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Facts
A search was conducted under Section 132(1) of the Income Tax Act on the assessee's residence. Subsequently, notices under Section 153A were issued. The AO made additions under Section 69A and assessed income under Section 153A. The CIT(A) annulled the assessment.
Held
The Tribunal held that the search warrant was not issued in the name of the assessee, making the entire assessment proceedings under Section 153A illegal and void ab initio. Therefore, the assessment was annulled.
Key Issues
Whether the assessment proceedings under Section 153A are valid when the search warrant was not issued in the name of the assessee, but in the name of third parties, indicating a mistaken identity.
Sections Cited
132(1), 153A, 143(2), 142(1), 69A, 131(1A), 132(4), 269ST, 250, 143(3)
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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ NEW DELHI
Before: SHRI MAHAVIR SINGH, HON’BLE
ORDER These appeals by the Revenue are directed against the separate orders of the Ld. CIT(A)-31, Delhi relating to assessment years 2011-12 to 2015-16 respectively. Since these appeals are related to the same assessee, hence, these appeals were heard together and disposed of by this common order by dealing with the facts of (AY 2011-12) being the lead case. The Revenue has raised as many as 09 grounds of appeal, however, Ld. DR only argued the jurisdictional ground relating to assumption of jurisdiction by the AO u/s. 153A of the Act, because the issue on merit was not adjudicated by the Ld. CIT(A), being academic.
2. The brief facts of the case are that a search u/s. 132(1) of the Act was conducted in the case of the assesse i.e. Honey Arora, at his residence on 06.02.2019. Consequently, notices u/s. 153A of the Act was issued on 17.12.2020 asking the assesse to file the return within 15 days of receipt of the notice. In response to the notice u/s. 153A of the Act the assesse filed the return for the relevant year on 20.12.2020 showing income of Rs. 48,000/-. Subsequently, notice u/s. 143(2) of the Act was issued on 17.01.2021 fixing the case for hearing on 20.01.2021. Notice u/s. 142(1) of the Act alongwith the detailed questionnaires was sent to the assesse on 08.01.2021 and 14.01.2021 for filing its reply on before 11.01.2021 & 20.01.2021. Thereafter, AO made the addition of Rs. 32,21,576- u/s. 69A of the Act and assessed the income at Rs. 32,69,576/- u/s. 153A of the Act. Against the above order, assesse preferred an appeal before the ld. CIT(A), who vide his impugned order has treated the assessment as annulled and allowed the appeal of the assesse.
3. Aggrieved with the order of the Ld. CIT(A), Revenue is in appeal before the Tribunal.
4. I have heard the rival contentions and gone through the facts of the case. Ld. I find Ld. CIT(A) has discussed the issue in dispute elaborately by observing as under:-
“8.1 I have carefully considered the facts and circumstances of the case and carefully perused assessment order, submissions of Appellant, remand report, rejoinder to the remand report, judicial precedents cited by the Appellant and the material available on record. Through Ground No. 6 the Appellant seeks to assail the very basis of assumption of jurisdiction by the AO u/s 153A of the Act. It has been contended by the Appellant that the AO is not justified in passing the assessment order under section 153A of the Act since the search conducted on the Appellant was illegal because of following reasons: a) Summons u/s 131(1A) were issued to the Appellant and his family members on the date of the search i.e. 06.02.2019 b) Hence there was no reason to believe to conduct search against the Appellant on the date of search i.e. 06.02.2019. c) The panchnama was not drawn in the name of the Appellant. d) The copy of search warrant was not provided to the Appellant in spite of repeated requests. e) The search was conducted on the Appellant as mistaken identity. 8.2 It has been argued that the department has conducted an illegal search on the Appellant as the Summons u/s 131(1A) (Annexure A) were issued to the Appellant and his family members on the date and time of the search and no panchnama (Annexure-C) was made in the name of the Appellant. Even the search warrant was not issued in the name of the Appellant (Annexure-B). The search conducted on the Appellant was illegal because of following reasons. 8.3 It has further been contended that the Search Warrant was not in the name of the Appellant (Annexure-B). The search was conducted on the Appellant due to mistaken identity. Summons u/s 131(1A) were issued to the Appellant and his family members on the date and time of the search 3 i.e. 06.02.2019 at 09.00 am. The summons was to appear at 09.00 am and the search was itself conducted at 09.00 am on 06.02.2019. Both issuing of summons and search dated 06.02.2019 at timing 09.00 am clearly suggests that department was not at all clear in his actions. It is the basic principle of search that you cannot dilute the privacy of a person until and unless you are clear about the consequence of your actions. The power of search is to be used very sparingly because it is the longest arm in the armory of the Department. The summons was issued to the Appellant and his family members at the time when the search parties entered the premises of the Appellant. Hence there was no reason to believe to conduct search against the Appellant on the date of search i.e. 06.02.2019. 8.4 It has also been contended that from the perusal of the search warrant, it is clear that the search has been conducted on the Appellant under section 132(1) (c) of the Act. Section 132(c) says that Search can be conducted on an assessee if the Department in consequence of information in his possession has reason to believe that "any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of this Act". From the contents of the search warrant it is clear that the search was conducted on Shri Avtar Ltd. and with regard to the search of these persons, the premises of the Appellant were covered. From the whole episode it is clear that search was not conducted on Appellant but it was conducted on the premises of the Appellant in respect of search of the aforesaid persons, meaning thereby that the whole process of issuing notices and completing assessment under section 153A/143(3) is unwarranted. 8.5 From the entire sequence of events i.e. from the conclusion of the search to issuing show cause notices to the Appellant under section 153A, it appears that the search is conducted on the Appellant on a mistaken identity. It is a well decided law that when a search is conducted on a mistaken identity and no incriminating document or record was found in the course of search, notice under section 153A had been held to be invalid, the case in point is that of Dr. Gautam Sen v. CCIT [2016] 74 taxmann.com 128 (Bom.). The Appellant has obtained copy of search warrant and copy of Panchnama under Right to Information Act, 2005 (hereinafter referred to as "RTI").
8.6 The Appellant contends that these documents were never provided to him in spite of various requests made in this regard during the assessment proceedings. The Appellant vehemently opposes the validity of the search on the following grounds .
1. Summons u/s 131(1A) were issued to the Appellant and his family members on the date and time of the search i.e. 06.02.2019. The summons had been issued to the Appellant and his family members at the time when the search parties entered the premises of the Appellant. Hence, there was no reason to believe to conduct search against the Appellant on the date of search i.e. 06.02.2019.
2. A perusal of the search warrant, shows that the search was not conducted on Appellant. Warrant was issued in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd and not to the Appellant.
3. The search was concluded on the premises of the Appellant and the Panchnama was drawn in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd. The Panchnama was not in the name of the Appellant. The search on the petitioner is on a mistaken identity.
4. The following opening line of statement of Appellant as recorded during search clearly shows that it was recorded in the case of a search on M/s H.L. Forex Pvt. Ltd and not in the case of a search of the Appellant: "Statement of Sh. Honey Arora S/o Sh. Anand Arora, aged 30 years R/o 3rd floor A-107 Sharda Puri, Ramesh Nagar New Delhi-110015 in the case of M/s H. L. Forex Pvt Ltd recorded on 07.02.2019 at 13.10 PM on oath u/s 132(4) of the Income Tax Act, 1961 during the course of Search proceedings u/s 132 of the Income Tax Act at 3rd floor A-107 Sharda Puri, Ramesh Nagar New Delhi- 110015."
5. The penalty Notice issued by JCIT, Central Range-7 in the subject of notice mentions " Show cause Notice for imposition of penalty for violation of section 269ST of the Income Tax Act, 1961 in the case of Sh. Honey Arora (PAN: ARNPA8541J) in Kochar Group (Dos: 06.02.2019) for the A.Y. 2018-19-reg". The Subject of notice also makes it very clear that it was search on Kochar Group and not on the Appellant.
8.7 On the basis of above documents and notices received by the Appellant it has been argued that there was no search conducted on the Appellant and consequently all assessments done thereafter deserves to be nullified. 8.8 The AO in the reply of RTI has mentioned that seized material and copy of statement was provided to the Appellant during the time of assessment. In this regard the Appellant countered it by stating that the said documents were never provided to him. During the entire assessment proceedings, the Appellant requested in every communication with the AO for copies of various documents, but it was never mentioned in any notice or communication by the AO that the same has been provided to the Appellant. Even the partial documents which were provided to Appellant were through application under RTI. The Appellant had to file Appeal before JCIT for receiving the balance documents. Hence, it has been contended that the Appellant was never provided any document during the assessment proceedings and was never communicated that documents were provided to him earlier. The whole Search as well as assessment is against the principles of natural justice. 8.9 The copies of seized material, warrants and Panchnama have been filed by the Appellant during these appellate proceedings. From the perusal of the same, it seen that the facts as narrated by the appellant above do emanate from these documents and that search was not conducted on the Appellant. Warrant was issued in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd and not in the name the Appellant. The search was concluded on the premises of the Appellant and the Panchnama was drawn in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd. The Panchnama was also not in the name of the Appellant. 8.10 In this regard, the Appellant has placed on record a copy of decision of Hon'ble ITAT Delhi in the case of Sanjay Jain Vs. PCIT (Central Circle)-3 Delhi. On the identical ground Hon'ble Delhi ITAT G bench vide its order dated 22.05.2024 in the case of Sanjay Jain Vs. PCIT (central Circle)-3 Delhi (ITA No.1587/Del/2024 and dated 22.05.2024 has quashed the whole assessment proceedings. The facts of the said case and that of the case of the Appellant are from beginning to end the same and identical. The Appellant has taken the same ground at the time of assessment proceedings also. The crux of the issue is that 6 search warrant was not issued in the name of the Appellant. On the perusal of search warrant No. 7262 dated 06.02.2019, it is clear that search was not made on Appellant. As stated earlier, Warrant was issued in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd and not in the name of the Appellant. 8.11 It is seen that on identical facts and circumstances, a search was also conducted on Shri Sanjay Jain in the above mentioned case on the same date i.e. 06.02.2019 vide search warrant No. 7263- the very next warrant following the warrant in the case of the premises of the Appellant bearing No.7262- which was also issued in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd and not in the name of Shri Sanjay Jain. In the above case it has been held by Hon'ble Delhi ITAT that assessment under section 153A cannot be upheld in the name of such person in whose case search action is not initiated u/s 132. The relevant paragraph of the order in the case of Sanjay Jain (supra) is reproduced below:- "22. The provisions of Sec. 153A of the Act mandates that to issue a notice u/s 153A, a search must have been initiated in case of the said person based on a warrant of authorization issued in the name of very such person, i.e., to invoke the provisions of Sec. 153A, initiation of search u/s 132 in case of the said person is a pre- requisite. The person referred under Sec. 153A and Sec. 132 is one & the same person. It is an undisputed & undeniable fact that there must be an issuance of a valid warrant of authorization of search in the name of the very person u/s 132 of the Act in whose case proceedings u/s 153A of the Act are initiated. In the case of the assessee, the Warrant of Authorization, Warrant no. 7263 on Form 45, was issued in the names of "Avtar Singh Kochar, Gagandeep Singh Kochar, Hari Singh Kochar, M/S. H.L. Forex Pvt. Ltd." And not in the name of the assessee, i.e., Sh. Sanjay Jain.
Therefore, we find merit in the argument of the Ld. AR that when no Warrant of Authorization has been issued u/s 132 of the Act in the name of the assessee then the assessment proceedings & orders cannot be framed u/s 153A of the Act in case of the assessee. Hence, the orders framed u/s 153A of the Act in case of, the assessee are non est, invalid, void-ab-initio, illegal and unlawful. Further, the facts of the instant case of the assessee are also similar to the case of Jindal Stainless Ltd. v. ACIT, CC-6 [2009] 7
120 ITD 301 (Delhi) as relied upon by the Ld AR whereby the Cordinate Bench held that the assessments framed on the assessee under section 153A are invalid assessments when there is no warrant of authorization of search u/s 132 of the Act in his own name. Accordingly, following the decision of the coordinate bench only, it is held that the assessments framed u/s 153A of the Act in case of the assessee are non-est, invalid, void-ab-initio, illegal and unlawful and deserves to be quashed in the interest of justice." 8.12 Upon careful consideration of the facts and circumstances of the case and the material on record, I find that the case of the Appellant is pari materia with the case of Sanjay Jain (supra). The facts and circumstances of the case of the Appellant and those of the said case are identical. The Appellant's case has to meet the same fate as that of the case of Shri Sanjay Jain. Therefore, respectfully following Hon'ble Delhi Bench of ITAT, I hold that the action of the AO in assuming the jurisdiction u/s 153A of the Act is not justified. Hence, the assessment so made u/s 153A of the Act is hereby annulled. This ground raised by the Appellant is, therefore, allowed. 8.13 Since the very assessment order does not survive having been annulled as above, the other grounds raised by the Appellant remain of academic interest only. Therefore, the same are not being adjudicated upon here. However, for a discussion on some of the other grounds raised here, appellate order passed by me u/s 250 of the Act in respect of the order u/s 143(3) of the Act for assessment year 2019-20 in Appellant's own case, may be referred to.
9. In the result, the appellant's appeal is allowed.”
5. Ld. DR relied upon the order of the Assessing Officer.
Per contra, Ld. AR for the assessee has relied upon the order of the Ld. CIT(A). Moreover, he submitted that the captioned appeals are not maintainable, in view of the CBDTs’ Circular No. 05/2024 dated 15.03.2024 which was later amended by the CBDT’s Circular No. 09/2024 dated 17.9.2024, as the tax effect in respect of the aforesaid assessment years i.e. 2011-12 to 2015-16 is less than 60 lacs in each year and on this account the captioned appeals are not maintainable and also the case of the assessee also does not fall within the exceptions as contained in CBDT’s Circular No. 05/2024 dated 15.03.2024.
In the background of the aforesaid discussions and upon careful perusing the finding of the Ld. CIT(A), as reproduced above, I note that Ld. CIT(A) has rightly observed from the perusal of the copies of seized material, warrants and Panchnama the search was not conducted on the Assessee. However, Warrant was issued in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd and not in the name the Assessee. The search was concluded on the premises of the Assessee and the Panchnama was drawn in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd. The Panchnama was also not in the name of the assessee. Ld. CIT(A) has further noted that ITAT, ‘G’ Bench, Delhi vide its order dated 22.05.2024 in the case of Sanjay Jain Vs. PCIT (Central Circle)-3 Delhi (ITA No.1587/Del/2024 and dated 22.05.2024 has quashed the whole assessment proceedings exactly on identical facts and circumstances of the case. The facts of the said case and that of the case of the Assessee are from beginning to end are exactly same and identical. The Assessee has taken the same ground at the time of assessment proceedings also. The crux of the issue is that search warrant was not issued in the name of the Assessee and on the perusal of search warrant No. 7262 dated 06.02.2019, it is clear that search was not made on assessee. As stated earlier, Warrant was issued in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd and not in the name of the Assessee. On identical facts and circumstances, a search was also conducted on Shri Sanjay Jain in the above mentioned case on the same date i.e. 06.02.2019 vide search warrant No. 7263 the very next warrant following the warrant in the case of the premises of the Assessee bearing No.7262 which was also issued in the name of Shri Avtar Singh Kochar, Shri Gagandeep Singh Kochar, Shri Hari Singh Kochar and M/s HL Forex Pvt. Ltd and not in the name of Shri Sanjay Jain. In the above case it has been held by Delhi ITAT that assessment under section 153A cannot be upheld in the name of such person in whose case search action is not initiated u/s 132. Hence, the case of the assessee pari materia with the case of Sanjay Jain (supra). The facts and circumstances of the case of the Assessee and those of the said case are identical. The Assessee’s case has to meet the same fate as that of the case of Shri Sanjay Jain. Therefore, respectfully following Delhi Bench of ITAT, Ld. CIT(A) rightly held that the action of the AO in assuming the jurisdiction u/s 153A of the Act is not justified. Hence, the assessment so made u/s 153A of the Act was declared as annulled. In view aforesaid discussions and respectfully following the aforesaid precedent, we do not find any infirmity in the order of the Ld. CIT(A) quashing the reopening and thus we affirm the same and accordingly, dismissed this issue raised in Revenue’s Appeal on the jurisdictional side, as argued by the both the sides. Even otherwise, the captioned appeals are not maintainable in view of the CBDT’s instructions, as the tax effect in the assessment years 2010-11 to 2015-16 is less than the prescribed limit in each year, hence, the same is also dismissed on this count.
My aforesaid decision for assessment year 2011-12 will apply mutatis mutandis to other remaining appeals.
In the result, all the 05 appeals filed by the Revenue stand dismissed.