M/S. LATE PRAVIN M SHAH, MUMBAI v. THE DY CIT CEN CIR-47, MUMBAI

ITSSA 31/MUM/2008 | misc
Pronouncement Date: 31-03-2011 | Result: Allowed

Appeal Details

RSA Number 3119916 RSA 2008
Assessee PAN AKQPS3958K
Bench Mumbai
Appeal Number ITSSA 31/MUM/2008
Duration Of Justice 3 year(s) 4 day(s)
Appellant M/S. LATE PRAVIN M SHAH, MUMBAI
Respondent THE DY CIT CEN CIR-47, MUMBAI
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-03-2011
Date Of Final Hearing 11-01-2011
Next Hearing Date 11-01-2011
Assessment Year misc
Appeal Filed On 27-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER IT(SS) NO.31/MUM/2008 BLOCK PERIOD 01.04.1996 TO 31.12.2002 LATE PRAVIN M. SHAH L/H: SHRI VIRANG P. SHAH 71 SAVARKAR SADAN FLAT NO.5&6 SHIVAJI PARK DADAR (W) MUMBAI 400 028 ASSESSEE VS DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 47 MUMBAI-400 020 REVENUE IT(SS) NO.32/MUM/2008 BLOCK PERIOD 01.04.1996 TO 31.12.2002 SHRI NIRMAL BANWANI B-509 PEARL APARTMENTS 3RD CROSS LANE LOKHANDWALA COMPLEX ANDHERI (W) MUMBAI 400 058 ASSESSEE VS DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 47 MUMBAI-400 020 REVENUE IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 2 IT(SS) NO.52/MUM/2008 BLOCK PERIOD 01.04.1996 TO 31.12.2002 DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 47 MUMBAI-400 020 REVENUE VS LATE SHRI PRAVIN M. SHAH L/H: SHRI VIRANG P. SHAH 71 SAVARKAR SADAN FLAT NO.5&6 SHIVAJI PARK DADAR (W) MUMBAI 400 028 ASSESSEE PAN: AKQPS 3958 K IT(SS) NO.53/MUM/2008 BLOCK PERIOD 01.04.1996 TO 31.12.2002 DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 47 ROOM NO.658 6TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020 REVENUE VS SHRI NIRMAL ASSUDOMAL BANWANI B-509 PEARL APARTMENTS 3RD CROSS LANE LOKHANDWALA COMPLEX ANDHERI (W) MUMBAI 400 058 ASSESSEE PAN: AAHPB 8981 E ASSESSEE BY: S/SHRI S.K. TULSIYAN & SHASHI TULSIYAN REVENUE BY: SHRI AJIT KUMAR SINHA IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 3 O R D E R PER R.S. PADVEKAR JM IN THIS BATCH OF FOUR APPEALS TWO APPEALS ARE FILE D BY THE TWO DIFFERENT ASSESSEES WHICH ARE ARISING OUT OF THE A SSESSMENT FRAMED UNDER SEC. 158BC OF THE ACT IN CONSEQUENCE OF THE S EARCH AND SEIZURE OPERATION U/S.132(1) OF THE ACT. THE REVENUE HAS A LSO FILED THE CROSS APPEALS IN CASES OF BOTH THE ASSESSEES CHALLENGING THE IMPUGNED ORDERS OF THE LD. CIT (A) GIVING PART RELIEF TO THE ASSESS EES. AS THE APPEALS BY BOTH THE ASSESSEES ARE ARISING OUT OF THE COMMON SE ARCH AND SEIZURE OPERATION AND THE ISSUES ARE IDENTICAL HENCE THI S BATCH OF APPEALS ARE BEING DISPOSED OFF BY THIS COMMON ORDER. 2. WE FIRST TAKE THE APPEAL FILED BY SHRI NIRMAL S. BANWANI BEING IT(SS) 32/MUM/2008. THE ASSESSEE HAS TAKEN MULTIPLE GROUNDS. THE FIRST ISSUE IS WHETHER THE ASSESSMENT ORDER IS BAD IN LAW AND VOID AB INITIO AS SAME IS PASSED BEYOND A TIME LIMIT FIXED UNDER SEC. 158 BE OF THE ACT AND THIS ISSUE ARISES FROM GROUND NOS.1.0 T O.3.2 IN ASSESSEES APPEAL. THE EFFECTIVE GROUNDS ON ABOVE ISSUE ARE A S UNDER:- 1.0 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJEC TING THE APPELLANTS CLAIM THAT THE ASSESSMENT MADE UNDER SE CTION 158BC OF THE ACT WAS BARRED BY LIMITATION. 2.0 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN IGNOR ING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF B.K. NOWLAKH AND OTHERS V. UNION OF INDIA AND OTHERS (19 2 ITR IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 4 436) AND ALSO THE DECISION OF THE HONBLE BOMBAY HI GH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. MRS. S ANDHYA P. NAIK AND OTHERS (253 ITR 534) AND REJECTING THE AP PELLANTS PLEA THAT THE SEARCH STOOD CONCLUDED ON 31.12.2002 AND NOT ON 07.02.2003 WHEN THE PROHIBITORY ORDER UNDER SECT ION 132(3) OF THE ACT PLACED ON ONE WOODEN CABINET WAS LIFTED. 3.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJEC TING THE APPELLANTS CONTENTION THAT THE TIME TAKEN FOR SPEC IAL AUDIT U/S.142(2A) OF THE ACT SHOULD NOT BE EXCLUDED FOR T HE PURPOSES OF CALCULATING THE TIME LIMIT FOR COMPLETI ON OF ASSESSMENT AS THE SPECIAL AUDIT WAS DIRECTED AT THE FAT END OF THE TIME-BARRING LIMIT. 3.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJEC TING THE APPELLANTS CONTENTION THAT THE DIRECTION FOR SPECI AL AUDIT UNDER SECTION 142(2A) OF THE ACT WAS ISSUED WITHOUT GIVING AN OPPORTUNITY TO THE APPELLANT OF BEING HEARD. 3. THE FACTS PERTAINING TO THE CASE ARE AS UNDER. THE ASSESSEE WAS INTERCEPTED BY THE OFFICERS OF AIR INTELLIGENCE UNI T (AIU) ON 30.12.2002 WHILE CARRYING CASH OF ` 5 LAKHS ON JET AIRWAYS FLIGHT NO.9W331 TO NEW DELHI. THE ASSESSEE WAS ASKED THE EXPLANATION IN R ESPECT OF SOURCE OF SAID CASH FOUND WITH HIM. THE ASSESSEE STATED THAT THE SAID CASH BELONGS TO M/S. N.A. FABRIC P. LTD. AND HE WAS CARR YING SAID CASH FOR MAKING CERTAIN PURCHASES IN NEW DELHI. IT APPEARS T HAT ON INFORMATION OF THE AIU ON 30/12 2002 SURVEY U/S.133A OF THE ACT W AS CONDUCTED AT M/S. N.A. FABRICS P. LTD. AND OTHER GROUP CASES AT 3/14-15 MOHATTA IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 5 MARKET PALTAN ROAD MUMBAI 400 001. SUBSEQUENTLY THE SURVEY ACTION WAS CONVERTED INTO THE SEARCH AND SEIZURE OPERATION ON THE SAME DAY AS IT WAS NOTICED THAT ONE OF THE CONCERN M/S. MKT SAL ES WAS INDULGED IN THE INFLATING THE PURCHASES. AS NOTED BY THE A.O. IN THE SEARCH AND SEIZURE OPERATION FOLLOWING CONCERNS AS WELL AS AS SESSEES WERE COVERED:- (I) NIRMAL A. BANWANI (II) LATE SHRI PRAVIN M. SHAH (III) M/S. N.A. FABRICS P. LTD. (IV) MKT SALES (V) VIRAG TRADING CO. 4. SO FAR AS THE ASSESSEE IS CONCERNED AS NOTED BY THE A.O. THE SEARCH OPERATION COMMENCED ON 30.12.2002 AND ENDED ON 7.2.2003 AS ON THAT DATE THE LAST PANCHNAMA FOR LIFTING A PROH IBITORY ORDER WAS MADE WHICH WAS PASSED UNDER SEC. 132(3) OF THE ACT ON 31/12/02. DURING THE COURSE OF SEARCH OPERATION COMPUTER DIS C VARIOUS DOCUMENT /LOOSE PAPERS WERE FOUND IN THE OFFICE PREMISES OF THE ASSESSEE AND OTHER ENTITIES WHICH WERE SEIZED BY THE SEARCH PARTY. TH E A.O. HAS STATED THAT THE ASSESSEE AND OTHER ENTITIES/CONCERNS WERE ENGAG ED IN THE BUSINESS OF SUPPLY AND TRADING IN THE ITEMS LIKE RICE DGPS NE W NOTE BOOKS DHS CYBER CAFE SEWING MACHINES SOAP DC MAHATEX POLI CE UNIFORM/WOOLEN JERSYS AND MISCELLANEOUS MATERIAL TO THE POLICE DEPARTMENT AND OTHER GOVT. ORGANIZATIONS AND DEPTS. .ETC. IN CONSEQUENCE OF THE SEARCH ACTION THE A.O. ISSUED N OTICE TO THE ASSESSEE TO FILE THE RETURNS U/S.158BC DATED 14.7.2003 AND A SSESSEE FILED THE RETURNS OF INCOME ON 31.5.2004. THE ASSESSMENT ORD ER IN THE CASE OF THE ASSESSEE WAS FINALLY PASSED ON 6.7.2007 CONSISTING OF THE BLOCK PERIOD FROM 1.4.1996 TO 30.12.2002. FOR DECIDING THE ISSU E OF THE LEGALITY AND VALIDITY OF THE ASSESSMENT ORDER FOR ALLEGEDLY PASS ED BEYOND THE PERIOD OF THE LIMITATION SPECIFIED IN SECTION 158BE WE HAVE TO TAKE INTO CONSIDERATION DIFFERENT DATES AS WELL AS THE EVENTS TOOK PLACE FROM THE DATE OF SEARCH TO THE PASSING OF THE ASSESSMENT ORD ER. IN THE PRESENT IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 6 CASE THE ASSESSEE HAS APPROACHED THE SETTLEMENT CO MMISSION UNDER SEC. 245C AND THE A.O. HAS ALSO DIRECTED THE ASSESS EE TO GET THE SPECIAL AUDIT REPORT U/S.142(2A) OF THE ACT IN RESPECT OF T HE BOOKS OF ACCOUNTS FOUND DURING THE SEARCH OPERATION. 