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TMI Blog2022 (11) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... that even if a search had been illegal, the evidence seized can be validly used in the assessments to follow. The files relating the recording of information and reasons to believe were called for and I find that the officer has recorded cogent reasons for the initiation of the search itself. The records reveal that the officer has had information in his possession to lead to the belief that action under Section 132 was warranted. The challenge to the search is rejected and all writ petitions on this score, are dismissed. Necessary response or urgency in the medical emergency leading to hospitalization of one of the children of the petitioner - HELD THAT: As the Hon ble Supreme Court has observed in the case of Pooran Mal [ 1973 (12) TMI 2 - SUPREME COURT ] search and seizure, by its very nature, is bound to cause some dislocation to the parties concerned. Some of this dislocation is also intended as a conscious measure to intimidate. There are limits that must be adhered to and in the present case, the exacerbation of the medical condition of the person concerned is a matter of hospital record. As does not dispute the medical record. His attempt is to state that the child had a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion would tantamount to re-writing of the provision to read in such a condition, which is legally impermissible. As the Audit has recommended, it is necessary that the Legislature or the Board, administratively, fix such timelines, for the purpose of integrity of procedure, including compliance with the provisions of natural justice as well as to ensure quality in the framing of assessments in a timely manner. This is protect against, and prevent a situation where the notices are issued too proximate to the expiry of limitation leading to a hurried framing of assessment and that the assessment is not based upon incriminating material. Such arguments are indeed available to assessees, but subsequent to the framing of the assessment itself, that would enable an examination of the material brought on record in order to test such submissions.The challenge to notices issued under Section 153A is rejected. Challenge to notices in terms of Section 153C - The provisions of Section 153C require the receiving officer, that is, the jurisdictional assessing officer of the assessee concerned, to issue notice,if he is satisfied that the books of account/documents/assets seized or requisitioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 17573, 17621, 17750 and 9289 of 2021 And WMP.Nos.24729, 24730, 24716, 24719, 24667, 24668, 24669, 24670, 24671, 24672, 24722, 24723, 24539, 24538, 24732, 24731, 24736, 24734, 24713, 24715, 24708, 24701, 24703, 24710, 24717, 24718, 24721, 24720, 24725, 24727, 24541, 24542, 24545, 24544, 24733, 24735, 24739, 24737, 24742, 24743, 24746, 24749, 24757, 24758, 24748, 24750, 24751, 24753, 24756, 24759, 24763, 24764, 24766, 24767, 24774 & 24776 of 2020 And WP.Nos.19996, 20050, 20030, 20048, 19876, 19877, 20056, 19998, 19999, 20000, 20038, 20041, 20046, 20028, 20033, 20036, 20039, 20040, 20045, 19867, 19871, 20051, 20055, 20057, 20061, 20060, 20063, 20064, 20065, 20068, 20071 & 20074 of 2020 And WMP.Nos.24540, 17712, 24815, 24813, 24810, 24806, 24804, 24801, 24803, 24824, 24822, 24821, 24820, 24823, 24825, 24828, 24831, 24808, 24809, 24811, 24814, 24817, 24818, 24819, 24826, 24827, 24829, 24830, 24832, 24833, 24835, 24837, 24855, 25856, 25857, 25835, 25836, 25834, 18758, 10104, 10107, 18924, 19381, 19388, 19391, 19383, 19384, 19394, 19395, 19392, 19385, 19387, 19378, 19379, 22429, 22430, 22424, 22419, 22414, 22408, 22402, 22396, 22423, 22417, 22412, 22405, 22401, 22169, 22172, 22171 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... batch. 3. The genesis of the Writ Petitions are the searches conducted under Section 132 of the Act between 06.08.2019 and 11.08.2019 and consequential proceedings thereafter, culminating in the passing of the assessment orders. SNJ Breweries Pvt. Ltd. is the primary assessee and is stated to be operational in this line of business from 06.04.2011. It operates from factories situated at Madurantakam in Tamil Nadu. 4. The matters were heard on various dates and this common and consolidated order is passed after hearing the detailed submissions of all learned Senior Counsel for the petitioners as well as the learned Senior Standing Counsels for the respondents. II. Issues: 5.Issue - 1 - The validity of search under Section 132 is challenged by way of Writ of Declaration by SNJ Breweries, SNJ Distillers, SNJ Sugars, N.Jayamurugan, Geetha Jayamurugan, Ramamoorthy Srithar, Srithar Sudha, Nandhini Transports Pvt. Ltd., Kandasamy Thirumoorthy, Thirumoorthy Kala, Manickam Karthikayen, Kaycee Distillers, Chandran Somasundaram, C.Mariappan, Shanmugakani Sivajothi, Somasundaram Rishi Sharaan and Leela Distillers. 6. Issue - 2 - The centralization of assessments under Section 127 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 150 officials of the Department are stated to have commenced the proceedings in the temporary rental residence of the Director of the brewery at No.4/27, Cenotaph Road First Lane, Teynampet, Chennai - 18. Simultaneous therewith, his permanent residence located at Chitharanjan Salai, Teynampet and other locations such as location of companies owned by the Directors of the brewery, the registered office of the petitioner companies at Nandanam and other registered offices, the offices/residences of suppliers and vendors and other factory premises located at Tamil Nadu, Kerala, Goa and Andhra Pradesh as well as residences of the relatives of the Directors of the petitioner companies, the auditor and employees were also searched. (vi) In all, 56 locations spread over 7 states in India were raided. (vii) The basis for such a wide and far reaching search is questioned, particularly in the absence of any credible material to indicate the necessity for such action. (viii) No cash or documents were seized in the residential premises of N.Jayakumar, Director of SNJ Breweries. Some slips/chits of papers, 2 laptops and a notebook were found in the other premises and this forms the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was filed seeking the production of the Director, N.Jayamurugan from illegal detention and notice was issued on 09.08.2019 to R2. Immediately upon receipt of the notice, the search was concluded in a hasty manner on 11.08.2019 at 11.00 a.m. (xvi) Ultimately, when the HCP came up for hearing on 13.08.2019, it was closed, the Division Bench recording as follows: 2. When the matter is taken up of hearing, the Learned Special Public Prosecutor submitted that what was done is only an enquiry, though the Learned Senior Counsel submits that it is a clear case of detention. Suffice it to state that the detenues are not in the custody of anyone as of now. Thus leaving open the larger issue these Habeas Corpus Petitions stand closed as nothing survives for consideration. However liberty is also given to the Petitioners to take appropriate action in the manner known to law, if they are of the view there involves illegal custody." (xvii) Several prohibitory orders were issued on 08.08.2019, 09.08.2019 and 10.08.2019 attaching the assets including bank accounts of the petitioners, all of which were duly disclosed. (xviii) N.Jayamurugan was taken to the registered office of SNJ Brewer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd reach the hospital. (xxvii) The search and seizure manual sets out in categoric terms the procedure to be followed in the conduct of searches. There has been clear violation of the stipulations thereunder. 12. The petitioners submit that the ingredients of Section 132 have not been satisfied in this case as the respondents have no 'reason to believe' that: a) a person who has been issued a summons or notice under the provisions of the present Act or 1922 Act for production of books of accounts or documents, has omitted/failed to do so; b) a person to whom summons or notice under the provisions of the present or 1922 Act might be issued would not comply with such summon/notice. c) the petitioners are in the possession of money, bullion, jewellery or other valuable article or thing which represents wholly or partly income or property that has not or will not be disclosed for the purposes of the present or 1922 Act. 13. Furthermore, it is a pre-requisite for the Income Tax Department to be in possession of 'information' leading to a 'reason to believe' that any one of the three conditions set out above would be satisfied in a particular case. The present proceedings consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and the submissions to the contrary were to be rejected in full. 18. They rely upon the following judgments to buttress their submissions:- Hon'ble Supreme Court: Commissioner of Commercial Taxes, Board of Revenue, Madras V. Ramkishan Shri Kishan Jhaver(66 ITR 664) Income-tax Officer V. Seth Brothers (74 ITR 836) Pooran Mal V. Director of Inspection (93 ITR 505) State of Punjab V. Baldev Singh ((1999) 6 SCC 172) DGIT (Inv.) V. Spacewood Furnishers (P) Ltd. (374 ITR 595) Income Tax Officer, Calcutta and Ors. vs. Lakhmani Mewal Das (103 ITR 437) Principal Director Of Income Tax (Investigation) vs Laljibhai Kanjibhai Mandalia((2022)140 taxmann.com) Commissioner of Income-tax, Gujarat V. Vijaybhai N. Chandra (357 ITR 713) Madras High Court: P.Murugesan V. Director of Income-tax (Inv.) (222 CTR 619) Agni Estates and Foundations (P) Ltd. V. DCIT (357 ITR 713) Delhi High Court: MDLR Resorts (P) Ltd. V. Commissioner of Income tax (361 ITR 407) Gujarat High Court: Madhupuri Corporation V. DDIT (256 ITR 498) Arti Gases V. DGIT (Inv) (248 ITR 55) Allahabad High Court: Digvijay Chemicals Ltd. V. ACIT (248 ITR 381) Calcutta High Court: Sambhu Prasad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was not arbitrary, but was premised on the satisfaction of statutory conditions justifying the search action. 