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TMI Blog2022 (6) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 153A of the IT Act, 1961 and the assessment order is without jurisdiction, bad in law and void. 3. The Ld. Assessing officer erred in making additions that are beyond the scope of provisions of assessment to be made under section 153A of IT Act, 1961 and hence bad in law and void. 4. The Ld. Assessing officer erred in completing the assessment beyond the time limit as per the provisions of section 153B of IT Act, 1961 and hence bad in law and void. 5. On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in assessing the income of your appellant at Rs. 4,74,41,51,670/- as against returned income of Rs. 55,95,863/-. Your appellant disputes wrongful variations and submits that his returned income to be accepted as correct. 6. On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making an addition of Rs.2,25,00,000/- on account of Alleged Bogus Share Application money under section 68 of the IT Act, 1961 as taxable income. Looking to the facts and in the circumstances of your Appellant's case the said addition made by the Ld. A.O. is incorrect and invalid and ought to be deleted as the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in imposing Interest under section 234B and 234C of the IT Act, 1961. 16. The learned A. O. erred in initiating penalty proceedings u/s. 271(1)(c) of Income Tax Act, 1961. 17. Any other ground or grounds as may be urged at the time of hearing." 04. ITA number 1292/M/2018 is filed by Balaji Universal Trade Links Private Limited (Assessee/Appellant) against the order passed by the Commissioner of Income Tax (Appeals) - 47, Mumbai (The Learned CIT (A)) dated 29/12/2017 for assessment year 2009 - 10. 05. Assessee has raised following grounds of appeal:- "1. The Order of the assessing office is erroneous on the facts and in the law. On the facts and in the circumstances of the case he ought to have accepted the returned income. 2. The Ld. Assessing Officer has erred in initiating the proceedings under section 153A of the IT Act, 1961 and the assessment order is without jurisdiction, bad in law and void. 3. The Ld. Assessing Officer erred in making additions that are beyond the scope of provisions of assessment to be made under section 153A of the IT Act, 1961 and hence bad in law and void. 4. The Ld. Assessing officer erred in completing the assessment beyond the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of your Appellant's case the said addition made by the Ld. A.O. is incorrect and invalid and ought to be deleted. 12. On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in disallowing of Rs. 4,12,214/- on account of Depreciation. Looking to the facts and in the circumstances of your Appellant's case the said disallowance made by the Ld. A.O. is incorrect and invalid and ought to be deleted. 13. On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making an addition of Rs. 18,87,82,519/- on account of Alleged Non Genuine Loans under section 68 of the IT Act, 1961. Looking to the facts and in the circumstances of your Appellant's case the said addition made by the Ld. A.O. is incorrect and invalid and ought to be deleted. 14. On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making an addition of Rs. 1,13,09,93,659/- on account of Alleged Unaccounted Stock. Looking to the facts and in the circumstances of your Appellant's case the said addition made by the Ld. A.O. is incorrect and invalid and ought to be deleted. 15. On the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Rs. 6,755,462/-. Subsequently the assessment order u/s 143 (3) read with Section 153A of the income tax act was passed on 7/8/2012 determining total income of the assessee at Rs. 1,51,05,04,880/-. 09. Assessee preferred an appeal before the learned CIT - A who passed an order on 29/12/2017 dismissing the appeal of the assessee for statistical purposes. Before the learned CIT - A assessee challenged the validity of search. The learned CIT - A upheld the validity of the search in paragraph number 7.8 of his order. The additions on the merits were confirmed. Therefore assessee aggrieved with the order of the learned CIT - A has preferred this appeal. 010. learned authorized representative straightway submitted that the issue is squarely covered in the case of the assessee itself by the order dated 31 October 2016 in ITA number 2183/M/2013 to 2186/M/2013 for assessment year 2004 - 05 to 2007 - 08 arising out of same search, where in the validity of search was examined and it was held that search is not valid. He submitted that when the search itself is invalid, consequent assessment order passed u/s 143 (3) rws 153A of the Act is also invalid and required to be quashed as it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the assessment u/s 153A of the act is bad in law and is liable to be quashed. Therefore the argument of the learned authorised representative was that when the coordinate bench has categorically - the assessment u/s 153A of the act for assessment year 2004 - 05 to 2007 - 08, there cannot be any assessment in the hands of the assessee Under the provisions of Section 153A of the act. He therefore submitted that assessment order passed by the learned assessing officer u/s 153A of the income tax act on 7/8/2012 deserves to be quashed. He submitted that when there is no such carried out on the assessee, there cannot be any applicability of the provisions of Section 153A of the act in the hands of the assessee. 