TMI Blog2018 (2) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances, we find that proven facts and truth is that search was actually conducted at the premises belong to Assessee i.e. "M/s. Verma Roadways", documents etc. were seized from its premises and when Assessee was called upon to explain, he gave various reasons and explanations without raising any dispute that there was no warrant of search validly issued in its respect and therefore, it was not liable to respond to any notice issued under Section 158 BC. Thus we find it difficult to hold that in the present case mention of different title in authorization and panchnama would be sufficent to hold that proceedings under Section 132(1) were conducted against different person and not Assessee. That being so proceedings under Section 158BC against Assessee also cannot be held bad. Search and seizure operations must be held to have been conducted against Assessee and, therefore, on the basis of material collected in search and seizure operations, ACIT/AA was justified in proceeding to make assessment under Section 158BC. - Decided against assessee. - Income Tax Appeal No. 3, 4 of 2000 - - - Dated:- 11-1-2018 - Hon'ble Sudhir Agarwal And Hon'ble Dr. Kaushal Jayendra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 was not exercised in the case of Assessee, M/s. Verma Roadways, and no warrant of authorisation was issued against Assessee, therefore, seizure and issue of notice under Section 158 BC and consequential block assessment against M/s. Verma Roadways was illegal? (7) Whether Appellate Tribunal was right in holding that there existed no requisitioned material before issue of notice under section 158 BC and hence notice under section 158 BC issued against Assessee was illegal? (8) Whether Appellate Tribunal was right in holding that Commissioner did not properly apply his mind to the matter before granting approval for assessment under section 158 BC and, therefore, approval was invalid? (9) Whether Appellate Tribunal was right in holding that addition of ₹ 10,50,000/- on account of investment in trucks could not be made under Section 158 BA and 158 BB of Act, 1961? (10) Whether Appellate Tribunal had no jurisdiction to examine validity of proceedings of search carried out against Assessee under section 132 of Act, 1961? 4. Assessee's appeal was admitted on following two substantial questions of law:- (1) Whether Tribunal having held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents seized by Income Tax Authorities, a notice under 158 BC was issued on 8.5.1997 in the name of M/s.Verma Roadways at 133/283, Transport Nagar, Kanpur which was served on 15.5.1997. M/s. Verma Roadways (Assessee) was required to file return for block period 1.4.1986 to 28.12.1996 in the prescribed form 2B. Assessee through its counsel vide letter dated 16.5.1997 requested Assessing Officer to issue Form 2B which was issued on 16.5.1997 itself. 12. Vide letter dated 16.5.1997 Assessee also requested to furnish photostat copy of seized record. Permission was granted on the same date and communicated to Assessee through counsel. Another letter dated 29.5.1997 was sent by Assessee stating that since photocopy of record is taking time, it may be allowed two months' time to file return. The request was accepted and time to file return was extended upto 13.6.1997. Assessee again sought further time vide letter received by Assessing Officer on 13.6.1997 whereupon 15 days further time was granted. However, no return was filed. 13. Reminder notice dated 29.7.1997 under Section 142(1) was served upon Assessee requiring it to file return by 8.8.1997. In response thereto, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order of Tribunal is against them. 17. Tribunal has considered various issues of Assessee and returned findings, in brief, as under:- (a) Warrant of authorisation was issued in Form 45(as per Rule 112 of Income Tax Rules, 1952(hereinafter referred to 'Rules, 1952') in the name of M/s. Verma Transport Company, Lucknow Banda Transport Company . Panchnama dated 29.11.1996 was also prepared in the name of M/s. Verma Transport Company 133/225, Transport Nagar, Kanpur . Assessee formed title as M/s. Verma Roadways which is an independent and separate entity, a partnership firm. Hence there was no valid warrant of authorisation in the name of Assessee. Therefore, there was no valid search under Section 132(1) of Act, 1961 at the premises of Assessee. (b) All consequential actions such as, seizure, issue of notice under Section 158 BC and consequential Block Assessment in the hands of Assessee i.e. M/s. Verma Roadways are illegal. Mere fact that actual search was conducted at the premises of Assessee would not validate warrant of authorisation which was not issued in the name of Assessee. (c) Notice dated 8.5.1997 issued under Section 158 BC was also not va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Search was also made at the premises which admittedly belong to Assessee. At no point of time, any such objection was raised by Assessee that search conducted by Income Tax Authorities was not at the premises of Assessee. Documents and other material seized by Income Tax Authorities were also from premises belong to Assessee. Hence, there was no such illegality in warrant of authorisation for search so as to hold entire assessment bad merely for the reason of wrong mention of name or title of Assessee. 