23. The issue of a warrant by a Commissioner is neither a judicial nor a quasi-judicial act. The Commissioner were enjoined to issue such warrant only based upon information in his possession in consequence of which he forms the necessary belief, the matter is not subject to scrutiny by the Court. 24. In this connection, they referred to a decision of the Allahabad High Court in Income-tax Officer, A-Ward, Agra and Ors. v. Firm Madan Mohan Demma Mal and anr. (70 ITR 293). The ratio of the aforesaid judgements has been applied over the years, Courts taking note of the allegations of assessee's on a case on case basis, to decide whether there is, prima facie, any indication of violations or perversity. In deciding the question of intervention, the Court concerned would apply the Wednesbury Principles of reasonableness to determine violations in law. 25. At paragraph 8, the Hon'ble Supreme Court states as follows: 8. The section does not confer any arbitrary authority upon the Revenue Officer. The Commissioner or the Director of Inspection must have, in consequence of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has in executing the authorisation acted bona fide. 26. The ratio of the aforesaid judgments was reiterated in the case of Pooran Mal (supra) when a constitutional challenge was laid to the provisions of Section 132 stating that the provisions violated Articles 19(1)(f) and (g) of the Constitution of India. This was repelled by the Hon'ble Supreme Court in the following terms at page 518: "……We are, therefore, to see what are the inbuilt safeguards in section 132 of the Income Tax Act. In the first place, it must be noted that the power to, order search and seizure is vested in the highest officers of the department. Secondly, the exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in Section 132(1)(a), (b) and (c) exists. In this connection it may be further pointed out that under sub-rule (2) of Rule 112, the Director of Inspection or the Commissioner, as the case may be, has to record his reasons before the authorisation is issued to the officers mentioned in sub-section (1). Thirdly, the authorisation for the search cannot be in favour of any officer below the rank of an I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e oppression that was allegedly meted out to the residents. So too in Pooran Mal's case. This has been noticed in the judgment itself, but the Bench takes an overall view of the matter stating that on the whole, the search was not established to be malafide, oppressive or excessive. So too in this case. The Bench held further that even if a search had been illegal, the evidence seized can be validly used in the assessments to follow. 28. The ambit of phrase 'reasons to believe' have been interpreted in the seminal judgment in the case of Lakmani Mewal Das (supra) in the context of Section 147 of the Act, which also deploys the same phrase. At page 445, the Bench states as follows: The grounds or reasons which lead to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorizing the search needs to be disclosed or communicated to the person against whom the warrant of authorization is issued. The same is the view expressed by this Court in Dr. Pratap Singh v. Director of Enforcement 155 ITR 166 (SC) while considering a pari materia provision in the Foreign Exchange Regulation Act. The material on which the officer has reasons to believe that any documents will be useful for or relevant to any investigation need not be disclosed in the search warrant; such material may be secret, may have been obtained through intelligence, or even conveyed orally by informants. In the said case, the Petitioner contended that, if the court is going to look into the file produced on behalf of the officer who authorized the search, it must be disclosed to the Petitioner so that the Petitioner "can controvert any false or wholly unreasonable material set out in the file", but the Supreme Court did not accept this submission. The Supreme Court also referred to an earlier decision in S. Narayanappa v. CIT MANU/SC/0124/1966 : (1967) 