IN INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV , JM AND SHRI RAJESH KUMAR, AM I.T(SS).A. No.05/Mum/2004 (Block Assessment Period : 1.4.1989 to 17.12.1999) Shri Rajendra Agarwal, Dy. Commissioner of Income 304, Atlanta Arcade, Vs. Tax -Range 8(2), Mumbai Marol Church Lane, 2nd floor, Aayakar Bhavan, Andheri (E), Mumbai-400059 M K Road, Mumbai-400020 PAN : AABPA9611N Assessee by Shri R C Jain Assessee by Shri Ashok Johri Date of Hearing : 26.8.2016 Date of Pronouncement :15.09.2016 O R D E R PER RAJESH KUMAR, A. M: This is appeal filed by assessee challenging order of ld.CIT(A) dated 28.10.2003 for block assessment period 1.4.1989 to 17.12.2099. 2. Grounds of appeal taken by assessee are as under : A. VALIDITY OF ASSESSMENT: 1. Ld. CIT (Appeals) erred in holding that assessment was not barred by limitation of time. 2 I.T(SS).A. No.05/Mum/2004 2. Ld. CIT (Appeals) in doing so did not appreciate that order u/s 132 (3) passed on 17.12.1999 and vacated on 14.02.2000 was futile excise not supported by any evidence as held by jurisdictional and other High Courts in matter. B. MERITS: 3. Ld. CIT (Appeals) erred in confirming addition of Rs.3,35,000/-as undisclosed income in respect of certain electronics items. 3.1 In any event LO. CIT (Appeals) ought to have held that estimate adopted by Assessing Officer was on high side and that too without any material. 4. Ld. CIT (Appeals) erred in confirming addition in respect unaccounted jewellery as undisclosed income to extent of Rs.76,115/ - out of addition of Rs. 1,58,598/ - made by Assessing Officer. 4.1 In so doing Ld. CIT (Appeals) did not appreciate facts material on record. 5. Ld. CIT (Appeals) erred in confirming addition I of Rs.22,50,000/- as undisclosed income in respect of 1,50,000 shares Arrochem Silvassa Ltd. 6. Ld.CIT (A) in confirming addition did not appreciate facts, material and evidence on record. 6. ld. CIT(A) erred in confirming addition of Rs.60,85,800/- out of addition of Rs. 82,27,100/- as undisclosed income in respect of 1,12,500 shares of Phar East Laboratories Ltd. 6.1 In confirming said addition Ld. CIT (Appeals) did not consider facts, material and evidence on record. 7. Ld. eIT (Appeals) erred in confirming addition u/s 68 of Rs.74,200/ - out of Rs. 1,51,404/ - made by Assessing Officer. 7. 1 In confirming same Ld. CIT (Appeals) did not appreciate facts, material, evidence on record and provisions of law in this regard. 3 I.T(SS).A. No.05/Mum/2004 3. Brief facts of case are that assessee was Director of M/s Macleods Pharmaceutical Ltd. search action was conducted at residence of assessee on 17.12.1999 and during course of search action one key of locker No.554 of SBI Malad (W) Branch, Mumbai in name of assessee and his wife Smt Anju Agarwal was seized and other valuables articles or things were inventorised as per annexures 2 to 8 which were found during course of search but not seized. locker no.554 was sealed on 23.12.1999 and same was searched on 14.2.2000 and jewellery of Rs.45100/- were found but was not seized by department. notice u/s 158BC of Act dated 25.5.2000 was issued to assessee which was complied with by assessee by filing return of income in Form No.2B on 12.6.2000 declaring income of Rs.7 lakhs for block period commencing from 1.4.1989 to 12.12.1999 along with copy of self assessment tax chalan for Rs.4,62,000/-. Finally, AO completed assessment u/s 143(3) read with section 158BC of Act vide order dated 27.2.2002 at amount of Rs.1,39,96,439/- and tax thereon worked out to Rs.92,37,650/-. 