19. He further argued that premises was common. Assessee has not disclosed anywhere that its office was at a place differently identifiable from that whose name was mentioned in warrant of authorisation. Premises was common. Even this was not shown that there was any firm in the name and title of M/s. Verma Transport Company and Lucknow-Banda Transport Company having distinguished identifiable premises or place. Hence it cannot be said that authorisation of search was bad or search was not validly conducted at the premises of Assessee. Sri Goel in support of submissions placed reliance on a Division Bench judgments of this Court in Civil Misc. Writ Petition (Tax) No. 451 of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as findings have been recorded against Revenue and repelled arguments advanced by Sri Manish Goel. In support of Assessee-appellant, learned Senior Counsel argued that once search and seizure itself was held illegal, material collected therein could not be used against Assessee and entire assessment was illegal. That being so, there was no occasion for Tribunal to remand matter to ACIT/AA and hence to this extent, order of Tribunal is illegal and liable to be set aside. 23. He further contended that in any case, observation of Tribunal that there was no evidence to establish that ₹ 65,59,302/- belong to Rameshwar Dayal Shiksha Samiti, is patently illegal and perverse. 24. We have heard respective submissions, perused record and various authorities cited at the Bar. 25. Search was conducted pursuant to warrant of authorization under Section 132(1) of Act, 1961 and Block Assessment has been made under Chapter XIV B; in particular, Section 158 BC of Act, 1961.It would be appropriate to have a glance over Section 132(1) and 158 BC of Act, 1961:- 132. Search and seizure.- (1) Where the Director General or Director or the Chief Commissioner or Commissioner or any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; (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: (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 Chief Commissioner or Commissioner, but such Chief 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 bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued for the purpose of proceeding under this Chapter ; (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 , 144 shall, so far as may be, apply; (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under section 132 or requisitioned under section 132A shall be retained to the extent necessary and the provisions of section 132B shall apply subject to such modifications as may be necessary and the references to regular assessment or reassessment in Section 132B shall be construed as references to block assessment . (emphasis applied) 26. Photocopy of warrant of authorisation issued in Form 45 under Section 112(I) of Income Tax Rules, pursuant whereto search was conducted at Assessee's premises on 28.11.1996 was produced before Tribunal, which are quoted in para 11.2 of Tribunal's order and rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any material or documents were found in respect to another person, namely M/s Verma Roadways and on that basis Assessing Officer, being satisfied that M/s. Verma Roadways has undisclosed money, he could have proceeded under Section 158 BD of Act, 1961 and not Section 158BC. Panchnama and seizure memo were prepared in the name of M/s.Verma Transport Company and Lucknow-Banda Transport Company and not in the name of M/s. Verma Roadways i.e. Assessee. The word Roadways was mentioned to make an attempt that everything was related to Assessee but it is this addition which is subsequent when notice was issued by department. Details of documents in which title/reference was mentioned, have been dealt in 14.1 of order of Tribunal and these observations are reproduced as under:- (I) Panchnama dated 29.11.96 (page 124 of the paper book of the department) which mentions as follows: A. Warrant in the case - M/s Verma Transport Co./ Lucknow Banda Co.(Verma Roadways): B. Warrant to Search- Godown at 133/235, Transport Nagar, Kanpur. (ii) Order under proviso 2nd to section 132 (1) (pages 7-8) which is addressed as follows: To-M/s Verma Transport Co.(Roadways, 173/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment has to be declared bad in law and void ab initio on these grounds and the same are liable to be quashed. The submissions raised on behalf of the assessee-appellant, relating to ground Nos. 1 5, therefore, are accepted and those of the revenue are not accepted. Ground No.1 5 are, therefore, allowed in favour of the assessee. 31. Search and seizure are not something unknown earlier or came to be resorted for the first time in 1961. It is well recognized process in all civilized countries in various fields even in Criminal Procedure Code. There are provisions for search and seizure authorizing police authorities. 32. The power of search and seizure and procedure under Section 132(1) read with Rule 112 is against a person who is believed, on good ground, to have illegally evaded or likely to evade payment of tax on its income and property. 