Rakesh Sarin vs The Deputy Commissioner of Income Tax, The Director of Income Tax (Investigation) and Deputy Director of Income Tax (Investigation)

K.B.K. Vasuki, J.—The Writ Petition is filed against the order of the first Respondent dated 30.6.2005 in No. 761R/ADXPRT7428R in

respect of the block Assessment Years 1997-98 to 2002-03 and part of 2003-04, to quash the same and to consequently direct the Respondents

to drop the proceedings initiated against the Petitioner for the block period.

The brief facts which are relevant for consideration herein are as follows:

The Petitioner is engaged in the business of financing and he is assessed to Income Tax regularly. While so the department held search in the

residential and official premises of the Petitioner on 27.03.2003 and 28.03.2003 respectively on the strength of individual warrant of authorizations

of even dated 26.03.2003 and in the course of such search documents reported to be incriminating in nature are found and few are seized and

others not seized and at the end of search held on 27.03.2003 and 28.03.2003, separate panchanamas are prepared by the authorized officer in

the presence of two witnesses and prohibitory orders dated 27.03.2003 and 28.03.2003 respectively are passed u/s 132(3) of the Income Tax

Act, from operating certain accounts, FD, RD, lockers etc., standing in the name of the Assessee in City bank, Standard Chartered bank, State

Bank of Indore, ABN Amro Bank, HDFC Bank, the particulars which are contained in the Prohibitory Order and also from tampering with the

contents kept in the wooden alamirah in the bed room said to be belonging to mother of the Assessee situated on the right side of the first floor of

the residential premises and the steel cabinet placed at the Assessee''s room situated in his business premises. The search was not concluded and

was kept pending and the search was continued on 17.06.2003 in the residential premises and on 12.06.2003 and 14.06.2003 in the business

premises on which dates the Prohibitory Orders dated 27.03.2003 and 28.03.2003 in respect of residential and business premises respectively are

lifted keeping the Prohibitory Order in respect of the banks to be pending and the search in the residential and business premises was finally

concluded on 17.06.2003 and 14.06.2003 respectively followed by three panchanamas dated 17.06.2003 in respect of residential premises and

dated 12.6.2003 and 16.03.2003 in respect of business premises furnishing the particulars about the documents found and not seized and the

documents found and seized from the wooden alamirah in the bedroom of the Assessee''s mother in the residential premises and steel cabinet in the

office room of the Assessee in the business premises.

Thereafter, the second warrant of authorization u/s 132 of the Income Tax Act is issued for the search to be conducted in M/s. Standard

Chartered Bank and in pursuance of the same the search was held in the Standard Chartered Bank premises in the presence of panchas and

Senior Manager of the Bank and the search was commenced at 11.15 am and finally concluded at 12.05 pm on 28.8.2003 followed by

panchanama in the course of such search RBI relief bonds are found and seized from OD account maintained by the Assessee and others from the

Standard Chartered Bank, the particulars are appended to panchanama. In the meanwhile, the prohibitory order in respect of the accounts above

referred to in M/s. Standard Chartered Bank is removed on 09.04.2003 and 10.04.2003. Thereafter the Assessee was issued notice for the

assessment enquiry on 27.11.2003 and the Assessee filed his reply on 14.09.2004 and he was issued with the questionnaire and in response to the

hearing notice, the Assessee furnished details as called for through his representative and the department has, after verifying all the documents and

the reply given by the Assessee through his representative, completed the assessment and passed the block assessment order on 30.06.2005.

Aggrieved against the same, the Petitioner filed statutory appeal before CIT (appeal). The Petitioner has also come forward with this writ petition

thereby questioning the validity of the block assessment order mainly on the ground that the same, having been passed beyond two years from end

of the month in which the last of authorization is executed, is barred by limitation and is without jurisdiction.

It is contended by the learned Counsel for the Petitioner that as per Section 158BE of Income Tax Act, time limit for completion of block

assessment order is two years from the end of the month in which is the execution of the last of authorization for search u/s 132A and as per the

Explanation 2(a) u/s 158BE authorization shall be deemed to have been executed on the date last panchanama was drawn in relation to any person

in whose case the warrant of authorization has been issued. According to the learned Counsel for the Petitioner, the search was concluded in the

residential as well as business premises of the Petitioner on 27.03.2003 and 28.03.2003 and the two years period for completion of block

assessment year is to be reckoned only from the end of month of March during which the execution of the last of the warrant of authorization is

completed.