5. THE LD. COUNSEL VEHEMENTLY ARGUED THAT AS PER TH E SEARCH WARRANT AS WELL AS PANCHNAMA ON RECORD THE SEARCH STARTED AT RESIDENCE OF THE ASSESSEE ON 30.12.2002 WHICH WAS ENDED ON 31.12.200 2. IT IS ARGUED THAT THE LAST PANCHNAMA OF THIS CASE WAS DRAWN ON 3 1.12.2002 AND THEREAFTER THERE IS NO FURTHER ACTION EITHER IN TH E FORM OF FURTHER SEARCH OR FURTHER PANCHNAMA. HE ARGUES THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR THE BLOCK PERIOD ON 31.5.2004. AS PER TH E LAST PANCHNAMA DRAWN ON 31.12.2002 THE A.O. WAS BOUND TO PASS THE ASSESSMENT ORDER AS PER THE SECOND PROVISO TO SECTION 158BE WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH LAST OF SEARCH WARRANT WA S EXECUTED. HE THEREFORE PLEADED THAT TIME LIMIT FOR PASSING THE ASSESSMENT ORDER HAD EXPIRED ON 31.12.2004; BUT THE ASSESSMENT ORDER IS PASSED MUCH AFTER THE EXPIRY OF SAID STATUTORY TIME LIMIT. HE ARGUES THAT THE ASSESSEE FILED AN APPLICATION BEFORE THE SETTLEMENT COMMISSION U/S .245C OF THE ACT ON 18.1.2005 BUT THAT WAS ONLY AFTER THE EXPIRY OF THE SPECIFIED TIME LIMIT AS PER THE PROVISIONS OF SECTION 158BE WHICH WAS REJEC TED VIDE ORDER DATED 29.8.2006 AND THE SAID ORDER WAS RECEIVED BY THE LD COMMISSIONER OF INCOME TAX (C.I.T.) ON 15.9.2006. IT IS ARGUED THA T THE A.O. ISSUED THE DIRECTIONS FOR THE SPECIAL AUDIT REPORT U/S.142(2A) ON 9.11.2006 JUST FOR THE SAKE OF EXTENDING THE TIME LIMIT AND ACTION OF THE A.O. ISSUING DIRECTIONS FOR SPECIAL AUDIT WAS NOT BONA FIDE AND NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE OF BEING HEARD BEFORE PASSING SUCH DIRECTIONS. HE FURTHER ARGUES THAT THE ASSESSEE FILED THE SECOND A PPLICATION BEFORE THE SETTLEMENT COMMISSION ON 22.12.2006 BUT THE SAID AP PLICATION WAS REJECTED VIDE ORDER DATED 17.4.2007. HE FURTHER SU BMITS THAT THE SPECIAL AUDITORS APPOINTED BY THE A.O. AS PER THE PROVISION S OF SECTION 142(2A) IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 7 SUBMITTED THEIR SPECIAL AUDIT REPORT ON 7.5.2007. H E SUBMITS THAT MEANWHILE ON 12.6.2007 PROVISIONAL ATTACHMENT ORDER U/S.181(B) WAS PASSED BY THE A.O. AND FINALLY THE ASSESSMENT ORDE R WAS PASSED ON 6.7.2007. IT IS ARGUED THAT THE TIME LIMIT FOR PAS SING THE ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE AS PER THE PROVIS IONS OF SECTION 158BE EXPIRED ON 31.12.2004 AS ADMITTEDLY SEARCH WAS COND UCTED ON 30.12.2002 AS THE WARRANT OF AUTHORIZATION WAS EXEC UTED. HE ARGUES THAT SUBSEQUENT EVENT LIKE FILING OF THE APPLICATIO N TO THE SETTLEMENT COMMISSION BY THE ASSESSEE TIME CONSUMED IN THE SE TTLEMENT PROCEEDINGS BEFORE THE SETTLEMENT COMMISSION COMMU NICATION OF THE ORDER OF THE SETTLEMENT COMMISSION TO THE LD. C.I.T MUMBAI AND ORDER/DIRECTIONS FOR REFERENCE TO THE SPECIAL AUDIT BY THE A.O. AND TIME TAKEN FOR FURNISHING THE AUDIT REPORT ARE NOT MATER IAL BECAUSE ALL THE EVENTS AFTER THE STATUTORY TIME LIMIT PRESCRIBED U/ S.158BE(1)(B) OF THE ACT AND HENCE THE BENEFIT FOR FURTHER EXTENSION OF THE TIME AS PER EXPLANATION-1 BELOW SEC. 158BE CANNOT BE GIVEN TO T HE A.O. 6. HE FURTHER SUBMITS THAT PROBABLY THE REVENUE MAY ARGUE THAT IN RESPECT OF THE M/S. N.A. FABRICS P. LTD. THE LAST P ANCHANAMA WAS DRAWN ON 7.2.2003 AND HENCE THE ASSESSEE BEING DIRECTOR OF THE SAID COMPANY THE A.O. HAD A TIME LIMIT TO PASS THE ORDER UPTO 28 TH FEBRUARY 2005 AND HENCE THE BENEFIT OF THE EXTENSION OF THE TIME IN VIEW OF THE EXPLANATION 1 TO SECTION 158BE IS AVAILABLE TO THE A.O. CANNOT BE ACCEPTED. HE FURTHER SUBMITTED THAT THE A.O. PASSED THE DIRECTIO NS FOR THE SPECIAL AUDIT U/S.142(2A) OF THE ACT IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AS BEFORE PASSING THE ORDER THE ASSESSEE WA S NOT GIVEN AN OPPORTUNITY OF BEING HEARD. MOREOVER FOR TAKING BE NEFIT OF FURTHER EXTENTION OF TIME LIMIT UNDER EXPL.-1(B) TO SEC. 15 8BE THE A.O. USED SAID PROVISION AND IT CAN NOT BE SAID TO BE BONA FIDE AC T OF THE A.O. IT IS ARGUED THAT HENCE DIRECTIONS FOR THE SPECIAL AUDIT GIVEN BY THE A.O. U/S.142(2A) ARE VOID AB INITIO AND BAD IN LAW AND THE PERIOD BETWEEN THE IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 8 DATE OF PASSING THE DIRECTIONS/ORDER U/S.142(2A) AN D TO THE DATE OF FURNISHING THE SPECIAL AUDIT REPORT CANNOT BE CONSI DERED UNDER CLAUSE (II) TO EXPLANATION 1 BELOW SECTION 158BE FOR EXTEN DING THE PERIOD OF LIMITATION. THE LD. COUNSEL HEAVILY RELIED ON THE DECISION IN THE CASE OF RAJESH KUMAR AND OTHERS VS. DCIT 287 ITR 97 (SC). THE LD. COUNSEL ALSO RELIED ON THE DECISION IN THE CASE OF CIT VS. MRS. SANDHYA P. NAIK AND OTHERS 253 ITR 534 (BOM) (PANJIM BENCH). THE L D. COUNSEL FURTHER ARGUES THAT IN THE CASE OF M/S. N.A. FABRICS P. LTD . M/S. MKT SALES LATE SHRI PRAVIN M. SHAH AND PRESENT ASSESSEE SHRI NIRMAL A. BANWANI WARRANT OF AUTHORIZATION WAS ISSUED BY THE ADIT DAT ED 30.12.2002 AND THAT WAS IN RESPECT OF BUSINESS PREMISES AT 3/14-15 MOHATTA MARKET PALTON ROAD MUMBAI 400 001. SO FAR AS PANCHNAMA I N RESPECT OF EXECUTION OF THE SAID WARRANT IS CONCERNED THERE I S NO MENTION OF NAME OF SHRI BANWANI IN THE PANCHNAMA AND HENCE WARRANT OF AUTHORIZATION WAS ONLY EXECUTED TO THE EXTENT OF M/S. N.A. FABRIC S P. LTD. AND MKT SALES. THE LD. COUNSEL REFERRED TO THE COPY OF THE PANCHNAMA DATED 31.12.2002 AND SUBMITS THAT AS PER ANNEXURES TO THE PANCHNAMA 5 LAKHS WERE SEIZED AND THE COMPUTER BACK-UP WAS TAKE N ON THE 7 CDS. HE FURTHER SUBMITS THAT DURING THE COURSE OF THE EX ECUTION OF THE SEARCH WARRANT THERE WAS WOODEN CUPBOARD WHICH WAS SUBJEC TED TO THE PROHIBITORY ORDER UNDER SEC.132(3) AND THE AUTHORIZ ED OFFICER MADE ANOTHER PANCHNAMA ON 7.2.2003 AND IT IS SURPRISING THAT IN THAT WOODEN CUPBOARD/SHELF ONLY ONE FILE CONTAINING 21 LOOSE-PA PERS WAS FOUND AND IT NOT KNOWN WHAT WAS NECESSITY ISSUE PROHIBITORY O RDER ON SAID WOODEN CUPBOARD WHEN IT WAS NOT DIFFICULT TO SEIZED SAID S MALL FILE. HE FURTHER PLEADED THAT EVEN IN THE CASE OF THE N.A. FABRICS A ND OTHER GROUP CASES THE SEARCH WAS CONCLUDED ON 31.12.2002 AND IN THIS CASES ALSO THE A.O. SHOULD HAVE PASSED THE ASSESSMENT ORDERS ON OR BEFO RE 31.12.2004 AS ADMITTEDLY IN ASSESSEES CASE THERE WAS ONLY ONE WA RRANT OF AUTHORIZATION AND NOTHING WAS DIFFICULT FOR THE SEARCH PARTY TO T AKE ONE SINGLE FILE FROM WOODEN CUPBOARD ON THE SAME DAY. HE FINALLY CONC LUDED HIS ARGUMENT IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 9 BY SUBMITTING THAT AS THE A.O. FAILED TO PASS THE A SSESSMENT ORDERS BEFORE 31.12.2004 AND SAME IS REQUIRED TO BE QUASHE D AND CANCELLED. 7. THE LD. CIT D.R. VEHEMENTLY SUBMITS THAT EVEN IF IN THE CASE OF THE ASSESSEE THE SEARCH AT THE RESIDENCE WAS CONCLUDED ON 31.12.2002 BUT AS FAR AS BUSINESS PREMISES ARE CONCERNED THE SEAR CH WAS ONLY CONCLUDED ON 7 TH FEBRUARY 2003. HE SUBMITS THAT THE ASSESSEE IS A DIRECTOR OF N.A. FABRICS P. LTD. AND AS PER THE WAR RANT OF AUTHORIZATION DATED 30.12.2002 THE ASSESSEE WAS ALSO SUBJECTED TO THE SEARCH & SEIZURE AND LAST OF THE PANCHNAMA THUS DRAWN ON 7.2 .2003 WHEN THE PROHIBITORY ORDER DATED 31.12.2002 WAS LIFTED. HE THEREFORE PLEADED THAT THE A.O. HAS TIME UPTO 20 TH FEBRUARY 2005 TO COMPLETE THE ASSESSMENT. THE ASSESSEE FILED APPLICATION TO THE SETTLEMENT COMMISSION ON 18.1.2005 AND ORDER REJECTING THE APP LICATION PASSED BY THE SETTLEMENT COMMISSION WAS RECEIVED BY THE LD. C IT MUMBAI ON 29.08.2006. HE SUBMITS THAT IN VIEW OF THE EXPLANA TION 1 TO SECTION 158BE THE A.O. WAS FURTHER ENTITLED TO MINIMUM 60 D AYS TIME. HE FURTHER SUBMITS THAT CONSIDERING THE COMPLEXITY OF THE BOOKS OF ACCOUNTS SEIZED DURING THE SEARCH OPERATION THE A.O. DECIDE D TO REFER THE MATTER FOR THE SPECIAL AUDIT U/S.142(2A) OF THE ACT AND TH E SPECIAL AUDIT REPORT WAS FURNISHED ON 7.5.2007 AND ASSESSMENT ORDER WAS PASSED ON 6.7.2007 AND HENCE THE ASSESSMENT ORDER IS PASSED W ITHIN THE TIME LIMIT PROVIDED U/S.158BE OF THE ACT. THE LD. DR. RELIED ON THE FOLLOWING PRECEDENTS:- (I) CHITRA DEVI SONI -313 ITR 182 (P&H) (II) M. B. LAL -279 ITR 298 (DEL) (III) M. BALA LTD. -95 ITD 489 (DEL)(SB) (IV) SHRI C. RAMAAIAH REDDY -87 ITD 489 (BANG)(SB) (V) PROMAIN LTD. -95 ITD 489 (DEL)(SB) IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 10 8. THE LD. DR. FURTHER SUBMITS THAT THE LEGISLATURE HAS USED THE EXPRESSION IN RELATION TO IN SECTION 158BE AND TH E SAID EXPRESSION IS NOT SYNONYMS WITH THE EXPRESSION IN RESPECT OF. HE FURTHER SUBMITS THAT AS PER THE LANGUAGE USED IN THE SAID PROVISION IT IS NOT NECESSARY THAT PANCHNAMA SHOULD BE DRAWN IN RESPECT OF THE AS SESSEE ONLY AND EVEN A PANCHANAMA WHICH IS IN RELATION TO THE ASSES SEE IS ALSO RELEVANT FOR THE PURPOSE OF COMPUTING THE LIMITATION U/S.158 BE AS IT IS REVEALED THAT HE WAS PARTNER IN OTHER CONCERN AS WELL AS DIR ECTOR OF M/S. N. A. FABRICS PVT. LTD. HE FURTHER PLEADED THAT THE ISSU E OF LIMITATION FOR PASSING THE ASSESSMENT ORDER RAISED BY THE ASSESSEE IS WITHOUT ANY MERIT. 9. IN THE REJOINDER THE LD. COUNSEL SUBMITS THAT E VEN IF IT IS PRESUMED FOR THE SAKE OF ARGUMENT THAT THE A.O. HAD A TIME LIMIT BY 28 TH FEBRUARY 2005 BUT THE BENEFIT OF FURTHER EXTENSION OF TIME OF CLAUSE (II) TO EXPLANATION 1 BELOW SECTION 158BE CANNOT BE GIVEN T O THE ASSESSEE AS THE ORDERS/DIRECTION U/S.142(2A) OF THE ACT FOR SPE CIAL AUDIT WAS PASSED WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE AND THE SAID ORDER IS BAD IN LAW AND VOID AB INITIO . HENCE THE PERIOD FROM THE PASSING OF THE ORDER TILL THE DATE OF FURNISHING OF THE AUDIT REPORT I.E. 9.1 1.2006 TO 7.5.2007 CANNOT BE CONSIDERED ADDITIONAL TIME AVAILABLE TO T HE A.O. AND AS THE ORDER OF THE SETTLEMENT COMMISSION WAS RECEIVED BY LD. CIT ON 16.9.2006 HENCE THE A.O. WAS BOUND TO PASS THE ORD ER ON 14.11.2006. THE SECOND APPLICATION BEFORE THE SETTLEMENT COMMIS SION WHICH WAS FILED ON 22.12.2006 IS HAVING NO BEARING ON THE ISS UE OF LIMITATION AS IT WAS FILED AFTER THE STATUTORY LIMITATION FOR PASSIN G THE ASSESSMENT ORDER AS PER THE PROVISIONS OF SECTION 158BE HAS EXPIRED. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES ALSO CONSCIOUSLY CONSIDERED ALL THE PRECEDENTS AS WELL A S THE WRITTEN SUBMISSIONS MADE BY BOTH THE PARTIES. WE HAVE GIVE N A DIRECTION TO THE IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 11 LD. CIT D.R. FOR PRODUCTION OF THE ORIGINAL FILE OF SEARCH OPERATION MORE PARTICULARLY TO EXAMINE THE WARRANT OF AUTHORIZATIO N AS WELL AS THE PANCHNAMAS. AS PER THE DIRECTIONS OF THE BENCH TH E LD. CIT D.R. HAS PRODUCED THE SAID FILE WHICH WAS PERUSED AND ALSO TOOK INTO CONSIDERATION DURING THE COURSE OF THE HEARING. TH E LD. CIT D.R. HAS FILED XEROX COPIES OF WARRANT OF AUTHORIZATION AS W ELL AS PANCHNAMAS WHICH WERE AVAILABLE IN THE ORIGINAL FILE. THE ASS ESSEE HAS RAISED OBJECTION BY TAKING THE CONTENTION THAT IN CASE OF THE ASSESSEE THE SEARCH WAS CONCLUDED ON 31.12.2002 AND ASSESSMENT ORDER PA SSED BY THE A.O. ON 06/07/2007 IS BEYOND TIME LIMIT PRESCRIBED UNDER SEC.158BE AND HENCE IS BAD IN LAW AND VOID AB INITIO . IT IS TO PUT ON RECORD THAT THE ORIGINAL WARRANT OF AUTHORIZATION ISSUED IN THE NAM E OF THE ASSESSEE WAS NOT FOUND IN THE FILE AND ONLY THE COPY OF THE PANC HNAMA WAS AVAILABLE IN CASE OF SEARCH OF ASSESSEES RESIDENCE. AS PER THE PANCHNAMA DRAWN DATED 31.12.2002 IT IS SEEN THAT WARRANT OF AUTHORI ZATION IS DATED 30.12.2002 ISSUED U/S.132 OF THE ACT IN THE CASE OF THE ASSESSEE FOR SEARCH OF HIS RESIDENCE. IT APPEARS THAT THE SAID WARRANT OF AUTHORIZATION WAS IN RESPECT OF HIS RESIDENCE AT B-509 PEARL APA RTMENTS 3 RD CROSS LANE LOKHANDAWALA COMPLEX ANDHERI (WEST) MUMBAI -400 058. THE SEARCH STARTED ON 30.12.2002 AND THE SAME WAS CLOSE D DOWN I.E. ON 31.12.2002. THERE IS A ONE MORE WARRANT (SR. NO.MU M-C.2813 DATED 30.12.2002) WHICH IS COMMONLY ISSUED IN THE NAMES O F (I) M/S. N.A. FABRICS P. LTD. (II) M/S. MKT SALES (III) SHRI NI MRAL A. BANWANI (THE ASSESSEE) & (IV) SHRI PRAVIN SHAH. THE SAID WARRAN T WAS EXECUTED ON 30.12.2002 IN THE BUSINESS PREMISES AT 3/14-15 MOH ATTA MARKET FALTAN ROAD MUMBAI 400 001. IT IS THE CASE OF THE DEPARTMENT THAT M/S. N.A. FABRICS P. LTD. AND M/S. MKT SALES WHICH IS PARTNERSHIP CONCERN IN WHICH LATE SHRI PRAVIN SHAH WAS HAVING 9 0% SHARE. THE ASSESSEE AND LATE SHRI PRAVIN SHAH BOTH HAD COMMON BUSINESS AND THEY WERE SHARING THE PROFIT EQUALLY. THE ASSESSEE IS D IRECTOR IN N.A. FABRICS P. LTD. AS PER THE COPY OF THE PANCHNAMA THE ASSE SSEES NAME IS NOT IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 12 MENTIONED AND ONLY THE NAME OF M/S. N.A. FABRICS P. LTD. AND M/S. MKT SALES ARE MENTIONED. IN THE CASE OF THE PRESENT AS SESSEE THOUGH THERE ARE TWO WARRANTS ISSUED AND EXECUTED ON THE SAME DA Y THE PANCHNAMAS WERE ALSO COMPLETED ON THE SAME DAY I.E. 31/12/02. WHILE EXECUTING THE WARRANT IN CASE OF M/S. N.A. FABRICS & OTHERS AUTH ORIZED OFFICER ISSUED PROHIBITORY ORDER IS ALSO IN THE NAME OF M/S. N.A. FABRICS P. LTD. IN WHICH THE ASSESSEE IS A DIRECTOR. IT MEANS THAT TH E SAID WOODEN CUPBOARD WAS BELONGING TO AND IN POSSESSION OF M/S. N.A. FABRICS P. LTD. ANOTHER PANCHNAMA WAS DRAWN ON 7.2.2003 IN WHICH IT IS STATED THAT IT IS IN CONTINUATION OF THE PROCEEDINGS DATED 31.12.2 002 AND AS PER ANNEXURE A IT IS SEEN THAT ONE LOOSE PAPER FILE C ONTAINING 25 PAGES WAS SEIZED ON 7.2.2003. WE FAIL TO UNDERSTAND WHAT WA S THE DIFFICULTY FACED BY THE AUTHORIZED OFFICER FOR NOT SEIZING THAT ONE FILE WHICH WAS LYING IN THE WOODEN CUPBOARD CONTAINING 21 PAGES. WE FIND T HAT THERE IS NO OTHER WARRANT OF AUTHORIZATION IN RESPECT OF BUSINE SS PREMISES OF THE ASSESSEE. 