ITAT Erred in Holding Vedanta’s Block Assessment Order Time-Barred: Madras HC Restores 25 Years Pending Matter to Tribunal [Read Order]
Based on the Income Tax Search and Seizure Manual and Supreme Court precedents, the Court determined that prohibitory orders under Section 132(3) are different from considered seizures and do not signal the conclusion of a search.
Assessment – order – ITAT – Taxscan
Assessment – order – ITAT – Taxscan
The Madras High Court has overturned the Income Tax Appellate Tribunal’s ( ITAT ) decision that had held the block assessment order issued against Vedanta Limited as time-barred and restored the 25-year old pending matter back to the tribunal.
The search that started on December 8, 1999, at Vedanta's headquarters under Section 132 of the Income Tax Act, 1961, was the root of the dispute.
Although the initial search began that day, it continued across multiple dates due to the voluminous nature of documents involving reportedly over 500 kg in 12 trunks and a 30,000 sq. ft. record room. Prohibitory orders under Section 132(3) were issued on 9 December 1999 and again on 21 January 2000, with the final search being concluded only on 2 March 2000.
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The assessing officer passed the block assessment order on 28 March 2002, adding ₹44.56 crore as undisclosed income. While the Commissioner of Income Tax (Appeals) upheld the validity of the order as being within the limitation period under Section 158BE, the ITAT disagreed. It held that the search had effectively concluded on 8 December 1999, and hence, the order issued in March 2002 was beyond the two-year limitation period.
However, the bench of Justices R. Suresh Kumar and C. Saravanan found fault with the ITAT’s reasoning. Based on the Income Tax Search and Seizure Manual and Supreme Court precedents, the Court determined that prohibitory orders under Section 132(3) are different from considered seizures and do not signal the conclusion of a search.
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The bench stated that the search in Vedanta’s case was a continuous process that legally concluded only on 2 March 2000, the date when the final prohibitory order was lifted.
Accordingly, the High Court ruled that the assessment order dated 28 March 2002 was well within the statutory time frame and set aside the ITAT’s order. The Court remanded the matter to the Tribunal to consider the appeal afresh on merits.
Also read: Auditor’s Advice on Rs. 20L Threshold Resulted in GST Registration Cancellation: Madras HC Orders Reopening of Portal for Return Filing [Read Order]
To Read the full text of the Order CLICK HERE
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