The learned Counsel for the Petitioner argued so for the following reasons; 1) the search conducted on bank premises on 28.08.2003 in

pursuance of warrant of authorization issued after the conclusion of the search in the residential as well as business premises cannot be treated as in

continuation of the search commenced in pursuance of warrant of authorization on 26.07.2003 and the same shall be taken into account separately

for subsequent assessment. 2) Though as per the records the search is said to be held on 27.03.2003 and 17.06.2003 at the residential premises

and on 28.03.2003, 12.06.2003 and 14.06.2003 at the business premises, the same was said to be finally concluded only on 17.06.2003 and

14.06.2003 respectively and there was no search held on 17.06.2003 and 12.06.2003 and 14.06.2003 in residential and as per the last

panchanamas dated 17.06.2003 and 12.06.2003 and 14.06.2003, what was done on those days was only to lift the early Prohibitory Order

passed on 27.03.2003 and 28.03.2003 in respect of wooden alamirah and steel cabinet in the residential and official premises respectively and to

seize the documents from the same and no actual search was held on the days above mentioned, as such the Panchanama drawn on those three

days cannot be treated as last panchanama evidencing the conclusion of search 3) the Prohibitory Orders passed on 27.03.2003 and 28.03.2003

are only u/s 132(3) and as per Section 132(8a) their validity period is only 60 days and they ceased to be in force after exceeding sixty days from

the date of the order and as the Prohibitory Orders passed on 27.03.2003 and 28.03.2003 expired on 27.05.2003 and 28.05.2003 and the

search and seizure followed by panchanama dated 17.06.2003, 12.06.2003 and 14.06.2003, cannot be treated as last panchanama for the

purpose of ascertaining the date of conclusion of the search to reckon two years period for block assessment.

Such contention of the Petitioner is seriously disputed on the side of the revenue both legally and factually and the legal objection raised is that

the Petitioner is not entitled to maintain two parallel proceedings one statutory against the assessment and another by way of writ petition against

the validity of search and seizure. Factually it is contended that the delay in lifting the Prohibitory Orders dated 27.03.2003 and 28.03.2003 is only

at the instance of the Petitioner who requested to postpone the proceedings due to his convenience and the search held on 28.03.2003 in the bank

premises is in pursuance of post search investigation leading to information of availability of FD, RBI relief funds and IDBI funds to the tune of Rs.

95,00,000/- in the Standard Chartered bank, as such the search and seizure held on 28.08.2003 is in continuation of the search commenced on

26.03.2003 and as the conclusion of the search is on 28.08.2003, the block assessment order passed on 30.06.2005 is not hit by limitation.

I heard the rival submissions made on both sides in the light of the facts involved and documents made available herein and in the light of

statutory and legal positions relied on both sides.

The point arises for consideration herein is as to what is the date of conclusion of the search held at both residential and business premises of the

Assessee whether it is 27.03.2003 and 28.03.2003 or 28.08.2003 so as to reckon the commencement of time limit of two years for completion of

block assessment.

Before going into the factual issue raised herein, the legal objection raised against the maintainability of the writ petition is to be first appreciated.

It is no doubt true that the Petitioner has filed the statutory appeal as well as the present writ petition against the same block assessment order

dated 30.06.2005. According to the Petitioner, the statutory appeal is against the assessment order on merits and the writ jurisdiction is invoked to

decide the validity of the assessment order on the point of jurisdiction and limitation. Both the counsel on record for the Petitioner as well as

revenue produced legal authorities in support of their respective contentions for and against the maintainability of the writ petition. The authorities

cited on the side of the Petitioner are (i) 2008 16 VST 188 Mad in M.U.A. Armugaperumal and sons v. Additional Commercial Tax Officer

(FAC), Srivilliputhur; (ii) K.S. Shivji and Co. Vs. Joint Commercial Tax Officer, Esplanade Division, Madras, ; (iii) Kantilal Somehand Shah and

Another Vs. Collector of Customs and Central Excise and Another, ; (iv) National Coal Co. Ltd. Vs. L.P. Dave and Others, .

The authority cited on the side of the Respondents is Delhi Gate Auto Service Station and Others Vs. B.P.C.L. Agra th. Sr. Div. Manager and

Others, . While the Division Bench of our High Court and other High Courts have in the authorities cited on the side of the Petitioner observed that

ordinarily submission to jurisdiction and pendency of statutory appeal would be a bar to the entertainment of writ petition, but when the

proceedings was without jurisdiction and against the principles of natural justice the High Court cannot be denied the power to interfere under

Article 226 of the Constitution, whereas the Supreme Court has in the judgment cited on the side of the revenue observed that two parallel

remedies could not be pursued by the Petitioner at one and the same time. Though this Court is bound by the law laid down by Apex Court, the

observations of Division Bench of our High Court and other High Courts as cited by the Petitioner is more applicable to the facts of the present

case for the following reasons. The Apex Court has in the judgment not gone into the question whether the High Court can exercise its jurisdiction

under Article 226 Constitution of India under the circumstances as discussed in the judgment of our High Court and other High Courts. In the case

decided by the Supreme Court no issue regarding want of jurisdiction or statutory bar is raised as such the Apex Court is of the view that the

Petitioner cannot be permitted to resort to two parallel proceedings at one and the same time. Our High Court and other High Courts have in the

authorities cited on the side of the Petitioner dealt with identical circumstances and decided the maintainability of the writ petition in favor of the writ

Petitioner. Applying the same ratio and by considering the different ground on which the block assessment order is challenged before the appellate

tribunal and before this Court, this Court is inclined to uphold the maintainability of the writ petition.

Further the Respondents cannot also be allowed to question the maintainability of the writ petition in view of the order passed by this Court, on

earlier occasion. While disposing of the stay petition herein, our High Court has specifically ordered that the appeal proceedings against the

assessment order may go on, however, giving effect to the order of the appellate authority alone is stayed and it will be depending on the outcome

of the present writ petition. In view of such order, the writ Petitioner and the revenue contested the statutory appeal on merits leaving the question

of jurisdiction and limitation to be decided in this writ petition and the appeal is also disposed of on factual issues leaving the two legal issues and

the revenue has also preferred further appeal before the board against the order passed against the assessment on merits. That being the conduct

of the parties in subjecting themselves to the jurisdiction of the appellate authority as well as to the writ jurisdiction and the manner of disposal of

the appeal, the writ petition cannot be at this length of time now thrown away on the ground of maintainability.

As already referred to the core issue involved herein is what the date of conclusion of the search is?. In order to appreciate this aspect the

relevant Section 158BE and explanation 2(a) u/s 158BE of Income Tax Act is extracted here under:

Time limit for completion of block assessment. 158BE. (b) within two years from the end of the month in which the last of the authorizations for

search u/s 132 or for requisition u/s 132A, as the case may be, was executed in cases where a search is initiated or books of account or other

documents or any assets are requisitioned on or after the 1st day of January, 1997.

Explanation 2(a) in the case of search, on the conclusion of search as recorded in the last panchanama drawn in relation to any person in whose

case the warrant of authorization has been issued.

The combined appreciation of Section 158BE and explanation 2(a) would lead to an irresistible conclusion that the warrant is deemed to be

executed on the conclusion of search as recorded in the last panchanama.

The next dispute arose between the parties herein is as to which is the last panchanama. While it is the case of the Petitioner, the last of

panachanamas are dated 27.03.2003 and 28.03.2003, according to the Respondent, it is dated 28.08.2003 on the basis of the grounds as already

referred to in the foregoing paragraphs. This Court is on the basis of the available records inclined to reject the stand of the department that the last

panchanama is the one dated 28.08.2003 and the date of conclusion of the search is 28.08.2003 as recorded in the same. It is to be concluded so

mainly on the basis of the report recorded by the searching party in that panchanama dated 17.06.2003 in respect of residential premises and the

panchanamas dated 12.06.2003 and 14.06.2003 in respect of business premises. It is definitely recorded in the panchanamas that search in

respect of both residential and business premises is finally concluded on 17.06.2003 and 14.06.2003. If that is so, the search held on 28.08.2003

in the premises of Standard Chartered bank is to be necessarily treated as fresh search held on the strength of fresh warrant authorization. The

Division Bench of Delhi High Court in the unreported judgment in Commissioner of Income Tax, Delhi v. Deepak Aggarwal following the earlier

judgment of Kerala High Court reported in (i) 2006 282 ITR 158 (Kerala) in Commissioner of Income Tax and Anr. v. Dr. C. Balakrishnan Nair

and Anr.; (ii) 2002 ITR 534 (Bombay) in Commissioner of Income Tax v. Mrs. Sandhya P. Naik and Ors. observed that the search u/s 132 of the

Act should be continuous and if there is gap, there must be a valid explanation for the gap. In the absence of one such valid and acceptable

explanation, the search held on three occasions cannot be treated as continuation of the search commenced on 27.03.2003. Having recorded that

the search is finally concluded on 17.06.2003 and 14.06.2003 respectively, the Respondents cannot be permitted to introduce a new theory as if

the search held on 28.08.2003 is in continuation of the earlier search initiated on 26.03.2003. That being the factual and legal position, the search

held on 28.08.2003 and the panchanama dated 28.08.2003 cannot be treated as the last panchanama for the purpose of reckoning

commencement of time limit of two years.

It is no doubt true that the search commenced on 26.03.2003 in both residential and business premises is recorded as search continues'' in

panchanamas dated 27.03.2003 and 28.03.2003 and is recorded as finally concluded only in the panchanamas dated 17.06.2003 and

14.06.2003. The learned Counsel for the Petitioner would then seriously contend that the last panchanamas dated 17.06.2003, 12.06.2003 and

14.06.2003 cannot be treated as the last panchanama as there was no search held on those days and what is done by the authorized officer on

those days are only to lift Prohibitory Order dated 26.03.2003 passed u/s 132(3) and seizure of the documents contained in the wooden alamirah

and steel cabinet covered under the Prohibitory Orders. It is further argued that as the Prohibitory Orders passed u/s 132(3) shall be u/s 132-8A

valid for 60 days, the Prohibitory Orders dated 27.03.2003 and 28.03.2003 becomes ineffective after 27 and 28.05.2003 and the seizure

following the lifting of panchanamas dated 17.06.2003 and 12.06.2003 and 14.06.2003 are not in continuation of the search commenced on 27 &

28.03.2003 and are without jurisdiction.

The learned Counsel for the Respondent would seek to defend the validity of those Prohibitory Orders on the ground that lifting of the

Prohibitory Order is postponed only at the instance of the Petitioner for his own convenience and the time limit prescribed u/s 132-8A is only

directory and not mandatory. It is further argued by the learned Counsel for the Respondents, that the Prohibitory Orders passed on 27.03.2003

and 28.03.2003 are not u/s 132(3) but only u/s 132(1) and the time limit prescribed u/s 132-8A is hence inapplicable to the same. In my

considered view, the contentions so raised have no legal or factual basis. It is noteworthy to mention that the provision of law referred to in the

Prohibitory Orders is Section 132(3) of the Act and the contents of the wooden alamirah and steel cabinet which are the subject matter of

Prohibitory Orders are not such in its volume, weight or other physical characteristics and not such dangerous in nature that it is not possible or

practicable to take physical possession of the same and to remove it from the said place. Once the Prohibitory Orders above referred to are to be

treated as the orders passed u/s 132(3), the same shall have no force beyond 60 days and no authority is vested upon the officials concerned to

extend the same beyond 60 days for any of the reasons mentioned by the revenue. Though the authority concerned is empowered to extend the

time beyond 60 days, after obtaining approval of the Director or Commissioner for the reason recorded in writing before 2002 amendment, such

power is removed by the Amendment Finance Act 2002 w.e.f. 01.06.2002. As such, it cannot be contended by the revenue that it is only

directory and not mandatory. The revenue cannot also permitted to argue that lifting of the order is postponed at the instance of the Petitioner for

his own convenience. The fact remains undisputed are the Prohibitory Orders dated 27.03.2003 and 28.03.2003 had force of law only till

27.05.2003 and 28.05.2003, as such any search, purported to be held in pursuance of lifting of the Prohibitory Orders on 17.06.2003,

