Last Panchnama Drawn During Search to be Relevant Date for Limitation Period in Block Assessments under Section 158BE of the Income Tax Act: SC

Last Panchnama Drawn During Search to be Relevant Date for Limitation Period in Block Assessments under Section 158BE of the Income Tax Act

Summary of the Judgment

In this case the Supreme Court of India considered the issue of limitation period for completing the block assessment proceedings under Section 158BC/158BE of the Income Tax Act, 1961. The case concerned the interpretation of Explanation 2 to Section 158BE, which provides that in cases of search, the period of limitation for completing the block assessment shall be counted from the date on which the last Panchnama was drawn.

The dispute in the case arose from the fact that two authorizations were issued for carrying out a search at a bank locker belonging to the assessee, with the first authorization issued on 13.03.2001 and the second authorization issued on 26.03.2001. The last Panchnama was drawn on 11.04.2001, which was related to the first authorization. The question before the court was whether the period of limitation of two years for the block assessment under Section 158BC/158BE would commence from the date of the Panchnama last drawn or the date of the last authorization.

The High Court had held that the date of the Panchnama last drawn would be the relevant date for considering the period of limitation of two years and not the last date of authorization. The Supreme Court upheld this decision, stating that the block assessment proceedings are initiated on the basis of the entire material collected during the search/s and on the basis of the respective Panchnama/s drawn. Therefore, the date of the Panchnama last drawn can be said to be the relevant date and can be said to be the starting point of limitation of two years for completing the block assessment proceedings.

The Court also noted that if the submission on behalf of the respective assessees that the date of the last authorization is to be considered for the purpose of starting point of limitation of two years, the entire object and purpose of Explanation 2 to Section 158BE would be frustrated. Thus, the view taken by the High Court was upheld and the appeals were dismissed.