Loading judgment…
Facts
The Revenue and Assessee filed appeals against the CIT(A)'s order for AY 2011-12. The CIT(A) had annulled the assessment, deeming it invalid because a search under Section 132 was conducted at an address belonging to a related entity rather than the assessee's registered address. The Revenue contended the search warrant was validly served on a director of the assessee company at the search address, establishing a connection to the assessee. The assessee's cross-objection challenged the CIT(A)'s failure to adjudicate the case on merits.
Held
The Tribunal observed that identical issues were previously decided in the assessee's own case for AY 2009-10, where the matter was remanded to the CIT(A) for adjudication on merits. Following this precedent, the Tribunal set aside the Revenue's appeal and the assessee's Cross Objection for AY 2011-12 back to the Ld. CIT(Appeals) to decide the grounds on merits. The Tribunal clarified that a search warrant can be authorized for any place where the issuing authority has reason to suspect relevant material or evidence is kept, not limited to the assessee's registered office.
Key Issues
Whether the CIT(A) erred in annulling the assessment by declaring the search invalid due to the search warrant being served at an address other than the assessee's registered address, and whether the assessment should be adjudicated on merits.
Sections Cited
153A, 132, 132(1), 132(4), 131, 142(1), 37, 22(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “C” NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI CHALLA NAGENDRA PRASAD
आदेश /O R D E R PER C.N. PRASAD, J.M.
The appeal and Cross Objection are filed by the Revenue and Assessee respectively against the order of the Commissioner of Income Tax (Appeals)-26, New Delhi dated 03/01/2018 for the AY 2011-12. The Revenue raised the following grounds in its appeal: -
“On the facts and circumstances of the case the CIT(A) has erred in holding the assessment invalid on the basis of address in search warrant without considering that warrant was duly served upon Shri Pradeep Kumar, who is director of assessee company as acknowledged by him while signing search warrant, and also the Vice President (Corporate Affairs) of Heritage Beverages Pvt. Ltd. situated on address which was mentioned in search warrant.
2. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of hearing of the appeal.”
In the cross objection the assessee raised the following grounds : -
1. “The Ld. CIT(Appeals) has grossly erred on facts as well as in law in not adjudicating ground no. v, vi, vii filed before the Ld. CIT(Appeals), mentioned on page 2 of the Ld. CIT(Appeals) order.
2. The appellant craves leave to add, alter, modify and withdraw any grounds before or during the course of appellate proceedings.”
3. Ld. Counsel for the assessee, at the outset, submits that the identical grounds came up for consideration in assessee’s own case for the AY 2009-10 in in Revenue’s appeal and CO No.52/Del/2022 filed by the Assessee and the Tribunal by order dated 02/11/2022 restored the Revenue’s appeal and CO of Assessee to the file of the Ld. CIT(Appeals) with a direction to adjudicate the grounds on merits. A copy of the order is placed on record.
Therefore, the Ld. Counsel for the assessee submits that the appeal of the Revenue as well the Cross Objection for the assessment year in appeal i.e. 2011-12 may also be restored to the file of the Ld. CIT(Appeals) for adjudicating the grounds on merits following the order of the Tribunal in assessee’s own case for the AY 2009-10.
Heard rival submissions, perused the orders of the authorities below and the order of the Tribunal for AY 2009-10. We observe that identical grounds came up for adjudication before the Tribunal in assessee’s own case for the AY 2009-10 and the Tribunal restored the appeal of the Revenue to the file of the Ld. CIT(Appeals) for adjudicating the issues on merits holding as under: -
“2. Following grounds have been raised by the Revenue:
1. On the facts and circumstances of the case, the Id. CIT(A) has erred in holding the assessment invalid on the basis of address in search warrant without considering that warrant was duly served upon Sh. 3
Pradeep Kumar, who is Director of assessee company as acknowledged by him while signing search warrant and also the Vice President (Corporate Affairs) of Heritage Beverages Pvt. Ltd. situated on address which was mentioned in search warrant. " 3. Following grounds have been raised by the assessee in CO:
1. The Id. CIT(A) has grossly erred on facts as well as in law in not adjudicating ground no. v, vi, vii filed before Id. CIT(A), mentioned on page 2 of the Id. CIT(A)'s order."
4. Co: Delay condoned.
5. The assessee took up various grounds before the Id. CIT(A), ground no. 2(i) to 2 (iv) pertain to jurisdictional issued, ground no. 2(v) to 2(vii) pertain to merits of the case. The Id. CIT(A) allowed the appeal of the assessee on jurisdictional issue and hence did not adjudicate on the merits of the issue. Aggrieved with the adjudication of the Id. CIT(A) on jurisdictional issue wherein it was held that "no search has been conducted on the assessee", the revenue filed appeal before us. In the CO, the assessee has taken up the grounds of non-adjudication on merits of the case.
6. The assessee company is a non-banking finance company engaged in the business of investing & financing. The assessee filed return of income on 29.09.2009 declaring an income of Rs.6,66,330/-. Notice u/s 153A was issued on 10.05.2016 in response to which the assessee filed the return on 02.06.2016 declaring an income of Rs.6,66,330/-. The assessee has objected to issuance of notice u/s 153A on the grounds that no search u/s 132 of the Income Tax Act, 1961 was undertaken in this case. The AO added Rs.9,08,80,000/- on account of share application money received from various investors on the ground that the income declared by the investors is lesser than the investment made by them. The Id. CIT(A) summarily annulled the assessment holding that no search has been conducted on the assessee.
With regard to the conduct of search u/s 132 on the assessee, the Id. CIT(A) held as under: "5.3 Grounds no. 2, 3 & 4 pertain to the issue that no search u/s 132 was undertaken in this case, I have perused the search warrant sent by the AO vide letter dt. 01/12/2017 which though contained the name of the assessee yet it was served at the address "Plot No. 237-238, Udyog Vihar, Phase-I, Gurgoan". This is the address of factory premises of M/s Heritage Beverages Pvt. Ltd. It is a fact that the address of the assessee was "201H, Gautam Nagar, New Delhi". The same is verifiable form the assessment order itself wherein the address of the appellant is mentioned at "201H, Gautam Nagar, New Delhi. Further, the Ld. AR has filed a copy of income tax return and annual return filed before ROC just prior to the date of search, i.e., AY 2014-15 and just after the date of search, i.e., AY 2015-16 which clearly evidences that at the time of search the address of the appellant was "201H, Gautam Nagar, New Delhi" and not "Plot No, 237-238, Udyog Vihar, Phase-I, Gurgoan". Even the AO though fully in the knowledge of correct address being of Gautam Nagar yet did not bring out any connection of the assessee with the Udyog Vihar address. In view of these facts, it is conclusively proved that no search was conducted at the premises of the appellant. Therefore, the proceedings u/s 153A are ex-facie illegal, arbitrary and without jurisdiction and hence the assessment order is hereby annulled."
Referring to the report of the DCIT, Central Circle- 15 prepared by Sh. Mohit Garg, the Id. CIT DR, Ms. Sapna Bhatia argued that search warrant was issued and served in the case of the assessee company. The submission of the Id. DR is as under: ....Search warrant in the case of the assessee company was served upon Shri Pradeep Kumar who is Director of M/s Indo Gulf Infrastructure & Investment P. Ltd., who was found available on the address (Plot No. 237-238, Udyog Vihar, Phase-1, Gurgaon). It is worthwhile to mention here that while 5 acknowledging the search warrant, Shri Pradeep Kumar has signed on it by specifically mentioning that he is the director of the M/s Indogulf Infrastructure & Investment Pvt. Ltd. and M/s MSG Finance India (P) Ltd. It is pertinent to point out here that the business premises situated at Plot No. 237- 238, Udyog Vihar, Phase-1, Gurgaon belongs to M/s Heritage Beverages (P) Ltd. and Shri Pradeep Kumar, Director of the assessee company in his statement recorded on 28.03.2015 has himself admitted that he is the Director in M/s Indogulf Infrastructure & Investment Pvt. Ltd. and M/s MSG Finance India (P) Ltd. Since, Shri Pradeep Kumar ’is the Director in M/s Indogulf Infrastructure 85 investment Pvt. Ltd. 8s M/s MSG Finance India (P) Ltd and also the Vice President of M/s Heritage Beverages (P) Ltd. therefore, it is clearly established that there is direct connection of the assessee company with the Udyog Vihar address and as such the search warrant was validly served upon the assessee company through its Director Shri Pradeep Kumar. Sh. Pradeep Kumar signed the said search warrant as director of M/s Indogulf Infrastructure & Investment Pvt. Ltd. Hence, the contention of assessee regarding no search proceedings in the case of assessee : M/s Indo Gulf Infrastructure & Investment P. Ltd. is without any basis and devoid of merit as duly signed search warrant was served on the director of the assessee company. "
We have perused the copy of the search warrant no. 4859 which was executed on 22.05.2015 wherein the name of the assessee is conspicuous. We have also perused the copy of the panchnama prepared at the conclusion of the search wherein the name of the assessee is apparent. In addition, we have also gone through the statement recorded u/s 132(4) of Sh. Pradeep Kumar Shastri son of R.K. Shastri who has been the Director of the assessee company and was present at the time of execution of the warrant. Sh. Pradeep Kumar
Shastri, Director has seen and accordingly confirmed of seeing the warrant by affixing a signature on the warrant on two occasions of both side of the warrant. We find that the similar issue has also been dealt by the Co- ordinate Bench of ITAT in the case of ACIT Vs. MSG Finance India Pvt. Ltd. in order dated 26.07.2022. For the sake of ready reference, the scanned copy of the warrant, panchnama and the statement are attached herewith.
Heard the arguments of both the parties and perused the material available on record.
A bare reading of the warrant proves that it has been issued after due satisfaction that summons under sub-Section (1) of Section 131 of the Income Tax Act, 1961 are issued. The assessee would produce the documents as required. The warrant is also based 10 on the satisfaction that the assessee company is in position of material which has not been disclosed for the purpose of Income Tax Act, 1961. The warrant reveals that the issuing authority has reason to suspect that such valuable things are kept and are to be found at Plot No. 237/238, Udyog Vihar, Phase-1, Gurgaon and authorized the Officers of the Department to enter and search such place.
Further, we have also gone through the provisions of Section 132 of the Income Tax Act, 1961 which is as under: "Search and seizure. 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— (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 Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (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 (hereinafter in this section referred to as the undisclosed income or property), then, — (A) 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, 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; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;" Further, the sub-section (4) of Section 132 read as under: "(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, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. 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."
The fundamentals behind the issue of authorization u/s 132 of the Income Tax Act, 1961 and Rule 112(1) of the Income Tax Rules, 1962 can be summarized as under: a. The warrant issuing authority has reasons to believe that issue of notice u/s 131 would not result in fruitful outcome. b. The warrant issuing authority has reasons to believe that issue of notice u/s 142(1) would not result in appropriate compliance. c. There is a belief that the assessee has not disclosed taxable income for the taxation purpose. d. There is a belief that the assessee would not disclose taxable income for the taxation purpose. 13 e. There is a reason to suspect that evidences pertaining to such taxable income are kept at different buildings/premises. f. Hence, the warrant is issued to search any such buildings/premises to enter, indentify, examine, seize, inventorise all such evidences viz. books of accounts, documents, money, bullion, jewellery or other valuable article or thing.
From the above, it is very clear that a warrant can be issued in the name of any assessee to search any place where the documents pertaining to the assessee have been kept or are to be found as per the satisfaction of the warrant issuing authority.
In the instant case, the warrant has been issued in the name of the assessee and the premises namely "Plot No. 237- 238, Uydog Vihar, Phase-1, Gurgaon" is the place where the warrant issuing authority had belief and had reasons to suspect that the documents and evidences leading to evasion of tax pertaining to the assessee have been kept or are to be found as per the satisfaction of the warrant issuing authority. The Director of the company has seen the warrant, signed and was present throughout the search procedure which can be observed by going through the warrant of authorization. Hence, the warrant is said to be rightly issued and search on the assessee has been correctly took place.
The observations of the Id. CIT(A) that there was no warrant executed at the address mentioned in the ROC record or the other address of the assessee and hence "no search was conducted" goes against the fundamentals of issue of warrant of authorization u/s 132. It is not necessary that warrant has to be issued only at /on the premises of the registered office of the company or corporate office, factory or godown but a warrant can be authorized to any other place where the issuing authority satisfies and reasons to suspect that the material/evidences pertaining to the assessee have been kept and are to be found. The Id. CIT(A) ignored the provisions of Section 132(1), the proviso under clause (B), provisions of (1A) which clearly deal with the jurisdiction, the premises and the actions that can be taken by the revenue authorities.
Hence, we hold that the decision of the Id. CIT(A) that "no search was conducted" on the assessee and summarily nullifying the proceedings u/s 153A as "ex- facie illegal" is devoid of any merit and cannot be sustained.
The Id. CIT(A) is hereby directed to adjudicate the grounds on merits of the case.
In the result, the appeal of the revenue and the CO of the assessee are allowed for statistical purpose.”
Grounds raised by the Revenue in the present appeal and CO of Assessee are identical to the grounds raised for the Ay 2009-10 and therefore the decision of the Tribunal for the AY 2009-10 squarely applies for the appeal under consideration. Thus, respectfully following the said decision, the appeal of the Revenue and the Cross Objection of the Assessee are set aside to the file of the Ld. CIT(Appeals) for deciding the grounds on merits in the light of the observations by the Tribunal for the Ay 2009-10. Needless to say that the assessee shall be given adequate opportunity of being heard by the Ld. CIT(Appeals).
In the result, appeal of the Revenue and Cross Objection of the Assessee are allowed for statistical purpose.
Order pronounced in the open court on 21/03/2025