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 February 9, 2000, and also prays for release of the seized assets as well as two Bank guarantees, of Rs. 11,60,000 and Rs. 8 lakhs deposited by the petitioner for, release of a portion of the seized jewellery in pursuance of the, orders of the Settlement, Commission. In short the facts of the case are that on July 18, 2001, return under section 158BC for the block, period April 1, 1989, to February 9, 2000, was filed. On August 17, 200. 1, the petitioner filed an application under section 245C before the Income-tax Settlement Commission, which was registered as Application No. 7/23/2001/3-IT.
3. The Settlement Commission on January 30, 2002, directed the Commissioner of Income-tax (Central) to-furnish report within 90 days, as required under rule 9 of the Income tax Settlement Commission (Procedure) Rules, 1997. The Settlement Commission also directed that the payment be made and accordingly the jewellery be released box-wise and serial-wise.
4. During the period commencing from March 15, 2002, to June 15, 2002, the petitioner deposited a sum of Rs 24 lakhs and after deposit of the said amount jewellery worth, Rs. 23,92,482 kept in box Nos. 1 to 7 as per panchnama dated February 9,2000, was released. On June 16, 2004, the petitioner made another application before the Settlement Commission for release of jewellery kept on box Nos. 8, to 10 and offered to furnish bank guarantee to the tune of Rs. 20 lakhs. On April 26, 2007, the Settlement Commission ordered for release of jewellery on furnishing a bank guarantee of Rs. 20 lakhs; in response to which, the petitioner had furnished one Bank; guarantee of Rs. 11,60,000 and the other of Rs. 8 lakhs.
5. When the proceedirigs 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 March 31, 2008, then the proceedings before the Settlement Commission shall abate bn March 31, 2008.
6. On July 17, 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 under section 245D(4) were not passed by the Settlement Commission by March 31, 2008.
7. 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.
8. 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, the amendment in the Finance Act, 2007, on June 1, 2007, (the pending proceedings before the Settlement Commission since abated, therefore, on March 31, 2008, in ease 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 June 1, 2007, which, in fact, enlarged the period of limitation by another one, year with effect from. March 31, 2008, i.e, up to March 31, 2009 for passing the assessment order.
9. The aforesaid provision provided a period of one additional year for completing the assessment, if the proceedings, before; the Settlement Commission abated under section 245HA.
10. In view of the aforesaid provision, the assessing authority was obliged to pass the assessment order under section 158BC on the basis of the return filed on July 18, 2001; in view, of the second proviso to section 153(4) of the Income-tax Act, 1961, by March 31, 2009 but the assessing authority did not pass any order of assessment, therefore, the returns filed for the period April 1, 1989, to February 9, 2000; had become, barred by time and no proceedings for assessment could be continued thereafter.
11. The petitioner had preferred an application before respondents 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 lakhs deposited in pursuance of the order passed by the Income-tax 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.
12. The short argument advanced by the learned counsel for 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 March 31, 2009, in view of the fact that the proceedings registered before the Settlement Commission stood abated on March 31, 2008, in terms of the second proviso to section 153(4) of the Act up to March 31, 2009, and the Assessing Officer having failed to do so, all the proceedings stand vitiated.
13. In support of his submission, learned counsel for the petitioner relies upon the judgment of the Delhi High Court in the case of Commissioner Of Income-Tax, Delhi, Central-I v. Escorts Farms P. Ltd. [1989] 180 ITR 280 (Delhi) wherein the court observed as under (page 282):
“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 infructuous. 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 the merits would be of no consequence, and for the same reason, the decision, on the 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 the merits. If, however, the reference of the Department against the order passed in M.A No. 4 of 1985 succeeds, then the decision on the merits of the various appellate authorities would automatically remain.”
14. 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.
15. 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.
16. Section 153(1) prescribes limitation for passing an assessment order in matters arising out of proceedings under section 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.
17. The second proviso to section 153(4) prescribed an 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.
18. 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 was there 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.
19. 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.
20. 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.
21. Consequent to our findings aforesaid, all assessment proceedings in pursuance of the search and seizure conducted by the Income-tax Department on February 9, 2000, are a nullity and are liable to be set aside. The jewellery which finds mention in the panchnama dated February 9, 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 lakhs also need be refunded to the petitioner. 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:
“132B. (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.”
22. 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 February 9, 2000, and further direct that the seized jewellery and the amount of Rs. 24 lakhs and two bank guarantees of Rs. 11,60,000 and Rs. 8 lakhs 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.
23. The writ petition is allowed. No order as to costs.