11. IN THE CASE OF SANDHYA NAIK (SUPRA) THE HONBL E HIGH COURT HAS CONSIDERED THE IDENTICAL SITUATION. IN THE SAID DE CISION THEIR LORDSHIPS HAVE LAID DOWN THE FOLLOWING PROPOSITIONS:- (I) ACTION U/S.132(3) OF THE I.T. ACT CAN BE RESORTED T O ONLY IF THERE IS ANY PRACTICAL DIFFICULTY IN SEIZING THE IT EM WHICH IS REQUIRED TO BE SEIZED. (II) WHEN THERE IS NO PRACTICAL DIFFICULTY THEN THE OFFI CER IS LEFT WITH NO OTHER ALTERNATIVE BUT TO SEIZE THE ITEM IF HE IS OF THE VIEW THAT IT REPRESENTED THE UNDISCLOSED INCOME. (III) SIMPLY STATING IN THE PANCHNAMA THAT THE SEARCH IS TEMPORARILY SUSPENDED AUTHORIZED OFFICER CANNOT KE EP SUCH PROCEEDINGS IN OPERATION BY PASSING PROHIBITORY ORD ER IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 13 TECHNICALLY EXTENDED TIME LIMIT CANNOT BE USED FOR PASSING THE ASSESSMENT ORDER. 12. IN THE CASE OF MS. SANDHYA NAIK (SUPRA) AFTER C OMPLETION OF THE SEARCH PROHIBITORY ORDER U/S.132(3) OF THE ACT WAS PASSED COVERING ONE CUPBOARD IN WHICH ALL THE SILVER ARTICLES WHICH WER E FOUND WERE PLACED IN A SEAL. ON 26.10.1996 6 KGS OF THE SILVER VESSELS FROM THE SAID CUPBOARD WERE RELEASED AND FURTHER ORDER WAS PASSED U/S.132( 3) OF THE ACT AND THE SAID CUPBOARD WAS PUT TO SEAL ONCE AGAIN. ON THE S AME DAY PANCHNAMA WAS ALSO DRAWN. ON 13.12.1997 ONE ASSTT. COMMISSI ONER REMOVED THE SEAL AND MADE FURTHER ORDER U/S.132(3) RELEASING TH E SAID SILVER VESSELS AND ARTICLES AND AGAIN THE PANCHNAMA WAS DRAWN. TH E ASSESSEE CONTENDED THAT THE SEARCH CONCLUDED ON 20.8.1996 AN D PROHIBITORY ORDER WAS NOTHING TO DO WITH THE CONCLUSION OF THE SEARCH . IN THE SAID CASE ALSO THERE WAS ONLY ONE SEARCH WARRANT AND SEARCH W AS CONCLUDED ON 20.10.1996 AND PANCHNAMA WAS DRAWN. IN THIS BACKGR OUND OF THE FACTS THE HONBLE HIGH COURT HAS HELD AS UNDER :- ..INDEED BY SIMPLY STATING IN THE PANCHANAMA THA T THE SEARCH IS TEMPORARILY SUSPENDED THE AUTHORIZED OFFICER CANNO T KEEP THE SEARCH PROCEEDINGS IN OPERATION BY PASSING A RESTRAINT ORD ER UNDER SECTION 132(3). RELIANCE PLACED BY THE DEPARTMENT ON THE JU DGMENT OF THE ALLAHABAD HIGH COURT IN THE CASE OF SRIRAM JAISWAL V. UNION OF INDIA [1989] 176 ITR 261 WAS CORRECT. THE RESTRAINT ORDE R IN VIEW OF THIS AUTHORITY CANNOT BE CANCELLED AND RENEWED FROM TIME -TO-TIME. ACTION UNDER SECTION 132(3) OF THE INCOME-TAX ACT CAN BE R ESORTED TO ONLY IF THERE IS ANY PRACTICAL DIFFICULTY IN SEIZING THE IT EM WHICH IS LIABLE TO BE SEIZED. WHEN THERE IS NO SUCH PRACTICAL DIFFICUL TY 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 SECT ION 132(3) OF THE INCOME-TAX ACT THUS CANNOT BE EXERCISED SO AS TO CI RCUMVENT THE IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 14 PROVISIONS OF SECTION 132(3) READ WITH SECTION 132( 5) OF THE INCOME- TAX ACT. THE POSITION HAS BECOME MUCH MORE CLEAR AF TER THE INSERTION OF THE EXPLANATION TO SECTION 132(3) EFFECTIVE FROM JULY 1 1995 THAT A RESTRAINT ORDER DOES NOT AMOUNT TO SEIZURE. THERE FORE BY PASSING A RESTRAINT ORDER THE TIME LIMIT AVAILABLE FOR FRAMI NG OF THE ORDER CANNOT BE EXTENDED. 13. IN THE PRESENT CASE ALSO AS PER PANCHNAMA DT 7/ 02/03 EXCEPT SMALL FILE OF THE 21 PAGES NOTHING WAS THERE IN THE SAID CUPBOARD AND IN OUR OPINION THE ENTIRE SEARCH WAS CONCLUDED ON 31. 12.2002. ON PERUSAL OF THE PANCHNAMA DRAWN ON THAT DAY AS EVERYTHING WA S SEIZED WHICH WAS REQUIRED TO BE AND PROHIBITORY ORDER U/S.132(3) WAS PASSED BY THE AUTHORIZED OFFICER AND SAID ORDER WAS LIFTED ON 7.2 .2003 CANNOT GROUND TO SAY THAT SEARCH WAS ONLY CONCLUDED ON 07/02/03. WE THEREFORE HOLD THAT THE A.O. WAS BOUND TO PASS THE ASSESSMENT ORDE R ON OR BEFORE 31.12.2004 AS ADMITTEDLY THERE IS NO OTHER SEARCH W ARRANT IN THIS CASE. THE ASSESSEE FILED THE FIRST APPLICATION TO THE SET TLEMENT COMMISSION ON 18.1.2005 AND IN OUR OPINION THE SAID APPLICATION IS FILED BY THE ASSESSEE BEYOND THE TIME LIMIT PRESCRIBED U/S.158BE OF THE ACT. LET US TAKE THE 7.2.2003 AS A DATE ON WHICH THE SEARCH WAS CONCLUDED; AS THE PROHIBITORY ORDER WAS LIFTED IN RESPECT OF THE ONE CUPBOARD THEN THE A.O. HAD THE TIME UP TO 28 TH FEBRUARY 2005. IN THAT SITUATION ALSO AS THE APPLICATION FILED BY THE ASSESSEE BEFORE THE SETTLE MENT COMMISSION WAS FINALLY DISPOSED OFF VIDE DT. 29.08.06 AND SAID OR DER WAS RECEIVED BY THE LD. CIT ON 15.0.9.2006 HENCE THE A.O. WAS ENTITLE D TO GET FURTHER MINIMUM TIME LIMIT OF 60 DAYS FROM 15.09.06. AS PER LD. CIT DR THE A.O. PASSED THE DIRECTIONS/ORDER U/S.142(2A) OF THE ACT AS THE A.O. HAS FURTHER TIME LIMIT FOR PASSING THE ASSESSMENT ORDER BY 6O DAYS FROM DATE ON WHICH SPECIAL AUDIT REPORT WAS FURNISHED. LD. C OUNSEL VEHEMENTLY ARGUED THAT THE ASSESSEE WAS NOT GIVEN AN OPPORTUNI TY OF BEING HEARD BEFORE PASSING THE SAID DIRECTIONS/ORDER. MOREOVER AS CONTENDED BY LD. IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 15 COUNSEL ACTION OF THE A.O. USING POWERS UNDER SEC. 142(2A) WAS NOT BONA FIDE BUT ONLY TO GET BENEFIT OF EXTENTION OF TIME LIMIT AND HENCE THE SAID ORDER IS BAD IN LAW AND PERIOD BETWEEN DATES O F PASSING OF THE SAID DIRECTIONS/ORDER TILL FURNISHING OF THE SPECIAL AU DIT REPORT I.E. 9.11.2006 TO 7.5.2007 CANNOT BE EXCLUDED FOR GIVING BENEFIT O F FURTHER TIME LIMIT FOR PASSING THE ASSESSMENT ORDER. IN SUPPORT OF HIS AR GUMENT THE LD. COUNSEL RELIED ON THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF RAJESH KUMAR (SUPRA). HE FURTHER SUBMITS THAT AT THE MOST THE TIME LIMIT FOR PASSING THE ORDER EXPIRED AFTER 60 DAYS F ROM THE DATE OF THE RECEIPT OF THE ORDER OF THE SETTLEMENT COMMISSION B Y THE LD. CIT I.E. 15.09.2006 AND AS IN THE PRESENT CASE THE ASSESSME NT ORDER IS PASSED ON 6.07.2007 AND THERE IS NO CLOUD OF DOUBT THAT TH E BLOCK ASSESSMENT ORDER PASSED BY THE A.O. IS TO BE QUASHED AND CANCE LLED. 14. BEFORE DEALING WITH THE ARGUMENTS OF THE LD. C OUNSEL WE HAVE TO EXAMINE THE PROVISIONS OF SECTION 158BE WHICH READ S AS UNDER:- 158BE. (1) THE ORDER UNDER SECTION 158BC SHALL BE PASSED (A) WITHIN ONE YEAR FROM THE END OF