63 ITR 219 (SC), to hold that whether grounds for ordering search were sufficient or not is not a matter for the court to inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her words, the Court will examine whether the reasons recorded are actuated by mala fides or on a mere pretence and that no extraneous or irrelevant material has been considered; vi) Such reasons forming part of the satisfaction note are to satisfy the judicial consciousness of the Court and any part of such satisfaction note is not to be made part of the order; vii) The question as to whether such reasons are adequate or not is not a matter for the Court to review in a writ petition. The sufficiency of the grounds which induced the competent authority to act is not a justiciable issue; viii) The relevance of the reasons for the formation of the belief is to be tested by the judicial restraint as in administrative action as the Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made. The Court shall not examine the sufficiency or adequacy thereof; ix) In terms of the explanation inserted by the Finance Act, 2017 with retrospective effect from 1.4.1962, such reasons to believe as recorded by income tax authorities are not required to be disclosed to any person or any authority or the Appellate Tribunal. 33. The files relating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities. The reason to believe in the present case was non-existent prior to the search. Even after the search, there was no material to conclude that no such disclosure had been made, or that no disclosure would be made so as to satisfy the pre- requisites of section 132 of the Act. The respondents have merely acted on the basis of surmises and conjectures, and without due authorisation. Their actions are in contravention of law, making the action of search and seizure bad in law. III(d) - Conclusion 36. In fine, the challenge to the search is rejected and all writ petitions on this score, are dismissed. However, I am left with the impression that the search team had failed to display necessary response or urgency in the medical emergency leading to hospitalization of one of the children of the petitioner in W.P.Nos.19877 and 20056 of 2020 (name withheld in the interests of privacy). 37. As the Hon'ble Supreme Court has observed in the case of Pooran Mal (supra),search and seizure, by its very nature, is bound to cause some dislocation to the parties concerned. Some of this dislocation is also intended as a conscious measure to intimidate. However, there are limits that must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dden distress needing hospital attention. There has been a specific allegation by the petitioner in regard to the delay in permitting the family to seek medical assistance. Though denied in general terms, I am unconvinced that the respondents did exercise necessary measures, as warranted, in such a situation. 42. The necessity for speculation in such a situation could have been avoided had the footage from CCTV cameras been available. In light of the discussion as above, I do find that the response of the officials in the medical emergency as above, is wanting, and leaves something to be desired. 43. Suffice it to say that on a wholistic appreciation of this aspect of the matter, I am inclined to give the benefit of doubt to the petitioner. Bearing in mind the factual disputes involved, this is not the appropriate forum to address this issue and I hence reserve the right of the petitioner to approach the Civil Courts/any other appropriate forum to establish (i) availability and disabling of CCTV in the searched premises and common areas and seek compensation/redressal and (ii) delay and procrastination on the part of the respondents in permitting the family to seek medical assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the order; ………….. 48. There is no dispute on the fact that reasons have been recorded by the officials prior to initiation of the proceedings for transfer and it is not the case of any of the petitioners before me that no reasons are recorded. The statutory provisions are also clear to the effect that the assessee must be afforded a reasonable opportunity of being heard in the matter, wherever it is possible to do so. 49. The issue thus turns on whether i) the opportunity afforded to the petitioners is reasonable and ii) whether non-service of the orders of centralization upon the petitioners would invalidate/vitiate the proceedings fatally. 50. The petitioners rely upon the following decisions: i) Ajantha Industries V. Central Board of Direct Taxes (102 ITR 281) ii) Loganathan V. District Collector (2019 SCC OnLine Mad 14546) iii) Government Wood Works V. State of Kerala (ILR1986 (2) Kerala 112) iv) General Exporters V. Commissioner of Income Tax and ors. (Manu/TN/0388/1997) 51. In one voice, they cite the judgment of the Hon'ble Supreme Court in Ajantha Industries (supra) that settles the proposition that a transfer order under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that since the proposal for transfer was during the pandemic period, travel between Coimbatore and Chennai would prejudice him, quite apart from involving substantial time and cost. 58. Therefore, he has requested that his file not be transferred 'in entirety' from Commissioner of Chennai. The request has been rejected in the interests of coordinated examination and assessment. 59. Likewise under Notification 26/2021 dated 09.02.2021, proposals were sent to Srithar Sudha, Thirumoorthy Kala and Manickam Karthikeyan and the Principal Commissioner of Income Tax records their absence and continues the proposal for transfer. 60. I am of the considered view that the non-grant of opportunity in the cases of the five petitioners above is not fatal to the centralization of the assessments, as show cause notices have been issued in all matters to which, in four out of the five cases, there has been no response. The provisions of Section 127(2)(a) do mandate adherence to the principles of natural justice and with the issuance of the show cause notices that have admittedly been served upon the petitioners, this requirement stands met. 61. Kandasamy Thirumoorthy who has filed a reply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clearly of opinion that the requirement of recording reasons under section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee. ….. When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated ……… 66. In conclusion, the Bench states as follows: We are, therefore, clearly of opinion that non- communication of the reasons in the order passed under section 127(1) is a serious infirmity in the order for which the same is invalid. The judgment of the High Court is set aside. The appeal is allowed and the orders of transfer are quashed. No costs. 67. The decision of the Division Bench of this Court in the case of Loganathan V. District Collector (supra) was rendered in the context of the computation of limitation for filing of appeal before the Debt Recovery Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... …………….. 70. In Government Wood Works (supra), Justice T.L.Viswanatha Iyer decided the same issue holding that an order cannot be said to be passed unless it is in some way pronounced or published or the party affected has the means of knowing it. Merely passing the order signing it and keeping it in the file would be irrelevant and cannot tantamount to issuance of the order. At paragraph 14, the Bench states as follows: 14. The order of any authority cannot be said to be passed unless it is in some way pronounced or published or the party affected has the means of knowing it. It is not enough if the order is made, signed, and kept in the file, because such order may be liable to change at the hands of the authority who may modify it or even destroy it, before it is made known, based on subsequent information, thinking or change of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein. This should be done within the prescribed period, though the actual service of the order may be beyond that period. This aspect of the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity has been afforded to the petitioners prior to the passing of the impugned orders. On the aspect of non-service, I am of the view that it constitutes an irregularity in procedure, but one that may be cured by supplying a copy of the order now. The reasons for centralization have admittedly been communicated to the petitioners even in the notices. The majority have not responded to the notices (four out of five). 75. In my considered view, with the communication of the reasons and the opportunity granted to respond, the responsibility cast upon the Department by the provisions of Section 127 stands substantially discharged. No doubt, the orders of centralization ought to have been served upon the petitioners and the failure to do so constitutes a procedural irregularity. However, it is not, on balance, and in the present circumstances, where the petitioners have been afforded opportunity to respond and have, in all but one case, not so responded, so grave as to go to the root of the matter and vitiate the proceedings totally. 76. Relevantly, the petitioners have, by virtue of the present challenge demonstrated that there has been no prejudice caused to them by the non-service o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authorisations for search was executed and thereupon the powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable by such Assessing Officer. 81. I have, in a batch of Writ Petitions in the case of Agni Estates and Foundations Private Limited V. Deputy Commissioner of Income Tax (W.P.Nos.35076 of 2019 etc. batch dated 17.03.2021), held that handing over of the documents beyond 60 days does not vitiate the notices, issued prior to the expiry of the overall limitation provided for completion of assessment. That order is stated to be pending in appeal, though parties confirm that, as on date there is no interim stay granted. 82. Faced with that order, learned Senior Counsel would make a distinction on facts. In that case, the notices had been issued on 01.11.2019 in respect of the seized material that had been handed over on 20.08.2019. Thus, the handing over had been prior to issuance of notices and hence the notices could be said to be based on the materials themselves, though handed over belatedly. 83. In the present case, the handing over of the documents was admittedly on 10.09.2020, whereas the notices had preceded such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f notices under Sections 153A/153C/148, segregate those cases where the seized materials pertain to persons other than the searched entities and the centralization of assessments. 90. The above Instruction finds place at paragraph 6.41 of the search and seizure manual and reads thus: Scrutiny of the appraisal report by the Assessing Officer and the Range head 6.41 On receipt of the appraisal report and seized material, the Assessing Officer and Range head should jointly scrutinise the same and prepare an examination note to decide: (i) Cases where notices under section 153 A are required to be issued. (ii) Cases where notices under section 153C are required to be issued. (iii) Cases where notices under section 148 are required to be issued (iv) Cases where seized material pertains to persons other than those whose cases have been centralised. 91. Proper procedure thus demands application of mind in regard to the seized material, as, if the officer, upon an examination of the material, finds nothing incriminating or that indicates evasion of tax, as a consequence, there is no necessity to issue notice under Section 153A at all. Thus, a proper reading and application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of March, 2021], 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 and for the relevant assessment year or 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 and for the relevant assessment year or years Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years [and for the relevant assessment year or years]: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years [and for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 lakhs or more, either for an assessment year or the aggregate of the assessment years, has escaped assessment. Thus, in such a situation, the existence of the seized materials is a sine qua non to the issuance of notice. 102. Section 153C, reads as follows: Assessment of Income of any other person. 153C. (1)][Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, "belongs to; or (b) any books of account or documents, seized or requisitioned, or pertains to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 105. The above conclusion supports the position that notice under Section 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the purport of Section 153C(2): A new sub-section (2) has been inserted in section 153C providing that in case of such other person for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, where (a) no return of income has been furnished by such person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such person but no notice under sub section (2) of section 143 has been served and the limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or re-assessment, if any, has been made, before the date of receiving of books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such assessing officer shall issue the notice and assess or re-assess total income of such other person for such assessment year in the manner provided in 153A. The provisions of the. newly inserted sub-section (2) would apply where books of account or documents or assets seized or requisitioned referred to in sub-section (1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no specific time limit prescribed in the Act for issue of notice u/s 153A/153C of the Act. However, section 153B of the Act provides that the AO shall pass an order of assessment within a period of two years from end of financial year in which last authorization u/s 132 of the Act for search was executed. The matter of non-specification