Jitendra Jain, AR for the Petitioner. Rahul Raman & Kavita P. Kaushik, DRs for the Respondent.

This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-VIII, Mumbai, [in short CIT(A)], in ITA No. CIT(A)C-VIII/DCCC.36/IT-66/07-08 dated 24.03.2008. The assessment was framed by the Dy. Commissioner of Narang International Hotels Pvt. Ltd.; block period 01.0.90 to 07.11.00 Income Tax-36 (in short DCIT/ITO/ AO) for the block period from 01.04.90 to 07.11.2000 vide order dated 28.11.2003 under section 158C read with section 144 of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2. At the outset, learned Counsel of the assessee stated that this appeal is barred by limitation by 84 days. Learned Counsel stated the facts that the block assessment was framed by the AO, which was challenged before CIT(A), who passed appellate order dtd . 24.3.2008, which was served on assessee on 3.4.2008. He stated that assessee was advised to file an appeal against this order before Tribunal for which due date was 3.6.2008. It was stated that this appeal was drafted by M/s. D.M. Harish & Co. and draft was circulated to Directors of assessee on 8.5.2008 for their approval and filing but this appeal could not be filed due to the following circumstances (which are narrated in letter dtd 21.8.2008 of the assessee), which are as under:-

“In respect of the block assessment of the Company (period from 1.4.1990 to 7.11.2000) the CIT(A) has confirmed additions of Rs.4.97 crores. This has resulted into IT demand of Rs. 4 crores including interest levied u/s 220(2). The grounds of appeal as settled by M/s. D.M. Harish & Co., the Company’s tax advisors and Consultants since 40 years were forwarded to you by me on 8.5.2008 for your doing the needful.

Further in respect of Asstt. Year 2002-03 (Y.E. 31.3.2002), the CIT(A) has confirmed additions of Rs.40 crores. This has resulted into net IT demand of Rs.15 crores and further liability of recurring interest @ 12% p.a. The grounds of appeal as settled by M/s. D.M. Harish & Co., were forwarded to you by me on 10.7.2008 for your doing the needful.

You have not till this day given your consent and refused the filing of the appeals and have delayed the filing of appeals without any valid reasons. Delay in filing the appeals exposes the Company to huge claim of over 19 crores, as also penal action against the Company and the Directors. Therefore, if I do not receive within 24 hours your approval to the filing of the above appeals, under the present circumstances, I have no option and constrained to file the above appeals, under the provisions of the Income-tax Act before the ITAT on behalf of the Company as the Chairman and Mg. Director under the advice of M/s. D.M. Harish & Co., to save the Company from huge losses and the payment of I.T demand of Rs.19 crores and also save the Company and its Directors from penal and other proceedings of serious nature and consequences.”

3. From the above, learned Counsel for the assessee argued that as there was a litigation and dispute going on in the family members of the assessee group cases, one of the Directors refused to give permission despite acknowledging the above stated letter. When these facts were confronted to learned CIT-DR, he only objected for condonation of delay, but could not state much. In view of the reasons stated, we are of the view that the assessee has a good prima facie case and going by the fact of delay that the same has occurred due to dispute in the family, and that also for 84 days, hence we condone the delay and admit the appeal.

4. The first issue in this appeal of assessee is as regards the order of CIT(A) upholding the action of the AO treating the block assessment as valid and not barred by limitation. According to assessee, the block assessment framed by AO is barred by limitation. For this, assessee has raised the following ground No. 2: -

“2. Validity of the Block Assessment :

i) The ld. CIT(A) erred in holding that the impugned order dtd. 28.11.2003 was made within the time period as per the provisions of Sec. 158BE.

ii) The ld. CIT(A) erred in failing to appreciate that the first panchnama was made on 4.12.2000 when Prohibitory Order u/s 132(3) of the I.T. Act was served on the appellant in respect of antiques found at Pali Hill, and for the same art pieces and for no valid reasons a deemed seizure under proviso to sec. 132(1) was made on 8.11.2001.

iii) The ld. CIT(A) erred in holding that the action undertaken on 8.11.2001 was in continuation of the earlier proceedings, insofar the subsequent panchnama dtd. 8.11.2001 was made not bonafide, and made only to illegally extend the period of assessment.

iv) The appellant, therefore, submits that the assessment is barred by limitation and thus bad in law by applying the ratio of the decisions of the jurisdictional High Court in the case of CIT vs. Mrs. Sandhya P. Naik (2002) 178 CTR 448 and Kerla High Court in the case of Dr. C. Balkrishnan Nair vs. CIT (1999) 237 ITR 70.”

