1. Heard Sri Pradeep Agrawal, learned Counsel for the Petitioner and Sri D.D. Chopra for the Respondents.
2. The Petitioner, who is an Assessee under the Income Tax Act, challenges the search and seizure conducted by the income tax Department on 9-2-2000 and also prays for release of the seized assets as well as two bank guarantees of Rs. 11,60,000 and Rs. 8,00,000 deposited by the Petitioner for release of a portion of the seized jewellery in pursuance of the orders of the Settlement Commission.
3. In short, the facts of the case are that on 18-7-2001, return u/s 158BC for the block period 1-4-1989 to 9-2-2000 was filed. On 17-8-2001, the Petitioner filed an application u/s 245C before the IT Settlement Commission, which was registered as Apple. No. 7/23/2001/3-IT.
The Settlement Commission on 30-1-2002 directed the CIT (Central) to furnish report within 90 days, as required under Rule 9 of the IT Settlement Commission (Procedure) Rules, 1957. The Settlement Commission also directed that the payment be made and accordingly the jewellery be released box-wise and serial-wise.
During the period commencing from 15-3-2002 to 15-6-2002, the Petitioner deposited a sum of Rs. 24,00,000 and after deposit of the said amount, jewellery worth Rs. 23,92,482 kept in box Nos. 1 to 7 as per Panchnama dated 9-2-2000 was released. On 16-6-2004, the Petitioner made another application before the Settlement Commission for release of jewellery kept in box Nos. 8 to 10 and offered to furnish bank guarantee to the tune of Rs. 20,00,000. On 26-4-2007, the Settlement Commission ordered for release of jewellery on furnishing a bank guarantee of Rs. 20,00,000, in response to which, the Petitioner had furnished one bank guarantee of Rs. 11,60,000 and the other of Rs. 8,00,000.
4. When the proceedings were pending before the Settlement Commission, an amendment was incorporated in the Finance Act, 2007 and by virtue of the said amendment, Clause (iv) was introduced in Section 245HA(1), which provided that if the final order under Sub-section (4) of Section 245D is not passed on or before 31-3-2008 then the proceedings before the Settlement Commission shall abate on 31-3-2008.
5. On 17-7-2008, the jewellery kept in box No. 9, valued at Rs. 11,57,500 was ordered to be released in pursuance of the bank guarantee of Rs. 11,60,000 by the Settlement Commission, but the proceedings pending before the Settlement Commission abated as final orders u/s 245D(4) were not passed by the Settlement Commission by 31-3-2008.
The consequence of the aforesaid amendment was that the assessing authority was to complete the assessment in accordance with law, which assessment was to be made by the assessing officer by the time prescribed.
6. So long as the matter was pending before the Settlement Commission, the assessing officer was not required to pass any assessment order and it was the Settlement Commission who was to take a final decision as per Section 245D(4) of the Act, but in view of the fact that by virtue of amendment in the Finance Act, 2007 on 1-6-2007, the pending proceedings before the Settlement Commission since abated, therefore, on 31-3-2008, in case the orders were not passed by then, the assessment was to be made thereafter by the assessing officer and, therefore, to give lease of life to such assessments, the Finance Act of 2007 also added the second proviso to Section 153(4) of the Income Tax Act, 1961 on 1-6-2007, which in fact, enlarged the period of limitation by another one year with effect from 31-3-2008 i.e., up to 31-3-2009 for passing the assessment order. The aforesaid provision provided a period of one additional year for completing the assessment, if the proceedings before the Settlement Commission abated u/s 245HA.
7. In view of the aforesaid provision, the assessing authority was obliged to pass the assessment order u/s 158BC on the basis of the return . filed on 18th July, 2001 in view of second proviso to Section 153(4) of the Income Tax Act, 1961, by 31-3-2009, but the assessing authority did not pass -any order of assessment, therefore, the returns filed for the period 1-4-1989 to 9-2-2000 had become barred by time and no proceedings for assessment could be continued thereafter.
8. The Petitioner had preferred an application before Respondent Nos. 2 and 3 for release of the seized jewellery, in view of the provisions of Section 132B(3), which included the refund of the amount of Rs. 24,00,000 deposited in pursuance of the order passed by the IT Settlement Commission as well as two bank guarantees furnished by the Petitioner for release of a portion of the seized jewellery, but his prayer has not been accepted till date.
