2016 (10) TMI 1361 - AT - Income Tax

Assessment u/s 153A - valid initiation of search - assessee has challenged execution of warrants and also whether valid search was initiated in this case? - HELD THAT - Search will be deemed to be concluded on the basis of last panchnama drawn in relation to the person in whose case the warrant of authorization has been issued and in the instant case we have observed that no panchnama was drawn against the assessee so it can be concluded that search against the assessee got vitiated as no panchnama was ever prepared against the assessee. The search is a serious invasion into the privacy of the person infringing on fundamental rights as enshrined in Article 21 of the Constitution of India and the same cannot be lightly carried out by the State in an casual or lax manner. The Revenue has prepared the Panchnama in the name of Manoj B Punmia and group while there is no concept of word group in the Act in context of search proceedings. Incidentally in the instant appeal there is no panchnama drawn by the Revenue against the present assessee which is an admitted position. Keeping in view the facts and circumstances of the case we are of considered view that the search proceedings in the case of present assessee got vitiated due to non-preparation of the panchnama in the name of the assessee which evidences conclusion of the search and which effectively decides against whom the Revenue has conducted search so much so further actions are required to initiate assessment proceedings u/s 153A of the Act for the last six years against the person so searched within the time stipulated u/s 153B. Thus in the absence of panchnama being drawn against the assessee no incriminating material having been found pertaining to the assessee and also the premises searched did not belonged to the assessee it could be concluded based on the cumulative effect of all the above-stated relevant facts that no valid search was conducted against the assessee and the assessment u/s 153A of the Act is bad in law hence liable to be quashed. Why despite a search we observe a notice u/s 153C as well as a survey being conducted on the assessee in the present case. Disallowance made on account of unexplained purchases to 50% - Since we have declared the proceedings u/s 153A as null and void these appeals for impugned assessment years have also remained for academic interest only. Since the basis for making the assessment/reassessment has been declared as null and void therefore the same ratio will be applicable to the appeals of the Revenue also consequently dismissed therefore these appeals are also decided in favour of the assessee. Incriminating material found during the course of search or not? - The assessee company had filed return of income on 20-10-2004 u/s 139(1) of the Act. The time limit for service of notice u/s 143(2) of the Act for the said relevant period was till the expiry of twelve months from the end of the month in which the return is furnished i.e. up-to 31-10- 2005. The search was initiated on 31-10-2009 and hence the period with in which Revenue could have issued notice u/s 143(2) of the Act to frame assessment under Section 143(3) of the Act has already expired and hence the assessment for the impugned assessment year is a concluded assessment as stipulated u/s 153A of the Act on the date of search on 31- 10-2009. Thus as per mandate of Section 153A of the Act the concluded assessment can be re-opened for framing assessment u/s 153A of the Act provided there is an incriminating material found during the course of search. Since in the instant case no incriminating material was during the course of search against the assessee company for the impugned assessment year no additions can be sustained. - Assessee appeal allowed.

Summary

Issues Involved:
1. Validity of search and seizure operation.
2. Execution of warrants.
3. Validity of proceedings under Section 153A of the Income Tax Act.
4. Addition based on seized material.
5. Jurisdictional issues raised by the assessee.
6. Incriminating material and concluded assessment.

Issue-wise Analysis:

1. Validity of Search and Seizure Operation:
The assessee challenged the validity of the search operation, arguing that the panchnama did not contain the name of the assessee but was prepared in the name of "Shri Manoj Punamiya & Group." The assessee contended that there is no concept of "group" under the Income Tax Act, 1961, and that the inventory of accounts, books, etc., was prepared only in the name of Shri Manoj Punamiya. The Revenue defended the search operation, asserting that it was validly carried out and that search warrants were executed.

2. Execution of Warrants:
The assessee's counsel argued that the search warrants were never executed against the assessee, and no search was initiated against the assessee pursuant to any warrant. The Revenue's representative claimed that warrants were issued against the assessee. However, the Deputy Commissioner of Income-tax, Central Circle-7(1), Mumbai, confirmed that the documents pertaining to the search were not available, and only material related to a survey action under Section 133A of the Act was available.

3. Validity of Proceedings under Section 153A of the Income Tax Act:
The assessee challenged the initiation of proceedings under Section 153A, arguing that such notice can only be issued where action under Section 132 is initiated or where books of accounts are requisitioned under Section 132A. The Tribunal found that the warrant of authorization under Section 132 was prepared in the name of the assessee company but the panchnama was drawn in the name of "Manoj B. Punamia & Group," which is not a valid concept under the Act. Therefore, the search against the assessee was deemed invalid.

4. Addition Based on Seized Material:
The Tribunal noted that no incriminating material was found during the search that linked the assessee to the premises searched. The assessment was completed under Section 143(3) read with Section 153A, but no material was unearthed that belonged to the assessee. The Tribunal cited various case laws, including CIT vs Kabul Chawla and CIT vs Tirupati Oil Corporation, to support the view that no addition could be made in the absence of incriminating material.

5. Jurisdictional Issues Raised by the Assessee:
The Tribunal considered the jurisdictional issues and found that the search was not validly initiated against the assessee. The Tribunal referred to the provisions of Section 132 and 132A, emphasizing that the competent authority must have information and reason to believe that the conditions stipulated in these sections exist. The Tribunal concluded that the search was illegal and invalid, and therefore, the proceedings under Section 153A were null and void.

6. Incriminating Material and Concluded Assessment:
The Tribunal observed that the assessment for the impugned assessment year was a concluded assessment as of the date of the search, and no incriminating material was found during the search. Therefore, no additions could be sustained. The Tribunal referred to the decisions of the Hon'ble Bombay High Court and the Hon'ble Delhi High Court, which held that in the absence of incriminating material, no assessment or reassessment under Section 153A can be made.

Conclusion:
The Tribunal declared the proceedings under Section 153A as null and void due to the invalid search and absence of incriminating material. Consequently, the appeals of the assessee were allowed, and the appeals of the Revenue were dismissed. The Tribunal emphasized that the assessment or reassessment under Section 153A arises only when a valid search is initiated and conducted. The decision in ITA No. 2183/Mum/2013 for the assessment year 2004-05 was applied mutatis mutandis to the appeals for the assessment years 2005-06, 2006-07, and 2007-08.