The judgment of the court was delivered by
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 20th Sept., 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 s. 158BE, the period is to be counted from the date on which the direction under s. 142(2A) is served on the assessee and not from the date of issue of direction by the AO under s. 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 s. 158BE Expln. 1, cl. (ii) that period for exclusion will commence from the day on which the AO gives a direction under s. 142(2A) ?"
3. The brief facts of the case are that 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 24th Feb., 1999 under s. 132(1) of the IT 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 s. 132(4) of the IT Act, and consequently, a notice under s. 158BC for the period ending on 24th Feb., 1999, was issued by the Dy. CIT, Circle Kota on 29th Oct., 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 dt. 5th Nov., 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 No. 2B on 8th Dec., 1999 vide receipt No. 00410. In the said return, the assessee declared total undisclosed income of the block period at Rs. nil, Notice under s. 142 dt. 18th Dec., 2000 along with a query letter was issued and duly served upon the assessee fixing case for hearing on 10th Jan., 2001, subsequently the then AO's, having jurisdiction over this case issued further notices under s. 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 accounts and documents, and in the background of : (a) None 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 interest of revenue, the AO decided to get the accounts audited by an accountant as defined in the Explanation below sub-s. (2) of 288. Therefore, with the previous approval of the CIT, Communicated vide his letter No. CIT/JPR/ITO(R&S)/2000-01/2031 of 9th Jan., 2001, direction under sub-s. (2A) of s. 142 of IT Act, 1961 were issued to the assessee vide letter No. Jt. CIT(OSD)/JPR/2000-01/32 dt. 18th Jan., 2001 by the Jt. CIT (OSD), Jaipur, the then AO, to get the accounts audited. It is pertinent to note that said notice was served upon the assessee on 23rd Jan., 2001. The assessee had furnished the audit report of the nominated auditor M/s C.M. Birla & Co., Kota as per his letter dt. 17th July, 2001, in the office of the AO.
4. Notice was issued under s. 158BC on 29th Oct., 1999 according to the provisions of s. 158BE, the period of two years would start from 28th Feb., 1999 from the end of the month in which the search was carried out. Therefore, assessment ought to have been passed before 28th Feb., 2001. However, in the period enter regnum, the AO had ordered to furnish the audit report as required under sub-s. (2A) of s. 142A on 18th Jan., 2001 which was required by the assessee on 23rd Jan., 2001. The audit report was submitted by the assessee on 17th July, 2001.
5. Therefore, the questions which came for the consideration is as to whether the order of the assessment which has been passed on 24th Aug., 2001 is time barred or not. For deciding this issues, it will be apt to reproduce provisions of s. 158 BE which reads as under :
"158BE. (1) The order under s. 158BC shall be passed—
(a) within one year from the end of the month in which the last of the authorisations for search under s. 132 or for requisition under s. 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 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 authorisations for search under s. 132 or for requisition under s. 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 1st day of January, 1997.
(2) The period of limitation for completion of block assessment in the case of the other person referred to in s. 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 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 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 1st day of January, 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 AO directs the assessee to get his accounts audited under sub-s. (2A) of s. 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 s. 129; or
(iv) in a case where an application made before the Settlement Commission under s. 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-s. (1) of s. 245D is received by the 74 (Principal CIT or) CIT under sub-s. (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-s. (1) or sub-s. (2) available to the AO for making an order under cl. (c) of s. 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-s. (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 s. 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer."
6. Sub-cl. (ii) appended with Expln. 1 to s. 158BE uses the word direct, which is required to be interpreted, or according to cl. (ii), the period between the date, on which AO directs the assessee to get his accounts audited under sub-s. (2A) of s. 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 Kerala High Court :
(i) Trustees of H.E.H. The Nizam’s Supplemental Family Trust vs. CIT (2000) 159 CTR (SC) 114 : (2000) 242 ITR 381 (SC) and;
(ii) Decision of Kerala High Court in Cochin Plantations Ltd. vs. State of Kerala (1997) 140 CTR (Ker) 178 : (1997) 227 ITR 38 (Ker) and CIT vs. N.C. John & Sons Ltd. (2002) 172 CTR (Ker) 685.
8. We have heard counsel for the appellant.
9. In this appeal, sub-cl. (ii) is required to be interpreted. However, counsel for the appellant has taken us to s. 153 & 153A which came up for consideration before the Kerala High Court and other Courts.
10. It can not be disputed that period of exclusion will commence from the day on which the AO gives a direction under s. 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. 18th Jan., 2001 is the day on which the AO taken a decision to get the bond audited, when such decision is conveyed to the assessee then only it results into direction. A purpose of interpretation of cl. (ii) above, read with the decision of 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, 23rd Jan., 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 23rd Jan., 2001 to 17th July, 2001 from 18th Jan., 2001 to 23rd Jan., 2001 it was only decision, and not the direction.
12. Learned 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.