2012 (3) TMI 117 - AT - Income Tax

Validity of Search - Block Assessment - reason recorded for issuance of 132 not furnished - Search warrant in joint name, assessment framed in the individual name was bad in law - Held That - In view of Smt. Vandana Verma (2009 - TMI - 34911 - ALLAHABAD HIGH COURT), since the warrant of authorisation was in the joint names and not in the individual names of the assessee, therefore the assessment framed u/s. 153A in individual capacity not maintainable. Accordingly the assessment framed by the AO u/s. 153A is annulled.

Issues Involved:
1. Validity of the assessment due to the warrant of authorization being in joint names.
2. Compliance with mandatory conditions for invoking Section 153A.
3. Legality of the search and initiation of proceedings.
4. Non-communication of centralization of jurisdiction.
5. Assessment of deemed dividend under Section 2(22)(e).
6. Treatment of further consideration received on account of transfer of shares as capital gains.
7. Determination of full value of consideration under Section 48.
8. Prior scrutiny assessments and their finality.
9. Levy of interest under Sections 234B and 234C.

Detailed Analysis:

1. Validity of the Assessment Due to the Warrant of Authorization Being in Joint Names:
The main grievance was the validity of the assessment due to the warrant of authorization being in the joint names of various persons, while the assessment was framed in individual names. The Tribunal noted that the warrant of authorization dated 02.02.2007 was indeed in the joint names of several persons. Citing the Hon'ble Allahabad High Court in CIT v. Smt. Vandana Verma and the Hon'ble jurisdictional High Court in CIT v. P.J. Kumar, it was held that a warrant of authorization must be issued individually, and if it is not, the assessment cannot be made in an individual capacity. Consequently, the assessment framed u/s. 153A was annulled.

2. Compliance with Mandatory Conditions for Invoking Section 153A:
The assessee argued that the conditions for invoking Section 153A did not exist, and mandatory conditions were not complied with, making the assessment bad in law. The Assessing Officer (AO) and CIT(A) disagreed, stating that the conditions were satisfied, and provisions of Section 153A were attracted. However, since the assessment was annulled on the first issue, no separate findings were given on this ground.

3. Legality of the Search and Initiation of Proceedings:
The assessee contended that the search was illegal and the proceedings should be dropped. The CIT(A) held that once a warrant of authorization is issued by the competent authority, the validity of the search cannot be questioned before the AO or appellate authorities. This argument was rendered moot due to the annulment of the assessment based on the first issue.

4. Non-Communication of Centralization of Jurisdiction:
The assessee claimed that the non-communication of centralization of jurisdiction violated principles of equity and natural justice. The Tribunal did not address this issue separately due to the annulment of the assessment.

5. Assessment of Deemed Dividend Under Section 2(22)(e):
The assessee challenged the assessment of deemed dividend, arguing that the amounts drawn were not loans or advances and the calculation of accumulated profits was contrary to law. The Tribunal did not provide separate findings on this issue due to the annulment of the assessment.

6. Treatment of Further Consideration Received on Account of Transfer of Shares as Capital Gains:
The assessee disputed the addition of Rs.2,19,13,068/- as capital gains, arguing it was based on suspicion and devoid of evidence. The Tribunal did not address this issue separately due to the annulment of the assessment.

7. Determination of Full Value of Consideration Under Section 48:
The assessee argued that the full value of consideration should be the transacted price, not the market value. This issue was not separately addressed due to the annulment of the assessment.

8. Prior Scrutiny Assessments and Their Finality:
The assessee pointed out that the issue of transfer of shares had been assessed in prior scrutiny assessments, and certain additions were deleted by the CIT(A) and had attained finality. The Tribunal did not provide separate findings on this issue due to the annulment of the assessment.

9. Levy of Interest Under Sections 234B and 234C:
The assessee denied liability to interest under Sections 234B and 234C, arguing the additions were debatable. The Tribunal did not address this issue separately due to the annulment of the assessment.

Conclusion:
The Tribunal annulled the assessment framed u/s. 153A due to the warrant of authorization being in joint names, following the precedent set by the Hon'ble jurisdictional High Court and the Hon'ble Allahabad High Court. Consequently, other grounds raised by the assessee and the department were not separately addressed. The appeals of the assessees were allowed, and the appeals of the department were dismissed.

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