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TMI Blog2016 (10) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee, Shri Manish Sanghvi, strongly advocated that panchnama does not contain the name of the assessee for which our attention was invited to the panchnama, prepared in the name of 'Shri Manoj Punamiya & Group', by asserting that under the Income Tax Act, 1961, there is no concept of group. It was canvassed that the inventory of accounts, books, etc, prepared on 24/12/2009, and prohibitory orders u/s 132(3) of the Act were also only in the name of Shri Manoj Punamiya alone and not the present assessee. It was clarified that the assessee has no nexus with the premises searched/surveyed by the Department. It was empathetically contended that none of the documents, claimed to be seized, belongs to the assessee. It was asserted that no search was ever conducted upon the assessee, hence, the proceedings u/s 153A of the Act are bad in law and void. The ld. counsel for the assessee took us to various pages of the paper book and also the copy of panchnama drawn by the Department. The ld. counsel also invited our attention to the finding contained in the impugned order (as mentioned at page-4), wherein, the assessee in response to letter dated 18/08/2011 asked the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llery, cut and polish diamonds, recycled plastic granules, etc. The assessee declared income of Rs.4,325/- in its return filed on 20/10/2004, accompanied by audited statement of accounts, which was accepted by intimation u/s 143(1) of the Act dated 01/07/2005. 2.5. An action u/s 132 of the Act was carried out at the residential premises of one Shri Manoj Punamiya (in his individual/personal capacity) on 31/10/2009 and thereafter on 24/12/2009, wherein, seventeen papers, were claimed to be found and seized. The copy of panchanama along with inventory of papers, found and seized, is matter of record. Pursuant to said action, notice u/s 153A was issued on 27/12/2010. The assessee challenged the initiation of proceedings u/s 153A of the Act. It is noteworthy that as abundant caution, the assessee filed return in response to notice u/s 153A on 24/08/2011, declaring total income at Rs.4,325/-, as was originally declared in return of income filed u/s 139(1) of the Act. The assessment was completed purportedly u/s 143(3) r.w.s. 153A on 29/12/2011 making certain additions. 2.6. The validity of initiation of proceedings u/s 153A of the Act were challenged before the ld. Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddl. CIT Central Range - 7, Mumbai. Deputy Commissioner of Income-tax Central Circle-7( 1), Mumbai . 2.8. If the aforesaid letter is analyzed, it is noted that the ld. CIT-DR asked the concerned DCIT, Central Circle-7(1), Mumbai, to provide the copy of the duly executed warrant of authorization u/s 132(1) of the Act r.w.r. 112(1) of the Income Tax Rules,1962 in form no.45 mentioning the name and address of the assessee and a copy of the panchnama prepared on the conclusion of the search at the premises of the assessee. Vide aforesaid letter, on verification of record, the ld. DCIT informed that above documents are not available on record and the only material available pertains to survey action u/s 133A of the Act on the assessee on 31/10/2009. We have carefully perused the documents produced before us and we have observed that the warrant of authorization u/s 132 of the Act read with Rule 112 (1) of The Income Tax Rules, 1962 (hereinafter the "Rules") was duly prepared by the DIT(Inv.)-II, Mumbai on 31-10-2009 which carries the name of the assessee company and is placed at page 58-59 of paper book and was executed on 31-10-2009 . The said search warrant is executed on the premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : Provided also that the Central Government may by rules8 made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 132 or books of accounts or other documents or any asset are requisitioned u/s 132A, the Assessing Officer shall issue a notice upon such person. The expression clearly relates to a person in respect of whom search u/s 132 has been initiated or as section 153A after 31st day of March 2003. The ratio laid down in Ramesh D. Patel (2014) 362 ITR 492(Guj.) supports our view. In that event the Assessing Officer shall:- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. 2.11. From the aforesaid provision, it is clear that the first requirement is v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. The ratio laid down in J.M. Trading Corporation vs ACIT (2008) 20 SOT 489 (Mum.), which was upheld by the Hon'ble jurisdictional High Court in ITA No. 589 of 2009 holding that provisions of section 153A are only applicable in a case, where valid search is conducted against the assessee u/s 132 of the Act, supports the case of the assessee. 2.14. For fair conclusion, we are also reproduced hereunder the provision of section 132 and 132 A of the Act for ready reference:- "132. (1) Where the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her documents, money, bullion, jewellery or other valuable article or thing; (iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing : [Provided that where any building, place, vessel, vehicle or aircraft referred to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or or Joint Commissioner to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner may, notwithstanding anything contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.] (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) or sub-section (1A) and it shall be the duty of every such officer to comply with such requisition. (3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1A) shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment under section 153A or clause (c) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or Director General or [Principal Director or] Director for such retention is obtained : Provided that the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner,[Principal Director General or] Director General or [Principal Director or] Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. (8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order. (9) The person from whose custody any books of account or other documents are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed. Explanation 1.