9. The short argument advanced by the learned Counsellor the Petitioner is that in view of the aforesaid provisions of the Income Tax Act, the assessing officer was legally obliged to. pass the assessment order by 31-3-2009, in view of the fact that the proceedings registered before the Settlement Commission stood abated on 31-3-2008 in terms of second proviso to Section 153(4) of the Act up to 31-3-2009 and the assessing officer having failed to do so, all the proceedings stand vitiated.
10. In support of his submissions, learned Counsel for the Petitioner relies upon the judgment of the Delhi High Court in the case of
In our opinion, the decision of the Tribunal is correct when it stated that the effect of holding that the assessment was barred by time is that all further proceedings pursuant to the said decision-would be in fructuous. The Income Tax Officer gets jurisdiction to pass an assessment order if it is within limitation. If the assessment is barred by time, then any decision on merits would be of no consequence, and for the same reason, the decision, on merits, by the appellate authorities would also be of no consequence and would have to be ignored. This is exactly what the Tribunal has observed in the impugned order. For, if the assessment is barred by time, no effect can be given to the other decision on merits. If, however, the reference of the department against the order passed in Misc. Apple. No. 4 of 1985 succeeds, then the decision on merits of the various appellate authorities would automatically remain.
11. Sri D.D. Chopra, appearing for the revenue, has very fairly stated that there cannot be any dispute with respect to the aforesaid legal provision and its effect thereof, but in the instant case, as a matter of fact, the assessing officer could not know about the proceedings being abated before the Settlement Commission, as no orders were passed by the Settlement Commission and that in the absence of knowledge that he is to pass an assessment order, the assessment order could not be passed within the period of limitation.
12. We do not find any exception under the Act where the period of limitation for passing the assessment order can be enlarged/enhanced, either by the court or by the assessing authorities.
13. Section 153(1) prescribes limitation for passing an assessment order in matters arising out of proceedings u/s 143 or Section 144 of the Act. The language used is prohibitive, which restrains/prohibits the assessing officer to pass an order of assessment, after the period prescribed therein. The second proviso to Section 153(4) prescribed ah extended period of one year for making the assessment, excluding the period during which the proceedings remained pending before the Settlement Commission and does not give any latitude for extending the aforesaid period.
14. It will be appropriate to observe that the proceedings before the Settlement Commission abated by virtue of an amendment in the Finance Act, 2007 and the amendment so brought on record on the statute book is presumed to be known to all concerned and particularly the revenue. There was no occasion for the Settlement Commission to pass any order of abatement, as the abatement was by operation of law nor there was any occasion for the Assessee to communicate the said fact to the assessing officer, though he might have done so, but it was the obligation of the assessing officer to pass the assessment order within the statutory period.
Lack of knowledge on the part of the assessing officer could never be a good ground for extending the period of limitation, in view of the specific statutory limitation prescribed.
15. Since the proceedings under the Act were to be taken in accordance with the statutory limitation prescribed, which does not permit any sort of relaxation, we are unable to accept the plea of the Respondents in this regard.
Consequent to our findings aforesaid, all assessment proceedings in pursuance of the search and seizure conducted by the income tax Department on 9-2-2000 are a nullity and are liable to be set aside. The jewellery which finds mention in the Panchnama dated 9-2-2000 is liable to be released forthwith along with two bank guarantees furnished by the Petitioner for release of a portion of the seized jewellery. The amount of Rs. 24,00,000 also needs to be refunded to the Petitioner.
16. The Petitioner is thus, entitled for release of the seized jewellery forthwith and the amount deposited in pursuance of the orders of the Settlement Commission in accordance with the provisions of Section 132B(3) of the Act, which reads as under:
132(B)(3) any assets or proceeds thereof which remain after the liabilities referred to in Clause (i) of Sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized.
17. We, therefore, set aside/quash all the proceedings of assessment initiated in pursuance of the search and seizure conducted by the income tax Department on 9-2-2000 and further direct that the seized jewellery and the amount of Rs. 24,00,000 and two bank guarantees of Rs. 11,60,000 and Rs. 8,00,000 deposited by the Petitioner in pursuance of the orders of the Settlement Commission for release of a portion of the seized jewellery, shall be released in favour of the Petitioner forthwith.
The writ petition is allowed. No order as to costs.