33. The scheme of Block Assessment was introduced and inserted under Chapter XIV-B of Act, 1961 with effect from 1.7.1995. This Chapter deals with special procedure for assessment of search cases. The main provision of Chapter XIV B was to curb tax evasion and simplify assessment in search cases. Undisclosed income have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer must have reasonable grounds for believing that anything necessary for the purpose of recovery of tax may be found in any place within his jurisdiction, (ii) he must be of the opinion that such thing is not got without any undue delay, (iii) he must record in writing the ground of his belief, and (iv) he must specify in such writing so far as possible the thing for which search is to be made. 37. Scope of Section 132 of Act, 1961 was considered in ITR vs. Seth Brothers 1969 (74) ITR 836 SC Court said that this provision does not confer any arbitrary authority upon Revenue Officers. Commissioner or Director (Investigation) must have, as a consequence of information, reason to believe that statutory conditions for exercise of power to order search exists. He must record reason for such belief and issue an authorisation in favour of designated officer to search premises and exercise power set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the Officer has reason to believe that any boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hest officers of the department. Exercise of power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in Section 132(1) (a),(b) and (c) exists. The authority concerned has to record reasons before authorization is issued to the officers mentioned in Sub Section (1). Authorization cannot be in favour of any officer below the rank of Income Tax Officer. The authorization is for specific purposes given in Clauses (i) to (v) in sub Section (1). An argument was raised that Section 132 may cause harassment in personal liberty to an innocent person who may possess any material without knowing that it is concealed income. This argument was repelled by Court. It held that the object is to get concealed income. Any person who is in custody without enquiring about its true nature, exposes himself to search. Court observed that if person is innocent, Section 132(4) takes care of such person in telling true facts to the searching officer explaining on whose behalf he held custody of valuables. Court also noticed that purpose and object of Section 132 of Act, 1961 can be achieved when a timely action is taken without giving any opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch. Court held that conviction of owner of the house under Section 63 of United Provinces Excise Act, 1910 would not be binding on account of fact that no warrant was issued for search though under Section 63 it was necessary that a search warrant should have been obtained before hand i.e. before proceeding to search a house. A Constitution Bench ultimately held:- it would thus be seen that in India , as in England, where the test of admissibility of evidence lies in relevancy, unless there is an express or necessarily implied prohibition in the Constitution or other law of evidence obtained as a result of illegal search or seizure is not liable to be shut out. In that view, even assuming, as was done by the High Court, that the search and seizure were in contravention of the provisions of section 132 of the Income-Tax, still the material seized was liable to be used subject to law before the income-tax authorities against the person from whose custody it was seized and, therefore, no writ of prohibition in restraint of such use could be granted. (emphasis added) 45. Going further to widen the scope of Section 132 in Dr. Pratap Singh vs. Director of Enforcement 1985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 ITR 112 (P H). In that judgment, the Punjab Haryana High Court has made the following observations: The applicability of S. 165, Cr. P.C, to the searches made under S. 132(1) gives an indication that this section is intended to apply in limited circumstances to persons of a particular bent of mind, who are either not expected to co-operate with the authorities for the production of the relevant books or who are in possession of undisclosed money, bullion and jewellery, etc. Take for instance, a particular assessee who has utilized his undisclosed income in constructing a spacious building. His premises cannot be subjected to a search under this section on this score alone. A search would be authorised only if information is given to the CIT that such a person is keeping money, bullion, jewellery, etc., in this building or elsewhere. Further, if an assessee has been regularly producing his books of account before the assessing authorities who have been accepting these books as having maintained in the proper course of business, it would be some-what unjustified use of power on the part of the CIT to issue a search warrant for the production of these books of account unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd powers of exercise are not for extraneous and irrelevant purposes. Moreover, material collected can be used for further enquiry and mere fact that there was some default or irregularity in the process of authorization or search and seizure operations, such defect will not denude the material etc. collected and seized of its evidentiary value for further proceedings. 