-For the purposes of sub-section (9A), "execution of an authorisation for search" shall have the same meaning as assigned to it in Explanation 2 to section 158BE. Explanation 2.-In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Incometax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year. 132A. (1) Where the [Principal Director General or] Director General or 75[Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or 7[Principal Commissioner or] Commissioner, in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no longer necessary to retain the same in his or its custody. (3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132Bshall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of subsection (1) of this section and as if for the words "the authorised officer" occurring in any of the aforesaid sub-sections (4A) to (14), the words "the requisitioning officer" were substituted." 2.15. In the present appeal, valid search was not carried out against the assessee. Conduct of search proceedings is an elaborate procedure enumerated u/s 132 of the Act which in clause-I, categorically authorizes the officer to enter and search any building, place, vessel, etc, where he has "reason to belief" that the books of accounts, money, bullion, jewellery or things belonging to the assessee are kept. Before us, the assessee has claimed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessments under this provision. Therefore, if nothing is found during the course of search, the additions in the assessment or reassessment u/s 153A is not only erroneous but also serves no purpose. It can be précised that the assessment or reassessment u/s 153A arises only, when a valid search has been initiated and conducted. The provisions of section 153A of the Act makes it clear that only in the case of a person on whom, a valid search is initiated, u/s 132 or books of accounts or other documents or any assets are requisitioned u/s 132A after 31/05/2003, the Assessing Officer shall after issuing notice assess or reassess the total income of such person for six assessment years immediately preceding the assessment year relevant to previous year, in which such search is conducted or requisition is made. The legislative intent is clear from the use of expression "such person" in section 153A(1)(a) of the Act. The expression clearly relates to a person in respect of whom search u/s 132 has been validly initiated as per section 153A itself provides. Our view find supports from Hon'ble Orissa High Court in Siksha "O" Anusandhan vs CIT (2011) 336 ITR 112 (Orissa). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form the requisite belief under section 132(1) on the basis of blank warrant of authorization signed by the Commissioner of Income-tax was illegal and no order under section 132(5) on the basis of such a search could be made. 10. The Delhi High Court in Ajit Jain's case [2000] 242 ITR 302 (Delhi) held that it is axiomatic that search under section 132 has to be a valid search. An illegal search is no search and as a necessary corollary in such a case Chapter XIV-B would have no application. This judgment of the Delhi High Court has been upheld by the apex court in Union of India v. Ajit Jain [2003] 260 ITR 80 (SC). The Delhi High Court in CIT v. M.S. Rohini S. Walia [2007] 289 ITR328 (Delhi), held that it would be a futile exercise to entertain appeals where admittedly no search warrant was issued in the case of the assessees and the Tribunal held that unless a search warrant was issued, the Assessing Officer could not invoke the provisions of section 158BC of the Income-tax Act, 1961 for initiation of block assessment proceedings against the assessees. 11. Thus, we are of the view that in absence of any search warrant in the name of an assessee, search conducted in its prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person" appearing in section 132 and in section 153A is one and the same person. Thus the person, in respect of whom search under section 132 is initiated, must be the same person against whom notice under section 153A is to be issued for making assessment/reassessment under that section." The Hon'ble Apex Court in the case of Union of India v. Ajit Jain ((2003) 260 ITR 80(SC), (2003) 129 Taxman 74(SC) ) held that initiation of valid search is a pre-requisite for framing search assessment u/s 158BC of the Act , held as under: "As the title of Chapter XIV-B suggests, these are special procedures for assessment of search cases and, therefore, a search under section 132 is a pre-requisite for invoking the provisions of this Chapter. It is axiomatic that search under section 132, as contemplated has to be a valid search. An illegal search is no search and as a necessary corollary, in such a case Chapter XIV-B would have no application. In the instant case, having come to the conclusion that the search conducted was without jurisdiction and was, thus, void ab initio, the imminent consequence would be that the provisions of Chapter XIV-B could not be invoked against the respondent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of search. As per section 100(4) of Cr.PC the authorized officer to make search is required to call upon two or more independent and respectable inhabitant of the locality in which the place to be searched is