4. assessee challenged validity of reopening of assessment in ground no.1 and 2 that ld.CIT(A) has erred on law and facts in holding that assessment was not barred by limitation. issue has been challenged by assessee before ld. CIT(A) vide ground no.1 4 I.T(SS).A. No.05/Mum/2004 which was dismissed by ld. CIT(A) after considering submissions and argument of assessee by holding and observing as under : 4. In ground No.1, appellant has contested action of Assessing Officer in passing order under section 158BC read with section 143(3) of Act under appeal dated 27.02.2002 on ground that said order was passed beyond period specified in section 158BE of Act. It was submitted that in instant case, search initiated on 17.12.1999 was concluded on same date. Thereafter, prohibitory order was only served on appellant which was finally lifted on 14/02/2000 when portion of residence and locker previously placed under prohibitory order were searched. It was submitted that prohibitory order under section 132(3) was passed which was subsequently removed on 14.02.2000 was in respect of premises that were not such as to envisage any practical difficulty for search on first date of search on 17.12.1999 so as to put restrained order in terms of section 132(3) as has been done in this case. In doing so, in pursuance to search action under section 132Jl), search party had circumvented provisions of law. Hence, it cannot be taken into account so as to prolong effective date for completion of block assessment proceeding. Such action is not permissible as per law. 5. In this regard, appellant s representative has relied upon decision in case of CIT V/s Mrs.Sandhya B. Nayak & Others 253 ITR 534 (Born); CIT Vs. Dr C Balakrishnan Nair and othes 237 ITR 70 (Ker.) and certain tribunal decisions. It was submitted that in view of the judicial decisions, search proceedings cannot be held to have continued beyond 17/12/1999 and, therefore, Assessing Officer was under legal obligation to complete assessment proceedings and pass assessment order under section 158BC of Act on or before 31.12.2001. It was submitted that under circumstance, impugned assessment order made on 27/02/2002 has been passed beyond limitation and hence is illegal being bad and therefore, required to be annulled. 6. submission made by appellant's representative has been considered. perusal of Chapter XIV -B of IT Act providing procedure for 5 I.T(SS).A. No.05/Mum/2004 Completion of assessment in case where search and seizure action taken place reveals that assessment is to be completed within time frame provided in section 158BE of Act. time limit for completion of proceedings under section 158BC as applicable to case of appellant is provided in clause (b) of subsection (1) of section 158BE of Act i.e. two years from end of month in which last of authorization for search under section 132 was executed. Explanation 2 below said section lays down that authorization referred to shall be deemed to have been executed on conclusion of search as recorded in punchanama drawn in relation to any person in whose case warrant of authorization has been issued. law is, therefore, clear that date of execution of authorization tantamount to date of conclusion of search by drawing of last panchanama and, therefore, so long as such panchanama is validly drawn time limit for conclusion of block assessment proceedings is required to be taken and reckoned from said date only. That date cannot be taken for considering period of limitation only if panchanama was not validly drawn. 7. If case of Mrs. Sandhya B. Nayak is examined, ratio- decendi of which has been relied upon by appellant's representative, it is true that Hon'ble IT AT had held that block assessment order passed was void having been passed on date beyond prescribed time limit. That decision was taken primarily on ground that last panchanama drawn was defective in many respects and hence, cannot be taken into account in determination of time limit under section 158BE of Act. This is however, not so in instant case. appellant cannot sit over judgement of Authorised Officer to invoke provisions of section 132(3) of Act on temporary conclusion of search on 17.12.1999 that was again started on 14.02.2000 and concluded on same date. Moreover, fact that order under section 132(3) of Act does not tantamount to seizure has been clarified in Explanation below said sub-section. 