1. These are two appeals, one filed by the revenue and other by the assessee for the block period from 1-4-1989 to 18-8-1999. The grounds raised by the assessee are as under: 1. That the learned Commissioner (Appeals)-II, Kanpur has erred in law and on f acts in sustaining the addition of Rs. 98,316 being the accrued interest on IVPs of aggregate value of Rs. 1,50,000 belonging to Smt. Asha Devi sister-in-law of the appellant, seized from a locker No. 150 with PNB, Bahraich opened and operated by the appellant and surcharge over and above the tax payable under Section 113 of the Income Tax Act, 1961.
2. That while sustaining the addition of Rs. 98,316 being the accruedinterest on IVPs of Rs. 1,50,000 the learned Commissioner (Appeals)-II, Kanpur has failed to consider and appreciate that the investaient of Rs. 1,50,000 in IVPs was made by the appellant as trustee as per terms of will dated 15-5-1995 on behalf of late Smt.
Asha Devi (sister-in-law of the appellant) for the benefit of unmarried daughters of the deceased, therefore, the income accruing on the said IVPs did not belong to the appellant and deserved to be deleted from the undisclosed income of the appellant for the block period.
3. The learned assessing officer has erroneously treated the income for assessment year 1998-99 and 1994-95 as undisclosed income and included it in the total income of the block period, without considering and appreciating that the income for assessment years 1993-94 and 1994-95 was below the taxable limit of respective year theref ore, the assessee was not obliged to file the return(s) of income for assessment years 1993-94 and 1994-95 under Section 139(1) or any order provision of the Income Tax Act, 1961.
4. That the order of the learned Commissioner (Appeals)-II, Kanpur is bad in law andcontrary to facts to the extent stated in ground Nos. 1 and 2 here abovetherefore deserves to be modified.
1. That the learned Commissioner (Appeals) erred in law and on the facts in deleting the addition of Rs. 1,20,000 made to the assessee's income by the assessing officer on account of undisclosed investment in purchase of K.V.P. 2. That the learned Commissioner (Appeals) erred in law and on the facts in deleting the addition of Rs. 1,00,000 made to the assessee's income by the assessing officer on account of unexplained investment in IVPs.
3. That the learned Commissioner (Appeals) erred in law and on the facts in deleting the following additions made to the assessee's, income by the assessing officer on account of unexplained dsits in Saving bank Account Nos. 19657, 19599, 19643 with Allahabad Bank, Swaroop Nagar, Kanpur in the names of minor children: 4. That the learned Commissioner (Appeals) erred in lawand on the facts in deleting the addition of Rs. 1,50,000 made to theassessee's income by the assessing officer on account of unexplainedInvestment in IVPs.
5. That the learned Commissioner (Appeals) erred in lawand on the facts in deleting the addition mentioned at grounds of appeal Nos.
(1) to (4) above, without properly appreciating the facts and thecircumstances of the case.
6. That the order of the learned Commissioner (Appeals)being erroneous in law and on facts be vacated and the order of the assessing officer restored.
3. In addition to this, the assessee has raised additional grounds vide his letter dated 22-8-2005 which are as under: (i) The order passed by the learned assessing officer under Section 158BC of the Act, in the case of the appellant dated 28-9-2001 isbarred by limitation as the search was conducted on 13 -9-1992, and thereafter no valid authorization of search was expected in the case(name) of the appellant, therefore, the order under Section 158BC ought to have been passed by the learned assessing officer by 31 -8-2001 and hence, the present order having been passed beyond limitation is illegal, bad in law and be ordered to be quashed.
(ii) The alleged consequential warrant of authorization of search signed by the Additional Director of Income Tax appellant and Dr.
D.P. Agarwal for search of locker No. 187 P.N.B., Swaroop Nagar, Kanpur, is illegal, bad in law and voidab initio as the learned Additional Director of Income Tax (Inv.), Kanpur, subsequent to 30-10-1998, was not authorised under the Income Tax Act, 1961 to sign and authorize any Income Tax Authority through a warrant of search and hence consequentially there being no valid search warrant in the name of the appellant, the learned assessing officer never acquired a legal or valid jurisdiction to initiate proceedings under Section 158BC in the present case, therefore, the present order so passed under Section 158BC of the Income Tax Act, 1961, being voidab initio and illegal be ordered to be quashed.