situated. Search is to be made in the presence of these two respectable inhabitants list of things to be seized and placed where these have been found is to be prepared and such list is to be signed by the authorized officer and the two witnesses. Copy of the list prepared is to be delivered to the occupant of the premises. Recording of the names of the officer authorized to search, the building or premises to be searched, the designation of the officer who authorized the search, name and addresses of two respectable persons called to witness the search, time of commencement of search and conclusion or suspension of search, list of valuables, documents etc. found as well as seized recording of statement if any person during search and mention of any restraint order or prohibitory order, are recorded in the prescribed format and such document is known as panchnama. Panchnama is prepared even if search is temporarily suspended. Panchnama is definitely prepared at the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to last authorisation is drawn and nothing beyond that. Hence, the Tribunal can examine the date when last panchnama was drawn. It will be relevant to quote from pg. 51 in the case of Promain Ltd. (supra) : "It is, however, pertinent to mention about the significance of the panchnama. The panchnama is a document which is prepared in the presence of panchas (respectable local witnesses) containing the items found and seized in the course of search. So the Assessing Officer must satisfy himself for the purpose of calculating the period limitation that document in question is in reality a panchnama. There may be a case where inventory is prepared in respect of books of account or valuable articles found in the course of search but taking of or removal of such books of account or valuable article is not practicable. The authorized officer may issue a restraint order under the proviso to section 132(1). Such restraint is deemed to be a seizure as per the said proviso. Hence, in such a case, the preparation of inventory and panchnama would be relevant and any action of the authorized officer lifting the restraint order would, in our opinion, be irrelevant. The reason is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever prepared against the assessee. The search is a serious invasion into the privacy of the person infringing on fundamental rights as enshrined in Article 21 of the Constitution of India and the same cannot be lightly carried out by the State in an casual or lax manner. The Revenue has prepared the Panchnama in the name of 'Manoj B Punmia and group' while there is no concept of word 'group' in the Act in context of search proceedings. 2.18. Hon'ble Supreme Court in the case of VLS Finance Limited v. CIT(2016) 68 taxmann.com368(SC) has held that limitation provisions for completing assessments are to be strictly construed as under: The counsel for the appellants are justified in their contention that the provision relating to limitation need to be strictly construed. In the case of K.M. Sharma v. ITO [2002] 254 ITR 772/122 Taxman 426 (SC), this principle is laid down in the following words: "13. Fiscal statute, more particularly a provision such as the present one regulating period of limitation must receive strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aradas D. Bhalgar (1978) 80 Bom LR 396, a panchnama was stated to be 'a memorandum of what happens in the presence of the panchas as seen by them and of what they hear'. 16. We have examined the meaning of the word panchnama in some detail because it is used in Explanation 2(a) to Section 158BE of the said Act although it has not been defined in the Act. A panchnama, as we have seen is nothing but a document recording what has happened in the presence of the witnesses (panchas). A panchnama may document the search proceedings, with or without any seizure. A panchnama may also document the return of the seized articles or the removal of seals. But, the panchnama that is mentioned in Explanation 2(a) to section 158BE is a panchnama which documents the conclusion of a search. Clearly, if a panchnama does not, from the facts recorded therein, reveal that a search was at all carried out on the day to which it relates, then it would not be a panchnama relating to a search and, consequently, it would not be a panchnama of the type which finds mention in the said Explanation 2(a) to section 158 BE." Incidentally in the instant appeal , there is no panchnama drawn by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applicable to the appeals of the Revenue also, consequently, dismissed, therefore, these appeals are also decided in favour of the assessee. 4. So far as merits of the case is concerned, we have observed that there was a search conducted against the assessee company by Revenue on 31-10-2009 which was held by us to be vitiated. There was no incriminating material found during the course of search for the impugned assessment year. The assessee company had filed return of income on 20-10-2004 u/s 139(1) of the Act. The time limit for service of notice u/s 143(2) of the Act for the said relevant period was till the expiry of twelve months from the end of the month in which the return is furnished i.e. up-to 31-10- 2005. The search was initiated on 31-10-2009 and hence the period with in which Revenue could have issued notice u/s 143(2) of the Act to frame assessment under Section 143(3) of the Act has already expired and hence the assessment for the impugned assessment year is a concluded assessment as stipulated u/s 153A of the Act on the date of search on 31- 10-2009. Thus, as per mandate of Section 153A of the Act the concluded assessment can be re-opened for framing assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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