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2016 (9) TMI 300 - HC - Income TaxAO jurisdiction to issue notice under Section 158-BC - Held that - Perusal of the warrant clearly shows that the names of Ms. Umlesh Goyal and Ms. Surbhi Goyal, has not been written in the warrant of authorisation. Thus, when names of the two assessees herein does not find mention in the warrant of authorisation, the AO has no jurisdiction to issue notice under Section 158-BC, and the issuance of notice was illegal and has rightly been annulled by the CIT(A) and confirmed by the Tribunal. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with law and only for the purposes for which the law authorises it to be exercised. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the court about the correctness of his action. Therefore, in our considered view a search under Section 132(1) has to be person specific . The Authority authorising search has to have information in his possession in respect of a person and such a person should be specifically named in search warrant and since names of the assessees having not figured in the authorisation of warrant as having been proved on the basis of Form 45 which has been reproduced by us in para 16 hereinbefore, the AO has exceeded its jurisdiction in issuing the notice under Section 158-BC and initiation of the proceedings being invalid, all subsequent action of A.O. including order of assessment is not sustainable in law. We need not go into the issue about issuance of notice under Section 158-BD instead of Section 158-BC particularly in view of the fact that learned counsel for the Revenue fairly conceded that Section 158-BD was not in existence at the time when the search on 23.3.1999 was conducted and the same was inserted with effect from 1.6.2002. After at-least 1.6.2002 an AO does get a right to assess a person, if satisfied on the material found that undisclosed income belongs to any person other than even the person searched.For the reasons assigned and our observation that when a search action under Section 132(1) has to be person specific & when admittedly the names of the present assessees did not figure in the warrant, we hold the AO had committed an apparent error to assess the assessees. Accordingly, we answer the question of law in favour of the assessee and against the Revenue.
Issues Involved:
1. Legality of the search under Section 132(1) of the Income Tax Act. 2. Interpretation of the term "family" in the search warrant. 3. Tribunal's power to adjudicate on the jurisdiction of the A.O. under Section 158BD. 4. Authority of CIT(A) to direct the A.O. to initiate action under Section 158BD/147. 5. Validity of the findings and conclusions of the Tribunal. Detailed Analysis: 1. Legality of the Search under Section 132(1): The primary issue was whether the search conducted under Section 132(1) was legal, given that the assessee's name was not specifically mentioned in the search warrant. The Tribunal and CIT(A) concluded that the search was not legal as the names of the assessees were not included in the search warrant. The court upheld this view, stating that the search should be "person specific" and that the names should be explicitly mentioned in the warrant. The absence of the assessee's names in the warrant rendered the search invalid, and thus, the notices issued under Section 158BC were illegal. 2. Interpretation of the Term "Family" in the Search Warrant: The court examined whether the term "family" or "family members" in the search warrant could cover the wife and daughter of a person. The Tribunal concluded that the term "family" did not cover the wife and daughter, and the court agreed. It was emphasized that all family members are separate assessable legal entities under the Income Tax Act. The court noted that the term "family" could not be stretched to include all family members, such as the wife and daughter, for the purposes of initiating proceedings under Section 158BC. 3. Tribunal's Power to Adjudicate on the Jurisdiction of the A.O. under Section 158BD: The issue here was whether the Tribunal had the power to adjudicate on the jurisdiction of the A.O. under Section 158BD when no such issue was decided by the CIT(A). The court did not delve deeply into this issue since it was rendered moot by the conclusion that the search itself was invalid. However, it was noted that Section 158BD was not applicable at the time of the search as it was introduced only on 1.6.2002, after the search was conducted. 4. Authority of CIT(A) to Direct the A.O. to Initiate Action under Section 158BD/147: The court examined whether the CIT(A) had the authority to direct the A.O. to initiate action under Section 158BD/147. It was concluded that the CIT(A) did not have such power, as the CIT(A) cannot expand the jurisdiction of the A.O. This position was upheld by the Tribunal and affirmed by the court. 5. Validity of the Findings and Conclusions of the Tribunal: The court found that the Tribunal's findings and conclusions were valid and not perverse. The Tribunal had correctly annulled the assessment proceedings based on the invalidity of the search warrant and the lack of jurisdiction by the A.O. to issue notices under Section 158BC. Conclusion: The court held that the search under Section 132(1) was invalid as the names of the assessees were not mentioned in the search warrant. Consequently, the notices issued under Section 158BC were illegal. The term "family" in the search warrant did not cover the wife and daughter. The CIT(A) did not have the authority to direct the A.O. to initiate action under Section 158BD/147. The Tribunal's findings were upheld, and the appeals were decided in favor of the assessees.
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