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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI AMARJIT SINGH, JM
PER PRASHANT MAHARISHI, AM:
Both these appeals are having similar grounds and issues in these appeals which have been argued by both the parties raising similar arguments and therefore are disposed of by this common order.
Grounds in ITA no. 1291/Mum/2018 are as under :–
“1. The order of the assessing officer 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.
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.
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.
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.
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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in disallowing a sum of Rs.7,20,000/- out of Remuneration paid to Director under section 37 of the IT Act, 1961 as taxable income.
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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making addition of Rs.9,03,55,342/- on account of Alleged Discrepancy in Delivery Challan 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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making addition of Rs.4,41,96,29,042/- on account of Alleged Unaccounted Stock and Profit on Sale of Unaccounted Stock as taxable income.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making addition of Rs.19,35,83,500/- on account of Alleged Negative Stock as taxable income. 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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in not allowing the Exemption under section 10AA. 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.
In reaching to the conclusion and making the aforesaid additions / disallowances, the learned A. O. omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors.
The entire assessment is based on assumptions, presumptions, surmises and guesswork and hence bad in law and void.
The assessment is made in gross violation of principles of natural justice and hence bad in law and void.
The learned A. O. erred in initiating penalty proceedings u/s. 271(1)(c) of Income Tax Act, 1961.
Any other ground or grounds as may be urged at the time of hearing.”
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.
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.
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.
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.
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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making an addition of Rs.12,72,00,000/- on account of Alleged Bogus Share Application money 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 as the provisions of section 68 has been complied with.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in disallowing a sum of Rs.15,60,000/- out of Remuneration paid to Director under section 37 of the IT Act, 1961.
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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making an addition of Rs.94,05,116/- on account of Alleged Excess purchase of Platinum bar. 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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in disallowing a Capital Loss of Rs.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in disallowing Compensation paid of Rs.35,00,000/-.
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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making an addition of Rs. 43,60,000/- on account of Alleged Unexplained Investments.
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.
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.
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.
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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in disallowing loss of Rs. 1,12,38,653/-.
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.
On the facts and in the circumstances of the case and in law, the Ld. A. O. erred in making an addition of Rs. 11,66,124/- on account of Alleged Expenses Capitalised.
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.
On the facts and the circumstances of the case and in law, the Ld. A. O. erred in not re-computing the Exemption under section 10AA of the IT Act, 1961.
Looking to the facts and in the circumstances of your Appellant's case the said computation made by the Ld. A.O. is incorrect and invalid and ought to be rectified.
In reaching to the conclusion and making the aforesaid additions/ disallowances, the learned A.O. omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors.
The assessment is made in gross violation of principles of natural justice and hence bad in law and void.
The learned A. O. erred in imposing Interest under section 234B and 234C of the IT Act, 1961.
The learned A. O. erred in initiating penalty proceedings u/s. 271 (1) (c) of the Income Tax Act, 1961.
Any other ground or grounds as may be urged at the time of hearing.”
Assessee in ITA No 1292 is a company engaged in trading in gold bar, gold jewellery, cut and polished diamonds in manufacturing of gold jewelry etc. For impugned assessment year assessee filed return of income on 21/9/2009 declaring a total income of ₹ 6,755,462/–.
Search & seizure action u/s 132 (1) of the act was carried out at the residential premises of Shri Manoj B Punamiya and Mr Arvind Vyas by The Director Of Income Tax (Investigation) Mumbai on 31/10/2009.
Subsequently notice u/s 153A was issued on 9/8/2011. In response to that notice assessee filed copy of the return of income filed on 24/8/2011 declaring total income of ₹ 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 ₹ 1,51,05,04,880/–.
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
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. He therefore submitted that here is no requirement of going in to the merits of the case.
He started reading the order of The coordinate bench in case of assessee in ITA no 2183 /M/2013 for AY 2004-05 and ITA No 2184 to 2186/M/2013 for AY 2005-06 to 2007-08 along with cross appeals filed by Ld AO for Ay 2005-06 to 2007-08 in ITA no 2906 to 2908 /M/2013 was decided per order dated 31/10/2016. He extensively referred to paragraph 2.5 of the order wherein the assessee challenged the initiation of proceedings u/s 153A of the act. He further referred to paragraph number 2.7 stating that the assessee took a preliminary objection that warrants were never executed against the present assessee. He also referred to letter dated 1/3/2016 which has been reproduced in the order of the coordinate bench at page number 7 where the learned AO has categorically held that he does not have warrant mentioning the name and address of the assessee as well as the copy of the panchnama prepared on the conclusion of the search at the premises of the assessee. He categorically stated that he has verified from his office record and h 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 act on assessee on 31/10/2009. Thereafter he referred to paragraph number 2.19 of the order wherein the coordinate bench has categorically held that there is no panchnama drawn by the revenue against the present assessee which is an admitted position.
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.
Accordingly, the learned authorised representative contested the order on the two grounds as stated above.
We have carefully considered the rival contention and perused the orders of the lower authorities. We find that consequent to search on 31/10/2009, the assessment u/s 143 (3) read with Section 153A of the income tax act 1961 was passed on 7/8/2012 for assessment year 2009 – 10. Similarly consequent to that such assessments were also framed for assessment year 2004 – 05 till assessment year 2007 – 08 u/s 153A of the income tax act. Assessment orders passed u/s 153A of the income tax act for assessment year 2004 – 05 till assessment year 2007 – 08 were challenged by assessee before the coordinate bench in ITA number 2183, 2184 – 2186/M/2013 which was decided by coordinate bench on 31/10/2016. By that order, it was held as Under:-
“2.1. During hearing, the ld. counsel for the assessee, Shri Manish Sanghvi, strongly advocated that panchnama does not contain the name of the assessee for which our attention was invited to the panchnama, prepared in the name of ‘Shri Manoj Punamiya & Group’, by asserting that under the Income Tax Act, 1961, there is no concept of group. It was canvassed that the inventory of accounts, books, etc, prepared on 24/12/2009, and prohibitory orders u/s 132(3) of the Act were also only in the name of Shri Manoj Punamiya alone and not the present assessee. It was clarified that the assessee has no nexus with the premises searched/surveyed by the Department. It was empathetically contended
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
2.3. However, the ld. CIT-DR contended that warrants were issued against the assessee. In reply, the ld. counsel for the assessee reiterated that issue is whether valid search was initiated against the assessee. It was also clarified from page 58 of the paper book that the authorization is with respect to flat no.504 (page-59 of the paper book) which belongs to Shri Manoj Punamiya and not the assessee. Again query was raised by the Bench whether search was conducted at the business premises of the assessee? The ld. CIT-DR stick to the reply of the ld. Assessing Officer dated 01/03/2016, by asserting that warrants were issued to the assessee also, therefore, the search is valid. In reply, the ld. counsel for the assessee challenged the assertion of the ld. CIT-DR by explaining that even it is presumed, though not admitted that warrants were issued by the Department against the assessee, that warrant, if any, neither was executed to the assessee nor any search was initiated against the assessee, pursuant to such warrant, and further the panchnama does not contain the name of the assessee.
2.4. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee company, at the relevant time, was engaged in the business of trading/manufacturing recycled plastic grinding, recycled plastic, agglomerates, platinum bars,
2.5. An action u/s 132 of the Act was carried out at the residential premises of one Shri Manoj Punamiya (in his individual/personal capacity) on 31/10/2009 and thereafter on 24/12/2009, wherein, seventeen papers, were claimed to be found and seized. The copy of panchanama along with inventory of papers, found and seized, is matter of record. Pursuant to said action, notice u/s 153A was issued on 27/12/2010. The assessee challenged the initiation of proceedings u/s 153A of the Act. It is noteworthy that as abundant caution, the assessee filed return in response to notice u/s 153A on 24/08/2011, declaring total income at Rs.4,325/-, as was originally declared in return of income filed u/s 139(1) of the Act. The assessment was completed purportedly u/s 143(3) r.w.s. 153A on 29/12/2011 making certain additions.
2.6. The validity of initiation of proceedings u/s 153A of the Act were challenged before the ld. Commissioner of 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
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:-
2.9. From the aforesaid factual matrix, following question arise for our consideration (i) whether a valid search was conducted against the assessee.
2.10. In the light of the aforesaid question, now, we shall deal with the facts available on record by keeping them 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—
(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 shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate :
(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the 9[Principal Commissioner or Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is
(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.
The scope and effect of insertion of section 153A and amendment made in various sections has been elaborated by Finance Act 2003 and Departmental Circular No.7 of 2003 dated 05/09/2003. The Finance Act, 2003 has provided that the provisions of this chapter shall apply where a search is initiated u/s 132 or books of account, other documents or any asset are requisitioned u/s 132A after 31/05/2003 by inserting a new section 153A 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
(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
2.11. From the aforesaid provision, it is clear that the first requirement is valid initiation of search. The Revenue has executed warrant of authorization in the name of the assessee company on 31-10-2009 which is placed at paper book page 58-59. The panchnama was prepared in the name of Shri Manoj Punamiya & Group, prohibitory order u/s 132(3) was also in the name of Shri Manoj Punamiya alone, no material was unearthed by the department linking the assessee with the premises so searched by the department and no document was seized from the flat of Shri Manoj Punamiya which belongs to the assessee company. It is also seen that the premises searched did not belong to the assessee company as the same is residential premises of Mr. Manoj B Punmia . The assessee company was also subjected to survey action u/s 133A of the Act at its
2.12. Now, we shall discuss certain case laws. The Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla (ITA 707/2014) order dated 28/08/2015 made an elaborate discussion on the issue and after considering various decisions like CIT vs Ankitech Pvt. ltd. (2011) 11 taxman.com 100(Del.), CIT vs Anil Kumar Bhatia (2013) 352 ITR 493 (Del.), Madugula Venu vs DIT (2013) 29 taxman.com 200(Del.), CIT vs Chetan Das Laxman Das, order dated 07/08/2012 (ITA No.2021/2010)(Del.), Ranbaxy Laboratories Ltd. vs CIT (2011) 12 taxman.com 74 (Del.), 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.
2.14. For fair conclusion, we are also reproduced hereunder the provision of section 132 and 132 A of the Act for ready reference:-
“132. (1) Where the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that—
(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or
(c) 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 the Indian Income-tax Act, 1922 (11 of 1922), or this Act
(A) the [Principal Director General or] Director General or 61[Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner 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;
(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 control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub- section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents;
(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in- trade of the business, found as a result of
(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;
(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing : [Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any [Principal Chief Commissioner or] Chief Commissioner or[Principal Commissioner or] Commissioner, but such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] having jurisdiction
Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure 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 stock- in-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
(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) or
(3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub- section.
Explanation.—For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1).
(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money,
Explanation.—For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. (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
(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 assessment under section 153A or clause (c) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or Director General or
Provided that the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner,[Principal Director General or] Director General or [Principal Director or] Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.
(8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order.
(9) The person from whose custody any books of account or other documents are seized under sub-section (1) or sub- section (1A) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf.
(10) If a person legally entitled to the books of account or other documents seized under sub-section (1) or sub- section (1A) objects for any reason to the approval given by the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or] Director 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
(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 sub- section (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 2.—In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income- tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.
132A. (1) Where the [Principal Director General or] Director General or 75[Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or 7[Principal Commissioner or] Commissioner, in consequence of information in his possession, has reason to believe that—
(a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the
(b) any books of account or other documents will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act and any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, such books of account or other documents on the return of such books of account or other documents by any officer or authority by whom or which such books of account or other documents have been taken into custody under any other law for the time being in force, or
(c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-
(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
(3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132Bshall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub- section (1) of this section and as if for the words "the authorised officer" occurring in any of the aforesaid sub-sections (4A) to (14), the words "the requisitioning officer" were substituted.”
2.15. In the present appeal, valid search was not carried out against the assessee. Conduct of search proceedings is an elaborate procedure enumerated u/s 132 of the Act which in clause-I, categorically authorizes the officer to enter and search any building, place, vessel, etc, where he has “reason to belief” that the books of accounts, money, bullion, jewellery or things belonging to the assessee are kept. Before us, the assessee
“8. Section 132 prescribes that the competent authorities are empowered to permit the authorized officers to enter, search, break open, seize, place marks of identification and take other steps as contemplated under sub-clauses (i) to (v). However, such powers can be exercised against a person upon fulfilment of certain conditions. Firstly, the competent authority must have information in its possession and,
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 by the Commissioner of Income-tax was illegal and no order under section 132(5) on the basis of such a search could be made.
The Delhi High Court in Ajit Jain’s case [2000] 242 ITR 302 (Delhi) held that it is axiomatic that search under section 132 has to be a valid search. An illegal search is no search and as a necessary corollary in such a case
Thus, we are of the view that in absence of any search warrant in the name of an assessee, search conducted in its premises is not a valid search as contemplated under section 132 of the Income-tax Act, 1961.
To deal with the second question, it is also necessary to examine what is contemplated in section 153A. The relevant provisions of section 153A are quoted below :
"153A. Assessment in case of search or requisition.— Notwithstanding anything contained
(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 :" (underlined for emphasis)
The Hon’ble Apex Court in the case of Union of India v. Ajit Jain ((2003) 260 ITR 80(SC), (2003) 129 Taxman 74(SC) ) held that initiation of valid search is a pre-requisite for framing search assessment u/s 158BC of the Act , held as under:
“As the title of Chapter XIV-B suggests, these are special procedures for assessment of search cases and, therefore, a search under section 132 is a pre-requisite for invoking the provisions of this Chapter. It is axiomatic that search under section 132, as contemplated has to be a valid search. An illegal search is no search and as a necessary corollary, in such a case Chapter XIV-B would have no application. In the instant case, having come to the conclusion that the search conducted was without jurisdiction and was, thus, void ab initio, the imminent consequence
Further, ratio laid down in CIT vs Ramesh D. Patel (2014) 362 ITR 492 (Guj.), Abhay Kumar Shroff vs CIT (2007) 290 ITR 114 (Jhar.), Spacewood Furnishers Pvt Ltd. vs DGIT (2012) 340 ITR 393 (Bom.) and CIT vs Smt. Shaila Agarwal (2012) 346 ITR 130 (All.) supports the case of the assessee. The ratio laid down by Hon’ble Apex Court in Union of India vs Ajit Jain 260 ITR 80(SC), CIT vs Ms. Rohini Valia 289 ITR 328 (Del.), Jindal Stainless Ltd. Vs ACIT 120 ITD 301 (Del.), Jayantilal Damjibhai & Ors. Vs DIT (2008) 219 CTR 26, also supports the case of the assessee. We are of the view that search action is in the nature of enforcement which involves invasion in the privacy of the assessee; such action has to be in full conformity with relevant legal provision. Such jurisdiction or action cannot be validated in casual or lax manner. We fully appreciate the mandate of the Superior Courts while considering the validity of assessment in such type of cases. The Mumbai Bench of the Tribunal in J.M. Trading Corporation vs ACIT
“…. 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
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Panchnama is not defined under Income-tax Act. However, Board has issued tax payer’s charter. In respect of charter of rights and duties of persons searched, the Board has mentioned that such person has a right to have a copy of panchnama together with all the annexure. Duty of the person searched
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
"It is, however, pertinent to mention about the significance of the panchnama. The panchnama is a document which is prepared in the presence of panchas (respectable local witnesses) containing the items found and seized in the course of search. So the Assessing Officer must satisfy himself for the purpose of calculating the period limitation that document in question is in reality a panchnama. There may be a case where inventory is prepared in respect of books of account or valuable articles found in the course of search but taking of or removal of such books of account or valuable article is not practicable. The authorized officer may issue a restraint order under the proviso to section 132(1). Such restraint is deemed to be a seizure as per the said proviso. Hence, in such a case, the preparation of inventory and panchnama would be relevant
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
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(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
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 privacy of the person infringing on fundamental rights as enshrined in Article 21 of the Constitution of India and the same cannot be lightly carried out by the State in an casual or lax manner. The Revenue has prepared the Panchnama in the name of ‘Manoj B Punmia and group’ while there is no concept of word ‘group’ in the Act in context of search proceedings.
2.18. Hon'ble Supreme Court in the case of VLS Finance Limited v. CIT(2016) 68 taxmann.com368(SC) has held that limitation provisions for completing assessments are to be strictly construed as under:
The counsel for the appellants are justified in their contention that the provision relating to limitation need to be strictly construed. In the case of K.M. Sharma v. ITO [2002] 254 ITR 772/122
f"13. Fiscal statute, more particularly a provision such as the present one regulating period of limitation must receive strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality."
2.19. The Hon’ble Delhi High Court has in the case of MDLR Resorts Private Limited v. CIT (2013) 40 taxmann.com 365(Delhi) has held the defect in the panchanama as curable and not affecting the validity of search but has also held in the said judgment as under:
“The effect of the said lapse on merits or to the value or degree of importance to be given to the material seized is a matter of appraisal and merits and not a
"15. These provisions demonstrate that a search and seizure 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
We have examined the meaning of the word panchnama in some detail because it is used in Explanation 2(a) to Section 158BE of the said Act although it has not been defined in the Act. A panchnama, as we have seen is nothing but a document recording what has happened in the presence of the witnesses (panchas). A panchnama may document the search proceedings,
Incidentally in the instant appeal , there is no panchnama drawn by the Revenue against the present assessee which is an admitted position. Keeping in view the facts and circumstances of the case, we are of considered view that the search proceedings in the case of present assessee got vitiated due to non-preparation of the panchnama in the name of the assessee which evidences conclusion of the search and which effectively decides against whom the Revenue has conducted search so much so further actions are required to initiate assessment proceedings u/s 153A of the Act for the last six years against the
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
In view of the above decision of co–ordinate Bench search carried out by the income–tax Department was held to be invalid in view of absence of any warrant, Panchanama as well as the report of the learned Assessing Officer dated 01.03.2016. The Impugned assessment orders before us is also arising out of the same search. The assessment order framed under section 153A of the Act is also one of the six years for which assessment is framed. Further, the learned Departmental Representative was specifically asked whether the order of the co–ordinate Bench has been contested before the higher Forum and if not or if it is not reversed, why it should not be followed. The learned Departmental Representative merely relied upon the orders of the lower authorities. Further, the decision relied upon by the learned Departmental Representative in case of MDLR Resorts Pvt. Ltd. vs. CIT has also been extensively considered by the co–ordinate Bench in paragraph no. 2.19. Therefore, the decision of the co–ordinate Bench binds us. Therefore, we respectfully following the same hold that the order passed under section 153A of the Act is
As all other grounds becomes redundant in view of the decision of the co–ordinate Bench as the assessment order passed under section 153A of the Act has become invalid. Hence, those are dismissed.
The facts in the case of both the above appeals are identical. Therefore, ITAs no. 1291 and 1292/Mum/2018 are allowed accordingly.
In the result, both the appeals are allowed.
Order pronounced in the open court on 29.04.2022.
Sd/- Sd/- (AMARJIT SINGH) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)
Mumbai, Dated: 29.04.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER,