TMI Blog2016 (10) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 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 person so searched within the time stipulated u/s 153B. Thus, in the absence of panchnama being drawn against the assessee, no incriminating material having been found pertaining to the assessee and also the premises searched did not belonged to the assessee, it could be concluded based on the cumulative effect of all the above-stated relevant facts that no valid search was conducted against the assessee and the assessment u/s 153A of the Act is bad in law hence liable to be quashed. Why, despite a search , we observe a notice u/s 153C as well as a survey being conducted on the assessee in the present case. Disallowance made on account of unexplained purchases to 50% - Since, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was initiated in this case. However, since, validity of search has been challenged, therefore, the outcome of this appeal will be applicable to the impugned appeals. 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 that none of the documents, claimed to be seized, belongs to the assessee. It was asserted that no search was ever conducted upon the assessee, hence, the proceedings u/s 153A of the Act are bad in law and void. The ld. counsel for the assessee took us to various pages of the paper book and also the copy of panchnama drawn by the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee company, at the relevant time, was engaged in the business of trading/manufacturing recycled plastic grinding, recycled plastic, agglomerates, platinum bars, silver Ignots, Gold bar, Gold jewellery, cut and polish diamonds, recycled plastic granules, etc. The assessee declared income of Rs.4,325/- in its return filed on 20/10/2004, accompanied by audited statement of accounts, which was accepted by intimation u/s 143(1) of the Act dated 01/07/2005. 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the survey action u/s. 133A of the 1. T. Act on the assessee on 31.10.2009. Yours faithfully, ( Sunil S Deshpande ) Deputy Commissioner of Income-tax Central Circle-7( 1), Mumbai. Copy to: The Pr.CIT Central - 4, Mumbai The Addl. CIT Central Range - 7, Mumbai. Deputy Commissioner of Income-tax Central Circle-7( 1), Mumbai . 2.8. If the aforesaid letter is analyzed, it is noted that the ld. CIT-DR asked the concerned DCIT, Central Circle-7(1), Mumbai, to provide the copy of the duly executed warrant of authorization u/s 132(1) of the Act r.w.r. 112(1) of the Income Tax Rules,1962 in form no.45 mentioning the name and address of the assessee and a copy of the panchnama prepared on the conclusion of the search at the premises of the assessee. Vide aforesaid letter, on verification of record, the ld. DCIT informed that above documents are not available on record and the only material available pertains to survey action u/s 133A of the Act on the assessee on 31/10/2009. We have carefully perused the documents produced before us and we have observed that the warrant of authorization u/s 132 of the Act read with Rule 112 (1) of The Income Tax Rules, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 : 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 : Provided also that the Central Government may by rules8 made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately preceding the Assessment year relevant to the previous year in which search was conducted u/s 132 or requisition was made u/s 132A of the Act. Thus, it can be said that the provision of section 153A of the Act makes it clear that in the case of a person on whom a valid search is initiated u/s 132 or books of accounts or other documents or any asset are requisitioned u/s 132A, the Assessing Officer shall issue a notice upon such person. The expression clearly relates to a person in respect of whom search u/s 132 has been initiated or as section 153A after 31st day of March 2003. The ratio laid down in Ramesh D. Patel (2014) 362 ITR 492(Guj.) supports our view. In that event the Assessing Officer shall:- (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 furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .), wherein, search was carried out at the residence of the partner but block assessment was made u/s 158BC, 158BD of the Act, upon the firm, the Hon ble High Court held that procedure laid down u/s 158 BD has to be followed, thus, the ratio laid down by Hon ble jurisdictional High Court supports the case of the assessee. The ratio laid down in J.M. Trading Corporation vs ACIT (2008) 20 SOT 489 (Mum.), which was upheld by the Hon ble jurisdictional High Court in ITA No. 589 of 2009 holding that provisions of section 153A are only applicable in a case, where valid search is conducted against the assessee u/s 132 of the Act, supports the case of the assessee. 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- (a) any person to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferred 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; (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 such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business; (iv) p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le or thing in respect of which an officer has been authorised by the [Principal Director General or] Director General or [Principal Director or] Director or any other [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner may, notwithstanding anything contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.] (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 sub-section (1A) and it shall be the duty of every such officer to comply with such requisition. (3) The authorised officer may, where it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (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 [Principal Director or] Director for such retention is obtained : 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-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1.-For the purposes of sub-section (9A), execution of an authorisation for search shall have the same meaning as assigned to it in Explanation 2 to section 158BE. Explanation 2.