For limitation U/s. 158BE, period is to be counted from the date on which the direction U/s. 142(2A) is served on the assessee

CIT Vs Amar Nath Arora (Rajasthan High Court)

Notice was issued under section 158BC on 29-10-1999 according to the provisions of section 158BE, the period of two years would start from 28-2-1999 from the end of the month in which the search was car­ried out. Therefore, assessment ought to have been passed before 28-2-2001. However, in the interregnum period , the assessing officer had ordered to furnish the audit report as required under sub-section (2A) of section 142 on 18-1-2001 which was required by the assessee on 23-1-2001. The audit report was submitted by the assessee on 17-7-2001.

 Therefore, the questions which came for the consideration is as to whether the order of the assessment which has been passed on 24-8-2001 is time barred or not.

Sub-clause (ii) appended with Explanation 1 to section 158BE uses the word direct, which is required to be interpreted, or according to clause (ii), the period between the date, on which the assessing officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, is to be excluded.

It cannot be disputed that the period of exclusion will commence from the day on which the assessing officer gives a direction under section 142(2A) and would end on the day when the assessee furnishes such audit report. According to us, the date of issuance of the notice (i.e., 18-1-2001) is the day on which the assessing officer had taken a decision to get the books audited, when such decision is conveyed to the assessee then only it results into direction. A purpose of interpretation of clause (ii) above, read with the decision of the Hon’ble Supreme Court (supra) would mean, the date on which the decision/notice is served on the assessee.

In that view of the matter, 23-1-2001 will be the crucial date from which the period to be excluded is to be reckoned, and therefore, the period which is required to be excluded in the period from 23-1-2001 to 17-7-2001 from 18-1-2001 to 23-1-2001 it was only deci­sion, and not the direction.

FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT

By way of this appeal, the Department has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal filed by the Department while dismissing the cross objections filed by the assessee.

2. This court while admitting the appeal on 20-9-2005 framed the following substantial questions of law :–

“1. Whether the findings of the Tribunal are perverse in holding that for the purpose of limitation under section 158BE, the period is to be counted from the date on which the direction under section 142(2A) is served on the assessee and not from the date of issue of direction by the assessing officer under section 142(2A) ?

2. Whether the order of the Tribunal is perverse in holding that the block assessment order was barred by limitation despite there being specific provision of section 158BE Explanation 1 clause (ii) that period for exclusion will commence from the day on which the assessing officer gives a direction under section 142(2A) ?”

3. The brief facts of the case are that the assessee is a partner of M/s. Jai Bharat Fruit Co., Subzi Mandoi, Kota engaged in the business of commis­sion agents and trading of vegetables. The premises of the said firm as well as its partners including the assessee were searched on 24-2-1999 under section 132(1) of the Income Tax Act, during which various valuables and incriminating books of account and many other documents were found and seized from the premises of the firms as well as its partners, including the assessee. During the course of search operation, statements of the assessee, his wife and other concerned persons were recorded under section 132(4) of the Income Tax Act, and consequently, a notice under sec­tion 158BC for the period ending on 24-2-1999, was issued by the Deputy Commissioner, Circle-Kota on 29-10-1999 requiring the assessee to file the return on his total income including undisclosed income within 16 days of service thereof. The assessee vide his letter dated 5-11-1999, requested that in view of delay in providing the photocopies of the seized documents, the time for filing the return of the block period may be extended to 45 days. The assessee, however, filed his return of total income, including undisclosed income in the prescribed form 2B on 8-12-1999 vide receipt No. 00410. In the said return, the assessee declared total undisclosed income of the block period at Rs. nil. Notice under section 142 dated 18-12-2000 along with a query letter was issued and duly served upon the assessee fixing the case for hearing on 10-1-2001, subsequently the then assessing officers, having jurisdiction over this case issued further notices under sections 143(2) and 142(1) coupled with query letters, which were duly served upon the assessee pursuant to which the assessee made partial compliance. Hav­ing regard to the peculiar nature and complexity involved in the seized books of account and documents, and in the background of: (a) No main­tenance of regular or proper books of account with regard to certain busi­ness activities ; (b) Close inter-connection and inter-linking with business associates and seizure of incriminating documents and duplicate sets of accounts, etc., showing substantial tax evasion ; (c) Incompleteness of financial or accounting records relating to conduct of several business activities during the block period and in the interests of the Revenue, the assessing officer decided to get the accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288. Therefore, with the previous approval of the Commissioner, Jaipur communicated vide his Letter No. CIT/JPR/ITO(R&S)/2000-01/2031 of 9-1-2001, direction under sub-section (2A) of section 142 of the Income Tax Act, 1961 were issued to the assessee vide Letter No. JCIT(OSD)/JPR/2000-01/32, dt. 18-1-2001 by the Joint Commissioner (OSD), Jaipur, the then assessing officer, to get the accounts audited. It is pertinent to note that the said notice was served upon the assessee on 23-1-2001. The assessee had furnished the audit report of the nominated auditor M/s. CM. Birla & Co., Kota as per his letter dated 17-7-2001, in the office of the assessing officer.

