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Facts
The assessee, Shorya Trading Company, part of the Oswal Group, faced assessment proceedings under Section 153A following a group search in 2018. Despite the assessee's alleged address being vacant and no search warrant or incriminating material found directly against it, the AO initiated assessment and enhanced income from Rs. 1,08,720/- to Rs. 2,87,08,720/-. The CIT(A) upheld the assessment, leading to this appeal.
Held
The Tribunal found that no search was initiated on the assessee, and no panchnama was drawn in its name, nor was any incriminating material found related to it. Following previous judgments, the Tribunal held that the notice issued under Section 153A was without jurisdiction and bad in law, rendering the assessment order and the impugned appellate order void ab initio.
Key Issues
Whether assessment proceedings initiated under Section 153A are valid when no search was conducted on the assessee and no incriminating material was found. Whether the assessment and appellate orders are void ab initio due to lack of jurisdiction.
Sections Cited
143(3), 153A, 132(1), 132A, 153D, 139, 133(6), 131
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI AVDHESH KUMAR MISHRA
ORDER
PER AVDHESH KUMAR MISHRA, AM
This appeal of the assessee for Assessment Year (‘AY’) 2008-09 is directed against the order dated 03.01.2025 of the Commissioner of Income Tax (Appeals)-3, Gurugram [‘CIT(A)’].
2. The Assessee has raised following grounds of appeal:
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) ['CIT(A)"] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, learned CIT(A) has erred, both on facts and in law in confirming the action of the Assessing Officer, despite the fact that the assessment order passed under section Shorya Trading Company P. Ltd. 143(3)/153A of the Income Tax Act, 1961 ('the Act') is without jurisdiction, void ab initio, illegal and deserved to be quashed.
3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of the AO despite that the proceedings initiated under section 153A against the appellant and the assessment order passed under section 143(3)/153A are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed.
4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of the AO despite that the assessment year under consideration le. AY 2008-09 is beyond the period of ten years from the end of assessment year relevant to the year in which search was conducted and proceeding initiated under section 153A of the Act and the consequent assessment order passed is without jurisdiction and barred by limitation.
5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of the AO in issuing notice under section 153A without there being any books of accounts or other documents or evidence in his possession revealing any income represented in the form of any asset has escaped assessment.
6. On the facts and circumstances of the case, learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the reassessment proceedings initiated and consequently reassessment order passed under section 143(3)/153A of the Act by the learned AO is bad and liable to be quashed in the absence of issue of any valid search warrant and panchnama for conducting search under section 132 of the Act.
7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the additions made by the AO under Section 143(3)/153A are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search. 8. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of the AO Shorya Trading Company P. Ltd. despite the fact that the assessment order passed under section 143(3)/153A is in violation of mandatory provision of section 153D the Act and as such is bad in the eyes law. (ii) That the purported approval u/s 153D of the Act is illegal, bad in law and also without application of mind. 9. (i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 2,86,00,000/- made by the AO on account of share capital and share premium received by the assessee. (ii) That the above addition has been confirmed rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee to prove the identity and creditworthiness of the investors as well as genuineness of the transactions.
10. On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that the assessment order under section 143(3)/153A has been issued without there being valid Document Identification Number (DIN) quoted on the body of the assessment order violating the CBDT Circular No. 19/2019.
11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition despite the fact that no independent enquiry was conducted by the AO under section 133(6)/131 of the Act.
12. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above additions by indulging in surmises without bringing on any direct evidence against the assessee, only on the basis of presumption and assumption.
13. On the facts and circumstances of the case, the observations given by learned CIT(A) are incorrect and contrary to the facts on record.
The appellant craves leave to add, amend or alter any of the grounds of appeal.”
Shorya Trading Company P. Ltd. 2.1 The substantive core issue raised in this appeal is that whether the assessment completed under section 143(3) rws 153A(1)(b) of the Income Tax Act, 1961 (‘Act’) without initiating search under section 132(1) of the Act and in absence of any seized material is a legally valid order. Besides the merit of addition, the assessee has also raised issues of non-quoting of DIN on the body of the order and validity of approval under section 153D of the Act in this appeal
The relevant facts giving rise to this appeal are that the appellant assessee, engaged in consultancy, investments in shares, etc., filed its original Income Tax Return (‘ITR’) of the respective year within the time specified under section 139 of the Act. On 22.01.2018, Oswal Group of cases of Karnal, was searched under section 132(1) of the Act. The assessee belongs to the Oswal Group of cases of Karnal. As per the assessment order, the assessee was not found in existence during the course of search operations carried out under section 132(1) of the Act at any premises; House No. 871, Sector-13, Karnal, House No. 836, Sector-13, Karnal and House No. C-5/2A, Rana Pratap Bagh, Opposite CC Colony, New Delhi though the assessee used to file its ITRs showing its address as House No. C- 5/2A, Rana Pratap Bagh, Opposite CC Colony, New Delhi. Therefore, the statement of the owner of the said property was recorded, which specifically admitted that the assessee was neither in possession of the said property ever nor it had done any business from the said premises. Further, the owner Shorya Trading Company P. Ltd. of the said property admitted that he had never heard the name of the assessee. Later, the Assessing Officer (‘AO’) initiated assessment proceedings under section 153A of the Act and completed consequential assessment at income of Rs.2,87,08,720/- as against the returned income of Rs.1,08,720/-. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal. Hence, this appeal is before us.
At the outset, the Ld. Counsel submitted that the search was never initiated on the assessee as evident from the report of the Assessing Officer (‘AO’) and Panchnama in the said case. Hence, proceedings initiated under section 153A of the Act, in this case, were not justified. Accordingly, he prayed for quashing the impugned order. In support of his contention, the Ld. Counsel placed reliance on the decision of the Tribunal in the assessee’s own case in in AY 2017-18, wherein it had been held that the search under section 132(1) of the Act was not imitated on the assessee as there was no panchnama drawn in this regard. Hence, notice issued under section 153A of the Act was quashed. The Ld. Counsel drew our attention to the relevant part of the order as under:
“6. We have heard the rival submissions and perused the material available on record. In the instant case it was claimed by the assessee that no search was taken place u/s 132 in its case and its name was not appearing in any of the Panchnama drawn as a result of search carried out by the department in entire group on 22.1.2018. In order to verify the claim of the assessee this bench vide order sheet entry dt. 27.9.2023 has directed the ld. DR to call for report from the AO as to whether search was conducted on assessee and if search was conducted a copy of search Shorya Trading Company P. Ltd. warrant in the name of the assessee be produced before the bench. During the course of hearing the ld. CIT DR has filed a report from the AO i.e. DCIT, Central Circle, Karnal Shorya Trading Company Pvt. Ltd. vs. ACIT wherein it is categorically admitted by the AO that no panchnama is available in folder containing the name of the assessee. It is also stated by the AO that no paper was found and seized wherein name of assessee / relation to the assessee has been found. The relevant report dt. 12.6.24 submitted by AO is as under: To Dated 12.06.2024 The Commissioner of Income Tax (DR) G-Bench, ITAT, New Delhi Sub: Appeal filed by the assessee in the case of M/s Shorya Trading Company Pvt. Ltd. vide for AY 2017-18 (PAN: AAKCS0778A)-Regarding- Kindly refer to your e-mail dated 24.05.2024 vide which certain documents in respect of subject mentioned assessee has been required by your goodself.
In this regard, requisite information/documents as per following details are enclosed herewith for your kind consideration. i Copy of panchnama drawan on 22.01.2018 in the H.No. 871, Sector-13, Karnal ii As per panchnama folder handed over to this office by the DDIT(Inv.), there is no such panchnama wherein name of assessee M/s Shorya Trading Company Pvt. Ltd. is mentioned. iii During the course of search at House No. 871, Sector-13, Karnal various loose papers were found and seized by the Department. On examination of these documents, no such document wherein name of assessee/relation to the assessee has been found. Encl. As above. Yours faithfully, (DR. AMAN BISHLA) Deputy Commissioner of Income Tax Central Circle, Karnal.
First we must refer the provisions as contained in section 153A(1) of the Act which is as follows: ………. As per above, notice u/s 153A of the Act can be issued only 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 of the Act. Admittedly in the case of the assessee neither of any such action was carried out thus the notice issued u/s 153A dt. 23.01.2019 is without jurisdiction and is bad in law. In view of these facts and after considering the report of the AO, we find that no search warrant was issued in the name of the assessee thus no proceedings u/s 153A of the Act could be initiate in the case of the assessee accordingly the notice issued us 153A is hereby quashed.” 4.1 Alternatively, the Ld. Counsel further submitted that even if it was presumed that the search had been initiated on the assessee, then also the AY 2008-09 was barred by limitation of 10 years. He placed reliance on the decision of the Hon’ble Delhi High Court in the case of Ojjus Medicare Pvt. Ltd. [2024 SCC OnLine Del 2439]. The Ld. Counsel, submitted without admitting that the search was initiated on the assessee on 22.01.2018 and thus, AY 2018-19 was the AY relevant to the previous year in which search was conducted or requisition was made and accordingly 10 years as per the explanation 1 to section 153A of the Act would be as follows- S. No. Assessment Years 1. 2018-19 2. 2017-18 3. 2016-17 4. 2015-16 Shorya Trading Company P. Ltd. 5. 2014-15 6. 2013-14 7. 2012-13 8. 2011-12 9. 2010-11 10. 2009-10 The Ld. Counsel, thus contended that AY 2008-09 was beyond the period of limitation and therefore, the assessment completed under section 143(3) r.w.s. 153A(1)(b) of the Act dated 31.12.2019 was illegal and bad in law as the same had been passed without valid jurisdiction and liable to be quashed. Other issues were not argued.
The Ld. CIT-DR argued the case vehemently and defended the impugned order.
We have heard both parties at length and have perused material available on the record. Generally, panchanama was drawn at the end of search proceedings under section 132(1) of the Act. However, it can be drawn in between also in case of any specified action; for eg. under section 132(3) of the Act. But we are of the considered view that it is not the sole conclusive proof for initiation of search proceedings under section 132(1) of the Act as it cannot be ruled out that there is no error in panchnama and there may be a also case where the search has been initiated but panchanama has not been drawn due to any reason. Thus, we are inclined to decide the case treating Shorya Trading Company P. Ltd. that the search had taken place in this case though it has not been conclusively proved/established/demonstrated by the Ld. CIT-DR. We find merit in the arguments/contentions/submissions of the Ld. Counsel that this case is squarely covered by the decisions of the Hon’ble Delhi High Court in the case of Ojjus Medicare (P.) Ltd (Supra) and the order dated 07.05.2025 of Co-ordinate Bench of the Tribunal in in the case of Plaza Fincap (P) Ltd. We therefore, following the reasoning given by the Hon’ble Delhi High Court in the case of Ojjus Medicare (P.) Ltd (Supra) and the Co-ordinate bench in the case of Plaza Fincap (P) Ltd. (supra), hold that not only the assessment order but also the impugned appellate order is void abinitio. Hence, the orders of Authorities below were quashed being without valid jurisdiction.
7. In view of the above, other grounds, being academic, are not being decided here.