By TIOL News Service

NEW DELHI, JULY 21, 2017: THE ISSUE BEFORE THE COURT IS - Whether second visit of search parties and the panchnama drawn up on that date can lead to postponement of the period for completion of assessment with reference to Section 153B(2)(a), where the second visit did not result in anything new being found that belonged to any of the searched parties. NO is the verdict.

Facts of the case:

During the subject year, on the basis of Authorization issued u/s 132(1), a search was commenced in the office premises of Rim Zim Valley Products Pvt. Ltd., J.H. Invest Pvt. Ltd., Aakriti International; M/s JH Business and Products Pvt. Ltd. and Surya Vinayak Industries Group. Two authorisations were shown in regard to the above entities which were to be searched. As per the panchnamas, the search at the Pitam Pura premises commenced on 21st March, 2007 and were closed on 22nd March, 2007. Second panchnama stated that the search commenced on 23rd March, 2007 and were finally concluded on the same day. For the search of Ashok Vihar premises, as per the first panchnama search commenced on 21st March, 2007 and closed on 22nd March, 2007. Second panchnama stated that the search commenced on 15th May, 2007 and closed on 15th May, 2007. Another authorization having E. No. 0070 pertains to the search of the Locker with a Bank in the name of Ms. N. As per first panchnama, the raids commenced on 21st March, 2007 and concluded on the same date. Second panchnama was dated 15th May, 2007 which shows that the searches were concluded on the same date. Authorization bearing E. No. 0071 was for the search at Locker with a bank in the name of Ms. N, Mr. R and Mr. S. As per first panchnama, the raids commenced on 21st March, 2007 and concluded on the same date. Second panchnama was dated 15th May, 2007 which shows that the searches were concluded on the same date. Thereafter, Assessment was framed by AO u/s 153A. On appeal, ITAT held that the assessment framed u/s 153A was barred by limitation.

On appeal, the HC held that,

++ it is seen that on the first day of search a restraint order was passed under Section 132 (3) in respect of the jewellery items of Ms. N and Ms. S kept in some wooden cupboard in the premises. There were also a restraint order communicated to the managers of some of the banks in respect of the lockers and bank accounts of the Respondents herein. At the time of the second visit, the aforementioned restrain order was lifted. No fresh material as such was found during the second visit on 15th May, 2007. A formal seizure of the jewellery of Ms. N was recorded in the second panchnama which also notes that there was already a valuation report dated 21st March, 2007 in respect of those very jewellery items. No de facto seizure actually took place on that date i.e., 15th May, 2007. For all practical purposes, therefore, the search concluded on 22nd March, 2007 at 6:00 am as far as Authorization E. No. 0069 is concerned and 22nd March, 2007 at 5:30 am as far as Authorization E. No. 0068 is concerned. It had to be the "last panchnama drawn in relation to any person in whose case the warrant of authorization has been issued". The last panchnama, no doubt, is dated 15th May, 2007 but what it records is the seizure of the jewellery items not of any of the persons searched but the wives of one of the directors i.e., of Ms. N who was not even a director of any of these entities. Therefore, even assuming that the jewellery of Ms. N was seized under panchnama of 15th May, 2007, as far as the searched entities are concerned, the Revenue cannot take advantage of Section 153B (2) (a) to contend that the period of limitation in respect of them stands extended for completing of assessment up to 31st December, 2009;

++ merely visiting the premises on the pretext of concluding the search but not actually finding anything new for being seized cannot give rise to a second panchnama. In such event, there would be no occasion to draw up a panchnama at all. Court is satisfied that the second visit by the search party to the Ashok Vihar premises on 15th May, 2007 did not result in anything new being found that belonged to any of the searched parties. The second visit and the panchnama drawn up on that date cannot lead to postponement of the period for completion of assessment with reference to Section 153B (2) (a). As regards the appeals involving J.H. Business India Pvt. Ltd., where proceedings were sought to be initiated under Section 153C, it is plain that in view of the above conclusion in the Surya Vinayak cases, the assessment framed by the AO under Section 153C read with Section 143(3) is barred by limitation. The search stood concluded qua J.H. Business India Pvt. Ltd. on 22nd March, 2007 itself. This, also, therefore, has to lead to the dismissal of the Revenue's Appeal even as regards PPC Business Pvt. Ltd. where Section 153C was involved.

(See 2017-TIOL-1356-HC-DEL-IT)