Summary
A search authorisation under Section 132 of the Income Tax Act issued on 13 March 2001 for the assessees' office and residence concluded with a panchnama on 11 April 2001, while a second authorisation of 26 March 2001 for a bank locker was executed and its panchnama drawn the same day. Block assessment orders were passed in April 2003. The Tribunal held them time-barred, computing the two-year period under Section 158BE from the last authorisation, but the Delhi High Court reversed. The Supreme Court dismissed the assessees' appeals, holding that under Explanation 2 to Section 158BE and the decision in VLS Finance the limitation for block assessment runs from the date on which the last panchnama recording the conclusion of the search was drawn, not from the date of the last authorisation, since block assessment proceeds on the entire material gathered in the search.
Issues
- Whether the two-year period of limitation for completing a block assessment under Sections 158BC and 158BE of the Income Tax Act, 1961 commences from the date of the panchnama last drawn or from the date of the last authorisation for search.
Provisions considered
- Section 158BE(1)(b) and Explanation 2, Income Tax Act, 1961The authorisation is deemed executed, in the case of a search, on the conclusion of the search as recorded in the last panchnama; the two years therefore run from the end of the month in which the last panchnama was drawn, here 11 April 2001, and the April 2003 assessments were within time. (¶¶ 6, 7, 8)
- Section 132, Income Tax Act, 1961Where several authorisations are issued and material is gathered on different dates, the block assessment rests on the entire material collected in the search, so the date of the last panchnama is the relevant starting point. (¶¶ 7, 8)
Held
- As held in VLS Finance, the relevant date is that on which the panchnama is drawn and not that on which the authorisations are issued; since block assessment proceedings are initiated on the basis of all material collected during the searches and the panchnamas drawn, the date of the last panchnama is the starting point of the two-year limitation. (¶ 7)
- Reading the period from the date of the last authorisation would frustrate the object of Explanation 2 to Section 158BE and leave unanswered what would happen to material collected in a search continuing after that date; the High Court's view that limitation runs from the panchnama last drawn is correct. (¶ 8)
Result
Appeals dismissed; Delhi High Court judgment dated 14.09.2010 setting aside the Tribunal's orders and holding the block assessments within limitation affirmed; no order as to costs.