2011 (8) TMI 1130 - HC - Income Tax

Warrant of authorisation under Section 132 (1) issued in the joint names - Held that - We do not find that the Tribunal has committed any error in law in relying upon the judgment in Smt. Vandana Verma s case (supra) in which it was held that where the search operations are carried out in the joint names, the individual assessment could not have been made. The Court has given reasons to reach to such conclusion. They have held that in case, the authorizing authority had information in his possession in consequence of which he had reason to believe that Mudit Verma and Vandana Verma though living in a single premises as husband and wife, possessed undisclosed assets including income separately, then, he might have issued warrant of search individually for conducting the search as both Mudit Verma and Vandana Verma are assessed to income tax in their individual capacity. When warrant of authorization was issued in the joint names it was not open for the assessing authority to assess Smt. Vandana Verma on the basis of the assets and documents seized during the course of search in pursuance of the warrant of authorization which was in the joint names, and that too by invoking the provisions of Chapter XIV-B in an individual capacity. She could be assessed jointly only as AOP of BOI as per the definition of the word person under the Income Tax Act.

Issues:
1. Interpretation of warrant of authorisation under Section 132(1) of the Income Tax Act for joint names.
2. Assessment order validity based on warrant of authorisation.
3. Existence of evidence for AOP/BOI status.
4. Application of Section 153A for persons searched under Section 132.
5. Comparison of facts in different cases for assessment.

Interpretation of Warrant of Authorisation:
The High Court dealt with Income Tax Appeals arising from the ITAT orders following a Division Bench judgment. The Court discussed the significance of the warrant of authorisation under Section 132(1) of the Income Tax Act, emphasizing that when issued in joint names of individuals living together, it restricts the assessing authority from assessing one individual alone based on seized assets and documents. The judgment in Smt. Vandana Verma's case was referenced to support the position that assessment should be done jointly as AOP or BOI, not individually.

Validity of Assessment Order:
The ITAT quashed the assessment order, highlighting that assessments in individual names cannot be made when the warrant of authorisation is issued in joint names. The revenue raised questions regarding the legal justification for dismissing the appeals, arguing that evidence establishing AOP/BOI status was lacking. The Court agreed with the ITAT's decision, citing the need for evidence of volition to produce profit from a common income source for AOP status.

Existence of Evidence for AOP/BOI Status:
The Court analyzed whether the ITAT erred in creating an AOP status without sufficient evidence, referencing the essential ingredients required for AOP existence. The judgment in Raghuraj Pratap Singh's case was cited to support the argument that mere inclusion of names in a warrant of search does not substitute for evidence of AOP formation.

Application of Section 153A:
The revenue questioned the ITAT's disregard for the provisions of Section 153A, which require proceedings for persons searched under Section 132 of the Income Tax Act. The Court examined the application of this section in the context of the case's assessment proceedings.

Comparison of Facts in Different Cases:
The Court addressed the revenue's argument that the ITAT incorrectly applied the judgment in Smt. Vandana Verma's case, emphasizing the differences in facts and circumstances. The Court upheld the ITAT's decision, stating that the questions raised were covered by the Division Bench judgment, and there was no need to revisit them. The Income Tax Appeals were dismissed, allowing the assessing authority to make assessment orders for those assessed separately as AOP/BOI.

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