5. Brief facts are that a search and seizure action under section 132 of the Act was carried out on the residential and business premises of the Narang Group of cases. The assessee company was one of the group entities and consequently it was covered under the search action. The assessee before us narrated that a search was conducted on 07.11.2000 under section 132 of the Act vide authorization issued dated 04.11.2000. The assessee brought out the complete details of events in its written submission vide Para 1 to 5 as under: -

“1. An action u/s 132 of the Act was conducted against the Appellant on 7-11-2000 under an authorisation dated 4-11-2000. The search proceedings were closed on 8-11-2000 at 8:45a.m. The search continued again on 8-11- 2000 from 12:15p.m. and was concluded at 11:55 a.m. The investigation agency seized files, books and cash. In the 8-11-2000 panchnama it is specifically stated that the search is “finally concluded” by striking off “temporarily concluded”.

On 10-11-2000, i.e. after 2 days, the investigation agency revisited the premises of the Appellant for conducting search at 8:30 p.m. under a fresh authorisation dated 10-11-2000 and the search action continued upto 11:40 p.m.(pgs 2-3).A statement u/s132(4)was also recorded on that day (pgs 3-5)and prohibitory order was passed.

On 24-11-2000, i.e. after 14 days from above, the investigation team again visited the premises of the Appellant under the same authorisation dated 10-11-2000 and the search commenced from 1:30 p.m. and continued upto 6:15p.m. (pgs 6- 7).

On 4-12-2000, i.e. after 10 days from above, the investigation team again visited the premises for conducting search under the same old authorisation dated 10-11-2000 (pgs 8-9) and passed prohibitory order u/s132(3) and the items were inventorised as detailed from pgs 10-28. On 7-11-2001, i.e. almost after a period of close to one year, the investigation team visited the premises of the Appellant under the same old authorisation dated 10-11-2000 (pgs 29-30) and stated that the search is finally concluded. On this day the prohibitory order passed on 4-12-2000 was converted into deemed seizure u/s 132(1)(iii) (pgs 31-43). There was nothing searched on this day except the passing of conversion order from section 132(3) to 132(1)(iii) of the Act.”

6. The assessee also filed a chart of Panchnama issued by the Investigation Wing of the Department on various dates along with copies of Panchnama and the relevant chart read as under: -

Sr.No.

Panchnama Pg. Nos

1. Panchnama dated. 10.11.2000 also statement of 132(4) 1-5

2. Panchnama dated. 24.11.2000 6-7

3. Panchnama dated. 4.12.2000 8-28

4. Panchnama dated. 7.11.2001 29-43

In view of the above the learned Counsel stated that limitation period under section 158BE of the Act read with explanation 2 starts from 7.11.2000 , being the last date of drawing panchanama in respect of conclusion of the search in lieu of original authorization issued vide dated 4.11.2000. The learned Counsel further stated that in case the above date cannot be considered for limitation purpose, in any case, limitation expired for framing of block assessment from 04.12.2000 and since period of 2 years from the end of month will expire on 31.12.2002, whereas the bock assessment in this case was framed vide order dated 28.11.2003. The learned Counsel stated that the CIT(A) as well as now the Revenue before us relying on the fact that the limitation will start from 07.11.2001 by virtue of explanation 2 read with section 158BE of the Act and hence, the block assessment framed vide order dated 28.11.2003 is within the limitation period. The learned Counsel for the assessee stated that the commencement of limitation period, considered by Revenue, by stating that Panchanama dated 07.11.2001 is to be considered for starting point of limitation for the purpose of section 158BE of the Act cannot be accepted. According to the learned Counsel for the assessee, this objection was taken before Assessing Officer and the said objection is dealt with in the block assessment order by the AO and then by CIT(A) in the appellate order. The learned Counsel stated that last visit by the investigation team on the premises of the assessee for conducting search under the same old authorization dated 10.11.2000 was on 04.12.2000, when the investigation team passed prohibitory order under section 132(3) of the Act and the items were inventorized as detailed from page 8–28 of the charts submitted by the assessee, as the assessee referred the same chart before us. The learned Counsel stated that on 07.11.2001, almost after a period of close to a year, the investigation team visited the premises of the assessee under the same old authorization dated 10.11.2000 (which is enclosed at page 29-30 of the chart submitted before us), prohibitory order passed on 04.12.2000 was lifted and it was converted into deemed seizure under section 132(1)(iii) of the Act but on this date, there was nothing searched except the passing of the conversion order from section 132(3) to section 132(1)(iii) of the Act. The learned Counsel for the assessee stated that as per explanation to section 158BE of the Act, the provision of explanation 2 to section 158BE of the Act cannot be read in isolation to the main section 158BE of the Act but the same has to be read together with section 132 of the Act. He explained that the explanation cannot override the main section and explanation 2 refer to “authorization” and it further proves the point that “Panchnama” cannot be looked at in isolation but the same has to be read along with the “authorization” pursuant to which the panchnama is prepared.

7. He argued that the main provision for authorization is to be found in section 132(1) of the Act which provide for officers specified therein to obtain authorization from higher authorities to enter and search any premises etc. on a particular day and this is also fortified by Form No.45 which prescribes the form of authorization. He explained that therefore the authorization is executed the moment investigation agency enters the premises and searches the same for any undisclosed income. The said authorization can be used and panchnama is to be drawn before leaving the premises and the moment search party leaves, the search comes to an end unless it is temporary suspended to be continued immediately after a short break due to various reasons like search extending into the night, voluminous documents that cannot be examined within 24 hrs. etc. He explained the provision and argued that every fresh entry after a gap of many days would require a fresh authorization so as to enable the search party to enter the premises for conducting search. Therefore, it was argued that based on one authorization issued one year back, the Revenue cannot conduct search after one year and draw a panchnama concluding search and thereby contending that limitation under section 158BE of the Act read with explanation 2 thereto should begin from the date of last drawn panchnama. It was explained that this practice or such interpretation would be contrary to the scheme and object of provisions relating to search. Assessee mainly relied on the decision of Hon’ble Karnataka High Court in the case of C. Ramaiah Reddy vs. ACIT (2011) 339 ITR 210 (Karnataka).

8. On the other hand, the learned CIT Departmental Representative never disputed the fact but agreed to the above fact reproduced from the submission of the assessee in para 5 of this order. The learned CIT Departmental Representative, Shri Rahul Raman, argued that the assessee has misinterpreted the provision to sections 132(1), 132(1)(iii) and 158BE of the Act. He referred to the proviso to Section 132(1) of the Act, and argued that where it is not possible or applicable to take physical possession of any valuable or article/thing and remove it to a safe place due to its Volume, Weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner, or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under section 132(1) of the Act. This is the provision concerning deemed seizure during the course of a Search action. This is invoked when the thing proposed to be seized are of a typical nature due to their physical characteristics such as that they cannot be put inside any box, or, sealed and taken away by the Department to be kept in their strong room or the strong room of a Bank. In such a situation, the Department places them under deemed seizure in the sense that these articles or things cannot be removed by the persons who is in the immediate control of such article or thing and if he does so, appropriate action shall be taken against him as per law. LD CIT-DR explained that the prohibitory order u/s.132(3) of the Act also prohibits the concerned persons from removing, parting with or otherwise deal with the particular documents as available except with the previous permission of such Officer.

9. Ld CIT-DR explained the reason for placing prohibitory order, that it is not practicable to seize the documents/valuables immediately but not due to their physical characteristics. It is different from deemed seizure in the sense that due to typical physical characteristics of goods or things like the seizure of an aircraft, a land, a car, a ship etc. can be made only through the provisions of deemed seizure. But, one thing to remember is that the deemed seizure is finally a seizure. The prohibitory order is not a seizure at all. It is a temporary suspension of Search. It usually takes place when due to shortage of man-power or police force or witnesses because of it being a night or a secluded place or odd timing, holiday etc, the search cannot take place. Therefore, the said premises etc. is placed under prohibitory order for the time being till the search can be resumed at the earliest possible date. The important thing to note here is that in the case of prohibitory order, the search has not taken place at all and the issue of seizure of the goods is yet to be decided whereas in the case of deemed seizure, the search has concluded and the Department has now come to a conclusion that the impugned goods or documents deserve to be seized. So, a prohibitory order and a deemed seizure are two different things altogether and should not be confused with each other. In the present case, the earlier Panchnamas dated 10-11-2000 and 04-12-2000 are essentially prohibitory orders. He argued that the deemed seizure has been done only with the Panchnama dated 07-11- 2001 but the assessee has mistakenly got over-impressed with the inventory of prohibitory order and the inventory of deemed seizure being one and the same. Since it was a case of painting /artefacts etc., the inventory for both the prohibitory order and the deemed seizure are one and the same. However, if we have to understand the prohibitory order and deemed seizure properly, then, a more apt example shall be a bank locker which is placed under prohibitory order. When a bank locker is placed under prohibitory order, no inventory is available except that the copy of the prohibitory order is placed on a bank locker and a copy is given to assessee and the Bank Officer. On the day when this prohibitory order is actually operated and the bank locker is opened in the presence of two witnesses, the assessee and the bank official, the inventory is prepared and either the goods are released or seized or partially released/partly seized. Now, on this day of the operation of prohibitory order and after drawing of the seizure memo, it shall mean that the Search has concluded. A search cannot be said to have been completed, when the prohibitory order is still in operation.

