2022 (2) TMI 701 - AT - Income Tax

Assessment u/s 153A - Undisclosed income on deposits in the foreign bank account - assessment completed in the instant case on the basis of joint locker held by the assessee jointly with her sister - contention of the assessee that no incriminating material was found or seized during the course of search relating to the issue of deposits in the foreign bank account of the appellant resulting in the impugned addition - HELD THAT - Search warrant issued on the locker so jointly held and consequential proceedings under Section 153A was found to be illegal and consequentially set aside in the case of one of the joint holder, i.e., sister Shah-E-Naaz Judge. The ratio of the decision would naturally apply mutatis mutandis in the case of other holder of the locker namely, the assessee herein where the search warrant on such locker was found to be in violation of Section 132(1) of the Act. The search warrant and consequential assessment u/s.153A in the case of other joint holder thus cannot be seen differently. Hence, on the basis of judgment rendered in the case of Shah E Naaz Judge vs. Additional Director of Income Tax (Inv)-Unit-VI, 2018 (12) TMI 292 - DELHI HIGH COURT we find merit in the Ground no.1 of the Cross Objection. Consequently, we hold that the search authorization warrant issued u/s.132 of the Act and consequential assessment framed u/s 153A of the Act is arbitrary and devoid of any legal basis and thus wholly unsustainable in law. This being so, the entire assessment order in question requires to be set aside and quashed at the threshold.

Summary

Issues:
1. Addition of undisclosed income based on foreign bank transactions.
2. Legality of search warrant and consequential assessment order under Section 153A.
3. Jurisdictional validity of assessment order under Section 153A.
4. Merits of the order passed by the lower authorities.

Issue 1: Addition of Undisclosed Income
The Revenue challenged the order of the CIT(A) regarding the deletion of additions made by the Assessing Officer on account of undisclosed income from foreign bank transactions. The CIT(A) analyzed the facts and deleted the additions in favor of the assessee on merits.

Issue 2: Legality of Search Warrant and Assessment Order
The Cross Objection by the assessee raised concerns about the legality of the search warrant and consequential assessment under Section 153A. The assessee argued that the search warrant issued for the joint locker held by the assessee and her sister was found to be illegal and set aside by the Delhi High Court in a similar case. The Tribunal found merit in this argument and held that the search authorization warrant and consequential assessment under Section 153A were arbitrary and devoid of legal basis, requiring the assessment order to be set aside.

Issue 3: Jurisdictional Validity of Assessment Order
The Tribunal concluded that since the search warrant on the joint locker was deemed illegal in a similar case involving the sister of the assessee, the same reasoning applied to the assessee's case. Therefore, the assessment order passed under Section 153A was considered unsustainable in law and required to be quashed.

Issue 4: Merits of Lower Authorities' Orders
Given the findings on the legality of the search warrant and assessment order, the Tribunal dismissed the Revenue's appeal and partly allowed the Cross Objection of the assessee. The challenge to the CIT(A)'s order on merits by the Revenue was deemed unnecessary in light of the decision on the jurisdictional validity of the assessment order.

In summary, the Tribunal dismissed the Revenue's appeal while partly allowing the Cross Objection of the assessee based on the illegality of the search warrant and consequential assessment order under Section 153A, as established by the Delhi High Court's judgment in a similar case. The assessment order was considered arbitrary and devoid of legal basis, leading to its quashing by the Tribunal.