2010 (5) TMI 923 - AT - Income Tax

Assessment orders under Section 153A invalidated due to search warrant issue. Tribunal rules money in bank accounts belongs to Trust, not individual. Departmental appeal dismissed. Assessee's appeal allowed.

Dr. Mansukh Kanj ibhai Shah Versus The A.C.I.T., Central Circle-2, Race Course Circle, Baroda and Vice-Versa

The Tribunal deemed the assessment orders under Section 153A invalid as the search warrant was not executed in the individual name of the assessee. It was ... - Issues Involved:1. Validity of the assessment order under Section 153A.2. Ownership and taxability of the unaccounted money found in the bank accounts.Detailed Analysis:1. Validity of the Assessment Order under Section 153A:The primary issue was whether the assessment orders issued under Section 153A were valid. The assessee argued that the notice under Section 153A was invalid because no search was conducted on the assessee individually, and no search warrant was served on the assessee or the Trust. The Commissioner of Income Tax (Appeals) upheld the notice under Section 153A, stating that the search was conducted in the name of the appellant in the bank premises, thereby validating the notice.The Tribunal examined the facts and found that the search warrant was issued in the name of 'K. M. Shah Charitable Trust, Mansukhbhai K. Shah,' and not in the individual capacity of the assessee. The Tribunal noted that the search was conducted in the bank premises where the Trust had accounts, and the warrant was served on the bank manager, not on the assessee. The Tribunal concluded that since the search warrant was not executed in the individual name of the assessee, the proceedings under Section 153A were invalid and bad in law. The Tribunal relied on the decision of the Allahabad High Court in CIT vs. Smt. Vandana Verma, which held that assessments could not be framed in an individual capacity if the warrant was issued in joint names.2. Ownership and Taxability of the Unaccounted Money:The second issue was whether the unaccounted money found in the bank accounts belonged to the assessee individually or to the Trust. During the survey, the assessee admitted that the money deposited in the Trust's bank accounts was his personal money. However, he later retracted this statement, claiming that the money belonged to the Trust. The Tribunal noted that the money was deposited in the Trust's bank accounts and was not reflected in the Trust's books. The Tribunal also observed that the amount seized from the bank accounts was adjusted towards the Trust's advance tax liability and not the assessee's individual liability.The Tribunal concluded that there was no independent or corroborative evidence to prove that the money belonged to the assessee individually. The Tribunal held that the statement made by the assessee during the survey did not have evidentiary value as it was not made under oath, and the assessee had retracted the statement. The Tribunal relied on the decision of the Madras High Court in CIT vs. S. Khader Khan Son, which held that statements recorded during a survey under Section 133A do not have evidentiary value and cannot be the basis for addition.The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals), who had concluded that the money belonged to the Trust and not to the assessee individually. Consequently, the Tribunal allowed the assessee's appeals and dismissed the departmental appeal, confirming that the amount seized belonged to the Trust and not to the assessee in his individual capacity.Conclusion:The Tribunal quashed the proceedings under Section 153A against the assessee in his individual capacity, holding them invalid and bad in law. It also concluded that the unaccounted money found in the bank accounts belonged to the Trust and not to the assessee individually, thereby dismissing the departmental appeal and allowing the assessee's appeals.