12.06.2003 and 14.06.2003 cannot be treated as search and seizure in the eye of law. Even otherwise, what is done on 17.06.2003, 12.06.2003

and 14.06.2003 is only lifting the Prohibitory Orders and the documents seized are already found in the course of earlier search kept in the

wooden alamirah and steel cabinet and it cannot be disputed that the seizure of the documents from the wooden alamirah and steel cabinet after

lifting the Prohibitory Orders is not in pursuance of any fresh and further search actually held on 17.06.2003 and 12.06.2003 and 14.06.2003. If

that is so, though the search is as per the records said to be finally concluded on 17.06.2003, 12.06.2003 and 14.06.2003, search is concluded

on 27.03.2003 and 28.03.2003 respectively, as such the panchanamas drawn on 27.03.2003 and 28.03.2003 in respect of both residential and

business premises are the last panchanamas and the date of the same is the date of conclusion of the search as referred to in explanation 2(a) u/s

158BE for reckoning the time limit of two years for completion of block assessment.

The same reasoning can be applied to the search and seizure held on 28.08.2003 in the bank premises. There again the documents, RD, relief

bonds recovered from the bank is already found in the search held on 27.03.2003 and inventory is also taken in respect of the same and the same

is also the subject matter of Prohibitory Order dated 27.08.2003 and the Prohibitory Order in respect of the banks where the accounts in question

held is admittedly removed on 10.04.2003. The seizure of the bonds from the bank on 28.08.2003 is not in pursuance of any search, as such the

panchanama dated 28.08.2003 cannot be hence treated as the last panchanama evidencing any search. Viewing from any angle, the conclusion of

actual search is on 27.03.2003 and 28.03.2003 in both the premises of the Assessee respectively and the same is the date to be reckoned as the

date of execution of the last of warrant of authorizations. Therefore, the limitation for completing block assessment order would end on

30.03.2005 being two years from the end of month in which the search was concluded and the impugned assessment order dated 30.06.2005 is

hopelessly barred by limitation.

The conclusion so arrived at by this Court is also supported by the decisions of Delhi and Bombay High Court and Income Tax tribunals of

different states in the following judgments (i) (2007) 106 ITD 569 Bangalore in DTS. Rao v. Assistant Commissioner of Income Tax, Investigation

Circle-II, Mysore; (ii) (2008) 115 ITD 1 Mumbai in Nandlal M. Gandhi v. Assistant Commissioner of Income Tax, Circle-26(3), Mumbai; (iii)

(2007) 290 ITR 128 Delhi Sarb Consulate Marine Products Private Ltd., v. Assistant Commissioner of Income Tax; (iv) Gaya Prasad Pathak Vs.

Assistant Commissioner of Income Tax and Others, ; (v) (2007) 104 ITD 221 (Mumbai) in Shahrukh Khan v. Assistant Commissioner of Income

Tax, Central Circle-23, Mumbai; (vi) (2006) 100 ITD 191 (Mumbai) in Deputy Commissioner of Income Tax, Circle 4(1)(Inv.) v. Adolf Patric

Pinto; (vii) (2007) 12 SOT 34 (Mum) in Javed Mohamed Peshimam v. Deputy Commissioner of Income Tax, Mumbai. (viii) 1999 237 ITR

Kerala in Dr. C. Balakrishnan Nair and Anr. v. Commissioner of Income Tax and Anr. and (ix) the unreported judgment of Delhi High Court in

Commissioner of Income Tax, Delhi V. Deepak Aggarwal referred to in the earlier paragraph.

In all these cases, the income tax Benches of different High Courts and Tribunal/Board have, on identical circumstances, held that the

Prohibitory Order passed u/s 132(3) shall be in force for 60 days and any search and seizure by lifting Prohibitory Order after 60 days does not

amount to actual search and seizure, and any search and seizure after lifting the expired Prohibitory Order cannot be regarded as continuation of

search commenced and cannot be taken into account for ascertaining the date of execution of the last of warrant of authorization and the search

shall be treated as continuous only when there is no unexplained gap between the commencement and completion of the search and the search

once completed cannot be resumed without valid reason and the last panchanama is the document evidencing conclusion of actual search and the

date of such panchanama is to be regarded as the date of conclusion of search and execution of the warrant, and the block assessment shall be

within two years from such date and any assessment beyond two years from such date is barred by limitation. The legal and factual aspects

involved herein as discussed above will only establish that the impugned block assessment order dated 30.06.2005 is barred by limitation and is

without jurisdiction and cannot be enforced against the Assessee and the Assessee is entitled to get the relief''s as sought for herein.

In the result, the writ petition is allowed as prayed for. No costs.