2019 (8) TMI 301 - HC - Income Tax

Assessment u/s 153A - validity of search conducted u/s 132 - search conducted in the premises in which the assessee may not be carrying on the business - HELD THAT - The language or expression of sub-section (1) of Section 132 is clear and unambiguous. The location of the premises is in relation to the satisfaction reached by the authorities mentioned therein and the authorised officer can search any place mentioned in the warrant including any other place where he suspects that the books of accounts belonging to the assessee are kept and as such, the mere change of address of the assessee even being in the know how of the income tax department by itself would not vitiate or invalidate the search conducted u/s 132. In the instant case, the search conducted is in respect of the premises where the business of the firm carried earlier and continued by Sri.K.M.Vishwanath, who no doubt had retired from the partnership of the assessee-firm and it is in this premises where the books of accounts relating to the assessee-firm has been found and seized, which by itself proves the fact that the said premises was used by the assessee even as on the date of search conducted. Hon ble Delhi High Court in MDLR RESORTS PVT. LTD. AND OTHERS VERSUS CIT 2013 (12) TMI 1116 - DELHI HIGH COURT has held that address being different would not vitiate the search and a person can also operate or keep books of accounts, jewellary etc., at different places and not necessarily the registered office or where the business is conducted. Hence, the search conducted in the premises in which the assessee may not be carrying on the business would not nullify the search. However, if the search is conducted in a premises other than what is reflected in the authorisation, then, the consequences would be different. In the instant case, search has been conducted in the premises, the address of which is reflected in the authorisation and undisputedly, occupied by Mr.K.M.Vishwanath, who was the erstwhile partner of the assessee till he retired on 31.07.2009. Despite notice issued u/s 153A, the said Sri.K.M.Vishwanath had not filed his return of income and had replied to the said notice contending that he is no longer a partner by enclosing the deed of retirement and deed of admission of other two partners. In this background, AO has concluded the proceedings u/s 144 which had been affirmed by the CIT (Appeals) and erroneously on the ground of search having been conducted in the premises not belonging to the assessee, appeal came to be allowed which is contrary to the tenor and language of Section 132. Hence, we answer the substantial questions of law in favour of the revenue and against the assessee.

Summary

Issues Involved:
1. Validity of search under Section 132 of the Income Tax Act.
2. Tribunal's failure to refer to the decision of the Delhi High Court in MDLR Resorts (P) Ltd. vs. Commissioner of Income Tax.
3. Tribunal's reliance on the decision in J.M. Trading Corporation vs. ACIT.

Issue-wise Detailed Analysis:

1. Validity of Search under Section 132 of the Act:
The primary issue was whether a search conducted at a location other than the official place of business of an assessee is valid under Section 132 of the Income Tax Act. The court clarified that under Section 132, the competent authority, if it has reason to believe that any person is in possession of undisclosed income or property, can authorize a search of any building, place, vessel, vehicle, or aircraft where such items are suspected to be kept. The court emphasized that the location of the premises is related to the satisfaction reached by the authorities, and the authorized officer can search any place mentioned in the warrant as well as any other place where he suspects that books of accounts belonging to the assessee are kept. Therefore, the change in the address of the firm does not invalidate the search, as long as the search is conducted in a place where the books of accounts or other documents are suspected to be located.

2. Tribunal's Failure to Refer to MDLR Resorts (P) Ltd. vs. Commissioner of Income Tax:
The court noted that the Tribunal did not refer to the Delhi High Court's decision in MDLR Resorts (P) Ltd. vs. Commissioner of Income Tax, which held that the address mentioned in the search warrant need not be the registered office or head office but can be any place where books of accounts, documents, etc., are located. The court reiterated that the search can be conducted at any place where the authorities suspect the books of accounts or other documents are kept, and the mere change of address does not invalidate the search.

3. Tribunal's Reliance on J.M. Trading Corporation vs. ACIT:
The Tribunal relied on its earlier decision in J.M. Trading Corporation vs. ACIT, where it was held that the premises where the assessee was functioning were not searched, and thus, the search was invalid. However, the court distinguished the facts of the present case from J.M. Trading Corporation, noting that in the present case, the search was conducted at the premises indicated in the authorization, which was occupied by the erstwhile partner of the assessee-firm. The court held that the search conducted at the premises where the books of accounts were found and seized was valid, even if the premises did not belong to the assessee at the time of the search.

Conclusion:
The court concluded that the search conducted under Section 132 was valid, and the change of address did not invalidate the search. The Tribunal's failure to refer to the relevant decision and its reliance on a distinguishable case led to an erroneous conclusion. The court set aside the Tribunal's order and dismissed the appeals filed by the assessee, answering the substantial questions of law in favor of the revenue.