10. Ld CIT-DR further argued that after having understood the concepts of prohibitory order and deemed seizure with the help of bank locker example, it can be seen easily that the interpretation and understanding of the Ld. Counsel of the entire situation is flawed. The earlier Panchnama was a prohibitory order. There was no Search. The last Panchnama dated 07-11-2001 with the deemed seizure is actually the conclusion of Search. A prohibitory order can never be a conclusion of a search because the search has not taken place at all. Only with the Panchnama of seizure or deemed seizure, it can be said that the Search has been finally concluded. Accordingly, the block assessment order passed is very much within the time limit. Now, section 158BE of the Act lays down that the order under section 158BC of the Act shall be passed within one year from the end of the month in which the last of the authorisations for Search under section 132 of the Act was executed. After some time, a dispute arose as to the meaning of the phrase "execution of authorisation". That is why, an amendment was brought by the Finance Act, 1998 and Explanation 2 was inserted at the end of Section 158BE of the Act with retrospective effect from 01- 07-1995. The Explanation 2 says that for the removal of doubts, it was being declared that the authorisation refer in sub-section shall be deemed to have been executed in the case of search, on the conclusion of search as recorded in the last Panchnama drawn, in relation to any person in whose case the Warrant of Authorisation has been issued.

11. Ld CIT-DR further argued that by insertion of this Explanation, all confusions regarding the meaning of the phrase "Execution of an Authorization" has been put to rest now. It has been made clear with insertion of Explanation 2 that in the case of a Search, the meaning of phrase, "execution of last authorisation" would mean last Panchnama drawn on conclusion of Search. Now, looked at from this angle, there does not seem to be any scope for any more confusion. Now, this fact is not in doubt that the last Panchnama drawn in this case is dated 07- 11-2001. That is when the Search was concluded with deemed seizure vide Panchnama dated 07-11-2001. Hence, the period of reckoning for passing an assessment order shall start from 07-11-2001 and not earlier. The earlier panchnamas were the panchnamas for prohibitory orders. A panchnama for Prohibitory Order is not a conclusion of search. In fact, in case of a Prohibitory Order, no search has taken place at all. It is only with the deemed seizure that the search can be said to have been concluded. Therefore, the assessment order passed on 28-11-2003 is very much within the time limit and the assessment order is not time- barred. The Ld. Counsel for the assessee has relied upon the judgement of the Karnataka High Court in the case of C. Ramaiah Reddy (supra) order dated 08-9-2010. However, as against the same, the Hon'ble High Court of Delhi in CIT Vs. Anil Minda [2010] 328 ITR 320 (Delhi) order dated 14-10-2010 has held otherwise. The Hon'ble High Court has discussed in detail the deeming provisions of Explanation 2 and has held that the main purpose of Explanation 2 is to count the period of limitation of 2 years for passing the assessment order, from the date of the last Panchnama drawn.

12. The Hon'ble Delhi Court has made it clear that the period of limitation for passing an order starts from the conclusion of Search and the Search shall stand concluded only on the date on which the last Panchnama was drawn. Therefore, by this deeming provision, even an authorization which may not be otherwise the last authorisation, would become last authorization if that is executed and the Panchnama is drawn. The Ld. Counsel has also relied upon the decision of Apex Court in VLS Finance Ltd. Vs. CIT [2016] 384 ITR 1 (SC). However, after a careful reading of this order of the Hon'ble Apex Court, it is surprisingly found that the reliance placed by the assessee is completely misplaced. In fact, this order is in favour of Revenue. The Hon'ble Apex Court has interpreted Section 158 BE of the Act in this order. In this case also the Revenue had searched premises of the assessee on different dates on the basis of authorisation for first search. The main issue before the Apex Court was, whether as the assessee had not challenged validity of subsequent Searches by contending that the same was illegal in absence of any fresh and authorisation, the limitation period have to be counted from the last date of search only when the last panchnama was drawn. Thus, this decision is in fact in favour of Revenue. It is found that in the present case also, the assessee has not challenged the validity of subsequent searches in absence of any fresh authorisation. Hence, it was argued by the learned CIT DR that the block assessment framed by the AO is within the limitation period.