4. Notice was issued under section 158BC on 29-10-1999 according to the provisions of section 158BE, the period of two years would start from 28-2-1999 from the end of the month in which the search was car­ried out. Therefore, assessment ought to have been passed before 28-2-2001. However, in the interregnum period , the assessing officer had ordered to furnish the audit report as required under sub-section (2A) of section 142 on 18-1-2001 which was required by the assessee on 23-1-2001. The audit report was submitted by the assessee on 17-7-2001.

5. Therefore, the questions which came for the consideration is as to whether the order of the assessment which has been passed on 24-8-2001 is time barred or not. For deciding this issue, it will be apt to repro­duce provisions of section 158BE which reads as under :–

“158BE. (1) The order under section 158BC shall be passed,–(a) within one year from the end of the month in which the last of the authorisations 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 the 30-6-1995, but before the 1-1-1997 ;

(b) within two years from the end of the month in which the last of the authorisations 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 the 1-1-1997.

(2) The period of limitation for completion of block assessment id the case of the other person referred to in section 158BD shall be–

(a) one year from the end of the month in which the 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 30-6-1995, but before the 1-1-1997 ; and

(b) two years from the end of the month in which the 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 1-1-1997.

Explanation 1.–In computing the period of limitation for the pur­poses of this section,–

(i) the period during which the assessment proceeding 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 audited under sub-sec­tion (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section; or

(iii) the time taken in reopening the whole or any 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 the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Principal Commissioner or Commissioner under sub-section (2) of that section, shall be excluded :–

Provided that where immediately after the exclusion of the afore­said period, the period of limitation referred to in sub-section (1) or sub-section (2) available to the assessing officer for making an order under clause (c) of section 158BC is less than sixty days, such remain­ing 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 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 drawn 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 receipt of the books of account or other documents or assets by the Authorised Officer.”

6. Sub-clause (ii) appended with Explanation 1 to section 158BE uses the word direct, which is required to be interpreted, or according to clause (ii), the period between the date, on which the assessing officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, is to be excluded.

7. Counsel for the appellant has relied upon the following judgment of the Supreme Court and the Kerala High Court :–

(i) Tmstees of H.E.H. the Nizam’s Supplemental Family Trust v. CIT (2000) 242 ITR 381 (SC) ; and

(ii) Decision of the Kerala High Court in Cochin Plantations Ltd. v. State of Kerala (1997) 227 ITR 38 (Ker) and CIT v. N. C. John and Sons Ltd. (2002) 253 ITR 524 (Ker).

8. We have heard counsel for the appellant.

9. In this appeal, sub-clause (ii) is required to be interpreted. However, counsel for the appellant has taken us to sections 153 and 153A which came up for consideration before the Kerala High Court and other courts.

10. It cannot be disputed that the period of exclusion will commence from the day on which the assessing officer gives a direction under section 142(2A) and would end on the day when the assessee furnishes such audit report. According to us, the date of issuance of the notice (i.e., 18-1-2001) is the day on which the assessing officer had taken a decision to get the books audited, when such decision is conveyed to the assessee then only it results into direction. A purpose of interpretation of clause (ii) above, read with the decision of the Hon’ble Supreme Court (supra) would mean, the date on which the decision/notice is served on the assessee.

11. In that view of the matter, 23-1-2001 will be the crucial date from which the period to be excluded is to be reckoned, and therefore, the period which is required to be excluded in the period from 23-1-2001 to 17-7-2001 from 18-1-2001 to 23-1-2001 it was only deci­sion, and not the direction.

12. The learned Income Tax Appellate Tribunal has thus committed no error of law in holding the assessment order to be time barred.

13. In that view of the matter, the issue is required to be answered in favour of the assessee and against the Department.

Ordered accordingly.

The appeal stands dismissed.