2023 (1) TMI 574 - HC - Income Tax

Validity of proceedings u/s 153A - Whether no search warrant at all issued preceding the search conducted in the residential and office premises of the Respondent? - HELD THAT - As far as the present cases are concerned, this Court in the first round of litigation accepted the legal position that without there being a valid search warrant authorizing the search in the premises of the Assessee u/s 132 question of initiating proceedings under Section 153A of the Act did not arise. The matter had been remanded to the ITAT only for determining the factual aspect of the existence of a valid search warrant. Before this Court also the Revenue has not been able to demonstrate that there exists in the records of the Revenue a valid search warrant authorizing the searches that were conducted in the premises of the Respondent-Assessee on 9th and 10th August, 2005. De hors such search warrant, validly issued to authorize the search, the question of initiating proceedings u/s 153A simply did not arise. Since the issue has turned purely on facts, the Court is unable to find any error having been committed by the ITAT in concluding that the entire assessment proceedings under Section 153A of the Act against the Respondent-Assessee were invalid. Court is unable to be persuaded to frame the question as urged by the Revenue in these appeals.

Summary

Issues:
Validity of proceedings under Section 153A of the Income Tax Act, 1961 without a search warrant.

Analysis:
The judgment involves appeals by the Revenue Department against an order passed by the Income Tax Appellate Tribunal concerning the validity of proceedings under Section 153A of the Income Tax Act, 1961. The main issue raised by the Revenue is whether the ITAT was justified in holding that the proceedings against the Assessee were without jurisdiction due to the absence of a search warrant preceding the search conducted at the Assessee's premises. This case marks the second round of litigation concerning the Assessee for the relevant assessment years.

The Respondent is a Society registered under the Societies Registration Act, 1860, engaged in charitable activities related to technical education. A search was conducted in the residential premises of the Society's President, leading to the initiation of proceedings under Section 153A of the Act and the raising of a substantial tax demand for multiple assessment years. The Assessee challenged the assessment orders, arguing that the lack of a valid search warrant rendered the proceedings under Section 153A invalid.

In the previous round of litigation, the ITAT remitted the matter to the CIT(A) to determine the existence of a valid search warrant. However, the High Court intervened and set aside the ITAT's order, emphasizing the need to establish the presence or absence of a search warrant before remitting the matter. Subsequently, the ITAT, upon re-examination, concluded that no valid search warrant was issued, leading to the quashing of the assessment against the Assessee under Section 153A.

The Revenue Department relied on certain judgments from other High Courts to support its position, but the Court found them distinguishable from the present case. The Court reiterated that without a valid search warrant, the initiation of proceedings under Section 153A was not permissible. As the Revenue failed to demonstrate the existence of a valid search warrant in the records, the Court upheld the ITAT's decision that the assessment proceedings were invalid. Consequently, the Court dismissed the appeals, stating that no substantial question of law arose for consideration.

In conclusion, the judgment delves into the crucial issue of the validity of proceedings under Section 153A of the Income Tax Act, emphasizing the necessity of a valid search warrant for such actions. The Court's detailed analysis and dismissal of the appeals underscore the importance of procedural compliance in tax assessments and the significance of factual evidence in determining jurisdictional validity.