13. In reply the learned Counsel for the assessee explained the object of action under section 132 of the Act is the surprise element to detect undisclosed income and hence the action has to be swift and fast. The Revenue cannot keep the search action in abeyance for a long period of almost one year from the date of the last authorisation more so when after a period of one year nothing is searched but only the prohibitory order passed one year back is converted into deemed seizure. The Revenue has not explained the delay in revisiting the premises from time to time under the same old authorisation dated 10-11-2000 and therefore the subsequent visit after almost one year is an attempt to extend the limitation period. He argued that every visit under section 132 of the Act after some gap requires fresh authorisation and therefore the panchanama drawn on 07-11-2001 based on authorisation dated 10-11-2000 is illegal. This is evident from the action of the Revenue themselves. On 07-11-2000 they conducted search based on authorisation dated 04-11-2000. The said authorisation was executed on 08-11-2000. On 10-11-2000 when the investigation team visited again they came with a fresh authorisation dated 10-11-2000. This itself proves that every visit after some gap requires fresh authorisation. Therefore, the visit on 07-11-2001 based on authorisation of 10-11-2000 cannot be treated as execution of authorisation dated 10-11-2000 and therefore panchnama drawn on 07-11-2001 cannot be the starting point of limitation under Explanation 2 to section 158BE of the Act. He argued that each authorisation’s life starts on entry of the premises specified therein and ends when the investigating agency leaves the premises unless a short break is taken but same cannot be after a long delay from the last entry date. Every fresh entry has to be authorised by a fresh authorization. He stated the fact that on 07-11-2001 the investigation team did not conduct any search but only converted the prohibitory order passed on 04-12-2000 into deemed seizure under section 132(1)(iii) of the Act. Nothing new was found on 07-11-2001 and therefore the panchnama dated 07-11-2001 is an attempt to extend the period of limitation which action cannot be permitted to overcome limitation provisions. He further stated that on 04-12-2000, the investigation team passed prohibitory order under section 132(3) of the Act. On a reading of section 132(3) of the Act it is clear that the said power can be exercised only for the reasons other than that specified in section 132(1)(iii) and section 132(1)(iii) of the Act empowers seizure if the items specified therein cannot be removed on account of volume, weight or other physical characteristics or dangerous nature. He argued that on 04-12-2000 when the prohibitory order is passed, the Revenue proceeded on admission that items for which prohibitory order is passed do not possess the qualities as specified in section 132(1)(iii)of the Act and therefore the deemed seizure order made on 07-11-2001 is illegal and therefore the said date cannot be the starting point of limitation in the absence of fresh authorisation coupled with the fact that deemed seizure order is illegal. 14. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the case of the Revenue is that the limitation will start from 07-11-2001 by virtue of Explanation 2 read with section 158BE of the Act and hence the last date for passing the block assessment order would expire on 30-11-2003 and since the assessment order is passed on 28-11-2003, same is within the limitation period. The assessee objected to the commencement of limitation period by stating that panchnama dated 07-11-2001 cannot be the starting point of limitation for the purposes of section 158BE of the Act. The said objection is dealt with in the block assessment order at page 2 by the AO and by the CIT(A) in para 2.2 of the appellate order. According to us, Explanation 2 to section 158BE of the Act cannot be read in isolation to the main section 158BE of the Act but same has to be read together and along with section 132 of the Act.

The Explanation cannot override the main section as it refers to “authorisation” and the panchnama cannot be looked at in isolation but the same has to be read along with the authorisation pursuant to which the panchnama is prepared. The provision for “authorisation” is to be found in section 132(1) of the Act which provides for officers specified therein to obtain “authorisation” from higher authorities to enter and search any premises, etc. on a particular day. This is also fortified by Form No. 45 which prescribes the form of authorisation. Therefore, the authorisation is executed the moment the investigating agency enters the premises and searches the same for any undisclosed income. The said authorisation is followed by drawing up of the panchnama before leaving the premises. The moment the search party leaves, the search comes to an end unless it is temporarily suspended to be continued immediately after a short break due to various reasons like search extending into the night, voluminous documents that cannot be examined in 24 hours, etc. Every fresh entry after a gap of many days would require a fresh authorisation so as to enable the search party to enter the premises for conducting search. Search based on one authorisation issued one year back, the department cannot conduct search after one year and draw a panchnama stating conclusion of search and thereby contend that limitation under section 158BE of the Act r/w Explanation 2 thereto should begin from such last drawn panchnama.

15. The object of action u/s 132 of the Act is the surprise element to detect undisclosed income and hence the action has to be swift and fast. The department cannot keep the search action in abeyance for a long period of almost one year from the date of the last authorisation more so when after a period of one year nothing is searched but only the prohibitory order passed one year back is converted into deemed seizure. The Revenue has not explained the delay in revisiting the premises from time to time under the same old authorisation dated 10-11-2000 and therefore the subsequent visit after almost one year is an attempt to extend the limitation period. The fact that the panchanama drawn on 07-11-2001 based on authorisation dated 10- 11-2000 and more over it is noted by us that the same contents are noted in the panchanama dated 07-11-2001 what was noted in the panchanama dated 04-12-2000 (this panchnama was drawn in lieu of authorisation freshly issued vide authorization dated 10-11-2000) and this is verified from the entry recorded (for example only) as under-:

Sr.No.