THE MONTH IN W HICH THE LAST OF THE AUTHORIZATIONS FOR SEARCH UNDER SECTION 132 OR FOR REQUISITION UNDER SECTION 132A AS THE CASE MAY BE WAS EXECUTE D IN CASES WHERE A SEARCH IS INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED AFTER THE 30TH DAY OF JUNE 1995 BUT BEFORE THE 1ST DAY OF JANUARY 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 EXECUTE D 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. IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 16 (2) THE PERIOD OF LIMITATION FOR COMPLETION OF BLOC K ASSESSMENT IN THE CASE OF THE OTHER PERSON REFERRED TO IN SECTION 158BD SH ALL BE (A) ONE YEAR FROM THE END OF THE MONTH IN WHICH TH E NOTICE UNDER THIS CHAPTER WAS SERVED ON SUCH OTHER PERSON IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED AFTER THE 30TH DAY OF JUNE 1995 BUT BEFORE THE 1ST DAY OF JANUARY 1997; AND (B) TWO YEARS FROM THE END OF THE MONTH IN WHICH T HE NOTICE UNDER THIS CHAPTER WAS SERVED ON SUCH OTHER PERSON IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED ON OR AFTER THE 1ST DAY OF JANUARY 1 997.] EXPLANATION 1.IN COMPUTING THE PERIOD OF LIMITATIO N FOR THE PURPOSES OF THIS SECTION (I) THE PERIOD DURING WHICH THE ASSESSMENT PROCEE DING IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT; OR (II) THE PERIOD COMMENCING FROM THE DAY ON WHICH THE ASSESSING OFFICER DIRECTS THE ASSESSEE TO GET HIS ACCOUNTS AU DITED UNDER SUB- SECTION (2A) OF SECTION 142 AND ENDING ON THE DAY O N WHICH THE ASSESSEE IS REQUIRED TO FURNISH A REPORT OF SUCH AU DIT UNDER THAT SUB-SECTION; OR (III) THE TIME TAKEN IN REOPENING THE WHOLE OR AN Y PART OF THE PROCEEDING OR GIVING AN OPPORTUNITY TO THE ASSESSEE TO BE RE-HEARD UNDER THE PROVISO TO SECTION 129; OR (IV) IN A CASE WHERE AN APPLICATION MADE BEFORE T HE SETTLEMENT COMMISSION UNDER SECTION 245C IS REJECTED BY IT OR IS NOT ALLOWED TO BE PROCEEDED WITH BY IT THE PERIOD COMMENCING O N THE DATE ON WHICH SUCH APPLICATION IS MADE AND ENDING WITH THE DATE ON WHICH THE ORDER UNDER SUB-SECTION (1) OF SECTION 24 5D IS RECEIVED BY THE COMMISSIONER UNDER SUB-SECTION (2) OF THAT S ECTION IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 17 SHALL BE EXCLUDED: PROVIDED THAT WHERE IMMEDIATELY AFTER THE EXCLUSION OF THE A FORESAID PERIOD THE PERIOD OF LIMITATION REFERRED TO IN SU B-SECTION (1) OR SUB-SECTION (2) AVAILABLE TO THE ASSESSING OFFICER FOR MAKING A N ORDER UNDER CLAUSE (C) OF SECTION 158BC IS LESS THAN SIXTY DAYS SUCH REMA INING PERIOD SHALL BE EXTENDED TO SIXTY DAYS AND THE AFORESAID PERIOD OF LIMITATION SHALL BE DEEMED TO BE EXTENDED ACCORDINGLY. EXPLANATION 2.FOR THE REMOVAL OF DOUBTS IT IS HE REBY DECLARED THAT THE AUTHORIZATION REFERRED TO IN SUB-SECTION (1) SHALL BE DEEMED TO HAVE BEEN EXECUTED (A) IN THE CASE OF SEARCH ON THE CONCLUSION OF SE ARCH AS RECORDED IN THE LAST PANCHNAMA DRAWN IN RELATION TO ANY PERSON IN WHOSE CASE THE WARRANT OF AUTHORIZATION HAS BEEN ISSUED; (B) IN THE CASE OF REQUISITION UNDER SECTION 132A ON THE ACTUAL RECEIPT OF THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSET S BY THE AUTHORIZED OFFICER. 15. THE ASSESSEES CASE IS COVERED U/S.158BE(1)(B) AND THE A.O. WAS BOUND TO PASS THE ASSESSMENT ORDER WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH LAST OF THE WARRANT WAS EXECUTED. E VEN CONSIDERING THE ARGUMENT OF THE LD. CIT D.R. THAT SEARCH ENDED ON 7 .02.2003 HENCE THE A.O. SHOULD HAVE PASSED THE ORDER ON OR BEFORE 28.0 2.2005 IN NORMAL SITUATION. BUT CONSIDERING THE CERTAIN SITUATION/CI RCUMSTANCES THE PERIOD OF LIMITATION FOR PASSING THE ASSESSMENT ORD ER CAN BE EXTENDED AS PER EXPLANATION-1 BELOW SEC. 158BE. IN THE CASE WH ERE THE A.O. PASSES THE DIRECTIONS FOR THE SPECIAL AUDIT U/S.142(2A) IS COVERED BY CLAUSE (2) TO EXPLANATION-1OF SECTION 158BE AND PERIOD FROM DA TE OF PASSING OF THE ORDER OR DIRECTIONS TO THE DATE OF FURNISHING OF TH E AUDIT REPORT IS TO BE EXCLUDED IN COMPUTING THE TWO YEARS PERIOD. MOREOV ER AS PER THE PROVISO BELOW EXPLANATION-1 IF AFTER EXCLUDING ABO VE PERIOD THE PERIOD IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 18 AVAILABLE TO THE A.O. FOR MAKING AN ORDER IS LESS T HAN 6O DAYS THEN THAT SITUATION A.O. GETS MINIMUM FURTHER PERIOD OF THE 6 0 DAYS. 16. IN THE CASE OF THE RAJESH KUMAR (SUPRA) SECTION 142(2A)(3) OF THE ACT HAS COME FOR THE JUDICIAL SCRUTINY BEFORE THE H ONBLE SUPREME COURT. BEFORE THE HONBLE SUPREME COURT IT WAS ARGUED THAT (I) SECTION 142(2A) OF THE ACT HAVING REGARD TO TH E ENORMITY OF POWER DESERVES A STRICT CONSTRUCTION; (II) PRINCIPLES OF NATURAL JUSTICE INHERE IN THE SA ID PROVISIONS; AND (III) STATUTORY POWER CONTAINING SECTION 142(2A) OF THE ACT CANNOT BE USED FOR COLLATERAL PURPOSES. IN THE SAID CASE ALSO SEARCH & SEIZURE OPERATION WA S CONDUCTED AND A.O. PROCEEDED TO COMPLETE THE ASSESSMENT U/S.158BC. TH E HONBLE SUPREME COURT ELABORATELY EXAMINED THE SCOPE OF THE PROVISI ONS AS WELL AS THE LIMITATIONS ON THE POWER OF THE A.O. AND HELD THAT THE ASSESSEE SUFFERS CIVIL CONSEQUENCE AND IN ORDER PASSED BY IT WOULD B E PREJUDICIAL TO HIM AND HENCE PRINCIPLES OF NATURAL JUSTICE SHOULD BE HELD IMPLICIT. THEIR LORDSHIPS HELD AS UNDER:- 55. THE FACTORS ENUMERATED IN SECTION 142(2A) OF T HE ACT THUS ARE NOT EXHAUSTIVE. ONCE IT IS HELD THAT THE ASSESSEE SUFFERS CIVIL CONSEQUENCES AND ANY ORDER PASSED BY IT WOULD BE PR EJUDICIAL TO HIM PRINCIPLES OF NATURAL JUSTICE MUST BE HELD TO BE IMPLICIT. THE PRINCIPLES OF NATURAL JUSTICE ARE REQUIRED TO BE AP PLIED INTER ALIA TO MINIMIZE ARBITRARINESS. 56. IT IS TRITE EVEN IF THERE IS A POSSIBILITY THA T THE TRIBUNAL WOULD CORRECTLY FOLLOW THE STATUTORY PROVISIONS STILL CO MPLIANCE WITH PRINCIPLES OF NATURAL JUSTICE WOULD BE REQUIRED. (S EE R. KENSIGNTONM AND CHELSEA RENT TRIBUNAL EX.P MACFARLANE(1974)1WL R 1486(QB). IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 19 57. JUSTICE AS IS WELL KNOWN IS NOT ONLY TO BE DO NE BUT MANIFESTLY SEEM TO BE DONE. IF THE ASSESSEE IS PUT TO NOTICE HE COULD SHOW THAT THE NATURE OF ACCOUNTS IS NOT SUCH WHICH WOULD REQUIRE APPOINTMENT OF SPECIAL AUDITORS. HE COULD FURTHER SHOW THAT WHAT THE ASSESSING OFFICER CONSIDERS TO BE COMPLEX IS IN FACT NOT SO. IT WAS ALSO OPEN TO HIM TO SHOW THAT THE SAME WOULD NOT BE IN THE INTEREST OF THE REVENUE. 