Facts of the Case

The Revenue preferred multiple appeals under Section 260A of the Income Tax Act against various assessees arising out of a common search operation conducted under Section 132. Search authorizations were executed on 21st March 2007 at business premises and associated locations of the assessee group.

The primary controversy revolved around whether the assessment orders passed on 24th December 2009 / 31st December 2009 were within the statutory limitation period prescribed under Section 153B.

The Revenue contended that the search concluded on 15th May 2007 because a second panchnama was drawn on that date. The assessees argued that the search effectively concluded on 22nd March 2007 itself and the subsequent visit was merely for lifting restraint orders and releasing jewellery, without any fresh seizure.

 Issues Involved

  1. Whether the second panchnama dated 15th May 2007 could be treated as the “last panchnama” for computation of limitation under Section 153B?
  2. Whether assessment under Section 153A and Section 153C completed in December 2009 was barred by limitation?
  3. Whether merely lifting restraint orders or releasing previously inventoried assets extends limitation?

 Petitioner’s Arguments (Revenue’s Contentions)

  • The Revenue argued that the search was finally concluded only on 15th May 2007 as recorded in the panchnama.
  • Therefore, the limitation period under Section 153B would commence from the end of FY 2007-08, making the assessment valid till 31st December 2009.
  • Revenue relied upon the wording of Section 153B and prior judicial interpretation to argue that the last panchnama governs limitation computation.

 Respondent’s Arguments (Assessee’s Contentions)

  • The assessees argued that the actual search operation was concluded on 22nd March 2007.
  • The subsequent visit on 15th May 2007 was only procedural for lifting restraint and formal release/seizure recording.
  • No fresh material was found or seized on 15th May 2007.
  • Therefore, limitation should be calculated from March 2007, making the December 2009 assessment time-barred.

 Court Findings / Observations

The Delhi High Court held:

  • A panchnama for limitation purposes must record an actual search or seizure event.
  • Merely visiting premises for lifting seals, revoking restraint, or formalizing previously inventoried articles does not amount to continuation of search.
  • If no new incriminating material is found, such subsequent panchnama cannot extend limitation.
  • The search stood concluded on 22nd March 2007.
  • Consequently, the assessments completed in December 2009 were barred by limitation.

 Court Order / Final Decision

The Delhi High Court dismissed all Revenue appeals and upheld the ITAT orders. It held that the assessments framed under Sections 153A and 153C read with Section 143(3) were barred by limitation and therefore invalid.

Important Clarifications by Court

1. Meaning of Panchnama for Limitation

A panchnama must record actual search activity or seizure to qualify for extending limitation.

2. Temporary Suspension Does Not Extend Search

Merely mentioning “temporarily concluded” does not automatically continue search proceedings.

3. Fresh Discovery Necessary

Without discovery of fresh material, subsequent procedural visits cannot extend statutory limitation.

4. Protection of Assessee’s Vested Rights

Statutory limitation cannot be extended at departmental convenience.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:3567-DB/SMD17072017ITA2902016.pdf

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