Description of Articles Mark of identification with seal and signature of DDIT,Unit – II(2)

Mark of identification placed on

1. Same as Sr. No. 1 of Annexure-2 of the Panchnama dt. 4.12.2000

1/A-2(1) On neck of top side

16. This is evident from the action of the Revenue themselves. On 07-11-2000 they conducted search based on authorisation dated 04- 11-2000. The said authorisation was executed on 08-11-2000. On 10- 11-2000 when the investigation team visited again they came with a fresh authorisation dated 10-11-2000. This itself proves that every visit after some gap requires fresh authorisation. Therefore, the visit on 07-11-2001 based on authorisation of 10-11-2000 cannot be treated as execution of authorisation dated 10-11-2000 and therefore panchnama drawn on 07-11-2001 cannot be the starting point of limitation under Explanation 2 to section 158BE of the Act. As per our understanding of the provision of section 132 of the Act is that each authorisation’s life starts on entry of the premises specified therein and ends when the investigating agency leaves the premises unless a short break is taken but same cannot be after a long delay from the last entry date and that also one year to seize the same contents. Every fresh entry has to be authorised by a fresh authorisation. We noted from the facts that on 07-11-2001 the investigation team did not conduct any search but only converted the prohibitory order passed on 04-12-2000 into deemed seizure u/s 132(1)(iii) of the Act. Nothing new was found on 07-11-2001 and therefore the panchnama dated 07-11-2001 is an attempt to extend the period of limitation which action cannot be permitted to overcome limitation provisions.

We found that on 04-12-2000, the investigation team passed prohibitory order u/s132(3) of the Act. On a reading of section 132(3) of the Act it is clear that the said power can be exercised only for the reasons other than that specified in section 132(1)(iii) and section 132(1)(iii) of the Act empowers seizure if the items specified therein cannot be removed on account of volume, weight or other physical characteristics or dangerous nature. We noted that on 04-12-2000 when the prohibitory order is passed, the Revenue proceeded on admission that items for which prohibitory order is passed do not possess the qualities as specified in section 132(1)(iii) of the Act and therefore the deemed seizure order made on 07-11-2001, the said date cannot be the starting point of limitation in the absence of fresh authorisation.

17. The present appeal is fully supported by the decision of the Karnataka High Court in the case of C. Ramaiah Reddy (Supra), and the relevant portion of the judgement reads as under: -

“75. Similarly, in circumstances not covered under those provisions, it is open for him to pass a prohibitory order under sub-section (3) not amounting to seizure which order will be in force for a period of 60 days after securing the possession of the materials, articles, etc., in the aforesaid manner. Action under section 132(3) of the Income-tax Act can be resorted to only if there is any practical difficulty in seizing the item which is liable to be seized. When there is no such practical difficulty the officer is left with no other alternative but to seize the item, if he is of the view that it represented undisclosed income. Power under section 132(1)(iii) of the Income-tax Act thus cannot be exercised, so as to circumvent the provisions of section 132(1)(iii) read with section 132(1)(v) of the Income-tax Act. It is open for the authorised officer to visit the place for the purpose of investigation securing further particulars. Under the scheme, the law provides for such procedure. But not when he visits the premises for further investigation for the materials already secured. It does not amount to search as the materials to be looked into and investigated is already known and is the subject- matter of a prohibitory order or a restraint order.

Though it is not seizure or deemed seizure, it amounts to deemed possession. What is in your possession is to be looked into to find out, is there any incriminating material. It does not amount to search as understood under section 132 of the Act. It is only because of paucity of time he has gone back and wants to come back and look into the matter leisurely. There is no provision in the Criminal Procedure Code or in the Income-tax Act or the rules for postponing the search for a long period. Then, the concept of search as understood either under the provisions of the Criminal Procedure Code or the Act which are made applicable expressly, would lose its meaning. If such a course is attracted, it is open to an authorised officer to keep the authorisation in his pocket like a season ticket and go on visiting the premises according to his whims and fancies. It seriously affects the valuable right of the assessee conferred under the Constitution. To keep the affected parties in a suspended animation about the probable continuation of search would be agonising. It is invading the right and freedom of the petitioners for a period more than required or necessary. The orders which are passed under section 132(3) may have a very far-reaching effect on the business of an assessee. The order of restraint may adversely affect the business and, therefore, adequate safeguards are sought to be provided in the Act by the insertion of the provisions of sub-section (8A) in section 132. In order that the restraint order must not be continued indefinitely, sub-section (8A) of section 132 provides that the restraint order can be continued only if, before the expiry of 60 days, and for reasons to be recorded, the Commissioner grants an extension. The provisions of sub-section (8A) cannot be bypassed or rendered nugatory by revoking an order under section 132(3) and, thereafter, pass another order on the same date.