8. Further, in respect of order of restraint under section 132(3) of Act dated 17.12.1999 as well as conclusion of search proceedings vide panchanama dated 14.2.2000 appellant at no stage had challenged proceedings of Department under section 132(3) of Act. Even before Assessing Officer, proceeding after December 1999 when as per appellant's 6 I.T(SS).A. No.05/Mum/2004 representative's version, proceedings ought to have been concluded was not challenged and appellant had from time to time given reply and furnished details called for by Assessing Officer in this regard. Hence, case of appellant is clearly distinguishable on facts from case of Mrs. Sandhya B.Nayak (Supra) in respect of which decision has been rendered which has been sought to be relied upon by appellant s representative to submit that assessment order under appeal is barred by limitation. 9. In their decision in case of CIT Vs. Sun Engineering Works (P) Ltd 197 ITR 297 (SC), Hon'ble Apex court have held that it is neither desirable nor permissible to pick out word or sentence form judgment divorced from context of question under consideration. judgement must be read on whole and observation from judgement have to be considered in light of question which were before court. decision of court takes colour from question involved in case of which it is rendered and while applying decision to later case, court must carefully try to ascertain true principle laid down in decision. In view thereof, decision in case of Mrs. Sandhya BNayak (supra) mutatis mutandis cannot be made applicable to case of appellant where there is no infirmity in drawing of last panchanama on basis of which AO has reckoned limitation for completion of block assessment proceedings, order passed by Assessing Officer, having been passed within time limit provided in section 158BE(1 )(b) of Act is therefore, held as legally valid order. appeal in respect of ground No. 1 is. therefore. dismissed. 5. ld.AR vehemently argued before us that assessment as made by AO and upheld by ld. CIT(A) was totally wrong and invalid as assessment was barred by limitation in terms of provisions of section 158BE(1)(b) of Act. ld. AR submitted that search was conducted u/s 132(1) on 17.12.1999 at residence of assessee in terms of warrant of authorisation dated 16.12.1999 which was in name of 7 I.T(SS).A. No.05/Mum/2004 assessee and his brother Shri Banwarilal Bawri. Similarly, search was carried out at premises of M/s Macleods Pharmaceutical Ltd. in terms of separate warrant of authorizing in which appellant was Director. ld. Counsel submitted that nothing was seized in search action at residential premises of assessee whereas authorized officer Shri R.K. Vishwakarma inventorised jewellery found at residence of assessee which value at Rs.4,23,354/- by department s valuer and was stored in small cupboard in residence of assessee in appellant s daughter and prohibitory order u/s 132(3) of Act was passed sealing cupboard in search proceedings. key of SBI Bank locker was also seized and sealed. Besides search team inventorised various articles like shares and list of bank accounts and search was concluded accordingly. bank locker with State Bank of India was sealed by order passed u/s 132(3) of Act on 23.12.1999 in pursuance of order dated 12.12.1999 issued in name of bank. counsel of assessee further submitted that bank locker was opened and operated on 14.02.2000 and contents(jewellery) of locker were got valued at Rs. 45,100/- from departmental valuer in presence of assessee s wife by Shri M.V Patil. prohibitary order u/s 132(3) dated 23.12.1999 was vacated on 14.02.2000. jewellery found in bank locker as well as kept at residence aggregating to Rs.4,68,954/- was handed over to assessee s wife in 8 I.T(SS).A. No.05/Mum/2004 terms of Panchnama dated 14.2.2002. ld. Counsel submitted that panchanama dated 14.2.2000 vacated prohibitory order resultantly list of jewellery was prepared and signed by Mr.M V Patil who was authorised officer to search bank locker and to pass prohibitory order dated 23.12.1999. His role got over as soon as bank locker was opened and operated. On 14.2.2000 nothing was seized and therefore search has concluded on 17.12.1999 or at most on 23.12.1999 and can not be extended to 14.02.2000 when only bank locker was opened and