012. He further submitted that as there is no valid search, the assessment order could not be passed u/s 143 (3) read with Section 153A of the IT act 1961 in the hence of the assessee. Assuming that the order should have been passed u/s 13 (3) of the act then the assessment order should have been passed on or before 31st of March 2012. In the present case the assessment order has been passed on 7/8/2012 and therefore it is barred by limitation. 013. Accordingly, the learned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the impugned order (as mentioned at page-4), wherein, the assessee in response to letter dated 18/08/2011 asked the authorities to provide the assessee, the copy of the search warrant, if any, issued against the assessee. 2.2. On the other hand, Shri N. P. Singh, ld. CIT-DR, strongly defended the case of the Revenue by contending that search and seizure operation was validly carried out by the Department and the search warrants were also executed. The case was heard at length on 17/02/2016. At this stage, since the jurisdictional issue was raised by the assessee, the ld. CIT-DR sought time to seek comments from the Assessing Officer. At the time of hearing on 03/03/2016, the ld. CIT-DR filed a reply dated 01/03/2016, duly signed by the DCIT, Central Circle- 7(1)(Mumbai), wherein, it has been replied as under:- "In this connection, this is to inform you that, I have verified from my office record and it is seen that the above documents are not available. The only material available is pertaining to the survey action u/s 133A of the I.T. Act on the assessee on 31/10/2009." 2.3. However, the ld. CIT-DR contended that warrants were issued against the assessee. In reply, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng certain additions. 2.6. The validity of initiation of proceedings u/s 153A of the Act were challenged before the ld. Commissioner of Income Tax (Appeals) by contending that 153A notice can be issued only in the cases, where action 132 is initiated and/or where books of accounts etc are requisitioned u/s 132A of the Act. The stand of the assessee was that, neither any search action was initiated against the assessee nor any books of accounts, etc were requisitioned u/s 132A of the Act, therefore, proceedings u/s 153A may be dropped. However, the ld. Commissioner of Income Tax (Appeals) affirmed the stand taken in the assessment order. The assessee is in further appeal before this Tribunal. 2.7. At the beginning of the hearing, the ld. counsel for the assessee took a preliminary objection that warrants were never executed against the present assessee. The ld. CIT-DR sought time to reply to the preliminary objection raised by the assessee. We are reproducing hereunder the reply dated 01/03/2016 of the ld. Assessing Officer, pursuant to the query of the Bench, (filed by the ld. CIT-DR) for ready reference and analysis:- 2.8. If the aforesaid letter is analyzed, it is noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in juxtaposition with the provisions of section 153A of the Act. Section 153A is reproduced hereunder:- 153A. (1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, 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 : Provided that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A in the Act. It is pertinent to mention here that the word used in Section 153A of the Act which confers jurisdiction to issue notice and frame assessment, is 'initiated'. Of course, it means a valid initiation, with which there can be no quarrel inasmuch as the warrant of authorization stands already executed by the competent authority and bears the name of the assessee- company among the persons to be searched. The new section 153A provides the procedure for completion of assessment, where a valid search is initiated u/s 132. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the Assessment year relevant to the previous year in which search was conducted u/s 132 or requisition was made u/s 132A of the Act. Thus, it can be said that the provision of section 153A of the Act makes it clear that 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 asset are requisitioned u/s 132A, the Assessing Officer shall issue a notice upon such person. The expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l.), Jai Steel India Jodhpur vs ACIT (2013) 36 taxman.com 523(Raj.), Hon'ble Bombay High Court in ITA No.36/2009 in the case of CIT vs M/s Murli Agro Products Ltd, M/s Canara Housing Developing Company vs DCIT (ITA No.38/2014) order dated 25/07/2014 from Hon'ble Karnataka High Court, Pr. CIT vs Kurele Paper Mills Pvt. ltd. (ITA No.369 of 20015) order dated 06/07/2015, CIT vs Continental warehousing corporation (Nhava Sheva) Ltd. (2015) 58 taxman.com78(Bom.), All Cargo Global Logistic Ltd. vs DCIT (2012) 23 taxman.com 103(Bom.)(SB), held that no addition could be made since no incriminating material was unearthed during search. 2.13.In another case, the Hon'ble Bombay High Court in CIT vs Tirupati Oil Corporation (248 ITR 194)(Bom.), wherein, search was carried out at the residence of the partner but block assessment was made u/s 158BC, 158BD of the Act, upon the firm, the Hon'ble High Court held that procedure laid down u/s 158 BD has to be followed, thus, the ratio laid down by Hon'ble jurisdictional High Court supports the case of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner or Deputy Commissioner or Income-tax Officer, or (B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to- (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (iib) require any person who is found to be in possession or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such valuable article or thing under clause (iii): Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stockin- trade of the