In the nature of things, the search is to be done expeditiously and the undisclosed income is to be unearthed and proceeding has to be initiated against such person and the tax legitimately due to the Government is to be recovered. There cannot be any laxity on the part of the authorised officer in this regard. Any other interpretation would run counter to the scheme of search provision under the Act. Therefore, by passing a restraint order, the time limit available for framing of the order cannot be extended. Once an order under section 132(3) has been passed, then the limitation period commences and such order cannot be continued unless and until the provisions of section 132(8A) are satisfied.

76. Once the authorised officer enters into the premises and conducts search, the search gets concluded when he comes out of the premises as evidenced by the panchnama. In the course of the said search he may seize any books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of search. In the course of search he has been vested with the power to break open any room in the premises, any locker in the premises, any almirah or where it is not possible or practicable to take physical possession, the second proviso to sub-section (1) of section 132 applies and pass a prohibitory order which amounts to a deemed seizure. In cases where sub-section (1) is not attracted, sub-section (3) provides for a restraint order which is not a deemed seizure. In the course of search if no incriminating material is found also, the search comes to an end. These are the four contingencies that can normally happen after the authorised officer enters the premises, before comes out of the premises. It is in the course of search those materials were considered and such orders were passed. Even in respect of the subject-matter of those two orders the search comes to an end when the authorised officer comes out of the premises. Once he comes out, the authorisation comes to an end. On the basis of the same authorisation he cannot enter the premises again for search. If he wants to search again he has to obtain another authorisation. However, in law he is entitled to enter the premises again, not for the purpose of search, but only for the purpose of inspection of the subject-matter of either the prohibitory order or the restraint order. When he enters the premises again, he has no jurisdiction to look into any other material except those materials which are the subject-matter of a prohibitory order or a restraint order. As he is not entering the premises again with the intention of making a search of the premises, the authorisation contemplated under section 132(1) of the Act is not necessary.

However, when he inspects the materials which are the subject-matter of these two orders it is done in furtherance of the search conducted when he entered the premises by virtue of the authorisation granted under section 132(1) of the Act. He can after such inspection seize any incriminating materials which disclose undisclosed income for the purpose of block assessment under Chapter XIV of the Act. Merely because one more panchnama is drawn evidencing seizure of any material in the course of such inspection that cannot be construed as a last panchnama referred to in Explanation (2) to section 158BE. When once a warrant of authorisation has been issued for search before it is concluded as evidenced by the panchnamas, what is to be recorded in the panchnama is as under :

(1) Whether the authorised officer entered and searched the premises ?

(2) Broke open the lock of any door, box, locker, safe, almirah, etc. ?

(3) Searched any person as provided under clause (iia) of sub-section (1) of section 132 ?

(4) Afford the authorised officer necessary facility to look into the electronic record as provided under clause (iib) of sub-section (1) of section 132 ?

(5) Seized any book of account, other documents, money, bullion, jewellery, etc. ?

(6) Placed any marks of identification, on any books of account, other documents, etc. ?

(7) Made a note of or an inventory of any such money, bullion, jewellery, other valuables, etc. ?

(8) Whether any prohibitory order made under the second proviso to sub-section (1) of section 132 amounting to deemed seizure ?

(9) Whether any restraint order passed under sub-section (3) of section 132 ?

(10) Whether nothing incriminating material is found and no seizure is made ?

77. The panchnama referred to in Explanation 2 to the said section specifically refers to search under section 132 and section 132 specifically refers to authorisation to enter and search and it has no reference to entering and searching the premises which are the subject-matter of prohibitory order or restraint order. No authorisation is required to enter the premises and inspect the materials which are the subject- matter of prohibitory order or restraint order. The said order itself acts as an authorisation to enter the premises and inspect the materials which are the subject-matter of those orders and it also empower them to seize any incriminating material. However, after entering the premises of such person, he has to confine his actions only for inspection of the subject-matter of prohibitory order or restraint order. He cannot search the premises over again. Any material seized after such inspection would be the undisclosed income for the purpose of the block assessment in pursuance of search under section 132(1) of the Act. The panchnama evidencing such inspection and seizure would be the last panchnama in respect of the said premises. But for the purpose of limitation under section 158BE, it would not be the last panchnama drawn in proof of conclusion of search, as defined in Explanation 2 to section 158BE. For the purpose of limitation, there can be only one search and one panchnama.

