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Facts
The appeals arose from search and seizure proceedings under Section 132 and subsequent assessments under Section 158BC of the Income Tax Act, 1961. The Revenue challenged the legality of the search warrant due to a lack of required satisfaction note, which was later confirmed by the Bombay High Court.
Held
The High Court, relying on previous judgments, held that the search and seizure action was illegal due to the absence of a satisfaction note. Consequently, the assessment orders based on these actions were rendered invalid. The appeals filed by the Revenue were dismissed, and those filed by the assessees were allowed.
Key Issues
Legality of search and seizure operations due to the absence of a satisfaction note, and the validity of consequent assessment orders.
Sections Cited
132, 158BC, 139(1), 158BC/158BD, 271D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Justice (Retd.) C V Bhadang, Hon’ble & Shri B R Baskaran, Hon’ble
Per Justice (Retd.) C V Bhadang, President :
This order shall dispose of the following twenty appeals.
5 India Containers, Ltd & Ors S.No. IT(SS)A/ITA No. Assessee Search Dt. Assessment concluded Order Dt. 1 60/M/2004 (Dept) India Containers Ltd. 15.09.2000 27.09.2002 2 62/M/2004 (Dept) Jyoti Records Mfg. Co. Ltd. 15.09.2000 27.09.2002 3 63/M/2004 (Dept) General Can Pvt. Ltd. 15.09.2000 27.09.2002 4 64/M/2004 (Dept) Shamvik Agrotech Pvt. Ltd. 15.09.2000 nil 5 65/M/2004 (Dept) Ainamid Engg & Metal Works P. 15.09.2000 27.09.2002 Ltd 6 70/M/2004 (Dept) Shamvik Containers Pvt. Ltd. 15.09.2000 27.09.2002 7 166/M/2004 (Assessee) Madhu Goel 21.09.2000 27.09.2002 8 90/M/2004 (Dept) Vikram Munshi 13.10.2000 22.10.2002 9 851/M/2003 (Assessee) Shamvik Glasstech Pvt. Ltd. 23.10.2000 22.10.2002 10 3/M/2004 (Assessee) Shamvik Glasstech Pvt. Ltd. 23.10.2000 22.10.2002 11 98/M/2004 (Dept) Shamvik Glasstech Pvt. Ltd 23.10.2000 22.10.2002 12 99/M/2004 (Dept) Shamvik Glasstech Pvt. Ltd. 23.10.2000 22.10.2002 13 104/M/2004 (Dept) Shamvik Glasstech Pvt. Ltd. 23.10.2000 22.10.2002 14 264/M/2004 (Dept) Shamvik Glasstech Pvt. Ltd. 23.10.2000 22.10.2002 15 3794/M/2005(Dept) Shamvik Glasstech Pvt. Ltd. 25.03.2003 16 298/M/2004 (Dept) Vijay Goel 23.10.2000 22.10.2002 17 850/M/2003 (Assessee) General Glass Co. Pvt. Ltd. 23.10.2000 27.09.2002 18 66/M/2004 (Dept) General Glass Co. Pvt. Ltd. 23.10.2000 27.09.2002 19 4779/M/2006 (Assessee) General Glass Co. P. Ltd. 29.03.2004 20 89/M/2004 (Dept) Kalpana Munshi 13.11.2000 22.10.2002 2. All the aforesaid appeals arise out of Search & Seizure proceedings u/s. 132 of the Income Tax Act, 1961 (Act for short) and the consequently assessments made u/s. 158BC of the said Act. The said search by the department was conducted on the Munshi Group of Companies and relate parties/entities. The record discloses that the assessee had filed an application seeking to raise an additional ground challenging the legality of warrant of assessment on the ground that necessary pre-condition viz. satisfaction for issue of search warrant u/s. 132 of the Act has not been complied with. The Bench on such an application had directed the Revenue to produce the record pertaining to the satisfaction note by an order dated 19.11.2008. It appears that inspite of seeking time repeatedly, the satisfaction note was not produced and, eventually, vide order sheet entry dated 18.04.2011 final opportunity was granted to the Revenue to produce the record
6 India Containers, Ltd & Ors putting the parties to notice that in absence thereof adverse inference would be drawn.
The Revenue challenged the said order before the Bombay High Court in Writ Petition Nos. 2433 of 2011, 2434 of 2011, 1257 of 2012, 1383 of 2012 and 1326 of 2013. The said petitions have been disposed of by High Court on 01.09.2023 in the following terms : “1. The counsels appearing for the respective Petitioners state that the Revenue does not have the satisfaction note and hence the situation will be similar to that covered by the order that this Court passed on 28th July 2023 in Writ Petition No.2849 of 2008 and another. For completion of record, Counsels state that they will file an affidavit confirming the same. 2. Even if the search is held to be invalid, the information or material gathered during the course thereof may be relied upon by Revenue for making adjustment to assessee’s income in an appropriate proceeding, if so advised, and Revenue may utilize the information or material in such proceeding, as is permissible in law. 3. The Income Tax Appellate Tribunal (“ITAT”) is directed to dispose the pending Appeals in terms of this order within a period of twelve weeks from the date this order is filed in the Registry of ITAT.
4. Petitions disposed.”
It can thus be seen that the High Court placing reliance on its earlier decision in the case of Marico Industries Ltd. & Anr & Ors in WP Nos. 2849 of 2008 and 745 of 2009, which arose on similar factual matrix has held that the Search and Seizure action was itself illegal for want of the satisfaction note as required u/s. 132 of the Act.
7 India Containers, Ltd & Ors 5. We have heard the parties in the context of the order passed by the High Court and it was fairly submitted on behalf of the Revenue that the Search and Seizure action itself having been held to be invalid nothing survives in the appeals filed by the Revenue.
On 18.11.2024, the respective assessees mentioned below have raised certain additional grounds as detailed below:-
(a) M/s Shamvik Glasstech Pvt Ltd in : “1) The order passed by the Additional CIT under Section 271D, predicated upon the satisfaction recorded in the assessment order issued under Section 153BC, is devoid of jurisdictional authority as the aforementioned assessment order is itself untenable owing to the illegality of the search and seizure operation.” (b) M/s India Containers Ltd – Under Rule 27 in ITA No.60/Mum/2004:-
“1) Hon’ble ITAT is requested to kindly direct the Learned Assessing Officer to restate income as per return filed u/s 139(1) of the Income tax Act, 1961 as the return filed in response to notice u/s 158BC/158BD is a nullity.” (c) The additional ground mentioned in (b) above has also been raised by the following assessees:-
(i) M/s General Glass Co Pvt Ltd in & 850/Mum/2003 (ii) M/s Shamvik Glass tech Pvt Ltd in & 104/Mum/2004 We have considered the same.
This group of twenty appeals, comprises of fifteen appeals filed by the Revenue and five appeals by the assessees. In view of the fact that the search
8 India Containers, Ltd & Ors and seizure action, which was the basis for passing of the assessment orders, itself is held to be illegal, the consequent assessment orders are rendered invalid. In such circumstances, the additional ground as raised, which is reproduced above, has also to succeed and the appeals filed by the Revenue are liable to be dismissed and those filed by the assessee are required to be allowed. Consequent thereto, the returns of income filed in pursuance of notices issued in those proceedings will become infructuous. Consequently, the tax and interest paid by the assessee in the above said returns are liable to be refunded, as the collection of said tax and interest is not authorized by the law. However, the Assessing Officer is at liberty to use the incriminating materials, if any, collected during the search proceedings in other appropriate proceedings, as may be permissible in law. We order accordingly.
In the result, the appeals filed by the Revenue are hereby dismissed and those filed by the assessee are allowed as prayed. Pronounced accordingly on 31.12.2024.