business: Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so. [(1A) Where any [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the [Principal Director General or] Director General or [Principal Director or] Director or any other [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of subsection (1) are or is kept in any building, place, vessel, vehicle or airc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true ; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (5) [***] (6) [***] (7) [***] (8) The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General or [Principal Director or] Director under sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents and the Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. (11) [***] (11A) [***] (12) [***] [(13) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1) or subsection (1A).] (14) The Board may make rules in relation to any search or seizure under this section ; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer- (i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available ; (ii) for ensuring safe custody of any books of account or other documents or assets seized. Explanation 1.-For the purposes of subsection (9A), "execution of an authorisation for search" shall have the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being in force, then, 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 may authorise any Additional Director, Additional Commissioner, Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer (hereafter in this section and in sub-section (2) of section 278D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer. (2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. (3) Where any books of account, other docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Special Bench of the Tribunal in All Cargo Global Logistic Ltd. vs DCIT (supra) and CIT vs Murli Agro Products Ltd.(supra) in CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 58 taxman.com78 (Bom.) has made elaborate discussion and concluded that in the absence of any incriminating material, no assessment/reassessment u/s 153A can be made. In the light of the foregoing discussion, it is evidently clear that an assessment u/s 153A is different from regular assessment. The section can be invoked only when a valid search is . initiated u/s 132 or books of accounts, other documents or any assets are requisitioned u/s 132A after 31/05/2003. The provision of section 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the later deals with search and seizure and the former deals with assessment in case of search, thus, the two are inextricably linked with each other, which implies that existence of books of accounts, incriminating documents, or unaccounted assets is or are sine qua non for making the additions in the assessments under this provision. Therefore, if nothing is found during the course of search, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 132 of the Income-tax Act, 1961 is conducted in the premises of a person without any warrant of authorization in the name of the person searched, or on the basis of a warrant of authorization in the name of some other persons, that would be a clear case of non-application of mind of the empowered income-tax authorities and such a search cannot be held to be valid. It is so, because the belief which forms the foundation of search relates to a definite person who is to be subjected to search. If the contrary is the fact situation, the same would amount to serious lapses and would be in clear violation of the provisions contained in section 132(1) of the Income-tax Act, 1961, as it does not stand the test of section 132 of the Income-tax Act, 1961. Therefore, the most serious content of the warrant of authorization is the name and description of the person whose premises, etc., are sought to be searched. 9. The Punjab and Haryana High Court in Jagmohan Mahajan v. CIT [1976] 103 ITR 579 (Punj. & Har.), held that a search authorized in the absence of material necessary to form the requisite belief under section 132(1) on the basis of blank warrant of authorization signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which such search is conducted or requisition is made :" (underlined for emphasis) 13.The provisions of section 153A of the Income Tax Act, 1961, make it clear that only in the case of a person on whom a search is initiated under section 132 or books of account or other documents or any assets are requisitioned under section 132A after 31st March, 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 the previous year in which such search is conducted or requisition made. The legislative intent is clear from the use of expression "such person" in clause (a) of section 153A. The expression clearly relates to a person in respect of whom search under section 132 has been initiated as section 153A itself provides. Thus to exercise powers under section 153A in the case of a person the mandatory requirement is that there must be initiation of a search as contemplated under section 132 or requisition under section 132A in respect of such person. The word "person" appearing in section 132 and in section 153A is one and the same person. Thus the person, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ern, the same does not result into a valid search u/s 132 of the Act upon the assessee. The appeal of the Revenue was dismissed by Hon'ble Bombay High Court vide order dated 29/06/2009 CIT vs J.M. Trading Corporation (ITA No.589 of 2009) and made following observations. ".... The Tribunal has categorically recorded a finding of fact of initiation of the search that non compliance to the provisions of the Act by the Authorized Officer, such searches are invalid and illegal. No search was conducted against the assessee as the premises occupied by the assessee were not entered upon and searched by the Authorized Officer...." 