58. IN THIS CASE ITSELF THE APPELLANTS WERE NOT MAD E KNOWN AS TO WHAT LED THE DEPUTY COMMISSIONER TO FORM AN OPINION THAT ALL RELEVANT FACTORS INCLUDING THE ONES MENTIONED IN SE CTION 142(2A) OF THE ACT ARE SATISFIED. IF EVEN ONE OF THEM WAS NOT SATISFIED NO ORDER COULD BE PASSED. IF THE ATTENTION OF THE COMMISSIO NER COULD BE DRAWN TO THE FACT THAT THE UNDERLYING PURPOSE FOR A PPOINTMENT OF THE SPECIAL AUDITOR IS NOT BONA FIDE IT MIGHT NOT HAVE APPROVED THE SAME. 59. ASSUMING THAT TWO SET OF ACCOUNTS WERE BEING MA INTAINED THE SAME WOULD NOT MEAN THAT THE NATURE OF ACCOUNTS IS DIFFICULT TO UNDERSTAND. IT COULD HAVE FURTHERMORE NOT BEEN SHO WN THAT THE POWER IS SOUGHT TO BE EXERCISED ONLY FOR AN UNAUTHO RIZED PURPOSE VIZ. FOR THE PURPOSE OF EXTENSION OF THE PERIOD OF LIMITATION AS PROVIDED FOR UNDER EXPLANATION 2 TO SECTION 158BE O F THE ACT. 60 AN ORDER OF APPROVAL IS ALSO NOT TO BE MECHAN ICALLY GRANTED. THE SAME SHOULD BE DONE HAVING REGARD TO THE MATERI ALS ON RECORD. THE EXPLANATION GIVEN BY THE ASSESSEE IF ANY WOUL D BE A RELEVANT FACTOR. THE APPROVING AUTHORITY WAS REQUIRED TO GO THROUGH IT. HE COULD HAVE ARRIVED AT A DIFFERENT OPINION. HE IN A SITUATION OF THIS NATURE COULD HAVE CORRECTED THE ASSESSING OFFICER I F HE WAS FOUND TO HAVE ADOPTED A WRONG APPROACH OR POSED A WRONG QUES TION UNTO HIMSELF. HE COULD HAVE BEEN ASKED TO COMPLETE THE PROCESS OF IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 20 ASSESSMENT WITHIN THE SPECIFIED TIME SO AS TO SAVE THE REVENUE FROM SUFFERING ANY LOSS. THE SAME PURPOSE MIGHT HAVE BE EN ACHIEVED UPON PRODUCTION OF SOME MATERIAL FOR UNDERSTANDING THE BOOKS OF ACCOUNT AND/ OR THE ENTRIES MADE THEREIN. WHILE EX ERCISING ITS POWER THE ASSESSING OFFICER HAS TO FORM AN OPINION . IT IS FINAL SO FAR AS HE IS CONCERNED ALBEIT SUBJECT TO APPROVAL OF TH E CHIEF COMMISSIONER OR THE COMMISSIONER AS THE CASE MAY B E. IT IS ONLY AT THAT STAGE HE IS REQUIRED TO CONSIDER THE MATTER AND NOT AT A SUBSEQUENT STAGE VIZ. AFTER THE APPROVAL IS GIVEN . 60. TO 62 63. THE REASONS ASSIGNED THEREFORE NEED NOT BE DET AILED ONES. BUT THAT WOULD NOT MEAN THAT THE PRINCIPLES OF JUS TICE ARE NOT REQUIRED TO BE COMPLIED WITH. ONLY BECAUSE CERTAIN CONSEQUENCES WOULD ENSUE IF THE PRINCIPLES OF NATURAL JUSTICE AR E REQUIRED TO BE COMPLIED WITH THE SAME BY ITSELF WOULD NOT MEAN TH AT THE COURT WOULD NOT INSIST ON COMPLYING WITH THE FUNDAMENTAL PRINCIPLES OF LAW. IF THE PRINCIPLES OF NATURAL JUSTICE ARE TO B E EXCLUDED PARLIAMENT COULD HAVE SAID SO EXPRESSLY. THE HEARI NG GIVEN IS ONLY IN TERMS OF SECTION 142(3) WHICH IS LIMITED ONLY TO THE FINDINGS OF THE SPECIAL AUDITOR. THE ORDER OF ASSESSMENT WOULD BE BASED UPON THE FINDINGS OF THE SPECIAL AUDITOR SUBJECT OF COURSE T O THEIR ACCEPTANCE BY THE ASSESSING OFFICER. EVEN AT THAT STAGE THE A SSESSEE CANNOT PUT FORWARD A CASE THAT POWER UNDER SECTION 142(2A) OF THE ACT HAD WRONGLY BEEN EXERCISED AND HE HAS UNNECESSARILY BEE N SADDLED WITH A HEAVY EXPENDITURE. AN APPEAL AGAINST THE OR DER OF ASSESSMENT AS NOTICED HEREINBEFORE WOULD NOT SERV E ANY REAL PURPOSE AS THE APPELLATE AUTHORITY WOULD NOT GO INT O SUCH A QUESTION SINCE THE DIRECTION ISSUED UNDER SECTION 142(2A) OF THE ACT IS NOT AN APPEALABLE ORDER. IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 21 17. IN THE PRESENT CASE NOTHING IS ON RECORD TO SH OW THAT THE A.O. HAS GIVEN OPPORTUNITY TO THE ASSESSEE BEFORE PASSING TH E DIRECTION/ORDER U/S.142(2A) OF THE ACT AND IN OUR OPINION THERE IS A CLEAR VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND HENCE THE ORDER PASSED BY THE A.O. U/S.142(2A) IS VOID AB INITIO . IT IS PERTINENT TO TAKE NOTE OF THE FACT THAT THE PARLIAMENT HAS ACCEPTED THE PRINCIPLES LAID DOW N BY THE HONBLE SUPREME COURT IN THE CASE OF RAJESH KUMAR(SUPRA) AN D BY THE FINANCE ACT 2007 AMENDMENT IS MADE BY INSERTING PROVISO IS TO SUB-SECTION (2A) TO SECTION 142 MAKING IT MANDATORY ON THE A.O. TO G IVE REASONABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING ANY DIREC TION U/S.142(2A). MOREOVER IT IS ALSO SEEN THAT EVEN WHAT SORT OF CO MPLEXITY WAS THERE IN THE ACCOUNTS SEIZED DURING THE COURSE OF THE SEARCH IS NOWHERE ELABORATED. WE ARE THUS OF THE OPINION THAT AS T HE DIRECTIONS GIVEN BY THE A.O. U/S.142(2A) FOR SPECIAL AUDIT ARE ILLEGAL AND VOID AB INITIO . THE BENEFIT OF FURTHER EXTENSION OF THE TIME IN RESPECT OF THE PERIOD BETWEEN PASSING DIRECTIONS UNDER SEC. 142(2A) TILL THE DATE OF FURNISHING SPECIAL AUDIT REPORT CAN NOT BE GIVEN TO THE A.O. AS SPECI FIED IN CLAUSE (II) TO EXPLANATION-1 OF SEC. 158BE FOR PASSING THE PRESENT ASSESSMENT ORDER ON 06/07/07. IN THE PRESENT CASE THE ORDER OF THE SE TTLEMENT COMMISSION WAS RECEIVED BY THE LD. CIT (A) MUMBAI ON 15.9.2006 AND AT THE MOST FURTHER 60 DAYS TIME WAS AVAILABLE TO THE A.O. FROM SAID DATE AND A.O. SHOULD HAVE PASSED THE ASSESSMENT ORDER ON OR BEFOR E 14.11.2006. MOREOVER NATURE OF THE COMPLEXITY OF BOOKS OF ACCO UNTS IS NOT SPECIFIED BY THE A.O. AND IN OUR OPINION THE USED POWERS UNDE R SEC. 142(2A) ONLY TO GET FURTHER EXTENTION OF TIME FOR PASSING PRESEN T ASSESSMENT ORDER. HENCE FOR THE REASONS GIVEN ABOVE WE ARE OF THE O PINION THAT THE ASSESSMENT ORDER PASSED IN THIS CASE IS BEYOND THE PERIOD OF LIMITATION SPECIFIED U/S.158BE AND THE SAID ASSESSMENT ORDER I S BAD IN LAW AND HAS TO BE CANCELLED. WE ACCORDINGLY ALLOW GROUND S TAKEN BY THE IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 22 ASSESSEE AND QUASHED/CANCELLED THE ASSESSMENT ORDER PASSED ON 6.7.2007. 18. AS WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE O N THE ISSUE OF TIME LIMIT FOR PASSING THE ASSESSMENT ORDER WE DO NOT C ONSIDER IT NECESSARY TO GO INTO OTHER GROUNDS TAKEN ON MERITS 19. NOW WE TAKE-UP THE APPEAL OF ANOTHER ASSESSEE I.E. LATE PRAVIN M. SHAH IN ITA NO.31/MUM/2008. IN THIS CASE ALSO THE ASSESSMENT ORDER IS PASSED IN OF THE SAME SEARCH & SEIZURE OPERATION. IN THIS APPEAL ALSO IDENTICAL GROUNDS ARE RAISED BY THE ASSESSEE BY TAK ING THE CONTENTION THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S.15 8BC IS TIME BARRED AND HENCE IN THIS CASE ALSO THE ASSESSMENT ORDER I S TO BE QUASHED/CANCELLED. THE EFFECTIVE GROUNDS ARE AS UN DER:- 1.0 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJEC TING THE APPELLANTS CLAIM THAT THE ASSESSMENT MADE UNDER SE CTION 158BC OF THE ACT WAS BARRED BY LIMITATION. 3.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJEC TING THE APPELLANTS CONTENTION THAT THE TIME TAKEN FOR SPEC IAL AUDIT U/S.142(2A) OF THE ACT SHOULD NOT BE EXCLUDED FOR T HE PURPOSES OF CALCULATING THE TIME LIMIT FOR COMPLETI ON OF ASSESSMENT AS THE SPECIAL AUDIT WAS DIRECTED AT THE FAG END OF THE TIME-BARRING LIMIT. 3.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJEC TING THE APPELLANTS CONTENTION THAT THE DIRECTION FOR SPECI AL AUDIT IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 23 UNDER SECTION 142(2A) OF THE ACT WAS ISSUED WITHOUT GIVING AN OPPORTUNITY TO THE APPELLANT OF BEING HEARD. 3.