4. Learned authorised representative for the assessee submitted that no fresh facts are required to be investigated, all the f acts relating to above grounds are on the record of the department therefore, in view of the decision of Hon'ble Supreme Court in case of NTPC Co. Ltd. v. CIT , the additional ground should be admitted.
5. Learned Departmental Revenue opposed the additional ground even though he could not B point out as to what: facts are required to be brought on record in order to adjudicate these grounds.
6. After considering the rival submissions, we admit the additional ground raised by the learned authorised representative for the assessee in view of Hon'ble Supreme Court decision in NTPC Co. Ltd. 's case (supra) and also decision of Delhi Bench of the Tribunal in Escorts Ltd. v. Asstt. CIT (2007) 104 ITD 427 (SC). Learned authorised representative submitted that in case he succeeds in case of additional grounds, then there will not be any ground of going into the merits of the case as assessment will be barred by limitation. He submitted that in this case search was carried out against her husband Shri D.P.Agrawal and the assessee on 13-8-1999 at their residential premises.
Consequential searches were also carried out on 23-8-1999 at the bank locker No. 187, P.N.B., Swaroop Nagar, Kanpur which is claimed to be owned by the assessee jointly with her husband. The learned authorised representative pointed out that four Panchnamas were drawn by the department at the time of search. One Panchnama was in pursuant to warrant of authorization issued against Shri D.P. Agrawal, 1/142B, Swaroop Nagar, Kanpur. As per this Panchnama, search was concluded on 14-8-1999. Second Panchnama was in respect of search in pursuant of warrant of authorization issued against Shri D.P. Agrawal and the assessee herself in respect of locker No. 187, P.N.B., Swaroop Nagar, Kanpur. This search was concluded on 23-8-1999 as per Col. 8 of the Panchnama. The third Panchnama was in pursuant to warrant of authorization issued against Shri D.P. Agrawal, the search for which was finally concluded on 23-8-1999. The last Panchnama was in respect of warrant of authorization issued against Shii D.P. Agrawal in respect of locker No. 150, P.N.B.,, Bahraich which was finally concluded on 7-9-1999. The assessing officer passed the block assessment order on 28-9-2001. Regarding limitation, learned authorised representative submitted that the warrant in respect of Neelam Agrawal was finally executed on 23-8-1999 and accordingly block assessment in her case should have been completed within two years from the end of the month for which last warrant was executed. Thus, two years from 31 -8-1999 would expire on 31 -8-2001 and hence block assessment should have been completed by 31-8-2001. As in the present case, block assessment has been completed on 28-9-2001, it is barred by limitation as per limitation provided under Section 158BE.7. The learned Departmental Revenue on the other hand submitted that this is a continuation of search carried out in the case of the assessee by way of warrant of authorization issued in the case of Shri D.P. Agrawal in respect of locker No. 187, P.N.B., Swaroop Nagar, Kanpur. The locker No. 150, P.N.B., Bahraich was in the name of Neelam Agrawal and she owned the entire contents. Therefore, the limitation should be counted from the execution of warrant issued in respect of this locker Ie. locker No. 150, P.N.B., Bahraich. If we count the limitation from this warrant which was finally executed on 7-9-1999 then block assessment order passed on 28-9-2001 would be in order and within limitation.
8. We have considered the submissions of learned Departmental Revenue and have also perused the material on record. In our considered view, the contentions of learned Departmental Revenue are not well founded. A search is deemed to be concluded as soon as f acts relating thereto are recorded in the Panchnama. A search would deem to continue only in respect of that premises only. Even if the search had not concluded in that premises then it cannot mean to have continued in respect of another premises. It is undisputed fact that warrant of authorization issued in the joint name of Shri D.P. Agrawal and Neelam Agrawal was in respect of locker No. 187, P.N.B., Swaroop Nagar, Kanpur where a separate warrant was issued in respect of locker No. 150, P.N.B., Bahraich. Firstly, two banks are at two different places. Locker numbers are different then it could not be said that warrant of authorization issued in the name of Shri D.P. Agrawal and Neelam Agrawal was also in respect of locker No. 150, P.N.B., Bahraich. In fact in law, a warrant of authorization contains two important ingredients; (i) the person against whom the search warrant is issued, (ii) premises in respect of which it is believed that concealed wealth, and/or documents relating to concealed income would be found and in respect of which search warrant is issued. The search warrant requires the mentioning of particulars of the premises to be searched. The name of owner of that premises and its address are important particulars. In one case, owner of the premises and persons searched, may be the same but in another case, they may be different. A premise to be searched has to be properly specified in the warrant. Unless all the particulars are contained in a warrant, the warrant cannot be said to be complete.