18. Further, Hon’ble Karnataka High Court finally interpreted the authorization vis-à-vis Panchanama as under:

“80. The law does not contemplate the authorised officer to set out in any of the panchnama 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 authorisation issued the search commences, it comes to an end with the drawing of a panchnama. When the authorised officer enters the premises, normally, the panchnama is written when he comes out of the 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, 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 authorisation 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.”

19. The Delhi High Court in the case of CIT Vs. Deepak Aggarwal [2009] 308 ITR 116 (Delhi) at para 4 while deciding the limitation point observed that delay in subsequent visits based on same authorisation, if not explained, then the Revenue cannot rely on the last drawn panchnama for the purposes of limitation. In the present case before us, the Revenue has not explained the inordinate delay of almost one year and therefore the Revenue cannot take recourse to 07-11-2001 panchnama for computing limitation. The Bombay High Court in CIT Vs. Sandhya P. Naik [2002] 253 ITR 534 (Bombay) observed that if subsequent authorisation/panchnama is illegal then limitation cannot be counted from such illegal authorisation/panchnama. The Madras High Court in the case of A. Rakesh Kumar Jain vs. JCIT [2013] 214 Taxman 39 (Madras) has observed that there cannot be multiple panchnamas based on one authorisation. The one panchanama one authorisation principle laid down by the Madras High Court squarely applies to the present matter. Therefore, the panchnamas dated 24-11-2000, 04-12-2000 and 07- 11-2001 drawn based on authorisation dated 10-11-2000 is bad in law and therefore the limitation cannot be counted from 07-11-2001 but ought to be counted from 10-11-2000 or at the most 4-12-2000. Reliance is also placed on the decision of the Delhi High Court in the case of PCIT Vs. PPC Business & Products (P.) Ltd. [2017] 398 ITR 71 (Delhi) in support of the above propositions of the assessee.

20. We noted from the decision of the Hon’ble Supreme Court in the case of VLS Finance Ltd. Vs. CIT reported in [2016] 384 ITR 1 (SC) that the assessee VLS Finance Ltd. had not challenged before the High Court subsequent panchnama and the assessee themselves proceeded on the footing that limitation would start from the last panchnama drawn on 05-08-1998 and therefore the assesse cannot now contend that for the purposes of limitation panchnama dated 05-08-1998 cannot be the starting point of limitation for the purpose of section 158BE of the Act. In the present case before the Tribunal, the assessee has challenged the subsequent panchnama which has been dealt with by the AO at pg 2 of the block assessment order and by the CIT(A) in para 2.2 of his order. Furthermore, it is also important to note the detailed facts of V.L.S Finance Ltd. as narrated in the Delhi High Court decision which is dealt in para 22 of this order, therefore, the decision of the Hon’ble Supreme Court is not applicable to the assessee’s case before the Tribunal. The Delhi High Court’s decision in the case of V.L.S Finance Ltd. Vs. CIT [2007] 289 ITR 286 (Delhi) and the discussion of the High Court could be found in paras 22-29. In that case the difference between the last and the second last panchnama was less than 60 days during which period the prohibitory order was alive as per section 132(8A) of the Act whereas in the present case of the assessee the period between the second last panchnama and the last panchnama is almost one year for which there is no explanation given by the Revenue and as per section 132(8A) of the Act the said prohibitory order has come to an end around 04-12-2001. Even prohibitory order dated 04-12-2000 comes to an end after 60 days and there is no extension after the expiry of 60 days. Furthermore, in the case of VLS Finance Ltd. 5000 documents were found and the Revenue went through all these 5000 documents during the period when prohibitory order was in effect and therefore no ulterior motive could be attributed for drawing subsequent search. In the case of the assessee herein on 07-11-2001, the investigation wing of department after almost one year has only converted the non-existent prohibitory order into deemed seizure, and therefore in the present case the panchnama dated 07-11-2001 is only for the purposes of extending the limitation period. During the period of one year no examination of any items was done whereas in the case of VLS Finance Ltd., the Revenue was scrutinising 5000 documents during the intervening period. It is, therefore, submitted that the facts before the Delhi High Court being totally different than the facts of the present assessee, limitation should start, even in the worst case, from 04-12-2000. Therefore, the assessment order dated 28-11-2003 is barred by limitation. Hence, we quash the block assessment order and on this jurisdictional issue and allow the appeal of the assessee.

21. Since we have quashed the block assessment order, we need not go into the other ground on merits.

22. In the Result, the appeal of assessee is allowed.

Order pronounced in the open court on 10.08.2020.

Sd/- Sd/-

( M. BALAGANESH) (MAHAVIR SINGH)

( ACCOUNTANT MEMBER) (VICE PRESIDENT)

म िंबई, ददिािंक/ Mumbai, Dated: 10.08.2020