions that the restraint order is passed when there is some practical difficulty to seize the items and not on items that are capable of being seized. Now the position has become crystal clear after the insertion of Explanation to s. 132(3) effective from 1st July, 1995, that restraint order does not amount to seizure and therefore, by passing a restraint order the time-limit available for framing of the order cannot be extended. Therefore, these decisions fortify our conclusion reached earlier that the search came to close on 20th October, 1996.
16. During the course of his arguments, the learned Departmental Representative Mr. Hari Krishan had argued that a defective Panchnama would not invalidate the search or seizure nor would a defective procedure render the search invalid. In support of this contention, several cases involving crime committed under the Penal Code, Customs Act, Opium Act and Conservation of Forests Act were cited as mentioned in para 5 supra. Reliance on all these cases was primarily placed on decisions involving interpretation of Cr.PC. In our opinion, these cases are not relevant for the case before us for the reasons that the IT Rules clearly prescribe the procedure for the search and seizure. Further, it has been accepted and held in the cases cited by us (supra) that search being an invasion of the privacy of an individual is a serious matter and a strict compliance with the provisions would be required.
17. In the light of above discussions, we hold that the search in this case had concluded on 20th October, 1996, when seizure of cash, jewellery and books of accounts was made and a valid Panchnama was drawn and the proceedings thereafter, were only with regard to the restraint order under s. 132(3) which do not amount to seizure in view of Explanation to said section. Accordingly, the assessment stood barred by limitation on 31st October, 1997. The impugned assessment order has been admittedly passed by the AO on 30th December, 1997. Accordingly we hold that the impugned assessment is barred by limitation and in that way also invalid. We accordingly annul the impugned assessment.
18. Since the assessee has succeeded on the preliminary ground that the assessment is barred by limitation, the other grounds become academic in nature and we feel no necessity to adjudicate upon the same in view of the judgment of the Special Bench of Nagpur Bench in the case of Rahulkumar Bajaj vs. ITO (1999) 64 TTJ (Nag) (SB) 200 : (1999) 69 ITD 1 (Nag)(SB) to which one of us (A. M.) was a party.
19. In the result, the appeal is allowed pro tanto.