2024 (5) TMI 839 - HC - Income Tax

Validity of Assessment u/s 153A - no search conducted u/s 132 and 132A as against the petitioner - authorisation issued to conduct search and seizure relating to the petitioner or not? - relevancy of panchnama as document - HELD THAT - In the present case, we find that challenge is to the very initiation of proceedings at the initial stage; search under Section 132 of the Act and jurisdiction of the assessing officer by initiating proceedings u/s 153A of the Act which needs to be examined. The validity of initiating search proceedings cannot be examined by the Appellate Authority as is already held in Chandra Kishor Jha. 1999 (9) TMI 948 - SUPREME COURT , OPTO Circuit India Limited 2021 (2) TMI 117 - SUPREME COURT , M/s. J. M. Trading Corporation 2009 (6) TMI 988 - BOMBAY HIGH COURT and Sarvmangalam Builders cases 2015 (12) TMI 1882 - DELHI HIGH COURT The petitioner has challenged the panchnama where its name has been entered and submits that it has already suffered search and seizure earlier resulting in an order passed under Section 153A of the Act and, therefore, proceedings again initiated under Section 153A were wholly unwarranted. The exercise of power under Section 153A based on panchnama was not available. In the present case, we find that there is no authorisation issued to conduct search and seizure relating to the petitioner. The panchnama prepared at Gurgaon office of M3M India Limited only reflects the name of the petitioner company. The term panchnama is not defined in the Income Tax Act. A panchnama is a document prepared in the ordinary course at a site of incident - panchnama would be a document which has to be prepared recording articles, material and objects which may be seized as incriminating documents at the time of conducting search of premises. Mentioning of the name of any company in the panchnama would only reflect that documents relating to that company were found during the search at the premises. A panchnama, therefore, cannot be treated to mean authorization issued to the authorities u/s 132. Thus we find that the respondents were obliged to compulsorily follow the procedure for reassessment of the petitioner company in the manner as prescribed u/s 153C (1) alone and in no other manner. However, we find that the respondents have invoked and initiated proceedings u/s 153A of the Act, although neither there is any search initiated u/s 132 as against the petitioner nor it can be said that the search was conducted at its premises. Similar view has been taken in Hitesh Ashok Vaswani 2023 (11) TMI 347 - GUJARAT HIGH COURT and Subhash Khattar s cases 2017 (7) TMI 1091 - DELHI HIGH COURT - Thus, the proceedings initiated under Section 153A are found to be vitiated. When there was no search conducted u/s 132 and 132A as against the petitioner and only a panchnama reflects the name of the petitioner prepared at the registered office of M3M India Limited, the action of the respondents in passing second assessment order on 07.02.2024 on the basis of notice u/s 153A is held to be unjustified and without jurisdiction. Assessee appeal allowed.

Summary

Issues Involved:
1. Validity of Search Proceedings and Panchnama.
2. Jurisdiction to Issue Notice u/s 153A.
3. Admissibility of Evidence.
4. Procedural Compliance u/s 153C.
5. Legality of Assessment Order and Demand Notice.

Summary:

1. Validity of Search Proceedings and Panchnama:
The petitioner challenged the search proceedings and consequent panchnama dated 24.07.2016 and 19.09.2016, arguing that there was no authorization for search and seizure u/s 132 of the Income Tax Act against it. The court concluded that the panchnama prepared at the premises of M3M India Limited, which mentioned the petitioner's name, did not constitute valid authorization for search against the petitioner. The court emphasized that a panchnama is merely a record of what is seen and heard by witnesses during a search and cannot be treated as authorization for search.

2. Jurisdiction to Issue Notice u/s 153A:
The petitioner argued that the proceedings initiated u/s 153A were without jurisdiction as there was no fresh search conducted against it. The court held that since no search was conducted under Section 132 against the petitioner, invoking Section 153A was not justified. The court reiterated that the proper procedure in such cases would be to follow Section 153C if incriminating material related to the petitioner was found during the search of another entity.

3. Admissibility of Evidence:
The petitioner contended that the material recovered from the laptop of Gaurav Jain was inadmissible as it did not comply with Section 65B of the Indian Evidence Act. The court did not delve deeply into this issue, as it found the entire proceedings u/s 153A to be without jurisdiction.

4. Procedural Compliance u/s 153C:
The court emphasized that if incriminating material related to the petitioner was found during the search of another entity, the proper procedure would be to follow Section 153C. The court cited the principle that when a specific procedure is prescribed by law, it must be followed strictly, referencing the doctrine from Nazir Ahmad vs King Emperor.

5. Legality of Assessment Order and Demand Notice:
The court quashed the notice dated 05.01.2018 and the assessment order and demand notice dated 07.02.2024, holding them to be without jurisdiction and non-est. The court concluded that once an assessment order was passed u/s 153A for the AY 2006-07 to 2012-13, a fresh order without conducting a new search and seizure operation was not sustainable in law.

Conclusion:
The writ petition was allowed, and the notice dated 05.01.2018, the assessment order, and the demand notice dated 07.02.2024 were quashed and set aside. The proceedings initiated u/s 153A were held to be non-est.