-In this section, the word proceeding means any proceeding in respect of any year, whether under the Indian Incometax 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oning officer. (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 or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. (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 subsection (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. Condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the provision contained in section 132(1), the reason being that the later deals with search and seizure and the former deals with assessment in case of search, thus, the two are inextricably linked with each other, which implies that existence of books of accounts, incriminating documents, or unaccounted assets is or are sine qua non for making the additions in the assessments under this provision. Therefore, if nothing is found during the course of search, the additions in the assessment or reassessment u/s 153A is not only erroneous but also serves no purpose. It can be pr cised that the assessment or reassessment u/s 153A arises only, when a valid search has been initiated and conducted. The provisions of section 153A of the Act makes it clear that only in the case of a person on whom, a valid search is initiated, u/s 132 or books of accounts or other documents or any assets are requisitioned u/s 132A after 31/05/2003, the Assessing Officer shall after issuing notice assess or reassess the total income of such person for six assessment years immediately preceding the assessment year relevant to previous year, in which such search is conducted or requisition is made. The legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961. Therefore, the most serious content of the warrant of authorization is the name and description of the person whose premises, etc., are sought to be searched. 9. 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. 10. 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 Chapter XIV-B would have no application. This judgment of the Delhi High Court has been upheld by the apex court in Union of India v. Ajit Jain [2003] 260 ITR 80 (SC). The Delhi High Court in CIT v. M.S. Rohini S. Walia [2007] 289 ITR328 (Delhi), held that it would be a futile exercise to entertain appeals where admittedly no search warrant was issued in the case of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The expression clearly relates to a person in respect of whom search under section 132 has been initiated as section 153A itself provides. Thus to exercise powers under section 153A in the case of a person the mandatory requirement is that there must be initiation of a search as contemplated under section 132 or requisition under section 132A in respect of such person. The word person appearing in section 132 and in section 153A is one and the same person. Thus the person, in respect of whom search under section 132 is initiated, must be the same person against whom notice under section 153A is to be issued for making assessment/reassessment under that section. 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) 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 100 of Cr.PC governs the conducting of search. As per section 100(4) of Cr.PC the authorized officer to make search is required to call upon two or more independent and respectable inhabitant of the locality in which the place to be searched is situated. Search is to be made in the presence of these two respectable inhabitants list of things to be seized and placed where these have been found is to be prepared and such list is to be signed by the authorized officer and the two witnesses. Copy of the list prepared is to be delivered to the occupant of the premises. Recording of the names of the officer authorized to search, the building or premises to be searched, the designation of the officer who authorized the search, name and addresses of two respectable persons called to witness the search, time of commencement of search an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 132(3) is a must. Hence, panchnama dated 25-4-1996 is not a valid panchnama. 38. 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 out the date when the last panchnama with reference to last authorisation is drawn and nothing beyond that. Hence, the Tribunal can examine the date when last panchnama was drawn. It will be relevant to quote from pg. 51 in the case of Promain Ltd. (supra) : 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in whose case the warrant of authorisation has been issued; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s witnessed. In Mohan Lal v. Emperor AIR 1941 Bom. 149, it was observed that 'the panchnama is merely a record of what a panch sees'. Similarly, the Gujarat High Court in the case of Valibhai Omarji v. State AIR 1963 Guj 145 noted that 'a Panchanama is essentially a document recording certain things which occur in the presence of Panchas and which are seen and heard by them.' Again in The State of Maharashtra v. Kacharadas D. Bhalgar (1978) 80 Bom LR 396, a panchnama was stated to be 'a memorandum of what happens in the presence of the panchas as seen by them and of what they hear'. 16. 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, with or without any seizure. A panchnama may also document the return of the seized articles or the removal of seals. But, the panchnama that is mentioned in Explanation 2(a) to section 158BE is a panchnama which docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue has challenged restricting the disallowance made on account of unexplained purchases to 50%, thereof, in view of the foregoing discussion made in A.Y. 2004-05, since, we have declared the proceedings u/s 153A as null and void, these appeals for impugned assessment years have also remained for academic interest only. Since, the basis for making the assessment/reassessment has been declared as null and void, therefore, the same ratio will be applicable to the appeals of the Revenue also, consequently, dismissed, therefore, these appeals are also decided in favour of the assessee. 4. So far as merits of the case is concerned, we have observed that there was a search conducted against the assessee company by Revenue on 31-10-2009 which was held by us to be vitiated. There was no incriminating material found during the course of search for the impugned assessment year. The assessee company had filed return of income on 20-10-2004 u/s 139(1) of the Act. The time limit for service of notice u/s 143(2) of the Act for the said relevant period was till the expiry of twelve months from the end of the month in which the return is furnished i.e. up-to 31-10- 2005. The search was initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other postsearch material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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