Therefore, a warrant issued in respect of one premises owned by a different person (in the present case PNB, Kanpur owning locker No.187) cannot authorize the officers to search another premises. In the present case, locker No. 150, P.N.B., Bahraich is a different premise and therefore search of locker No. 187, P.N.B., Swaroop Nagar, Kanpur cannot be said to continue in respect of locker No. 150, P.N.B., Bahraich. A satisfaction for issuance of warrant has to be necessarily mention all the above important ingredients and, therefore, one warrant for search is specific to a person searched, the premises and its owner.
9. A warrant issued in respect of one premise cannot be valid to search another premises. If the authorities intend to search another premise, they will have to issue another wan ant after recording satisfaction as per law. Our view is supported by the provisions of Section 132(1) which clearly provides that even though warrant of authorization can be issued in respect of any building, place, vessel, or aircraft in respect of which the authorizing officer has reasons to suspect that the person, against whom the search warrant is being issued, has kept or hidden concealed wealth or income or books or documents relating thereto, but once the authorizing officer has issued the warrant against a particular specific building than thereaf ter that warrant cannot be a general warrant authorizing the authorized officers (categories of officers as mentioned in that Section) to enter and search any building, place, vessel, or aircraft which they (authorized officers) choose. In this regard we refer to that Section as under: 132. Search and seizure.(1) Where the Director General or Director or the Chief Commissioner or any such Joint Director or Joint Commissioner as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to believe that: (a) Any person to whom a summons under Sub-section (1) of Section 37of the Indian Income Tax Act, 1922 (11 of 1922), or under Sub-section (1) of Section 131 of this Act, or a notice under Sub-section (4) of Section 32 of the Indian Income Tax Act, 1922, or under Sub-section (1) of Section 142 of this Act was issued to produce, or causeto be produced, any books of account or other documents hasomitted or failed to produce, or cause to be produced, such books of account, or other documents as required by such summons ornotice, or (b) Any person to whom a summons or notice as aforesaid has been ormight be issued will not, or would not, produce or cause to beproduced, any books of account or other documents which will be usefull f or or relevant to, any proceeding under the Indian Income Tax Act, 1922 (11 of 1922), or under this Act, or (c) Any person is in possession of any money, bullion, jewellery or othervaluable article or thing and such money, bullion, jewellery orother valuaible article or thing represents either wholly or partlyincome or property which has not been, or would not be, disclosedf or the purposes of the Indian Income Tax Act, 1922 (11 of 1922), orthis Act (hereinafter in this Section referred to as the undisclosedincome or property), (A) The Director General or Director or the Chief Commissioner orCommissioner, as the case may be, may authorise any Joint Director, Joint Commtissioner, Assistant Director or Deputy Director, AssistantCommissioner or Deputy Commissioner or Income Tax Officer, or (B) Such Joint Director or Joint Commissioner, as the case may be, mayauthorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income Tax Officer, (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah orother receptacle f or exercising the powers conf erred by Clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion,jewellery or other valuable article or thing: Provided that where any building, place, vessel, vehicle or aircraft referred to in Clause (i) is within the area of jurisdiction of any Chief Commissioner or Commissioner, but such Commissioner has no jurisdiction over the person referred to in Clause (a) or Clause (b) or Clause (c), then, notwithstanding anything contained in Section 120 it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the Chief Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue.
Provided further that where it is not possible or practicable to take physical possession of any valuable article or 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 Clause (iii).
(IA) Where any Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the Director General or Director or any other Chief Commissioner or Commissioner or any such Joint Director or Joint Commissioner as maybe empowered in this behalf by the Board to take action under Clauses (f) to (v) of Sub-section (1) are or is kept in any building, place, vessel, vehicleor aircraft not mentioned in the authorisation under Sub-section (1) suchChief Commissioner or Commissioner may, notwithstanding anything contained in Section 120 authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.
For the purposes finding answer to the issue raised by learned Departmental Revenue, we also refer to sub-rules (3), and (4) of rule 112 of Income Tax Rules, 1962.
(3) Any person in charge of or in any building, place, vessel, vehicle or aircraft authorised to be searched shall, on demand by the officer authorised to exercise the powers of search and seizure under Section 132 (hereinafter referred to as the authorised officer) and on production of the authority, eillow him free ingress thereto and afford all reasonable facilities for a search therein.
(4) If ingress into such building or place cannot be so obtained it shall be lawful for the authorised officer executing the authority, with such assistance of police officers or of officers of the Central Government, or of both, as may be required, to enter such building or place and search therein and in order to effect an entrance into such building or place, to break open any outer or inner door or window of any building or place, whether that of the person to be searched or of any other person, if after notification of his authority and purpose and demand of admittance duly made, he cannot otherwise obtain admittance.
10. There are steps and procedure for collecting information, material, their verification and consequent formation of belief by the competent authority, that a particular person or persons has/have a massed income and wealth on which taxes have not been paid or is /are in possession of books of account or documents, which are not produced or are unlikely to be produced on issue of summons by the assessing officer and such books of account or documents or/and concealed wealth representing income on which taxes are not paid are suspected to be kept or hidden at a particular place or building or vessel or aircraft then that competent authority assuming powers under Section 132(1) becomes authorizing officer and authorize certain category of officers as mentioned in that Section to do acts as specifically mentioned in that Section to unearth, and if required, seize, concealed income and weaith of that person /persons from that premise (building, vessel, vehicle, place or aircraft). Even though Section 132(1) mentions "enter and search any building, place, vessel, vehicle or aircraft" and from this the learned Departmental Revenue infers that the authorized officer can search any building place vessel vehicle or aircraft, but Clause (z) of Section 132(1) wherein this phrase is mentioned, refers to the powers of the authorizing officer as to what he can direct the authorized officers to do. The word "any" used in that clause empowers the authorizing officer to issue search warrant in respect of "any" building, place, vessel, vehicle or aircraft where he suspects that concealed income or wealth or books or documents relating thereto, are kept or hidden. The clause does not say "where they suspect". Here "he" refers to the authorizing officer. It provides discretion only to the authorizing officer to direct the search of such building, place, vessel, vehicle or aircraft in respect of which he has recorded suspicion. It does not provide any discretion to the authorized officers to enter and search any other building, place, vessel, vehicle or aircraft where they suspect that concealed income or wealth or books or documents of the person/persons searched are kept or hidden. The building, place, vessel, vehicle or aircraft is specified as soon as reasons for suspicion are recorded by the authorizing officer. The authorized officers can do only those acts or things which are mentioned in the Section and in the warrant and for which they are authorized, such as enter the premise, carry out search, make inventories of valuables/money/bullion/books/documents/other things found in the search or place mark of identification and also effect seizure of sorae or all of them and make inventory thereof as well.
This power of the authorized officers, of being present at the premise, and carrying out search and seizure operation thereat, germinates after the signing of warrant by the authorizing officer and gets exhausted as soon as panchnama is drawn concluding the search. It germinates for a specific premise and gets exhausted at that premise. When Clause (ii) mentions that "break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by Clause (i) where the keys thereof are not available;" or Clause (iia) where it is written that "search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing"; it clearly lays down that the authorized officers have to act within and at the premise for which they are authorized to act. They cannot do authorized acts at any other premise. The use of the word "the" before "building, place, vessel, vehicle or aircraft" in Clause (iia) is in respect of the building, place, vessel, vehicle or aircraft for which they are authorized as per Clause (i) and not any other building, place, vessel, vehicle or aircraft. Rule 112 of IT rules also, as referred above, makes it clear that the authorized officers can enter, search and do all other acts for which they are authorized, in respect of the premise for which they are authorized. There is no general power in respect of any premise which they consider suspected to enter and carry out search operation. Rule 112(2) requires the person in charge of or in any building, place, vessel, vehicle or aircraft authorised to be searched to cooperate with the authorized officers in carrying out the search operation and in discharging of their statutory duties. Use of word "such" before "building or place" refers to the building or place which is mentioned in the warrant of authorization. Warrant of authorization in Form No. 45 contains following part: And whereas I have reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing have been kept and are to be found in (specify particulars of the building/place/vessel/vehicle/aircraft) which is within my area of jurisdiction, Thus there is no discretion available to the authorized officers to enter and search any other premise except the one for which they are authorized by the authorizing officer.
11. The arguments of learned DR are further not tenable even in view of column No. 8 of the Panchnama wherein it is written that. search of locker No. 187, P.N.B., Swaroop Nagar, Kanpur is finally concluded.
Therefore, question of any search on locker No. 187, P.N.B, Swaroop Nagar, Kanpur cannot be said to be continuing or temporarily concluded, in our considered view, even where a search is not finally concluded, then it can only continue, on subsequent dates only on that very same premises because authority given to the authorised officers by virtue of warrant specific is also premise specific. As a result, we reject this argument of learned DR.12. Now coming to the limitation, we notice that under Section 158BE, as amended by Finance Act, 2002, a block assessment has to be completed within two years from the end of the month in which search was executed. We refer Sub-section (1) of Section 158BEi as under: (a) within one year from the end of the month in which the last of the authorizations for search under Section 132 or for requisition under Section 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 after 30-6-1995, but before 1-1-1997; (b) within two years from the end of the month in which the last of the authorizations for search under Section 132 or for requisition under Section 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 1-1-1997.
Explanation 2. For the removal of doubts, it is hereby declared that the authorisation referred to in Sub-section (1) shall be deemed to have been executed, (a) in the case of search, on the conclusion of search as recorded in the last panchnama drav/n in relation to any person in whose case the warrant of authorisation has been issued, (b) in the case of requisition under Section 132A, on the actual receiptof the books of account or other documents or assets by theAuthorised Officer.
Explanation 2: given as above under Section 158BE is relevant for our purposes. Thus, a search is executed when the last Panchnama was drawn. It is undisputed fact that last Panchnama, in this case of the assessee, was drawn on 23-8-1999 which was in pursuant to warrant of authorization issued in the joint name of Shri D.P. Agrawal and Neelam Agrawal in respect of locker No. 187, P.N.B., Swaroop Nagar, Kanpur. It is not a claim of the revenue that any other warrant of authorization against Neelam Agrawal was issued.
Accordingly, the limitation has to be counted from 23-8-1999. The period of two years of limitation has to start with end of the month when last Panchnama was drawn. Thus, two years would start on 1-9-1999 and would come to an end on 31 -8-2001. In this regard, it would be relevant to refer the decision of Hon'ble Kerala High Court in the case of T.O. Abraham & Co. v. Asstt. Director of Income Tax (Inv.) (1989) 238 ITR 501' wherein it is clearly held that limitation starts from the end of the month of completion of the search. Head note from that decision are as under: Section 132 of the Income Tax Act, 1961, authorizes search and seizure. If the authorised officer has reason to believe in consequence of information that any person is in possession of money, income etc, which has not been disclosed. Sub-section (5) of Section 13 2 of the Act obliges the Income Tax Officer to pass appropriate orders within 120 days of seizure. The special procedure given under Chapter XIV-B gives a separate time limit for completion of block assessment under Section 158BE of the Act. Section 158B of the Act defines block period as consisting of the previous years relevant to ten assessment years preceding the previous year in which the search was conducted and the period up to the date of the commencement of the search. Section 158BE of the Act prescribed the time limit of one year for the completion of block assessment. The period of one year starts from the execution of the authorization.
On a plain reading of Section 158BE, it could only mean that the one year period will start from the end of the month of the execution of the authorization meaning thereby after completion of search or implementation of the search order. Any other interpretation would be inconsistent with the object for which the special provision has been enacted. Only after the completion of the search, the department will have the materials collected and be in a position to begin the assessment.
13. In the present case, there is no claim of the revenue that there was any extension of time limit because of any injunction by the court or otherwise as provided in Explanation (1) to Section 158BE.Accordingly, assessment framed on 28-9-2001 is barred by limitation and, therefore, cannot be uphelearned The issue of limitation was also considered by Income Tax Appellate Tribunal Bangalore Bench in C.Ramaiah Reddy v. Asstt. CIT (Investigation) where it is held (part of the head note) as under: ...The time limit under Section 158BE(1) to pass an order under Section 158BC(c) is to commence from the end of the month in which the last of the authorisations for search under Section 132 is executed. When such authorisation is said to be executed, is explained by way of Explanation 2 to Section 158BE as introduced by the Finance (No. 2) Act, 1998, with retrospective effect from 1-7-1995. As per the said explanation the time limit commences on conclusion of search as recorded in the last Panchnama drawn....
14. The block assessment is, therefore, annulled as being time-barred.
The appeal of the assessee is therefore allowed whereas the appeal of the revenue becomes infructuous and, therefore, dismissed.