2.16. The ITAT, Bangalore in D T S Rao v. ACIT (2007) 106 ITD 569(Bang. Trib) which was affirmed by Hon'ble Karnataka High Court in the case of (2012) 23 taxmann.com 352(Kar. HC), held as under: "28. In view of Explanation 2 to section 158BE, execution of search warrant is to be inferred from the date recorded in respect of conclusion of search in the last panchnama. Panchnama is not defined in the IT Act. However, section 100 of Cr.PC governs the conducting of search. As per section 100(4) of Cr.PC the authorized officer to make search is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocedure to be followed in search. Combined reading of rule 112 and the tax payer's charter makes it clear that panchnama referred in Explanation 2 to section 158BE is that panchnama copy of which is given to the party searched. In the instant case, there are three panchnamas dated 6-2-1996, 19-2-1996 and 25-4- 1996. As stated earlier order under section 132(3) was not valid on 25-4- 1996. When order under section 132(3) was not extended beyond sixty days then lifting of such prohibitory order vide panchnama dated 24-4-1996 has no legal sanction, when violation of order under section 132(3) can result into punishment with rigorous imprisonment then, communication of extension of order under section 132(3) is a must. Hence, panchnama dated 25-4-1996 is not a valid panchnama. 38. Search comes to an end when the last panchnama is drawn. It is date of such panchnama which is relevant for determining the period of limitation for passing the order under section 158BC by the Assessing Officer. Accordingly, the Assessing Officer is required only to find out the date when the last panchnama with reference to last authorisation is drawn and nothing beyond that. Hence, the Tribunal can exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal can examine the record of search with a view to find out the factum of last panchnama as discussed above." Section 153B of the Act as applicable to the relevant year stipulate that time limit for completion of the assessment u/s 153A of the Act shall be computed based on the conclusion of the search as recorded in the last of the panchnama drawn as under: "153BTime-limit for completion of assessment under section 153A '*** (2) The authorisation referred to in clause (a) and clause (b) of sub- section (1) shall be deemed to have been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued;" 2.17. Thus, the search will be deemed to be concluded on the basis of last panchnama drawn in relation to the person in whose case the warrant of authorization has been issued and in the instant case , we have observed that no panchnama was drawn against the assessee so it can be concluded that search against the assessee got vitiated as no panchnama was ever prepared against the assessee. The search is a serious invasion into the privac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure under the said Act has to be carried out in the presence of at least two respectable inhabitants of the locality where the search and seizure is conducted. These respectable inhabitants are witnesses to the search and seizure and are known as 'panchas'. The documentation of what they witness is known as the panchnama. The word 'nama', refers to a written document. Its type is usually determined by the word which is combined with it as a suffix. Examples being, nikah- nama (the written muslim marriage contract), hiba-nama (gift deed, the word hiba meaning - gift), wasiyat-nama (written will) and so on. So a panchnama is a written record of what the panch has witnessed. In Mohan Lal v. Emperor AIR 1941 Bom. 149, it was observed that 'the panchnama is merely a record of what a panch sees'. Similarly, the Gujarat High Court in the case of Valibhai Omarji v. State AIR 1963 Guj 145 noted that 'a Panchanama is essentially a document recording certain things which occur in the presence of Panchas and which are seen and heard by them.' Again in The State of Maharashtra v. Kacharadas D. Bhalgar (1978) 80 Bom LR 396, a panchnama was stated to be 'a memo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating material having been found pertaining to the assessee and also the premises searched did not belonged to the assessee, it could be concluded based on the cumulative effect of all the above-stated relevant facts that no valid search was conducted against the assessee and the assessment u/s 153A of the Act is bad in law hence liable to be quashed. Why, despite a 'search', we observe a 'notice' u/s 153C as well as a survey being conducted on the assessee in the present case. 3. Now, we shall take up the cross appeals for A.Y. 2005- 06, 2006-07 and 2007-08. In these appeals also, the identical jurisdictional issue has been raised by the assessee and the Revenue has challenged restricting the disallowance made on account of unexplained purchases to 50%, thereof, in view of the foregoing discussion made in A.Y. 2004-05, since, we have declared the proceedings u/s 153A as null and void, these appeals for impugned assessment years have also remained for academic interest only. Since, the basis for making the assessment/reassessment has been declared as null and void, therefore, the same ratio will be applicable to the appeals of the Revenue also, consequently, dismissed, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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