of time limit for issue of notices under section 158BD was pointed out in CAG's earlier Audit Report No.7 of 2006 but the same was not resolved even in amended section 153A/153C of the Act. We noticed 98 cases in three states where AO issued notices u/s 153A/153C of the Act to the assessee after period ranging from five months to 21 months from the end of previous year in which search was conducted. Further, in two out of 98 cases, notice u/s 153C of the Act was issued just before four days from the date of completion of assessment. Thus there were considerable delays in issue of notices. As a result, the time left for completion of assessment was not enough for in depth examination of all the issues pointed out during search operations and also having risk of human error, which could eventually affect the quality of search assessments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Delhi High Court in the case of Saraya Industries (supra) does not advance the case of the petitioners in light of the distinction in facts as noticed aforesaid. 118. The second submission is that the seized material must be relatable to each of the assessment years for which notices under Section 153C have been issued. For this purpose, reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax V. Sinhgad Technical Education Society ((2018) 11 SCC 490) and of the Delhi High Court in Principal Commissioner of Income Tax (Central 2) V. Index Securities Private Limited and ors. ((2018) 304 CTR (Delhi) 67). The satisfaction notes, according to the petitioner, do not reveal the existence of seized material qua each year, and this, according to the petitioner, establish their argument as aforesaid. VI (b) - Submissions of respondents with case-law 119. The respondents rely on the plain language of Section 153C to argue that the provision requires the officer to mandatorily issue notice for the 6 years comprising the block period as stipulated for the main assessee, that is, the searched person subject only to the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of the assessee was also notified to this office vide Notification No.60/2019-20 dated 18.10.2019 of PCIT, Chennai-6, Chennai. During the course of search proceedings conducted at the factory premise of M/s.Anitha Bottles at No.192/1060/1, Venkateswara Rice Mill, G.S.T.Road, Madhuranthakam - 603 306 on 06.08.2019, certain incriminating material in the form of loose sheets, Books & Documents, Electronic devices were found and seized vide annexures- ANN/MA/AB/B&D/S(1-3), ANN/MA/AB/LS/S and ANN/MA/AB/ED/S which contain details of inflation in sale of empty old bottles to M/s.SNJ Distillers Pvt Ltd (SNJDL in short) & M/s.SNJ Breweries Pvt. Ltd (SNJBL, in short) by M/s.Anitha Bottles. During the course of search, it was seen that the assessee has supplied empty bottles by inflating the rate of bottles during the period prior to GST and by doubling the number of bottles after the implementation of GST. The weekly filling data, i.e. the bottles supplied by the assessee and consumed at SNJ distilleries Pvt. Ltd. was found maintained in the desk top of Shri K.Rajkumar, Supervisor and printouts of the same has been seized vide sheets numbers from 6 to 39 in aNN/MA/AB/LS/S. When as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase vouchers by inflating the price per bottle. For example, the actual purchase price of 650 ml Green beer bottle purchased from M/s.NIHA International Pvt. Ltd. is Rs.3.15 as per invoice no.189 available in ANN/MA/AB/B&D/S-1 (page number 222) whereas, the purchase value of similar beer bottle is recorded as Rs.6.10 in the self made purchase voucher purchased from others as can be seen from seized material vide ANN/MA/AB/B&D/S-2. The financial year wise bogus purchases booked under the head 'Bottle Purchase Account' for the FYs 2017-18 to 2019-20 (till July) worked out to Rs.26,99,80,939/- as below: S.No. FY Amount as mentioned in tally (in Rs) 1 2019-20 1,72,51,444/- (April to 3rd Aug 2019) 2 2018-19 11,86,73,835/- 3 2017-18 13,40,55,660/- TOTAL 26,99,80,939/- Further, when it was asked to provide the inflated sale invoices raised by M/s.Anitha Bottles to M/s.SNJ group Shri K.Rajkumar has provided the FY wise inflated sales invoices raised by M/s.Anitha Bottles to M/s.SNJ Group which amounts to Rs.25,81,70,751/- for the FYs 2016-17 to 2019-20 (till July) in his answer to question no.35 in the sworn statement. S.No. FY Value of surplus sale boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tles is as below. From the above, it is clear that the assessee is inflating the sales of bottles to SNJ group and is returning the inflated amount of sales to SNJ Group by cash once the same is received through banking channels. During the course of search in the residential premises of Shri C.Mariappan 881.600 gms of gold jewellery valued at Rs.29,56,097/- was seized vide ANN/NN/CM/Jew/S dated 16.09.2019. This is required to be assessed to tax for the A.Y.2020-21. Similarly, excess cash of Rs.8,77,500/- was seized vide ANN/NN/CM/CASH/S and the same is required to be brought to tax for the A.Y. 2020-21. Thus, I am satisfied that the seized materials, jewellery and cash belong to the assessee and contain information relating to the assessee M/s.Anitha Bottles (Prop. C.Mariappan) and that the details in the seized materials have got a bearing on the computation of total income of the assessee for the A.Y. 2014-15 to 2020-21. Section 153C(1) as amended with effect from 01.04.2017 provides that if any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to or any books of account or document seized or requisitioned pertains or pertain to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax V. Sinhgad Technical Education Society (397 ITR 344), has been rendered in statutory appeal. I have carefully studied the same along with the decisions of the High Court of Bombayas well as the Income tax Appellate Tribunal, Pune. The Tribunal, the final fact finding authority, has rendered therein, a categoric finding that there was no seized material that was available as part of the records to justify the assessments framed in terms of Section 153C. 127. This finding has been confirmed by the High Court and thereafter the Hon'ble Supreme Court in statutory appeal. In the present case, the proceedings are, as on date, at a very preliminary stage and the petitioners have approached this Court challenging the very initiation of proceedings by notices. To intervene at this stage would require the establishment of legal error or a high degree of perversity, in the proceedings which threshold has not been achieved in this case, in my considered view. 128. The mahazar refers to certain sheets of paper that have been found in the course of search. The petitioners have argued that loose sheets of paper can hardly form the basis for initiation of assessment, relying upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment in the case of Manohar Lal Sharma (supra), that has been rendered in an entirely different context. Even there, the Hon'ble Supreme Court refers to its judgment in the case of Central Bureau of Investigation V. V.C.Shukla ((1998) 3 SCC 410), wherein, the litigation had stood the test of trial. 135. At paragraph 282 of the judgment, the Court no doubt states that loose sheets of paper are inadmissible as evidence under Section 34 of the Evidence Act. This finding has to be weighed as against the context of the lis before the Apex Court. 136. The judgment in the case of Lalitha Kumari V. State of Uttar Pradesh ((2014) 2 SCC 1), Beni V. BisanDayal(AIR 1925 Nagpur 445), Mukundram V. Dayaram (AIR 1914 Nagpur 44) and State of Haryana V. Bhajan Lal (1992 Supp (1) SCC 335) were discussed, the Court coming to the opinion that the materials in question, being loose papers and electronic data were not good enough to constitute offences to direct the registration of a First Information Report (FIR) and investigation thereupon. They say that the materials found, must qualify as proper materials as per the decisions discussed by them. Thus, they reject the request for directing inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nths from date of order of provisional attachment, though the proviso permits the period to be extended for reasons to be recorded in writing. Such extensions, in total, are not to exceed two years pending proceedings or 60 days after the date of order of assessment/reassessment, whichever is later. 143. Though the parties would agree that there has been some extension of the orders passed originally, there is lack of clarity on the number of extensions and the periods that such extensions covered. Thus, and in light of the aforesaid ambiguity, I would merely reiterate the provisions of Section 281B. As no material has been placed before the Court to the effect that the extensions are contrary to statute, the submissions of the petitioners are rejected. 144. These Writ Petitions are dismissed. V III. ISSUE 6 C hallenge to notices under Section 143(2) and orders of assessment under 143(3) VIII (a) Discussion and Conclusion 145. W.P.Nos.9557, 9499, 17577, 17628, 17771 of 2021 challenge notices issued under Section 143(2) on various dates in the case of Ramamoorthy Srithar, Srithar Sudha, Kandasamy Thirumoorthy, Thirumoorthy Kala and Manickam Karthikeyan. 146. W.P.Nos.23586, 235 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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