nothing was seized. ld. Counsel argued that thereafter block assessment was initiated by AO and framed assessment at amount of Rs. 1,39,96,439/- against returned income of Rs.7 lakhs and demand of Rs.92,32,650/- was raised. ld. Counsel vehemently submitted that assessment order as framed by AO and confirmed by ld. CIT(A) was invalid , illegal and non-est as same was not framed within period of two years from date of conclusion of search . prohibitory order was vacated on 14.2.2000 by officer who was authorized in terms of authorization letter dated 16.12.1999. In support of same, ld. counsel relied on decision of jurisdictional High Court in case of CIT V/s Mrs. Sandhya B. Naik & Others 253 ITR 534. ld. counsel submitted that nothing was seized on 14.2.2000 and it was only bank locker was opened and operated and after valuing jewellary found in locker same was valued and handed over to 9 I.T(SS).A. No.05/Mum/2004 wif4e of assessee. On same date prohibitory order placed on assessee on 17.12.1999 and bank locker on 23.12.1999 were vacated. ld submitted that search was concluded on 17.12.1999 or latest on 23.12.1999 and therefore block assessment order passed on 27.2.2000 was barred by limitation for reasons that as prohibitory orders was not seizer in terms of provision of section 132(3) of Act which has been adequately explained in case of Mrs.Sandhya B. Nayak & Others (supra). ld. Counsel submitted that prohibitory order could not continued for longer period if facts did not warrant such continuation. In present case whole process got concluded which has been specified in panchnama adequately. It was pointed out that nothing was seized in last panchanam dated 14.2.2000 and it was only to vacate order passed u/s 132(3) of Act. Therefore block assessment order dated 27.2.2002 was barred by limitation as provided in section 158BE(1)(b) of Act. said order should have been passed with reference to first panchnama dated 17.12.1999 or at most 2nd panchanama dated 23.12.1999.Lastly ld AR prayed that assessment order passed by AO be quashed on ground of barred by limitation. 6. ld. DR reiterated facts as mentioned in appellate order and heavily relied on orders of authorities below. ld Dr ,while 10 I.T(SS).A. No.05/Mum/2004 vehemently opposing arguments of ld AR, submitted that assessment was made well within time as last punchnama was drawn on 14.2.2000 and therefore search was concluded on 14.02.2000 and not on 17.12.1999 or 23.12.1999 as submitted by ld AR. ld Dr submitted that on 14.02.2000 locker was operated and jewellary found therein and valued at Rs. 45,100/- . entire jewellary which was found at residence of assessee on 17.12.1999 and 14.02.2000 was handed over to assessee on 14.02.2000. Taking above facts in totality , search started on 17.02.2000 was concluded on 14.02.2000 and assessment was framed on 27.02.2000 which was well within limitation in terms of section 158BE(1)(b) of Act. In defence of his arguments ld DR relied on number of decisions namely (i) VLS Finance Ltd Vs Commissioner of Income Tax (2016) 68 Taxman.com 368(SC) (ii) Navin Kumar Aggarwal Vs CIT ITA No 11 of 2005 dated 12.05.2015 and (iii)CIT Vs Mukund ray Shah. Finally ld Dr prayed that order of CITA) be upheld. 7. We have heard rival parties and perused relevant records placed before us including judicial decisions referred and relied by parties. search u/s 132 of Act was conducted on 17.12.1999 pursuant to warrant of authorisation dated 16.12.1999. Simultaneous search was also carried out on company M/S Macleods 11 I.T(SS).A. No.05/Mum/2004 Pharmaceuticals Ltd in pursuance of separate warrant of authorisation in which assessee was director. During course of search on assessee nothing was seized by search party but authorised officers Shri K.J. Singh and Shri R.K. Vishwakarma inventorised jewellery found at residence of assessee which was valued by Deptt valuer at Rs. 4,23,354/- and was put in cupboard at residence of assessee which was sealed by prohibitory order u/s 132(3) of Act. Similarly key of Bank locker of assessee with State Bank of India found during search was sealed on 23.12.1999 in terms of warrant of authorisation dated 21.12.1999 and prohibitory order u/s 132(3) was passed. Thereafter said bank locker was opened on 14.02.2000 and jewellery found therein was got valued at Rs. 45,100/- from Deptt valuer by Shri M.V Patil and orders u/s 132(3) of Act dated 17.12.1999 and 23.12.1999 were vacated. As result jewellery found at residence of assessee worth Rs. 4,23,354 and found in bank locker worth Rs. 45,100/- aggregating to Rs. 4,68,954/- was handed over to wife of assessee in term of punchnama dated 14.02.2000. Thus it is apparent from above that nothing was found and seized on 14.02.2000 in terms of punchnama dated 14.02.2000. Now legal issue qua search is whether block assessment as made by AO was barred by limitation u/s 158BE(1)(b) of Act. According to provisions of section 158BE (1)(b) of Act order in block 12 I.T(SS).A. No.05/Mum/2004 assessment has to be passed by AO within two years from end of month in which search was conducted and concluded .Now issue to be adjudicated is whether search concluded in 17.12.1999/23.12.1999 or 14.02.2000. From facts discussed and narrated above it is clear that no seizure was made on 14.02.2000 but only bank locker was opened at strength of order dated 14.2.2000 and prohibitory order u/s 132(3) of Act were vacated. In view of said fact it clear that date of conclusion of search can not be taken as 14.02.2000 and has to be either 17.12.1999 or 23.12.1999 especially when nothing was found and seized on 14.2.2000. Moreover it is also clearly mentioned in punchnama dated 17.12.1999 and dated 23.12.1999 that search was finally concluded and not on 14.2.2000. case of assessee also find support from decision in case of Sandhya P. Naik (supra) that limitation shall not extend to date of passing order u/s 132(3) of Act. time limit for making assessment can not extended to date of passing restraint order. In Mrs. Sandhya B. Nailk & Others (supra) search was conducted and concluded on 16.10.1996 and assessment was completed on 31.12.1997. assessee challenged assessment being time barred by limitation on ground that same should have been made within one year from conclusion of search i.e assessment should have been completed on or before 31.10.1997 as search was completed on 20.10.1996. In this case also 13 I.T(SS).A. No.05/Mum/2004 order u/s 132(3) was passed on seizing all articles found in cupboard and was sealed accordingly. Thereafter some silver items were released and remaining were again sealed by further order passed u/s 132(3) of Act on 31.12.1997. revenue claimed that search was commenced on 16.10.1996 and was completed on 13.12.1996 when last punchnama was drawn as there was deemed seizure on 13.12.1996 as per second proviso to section 132(1) of Act. In second appeal, Tribunal quashed order being barred by limitation. In third appeal, Hon ble High Court has dismissed appeal of revenue in limine meaning thereby upholding decision of tribunal that assessment was time barred and also invalid. Thus assessment annulled by Tribunal was approved. . facts of assessee s case are squarely covered by decision of Mrs.Sandhya B. Nayak & Others(supra). decisions relied by revenue in its support are distinguishable on facts and therefore ratio decendi of same is not applicable to facts of present case .In view of above facts and ratio laid down in case of Sandha P. Naik (supra) we set aside order of AO and hold block assessment as barred by limitation as discussed above. Since we have decided assessee s appeal on preliminary technical issue, so issue raised on merit becomes academic and same may be agitated as and when situation arises. 14 I.T(SS).A. No.05/Mum/2004 9. In result, appeal of assessee is partly allowed). Order pronounced in open court on 15.9.2016. Sd sd (SHAILENDRA KUMAR YADAV) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED :16.9..2016 Sr.PS:SRL: Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, True copy (Dy./Asstt. Registrar) ITAT, Mumbai Rajendra Agarwal v. Dy. Commissioner of Income Tax -Range 8(2), Mumbai