49. Coming to the next aspect, whether Assessing Officer or Appellate Authority or Tribunal can examine validity of search and seizure proceedings, we find that answer is contained in the authorities cited at the Bar. 50. In Trilok Singh Dhillon vs. Commissioner of Income-Tax(supra) Chhattisgarh High Court held that validity of search proceeding cannot be examined either by Assessing Authority or in an appeal by the Tribunal, since it would not have jurisdictional effect within the parameters of assessment proceeding or in appeal arising therefrom. Court referred to judgment of Delhi High Court in M.B. Lal Vs. Commissioner of Income Tax(supra); Commissioner of Income-Tax vs. Paras Rice Mills(supra) and Madhya Pradesh High Court judgment in Gaya Prasad Pathak vs. Assistant Commissioner of Income-Tax (2007) 290 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... go into such questions and consequently the appellate authority which has to look into the validity of the assessment order cannot question the validity of the search. 53. This Court clearly said that neither assessing officer nor tribunal in appeal can examine warrant of authorization for the purpose of examining whether there existed reasons to believe on material before competent authority to order search under Section 132(1) of Act, 1961. Agreeing with 5 Member Bench of Tribunal's finding in Promain Ltd. Vs. Deputy CIT(supra), Court detail as to what can be looked into by Tribunal and what not and these are detailed in paragraph 24 and 25, which are reproduced as under: 24. The Five Member Bench of the Tribunal held that the Tribunal cannot adjudicate upon the action of the Director of Investigation/Commissioner of Income-tax under section 132(1). It may look into the point, if it was raised before the Assessing Officer regarding the later stages, namely issuance of notice under section 158BC and preparation of panchnama to satisfy itself that the search was initiated and carried out in case of the person on whom the notice was served. If the Assessing Officer do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves in respectful agreement but the question would be whether aforesaid proposition has application in the case in hand. Here Tribunal has not examined validity of search and seizure operation under Section 132(1) but what has been considered, whether there was any search and seizure authorization against Assessee in question or not. 56. Before Assessing Authority, Assessee never challenged correctness of warrant of authorisation pursuant whereto Assessee 's premises wee searched and documents etc. were seized by Income Tax Authorities. 57. In the present case, interesting fact is that warrant of authorisation is in the name of M/s. Verma Transport Company, Lucknow Banda Transport Company containing address as 133/225 Transport Nagar, Kanpur. Said title and address was also shown in Panchnama dated 29.11.1996, Under Section 132(3) and under Second proviso to 132(1) it is also true that before issuing such warrant of authorisation, competent authority must record its reason to believe that in books of accounts or other documents, which will be useful for, or relevant for any proceedings, may be found etc. Language of Section 132 also shows that warrant of authorisation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e operations were carried on. Had it been a different person, and there would have been another person in the same premises with the title mentioned in the authorization and also in panchnama and material seized also would not have been belonged to Assessee, in our view, difference of identity in that case would have been sufficient to vitiate entire proceedings. We would have answered the question straightaway in favour of Assessee, but here it appears to be more in the nature of clerical mistake than mistake of identity. Reason being that search and seizure actually was conducted at the premises of Assessee and whatever was seized included money and document everything belonged to Assessee. As a matter of fact, these things are not in dispute. Assessee at no point of time, before ACIT/AA raised any such dispute that authorization as well as panchnama prepared by search and seizure team relate to another person than Assessee. On the contrary factum that search and seizure was at the premises of Assessee and material also belonged to Assessee was not disputed. It is in these facts and circumstances, we find that proven facts and truth is that search was actually conducted at the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 284 ITR(1) SC, Court declined to interfere in the proceedings where on a single authorisation, repeated searches were made without having separate warrant of authorisation for every subsequent search on the ground that no-objection was taken by Assessee in respect to subsequent searches and therefore, subsequent search cannot be held to be illegal and would be treated to be a valid search. 62. Section 158 BD would have been attracted only when search and seizure was made in the premises of another person and material collected belong to another person as is found therein. In the present case, as we have already discussed above, search and seizure was actually made on the premises of Assessee and documents and material collected therefrom also pertain to it, therefore, Section 158 BD is not attracted. We have no manner of doubt that if premises would have been of any other person, then, what has been argued and also held by the Tribunal that proceedings under Section 158 BD ought to have been conducted and that is mandatory as held in Manish Maheshwari vs. Assistant Commissioner of Income Tax, 2007 3 SCC 794 and Assistant Commissioner of Income Tax vs. Hotel Blue Moon, (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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