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REJEC TING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F RAJESH KUMAR & OTHERS VS. DCIT (287 ITR 91) AND ALSO THE D ECISION OF THE HONBLE ITAT MUMBAI BENCH IN THE CASE OF AC IT VS. CLARIDGES INVESTMENT & FINANCE PVT. LTD. (ITA NO.3475/MUM/2006 DT. 09.08.2007). 20. THE FACTS ARE ALMOST IDENTICAL AS IN THE CASE O F ANOTHER ASSESSEE I.E. SHRI NIRMAL BANWANI. THE ASSESSEE WAS SUBJECT ED TO SEARCH & SEIZURE OPERATION IN CONSEQUENCE OF CASH OF 5 LAKHS SEIZED BY THE AIR INTELLIGENCE UNIT (AIU) FROM SHRI NIRMAL A. BANWANI ON 30.12.2002 WHILE HE WAS GOING TO THE DELHI BY JET AIRWAYS FLIGHT 9W 331. AS PER THE STATEMENT OF SHRI BANWANI THE SAID CASH BELONGED TO M/S. N.A. FABRICS P. LTD. AS AT 3/14-15 MOHATTA MARKET FALTAN ROAD MUMBAI 400 001 IN WHICH THE SAID SHRI BANWANI WAS ONE OF THE DIRECTOR S. IMMEDIATELY THE SURVEY ACTION WAS CONDUCTED U/S.133A OF THE ACT IN N.A. FABRICS P. LTD. AND IT WAS FOUND THAT THE ASSESSEE WAS ALSO CARRYIN G ON THE BUSINESS FROM THE SAID PLACE THROUGH THE FIRM M/S. MKT SALES IN WHICH THE ASSESSEE WAS SHOWN AS A PARTNER WITH 90% SHARE OF P ROFIT. THE SURVEY ACTION WAS CONVERTED INTO SEARCH & SEIZURE OPERATIO N U/S.132 OF THE ACT. AS STATED EARLIER IN THE CASE OF SHRI N. A. BANWAN I COMMON SEARCH WARRANT WAS ISSUED (SERIAL NO.MUM/2813 DATED 30.12. 2002) AND THE SAID WARRANT WAS EXECUTED ON SAME DAY I.E. 30.12.02 AND AS PER THE PANCHNAMA MADE BY THE AUTHORIZED OFFICER ON 31.12.2 002 THE SEARCH PROCEEDINGS WERE SHOWN AS TEMPORARILY CLOSED AT 1.1 5 P.M.. IN THE PANCHNAMA DT. 31.12.02 IT IS STATED THAT COMPUTERS ARE KEPT IN ONE WOODEN SHELVE AND PROHIBITORY ORDER WAS PASSED AGAI NST SAID IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 24 SHELVE/CUPBOARD WHICH WAS LIFTED ON 7.2.2003 AND AG AIN PANCHNAMA WAS MADE SHOWING THAT ONE FILE WAS SEIZED CONTAININ G 21 LOOSE-PAPERS AND THERE IS NO MENTION OF ANY COMPUTER IN THE SAID PANCHNAMA MADE ON 7.02.2003. 21. THE LD. COUNSEL ARGUED THAT AS PER THE PANCHNAM A DRAWN THE SEARCH WAS COMMENCED ON 30.12.2002 AT 11.40 AM AND COMPLETED ON 31.12.2002 AT 1.15 AM AND COMPLETED ON 31.12.2002 A T 1.15 PM. HE FURTHER SUBMITTED THAT IN RESPECT OF THIS THE ASSES SEE ONLY ONE WARRANT WAS ISSUED ON 23.1.2003 AND THAT WAS EXECUTED FOR I SSUING THE PROHIBITORY ORDER U/S.132(3) OF THE ACT AGAINST LOC KER NO.65 OF UNITED WESTERN BANK LTD DADAR (EAST) BRANCH MUMBAI WHICH WAS ON THE NAME OF THE ASSESSEE. HE FURTHER SUBMITS THAT PROH IBITORY ORDER WAS LIFTED ON 25.1.2003 AS THE SAID LOCKER WAS FOUND EM PTY. THERE WAS NO OTHER SEARCH WARRANT AGAINST THE ASSESSEE AND HENCE AT THE MOST CONSIDERING THAT COMMON SEARCH WARRANTS WAS ISSUED IN THE CASE OF M/S. N.A. FABRICS P. LTD. AND M/S. M.K.T. SALES ETC . ON 30.12.2002 WHICH WAS EXECUTED ON THE SAME DATE AND SEARCH WAS CONCLUDED ON 31.12.2002 THE A.O. SHOULD HAVE PASSED THE ASSESSM ENT ORDER OF THE BLOCK PERIOD ON OR BEFORE 31.12.2004. IT IS ARGUED THAT WHILE EXECUTING THE COMMON SEARCH WARRANT AGAINST M/S. N.A. FABRICS P. LTD. AND M/S. MKT SALES ETC. A PROHIBITORY ORDER WAS ISSUED WHICH WAS LIFTED ON 7.2.2003 IN RESPECT OF THE WOODEN CUPBOARD AS SAID PROHIBITORY ORDER WAS NOTHING TO DO WITH THE ASSESSEE AS ADMITTEDLY T HE FILE SEIZED FROM THE SHELVE/WOODEN CUPBOARD WAS IN RESPECT OF M/S. N.A. FABRICS PVT. LTD AND NOT OF THE ASSESSEE. HE FURTHER PLEADED THAT E VEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE A.O. HAS TIME UPTO 28.2.2 005 FOR PASSING THE ASSESSMENT ORDER BUT THE BENEFIT OF THE EXTENSION OF THE PERIOD UNDER CLAUSE (II) TO EXPLANATION-1 TO SEC. 158BE CANNOT B E GIVEN AS THE DIRECTION PASSED U/S.142(2A) FOR THE SPECIAL AUDIT WAS BAD IN LAW AND VOID AB INITIO AS THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY BEFO RE IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 25 PASSING THE SAID ORDER. IT IS ARGUED THAT IN THIS C ASE ALSO JUST GET BENEFIT OF FURTHER EXTENTION OF TIME THE A.O. EXERCISED HI S POWER UNDER SEC. 142(2A) AND HIS SAID ACTION WAS NOT BONA FIDE. HE FURTHER SUBMITS THAT AS HELD IN THE CASE OF RAJESH KUMAR (SUPRA) BY THE HONBLE SUPREME COURT THE A.O. HAS NOT SPECIFIED THE REASONS HOW TH ERE WAS A COMPLEXITY IN THE ACCOUNTS AND WHY THERE WAS A NECESSITY OF TH E SPECIAL AUDIT. HE FURTHER SUBMITS THAT THE ASSESSEE HAS FILED AN APPL ICATION BEFORE THE SETTLEMENT COMMISSION ON 18.1.2005 AND ORDER OF THE SETTLEMENT COMMISSION DISMISSING THE PETITION OF THE ASSESSEE WAS RECEIVED BY THE LD. CIT MUMBAI ON 15.9.2006 AND THE A.O. SHOULD HA VE PASSED THE ASSESSMENT ORDER ON OR BEFORE 14.11.2006 CONSIDERIN G FURTHER EXTENDED PERIOD BY 60 DAYS FROM 15.09.06 AS PER CL. (IV) OF EXPL. 1 TO SEC . 158BE OF THE ACT. HE FURTHER PLEADED THAT THE ASSESSMENT ORDERS PASSED IN THIS CASE ON 6.7.2007 IS MUCH BEYOND THE TIME LIMIT SPEC IFIED U/S.158BE OF THE ACT AND HENCE THE ASSESSMENT ORDER MAY BE QUAS HED AND CANCELLED. THE LD. COUNSEL SUBMITTED THAT ALL THE ARGUMENTS AN D HIS SUBMISSIONS MADE IN THE CASE OF SHRI NIRMAL A. BANWANI MAY TREA TED AS HIS ARGUMENT AND SUBMISSIONS IN THIS CASE ALSO. 22. THE LD. CIT DR SUBMITTED THAT FOR AVOIDING THE REPETITION OF THE ARGUMENT HE RELY ON HIS ARGUMENT IN CASE SHRI N.A. BANWANI BUT THERE ARE SOME ADDITIONAL ARGUMENTS ON WHICH HE DESIRES T O ARGUE. THE LD. CIT D.R. VEHEMENTLY SUBMITTED THAT THERE ARE TWO SEARCH WARRANT IN THE CASE OF THIS ASSESSEE ONE WAS ISSUED ON 30.12.2002 WHIC H WAS EXECUTED ON THE SAME DAY BUT THE SEARCH WAS CONCLUDED WHEN THE PROHIBITORY ORDER WAS PASSED U/S.132(3) WAS LIFTED ON 07.02.03 AND PA NCHNAMA WAS MADE. HE SUBMITS THAT ANOTHER SEARCH WARRANT WAS I SSUED ON 23.1.2003 WHICH WAS EXECUTED ON 25.3.2003 AGAINST LOCKER NO.6 4 OF UNITED WESTERN BANK LTD. DADAR (EAST) AND HENCE THE AO. HAS TIME UPTO 28.2.2005 FOR PASSING THE ASSESSMENT ORDER BUT AS THE ASSESSEE HA S FILED THE APPLICATION TO THE SETTLEMENT COMMISSION UNDER SE C. 245C(1) ON IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 26 18.1.2003 AND ORDER DISMISSING THE SAID APPLICATION WAS RECEIVED BY THE LD. CIT (A) ON 15.09.2006 HENCE THE A.O. HAS TIME LIMIT UPTO 15.11.2006 TO PASS THE ASSESSMENT ORDER. IT IS ARG UED THAT THE A.O. PASSED THE DIRECTION/ORDER FOR SPECIAL AUDIT U/S.14 2(2A) OF THE ACT ON 9.11.2006 AND THE SPECIAL AUDIT REPORT WAS FURNISHE D ON 7.5.2007. HE SUBMITS THAT THE ASSESSEE FILED THE SECOND APPLICAT ION BEFORE THE SETTLEMENT COMMISSION ON 22.12.2006. THE A.O. PASS ED THE ASSESSMENT ORDER ON 6.7.2007 I.E. WITHIN 60 DAYS FROM THE DATE OF FURNISHING OF THE SPECIAL AUDIT REPORT. HE FURTHER SUBMITS THAT TH E ASSESSMENT ORDER PASSED BY THE A.O. ON 6.7.2007 IS WELL WITHIN THE T IME LIMIT PROVIDED U/S.158BE OF THE ACT. HE ALSO SUBMITTED THAT HE RE LIES ON ALL HIS SUBMISSIONS MADE IN CASE OF SHRI NIRMAL BANWANI AND ALSO ON ALL THE DECISIONS AND PRECEDENTS WHICH WERE CITED AND RELIE D IN THE SAID CASE 23. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND ALSO CAREFULLY CONSIDERED ALL THE WRITTEN SUBMISSIONS FI LED BY THE ASSESSEE AS WELL AS THE DEPARTMENT AND ALL THE RELEVANT CASE LA W CITED AT BAR BY BOTH THE PARTIES. THE ASSESSEE WAS PARTNER IN M/S. MKT SALES AND HE WAS ALSO DOING THE BUSINESS IN HIS INDIVIDUAL CAPACITY. AS PER THE FOLDER CONTAINING THE SEARCH DOCUMENT PRODUCED BY THE LD. CIT D.R. IT IS SEEN THAT IN THE COMMON SEARCH WARRANT (SERIAL NO.MUM/C. /2813) DATED 30.12.2002 THE NAME OF THE ASSESSEE IS MENTIONED. IT APPEARS THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS FROM THE COMM ON PREMISES OF M/S. N.A. FABRICS P. LTD. IN THE 3/14-15 MOHATTA M ARKET FALTAN ROAD MUMBAI 400 001. THOUGH THE SEARCH WAS CONCLUDED ON 31.12.2002 BUT THE PROHIBITORY ORDER IN RESPECT OF ONE WOODEN SHEL VE/CUPBOARD PASSED U/S.132(3) WAS LIFTED ON 7.2.2003. ONE ADDITIONAL ASPECT IN THE CASE OF THE ASSESSEE IS THAT ANOTHER WARRANT WAS ISSUED ON 23.1.2003 BUT THAT WAS IN RESPECT OF LOCKER NO.64 IN THE UNITED WESTER N BANK LTD. DADAR (EAST) MUMBAI. THE ORIGINAL SEARCH WARRANT DATED 23.1.2003 OR ITS COPY WAS NOT MADE AVAILABLE TO US AS IT WAS NOT IN THE FOLDER PRODUCED BY THE IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 27 LD. CIT DR BUT AS PER THE PANCHNAMA IT APPEARS THA T THE SAID SEARCH WARRANT WAS ONLY IN RESPECT OF LOCKER NO.64 WHICH WAS STANDING IN THE NAME OF SHRI PRAVIN M. SHAH WHICH WAS FOUND EMPTY. THERE IS NO PROOF OF ANY OTHER SEARCH WARRANT WHICH WAS INDIVIDUALLY ISSUED AGAINST THE ASSESSEE. AS THE ORIGINAL SEARCH WARRANT IS NOT BE FORE US IT IS DIFFICULT FOR US TO GIVE ANY FINDING WHETHER THE SAID SEARCH WARRANT WAS SPECIFICALLY DIRECTED AGAINST AND WHETHER IN THE SA ID SEARCH WARRANT THE NAME OF SHRI PRAVIN M. SHAH WAS MENTIONED OR THE SE ARCH WARRANT WAS RESTRICTED TO LOCKER NO.64 OF THE UNITED WESTERN BA NK DADAR (EAST) MUMBAI WHICH WAS FOUND EMPTY AND IT IS CLEAR FROM T HE PANCHNAMA DRAWN ON 25.1.2003. ON THE EXECUTION OF THE SAID W ARRANT NOTHING WAS SEIZED. AS PER THE PROVISIONS OF SECTION 132(1)(I) AS WELL AS (II) THE AUTHORIZED OFFICER CAN ENTER AND SEARCH ANY BUILDING PLACE VESSEL VEHICLE OR AIRCRAFT WHERE HE HAS REASON TO SUSPECT THAT ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLES OR TH INGS ARE KEPT AND HE CAN BREAK OPEN THE LOCK OF ANY DOOR BOX LOCKER SAFE ALMIRAS ETC. FOR EXERCISING THE POWER CONFERRED IN CLAUSE (I) WHERE THE KEYS THEREOF ARE NOT AVAILABLE. IT IS NOT NECESSARY THAT THE BUILDING O R PLACE SHOULD BELONG TO THE ASSESSEE. NOWHERE IT IS DISPUTED THAT LOCKER N O.64 IN THE UNITED WESTERN BANK DADAR (EAST) MUMBAI BELONGS TO THE A SSESSEE AND EVEN IF NOTHING IS FOUND IN THAT BUT ADMITTEDLY THE SEARCH WARRANT WAS EXECUTED ON 23.1.2003. THE A.O. HAS TIME LIMIT UPTO 31.1.20 05 TO PASS AN ASSESSMENT ORDER. THE ASSESSEE FILED THE APPLICATI ON BEFORE THE SETTLEMENT COMMISSION ON 18.1.2005 WHICH WAS DISMIS SED 0N 29.08.06 AND ORDER DISMISSING THE APPLICATION FILED BY THE A SSESSEE WAS RECEIVED BY THE LD. CIT MUMBAI HAVING JURISDICTION OVER THE ASSESSEES CASE ON 15.9.2006 AND HENCE THE A.O. HAD THE TIME LIMIT UP TO 14.11.2006 FOR PASSING THE ASSESSMENT ORDER. THE A.O. PASSED THE ORDERS / DIRECTIONS U/S.142(2A) OF THE ACT ON 9.11.2006 FOR SPECIAL AUD IT THAT WAS WITHIN 60 DAYS FROM 15.9.2006 AND HENCE IN VIEW OF CLAUSE (I I) TO EXPLANATION 1 BELOW SECTION 158BE THE A.O. GOT FURTHER EXTENSION OF TIME FOR PASSING IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 28 THE ASSESSMENT ORDER TILL THE DATE ON WHICH THE SPE CIAL AUDIT REPORT WAS FURNISHED THAT WAS ON 7.5.2007. AS ARGUED BY THE L D. CIT D.R THE A.O. WAS GOT THE FURTHER EXTENSION OF THE 60 DAYS FROM 7.5.2007 TO PASS THE ASSESSMENT ORDER BEFORE 6.7.2007 AND HENCE THE ASS ESSMENT ORDER PASSED ON 6.7.2007 CANNOT BE SAID TO BE PASSED BEYO ND THE TIME LIMIT AS SPECIFIED U/S.158BE. IN THE CASE OF THE PRESENT AS SESSEE ADMITTEDLY NO OPPORTUNITY WAS GIVEN BY THE A.O. BEFORE PASSING TH E ORDER/DIRECTIONS U/S.142(2A) AND HENCE AS HELD BY US IN THE CASE OF NIRMAL A. BANWANI FOLLOWING THE PRINCIPLES LAID DOWN IN THE CASE OF R AJESH KUMAR (SUPRA) THE SAID DIRECTIONS/ORDER ARE TO BE HELD AS BAD IN LAW AND VOID AB INITIO . WE THEREFORE FOLLOWING OUR REASONS GIVEN IN THE C ASE OF SHRI NIRMAL A. BANWANI HOLD THAT THE A.O. CANNOT BE GIVEN THE BENE FIT OF THE FURTHER EXTENSION OF TIME BY EXCLUDING THE PERIOD FROM THE DATE OF PASSING THE DIRECTIONS U/S.142(2A) ON 9.11.2006 TO THE DATE OF FURNISHING THE SPECIAL AUDIT REPORT ON 7.5.2007 AND AT THE MOST THE A.O. S HOULD HAVE PASSED THE ASSESSMENT ORDER WITHIN 60 DAYS FROM 15.9.2006 I.E. THE DATE ON WHICH THE ORDER OF THE SETTLEMENT COMMISSION WAS RE CEIVED BY THE LD. CIT MUMBAI. IN THE CASE OF THE PRESENT ASSESSEE T HE ASSESSMENT ORDER IS PASSED ON 6.7.2007 AND HENCE IN OUR OPINION TH E ASSESSMENT ORDER IS BAD IN LAW. WE HAVE NO OPTION BUT TO CANCEL THE AS SESSMENT ORDER PASSED BY THE A.O. FOR THE BLOCK PERIOD I.E. 1.4.19 96 TO 31.12.2002 DATED 6.7.2007 AND WE ACCORDINGLY ALLOW THE GROUNDS TAKEN BY THE ASSESSEE ON THE ISSUE OF TIME LIMIT FOR PASSING THE ASSESSMENT ORDER. 24. NOW WE TAKE-UP THE APPEALS FILED BY THE REVENU E BEING IT(SS) 52/MUM/2008 AND IT(SS) 53/MUM/2008 IN THE CASE OF B OTH THESE ASSESSEES CHALLENGING THE RESPECTIVE IMPUGNED ORDE RS OF THE LD. CIT (A) CENTRAL III MUMBAI. BOTH THE APPEALS BECOME INFRU CTUOUS AS WE HAVE CANCEL THE ASSESSMENT ORDERS IN THE CASE OF BOTH TH E ASSESSEES ON THE GROUND OF PASSING THE ASSESSMENT ORDERS BEYOND THE TIME LIMIT PRESCRIBED U/S.158BE OF THE ACT EVEN AFTER CONSID ERING THE IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 29 EXPLANATION-1 BELOW SAID SECTION. WE THEREFORE D ISMISS BOTH THE APPEALS OF THE REVENUE. 25. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE BEING IT(SS) A. NO.31/MUM/2008 AND IT(SS) A 32/M/2008 ARE ALLOWED A ND BOTH THE APPEALS OF THE REVENUE BEING IT(SS) 52/MUM/2008 AND IT(SS) 53/MUM/2008 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY O F 31ST MARCH 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 31ST MARCH 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 29 MUMBAI. 4) THE CIT 8 MUMBAI. 5) THE D.R. C BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR *CHAVAN I.T.A.T. MUMBAI IT(SS) NOS.31 32 52 & 53/M/2008 LATE SHRI PRAVIN M. SHAH SHRI NIRMAL A. BANWANI 30 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 24.03.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 25.03.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER