2025 (6) TMI 1539 - AT - Income Tax

Assumption of jurisdiction by the AO u/s. 153A - search warrant was not issued in the name of the Assessee HELD 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 2024 (5) TMI 1582 - ITAT DELHI . The facts and circumstances of the case of the Assessee and those of the said case are identical. 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. Assessee appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(a) Whether the Assessing Officer (AO) had jurisdiction to assume proceedings under section 153A of the Income Tax Act, 1961 (the Act) against the assessee, given that the search warrant under section 132 was not issued in the name of the assessee but in the names of other persons and entities;

(b) Whether the search conducted on the premises of the assessee was valid or was conducted on mistaken identity;

(c) Whether the assessment order passed under section 153A of the Act is valid in the absence of a valid search warrant in the name of the assessee;

(d) Whether the non-provision of copies of search warrant, panchnama, and seized material to the assessee during assessment proceedings violates principles of natural justice;

(e) Whether the appeals filed by the Revenue are maintainable in view of CBDT Circulars prescribing minimum tax effect thresholds for filing appeals;

(f) Ancillary issues relating to the merits of additions made under section 69A of the Act were not adjudicated as the jurisdictional issue was determinative.

2. ISSUE-WISE DETAILED ANALYSIS

Jurisdiction of AO to assume proceedings under section 153A of the Act

Legal framework and precedents: Section 153A mandates that for initiating assessment proceedings under this section, a search must have been conducted on the assessee under section 132 of the Act. The search warrant must be issued in the name of the person against whom proceedings under section 153A are to be initiated. This principle has been upheld in precedents such as Jindal Stainless Ltd. v. ACIT and the decision of the ITAT Delhi Bench in Sanjay Jain v. PCIT (Central Circle)-3 Delhi.

Court's interpretation and reasoning: The Tribunal, relying on the detailed findings of the Ld. CIT(A), observed that the search warrant (No. 7262 dated 06.02.2019) was issued in the names 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. The panchnama and seized material were also recorded in the names of these persons and entities. The search was conducted on the premises of the assessee but in connection with the above persons/entities, not the assessee himself.

Key evidence and findings: The assessee produced copies of the search warrant, panchnama, and seized material obtained under the Right to Information Act, 2005. These documents confirmed that the search was not initiated against the assessee. The statement recorded during the search proceedings was also in the context of M/s H.L. Forex Pvt. Ltd., not the assessee. Additionally, summons under section 131(1A) were issued to the assessee and his family members on the date and time of the search, indicating confusion in the department's actions.

Application of law to facts: The Tribunal applied the legal principle that jurisdiction under section 153A can only be assumed if a valid search under section 132 is initiated against the assessee. Since no search warrant was issued in the name of the assessee, the assumption of jurisdiction was held to be invalid.

Treatment of competing arguments: The Revenue contended that the search was valid and the assessment proceedings under section 153A were proper. However, the Tribunal found the Revenue's reliance on the AO's order unconvincing, especially in light of the identical facts and precedent in Sanjay Jain's case where the assessment under section 153A was quashed on similar grounds.

Conclusions: The Tribunal held that the AO's assumption of jurisdiction under section 153A was not justified, rendering the assessment order passed under this section null and void.

Validity of the search and mistaken identity

Legal framework and precedents: The principle that search and seizure must be conducted only where there is reason to believe that the person searched is in possession of undisclosed income or assets is fundamental. Mistaken identity in searches vitiates the proceedings. The Tribunal referred to the decision in Dr. Gautam Sen v. CCIT where search conducted on mistaken identity was held invalid.

Court's interpretation and reasoning: The Tribunal noted that the summons under section 131(1A) were issued to the assessee and family members at the same time the search was conducted, indicating lack of clarity in the department's actions. The search warrant was not in the name of the assessee, and the panchnama did not record the search against the assessee. The statement of the assessee was recorded in the context of another entity. These facts supported the contention that the search was conducted on mistaken identity.

Key evidence and findings: The assessee's production of documents obtained under RTI, the timing of summons and search, and the nature of the panchnama and statement recording were critical evidence.

Application of law to facts: The Tribunal applied the principle that search powers must be exercised sparingly and only when justified. The lack of a warrant in the assessee's name and the contradictory issuance of summons negated the reason to believe necessary for search.

Treatment of competing arguments: The Revenue did not effectively counter the evidence of mistaken identity. The Tribunal found the assessee's arguments compelling and supported by documentary evidence.

Conclusions: The search was held to be invalid as it was conducted on mistaken identity, further invalidating the subsequent assessment proceedings.

Non-provision of copies of search warrant, panchnama, and seized material

Legal framework: Principles of natural justice require that the assessee be provided copies of documents relied upon during assessment proceedings to enable effective defense.

Court's interpretation and reasoning: The Tribunal observed that despite repeated requests, the assessee was not provided copies of search warrant, panchnama, or seized material during assessment proceedings. The assessee had to resort to RTI applications and appeals to obtain partial documents. This non-provision violated principles of natural justice.

Key evidence and findings: Correspondences and the need for RTI applications to obtain documents were noted.

Application of law to facts: The Tribunal emphasized that failure to provide relevant documents during assessment proceedings is a procedural infirmity affecting fairness.

Treatment of competing arguments: The AO claimed documents were provided, but no communication to that effect was produced. The Tribunal accepted the assessee's contention.

Conclusions: The non-provision of documents constituted a breach of natural justice, further undermining the validity of the assessment.

Maintainability of Revenue's appeals in view of CBDT Circulars

Legal framework: CBDT Circular No. 05/2024 dated 15.03.2024 and its amendment Circular No. 09/2024 dated 17.09.2024 prescribe a minimum tax effect threshold of Rs. 60 lakhs for filing appeals by the Revenue for the relevant assessment years, subject to certain exceptions.

Court's interpretation and reasoning: The Tribunal noted that the tax effect in the assessment years 2011-12 to 2015-16 was less than Rs. 60 lakhs in each year, and the case did not fall within the exceptions specified in the Circulars.

Application of law to facts: The Tribunal applied the Circulars to hold that the Revenue's appeals were not maintainable on this ground.

Treatment of competing arguments: The assessee relied on the Circulars; the Revenue did not dispute the tax effect figures.

Conclusions: The appeals filed by the Revenue were dismissed as not maintainable in view of the CBDT Circulars.

Other grounds on merits of additions under section 69A

The Tribunal did not adjudicate on the merits of the additions made under section 69A of the Act, as the jurisdictional issue regarding the validity of search and assumption of jurisdiction under section 153A was dispositive. The Ld. CIT(A) had treated the assessment as annulled, rendering other grounds academic.

3. SIGNIFICANT HOLDINGS

"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... 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."

"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."

"The search was conducted on the premises of the Assessee but the warrant was not in his name. The panchnama was also not in the name of the Assessee. The search was conducted on mistaken identity."

"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."

"The appeals filed by the Revenue are not maintainable in view of the CBDT's Circular No. 05/2024 dated 15.03.2024 and its amendment dated 17.09.2024 as the tax effect is less than Rs. 60 lakhs in each year."