2017 (8) TMI 232 - AT - Income Tax

Assessment u/s 153A - Held that - Hon ble Supreme Court in the case of Pooran Mal (1973 (12) TMI 2 - SUPREME Court) in which it has been laid down that even though search and seizure was in contravention of the provisions of section 132 but the material seized can be used against the person from whose custody it was seized. This judgment, again, does not support the case of the Revenue any further for the reason that no incriminating material worth the name could have been seized from the assessee as the search itself was not conducted. Ergo, it is abundantly clear that the view canvassed by the learned Commissioner of Income-tax (Appeals) in validating the issue of notice under section 153A followed by the assessment under this section, cannot be countenanced. In view of the foregoing discussion, it is clear beyond any shadow of doubt that the notice under section 153A of the Act was issued without any jurisdiction. The natural corollary, which therefore, follows is that all the proceedings flowing from such invalid notice, including the resultant assessment order, are bad in law and hence liable to be quashed. - Decided in favour of assessee.

Issues Involved:
1. Validity of initiation of proceedings under section 153A of the Income-tax Act, 1961.
2. Validity of assessment order based on notice under section 153A.
3. Applicability of section 124(3) regarding jurisdictional challenge.
4. Relevance of monetary limits for filing appeals by the Revenue.

Issue-wise Detailed Analysis:

1. Validity of Initiation of Proceedings under Section 153A:
The core issue revolves around whether the initiation of proceedings under section 153A was valid. The facts indicate that a search and seizure action was carried out in the Swastik Pipes group of cases, and a notice under section 153A was issued to the assessee. The assessee challenged the initiation, arguing that no search warrant was executed on it. The Tribunal noted that section 153A requires a search to be initiated under section 132 or a requisition under section 132A. The Tribunal found that the warrant of authorization did not include the assessee's correct name or address. Despite multiple opportunities, the Department could not produce evidence of an actual search on the assessee. Consequently, the Tribunal concluded that the initiation of proceedings under section 153A was invalid as there was no search initiated or conducted on the assessee.

2. Validity of Assessment Order Based on Notice under Section 153A:
Given that the initiation of proceedings under section 153A was found invalid, the Tribunal held that all subsequent actions, including the assessment order, were also invalid. The Tribunal emphasized that without a valid initiation of search, the Assessing Officer lacked jurisdiction to issue a notice under section 153A and complete the assessment. The Tribunal quashed the assessment order as it flowed from an invalid notice.

3. Applicability of Section 124(3) Regarding Jurisdictional Challenge:
The Department argued that the assessee's failure to challenge the jurisdiction within the stipulated time under section 124(3) barred it from raising the issue later. However, the Tribunal found that the assessee had indeed raised the objection within the stipulated period after receiving the notice under section 153A. The Tribunal clarified that once an objection to jurisdiction is raised timely, there is no need to repeat it after the issuance of subsequent notices under sections 142(1) or 143(2). Thus, the Tribunal rejected the Department's contention based on section 124(3).

4. Relevance of Monetary Limits for Filing Appeals by the Revenue:
The Tribunal also addressed the Revenue's appeal, noting that the tax effect involved was less than ?10,00,000. Referring to Circular No. 21 of 2015 issued by the Central Board of Direct Taxes, which prescribes a monetary limit for filing appeals, the Tribunal observed that the appeal should not have been filed or should have been withdrawn. The Tribunal dismissed the Revenue's appeal on this ground as well.

Conclusion:
The Tribunal allowed the assessee's appeal, quashing the notice under section 153A and the resultant assessment order due to the lack of a valid search initiation. The Revenue's appeal was dismissed due to the tax effect being below the prescribed limit for filing appeals. The Tribunal's decision underscores the necessity of a valid search initiation under section 132 for proceedings under section 153A and adherence to prescribed monetary limits for appeals.

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