2022 (6) TMI 144 - AT - Income Tax

Invalid Search Renders Assessment Orders Void; Appeals Allowed

Balaji Bullion & Commodities (India) Private Limited, Balaji Universal Tradelinks P. Ltd. Versus The Dy. Commissioner of Income–tax, Central Circle–40, Mumbai

The tribunal held that the assessment orders under Section 153A were invalid due to the absence of a valid search and panchnama in the assessee's name. ... Assessment u/s 153A - valid initiation of search - panchnama was drawn against the assessee or not? - HELD THAT:- As decided in M/S BALALJI UNIVERSAL TRADELINK PVT. LTD. [2016 (10) TMI 1361 - ITAT MUMBAI] search carried out by the income–tax Department was held to be invalid in view of absence of any warrant, Panchanama as well as the report of the learned Assessing Officer dated 01.03.2016. The Impugned assessment orders before us is also arising out of the same search. The assessment order framed under section 153A of the Act is also one of the six years for which assessment is framed. Departmental Representative was specifically asked whether the order of the co–ordinate Bench has been contested before the higher Forum and if not or if it is not reversed, why it should not be followed. The learned Departmental Representative merely relied upon the orders of the lower authorities. Further, the decision relied upon by the learned Departmental Representative in case of MDLR Resorts Pvt. Ltd. [2013 (12) TMI 1116 - DELHI HIGH COURT] has also been extensively considered by the co–ordinate Bench in paragraph no. 2.19. Therefore, the decision of the co–ordinate Bench binds us. Therefore, we respectfully following the same hold that the order passed under section 153A of the Act is not valid. Accordingly, we allow the appeal of the assessee on this ground. Issues Involved:1. Validity of proceedings initiated under Section 153A of the IT Act, 1961.2. Jurisdiction of the assessment order.3. Additions made beyond the scope of Section 153A.4. Completion of assessment beyond the time limit under Section 153B.5. Incorrect assessment of income.6. Additions on account of alleged bogus share application money under Section 68.7. Disallowance of remuneration paid to the director under Section 37.8. Additions due to alleged discrepancies in delivery challan.9. Additions due to alleged unaccounted stock and profit on sale of unaccounted stock.10. Additions due to alleged negative stock.11. Non-allowance of exemption under Section 10AA.12. Violation of principles of natural justice.13. Imposition of interest under Sections 234B and 234C.14. Initiation of penalty proceedings under Section 271(1)(c).Detailed Analysis:1. Validity of Proceedings under Section 153A:The primary issue raised was the validity of the search and subsequent proceedings under Section 153A. The assessee argued that the search was invalid as no warrant or panchnama was executed in their name. The tribunal referred to its previous decision in the case of the same assessee for earlier assessment years, where it was held that the search was invalid due to the absence of a panchnama in the assessee's name. Consequently, the assessment under Section 153A was deemed invalid and required to be quashed.2. Jurisdiction of the Assessment Order:The tribunal noted that the assessment order under Section 153A was passed without jurisdiction due to the invalid search. As the search was not valid, the proceedings under Section 153A were also without jurisdiction and void.3. Additions Beyond the Scope of Section 153A:The tribunal observed that the assessing officer made additions beyond the scope of Section 153A. Since the search itself was invalid, any additions made under this section were also invalid.4. Completion of Assessment Beyond Time Limit under Section 153B:The assessee contended that the assessment was completed beyond the time limit prescribed under Section 153B. The tribunal agreed, noting that the assessment order should have been passed on or before 31st March 2012, but was instead passed on 7th August 2012, rendering it barred by limitation.5. Incorrect Assessment of Income:The assessee disputed the assessment of income at significantly higher amounts than the returned income. However, since the tribunal found the proceedings under Section 153A invalid, this issue became redundant.6. Additions on Account of Alleged Bogus Share Application Money under Section 68:The tribunal noted the assessee's argument that the provisions of Section 68 had been complied with, and the addition was incorrect. However, this issue was also rendered redundant due to the invalidity of the Section 153A proceedings.7. Disallowance of Remuneration Paid to Director under Section 37:The assessee challenged the disallowance of remuneration paid to the director. Again, this issue was rendered redundant due to the invalidity of the Section 153A proceedings.8. Additions Due to Alleged Discrepancies in Delivery Challan:The assessee disputed the addition made due to alleged discrepancies in the delivery challan. This issue was also rendered redundant due to the invalidity of the Section 153A proceedings.9. Additions Due to Alleged Unaccounted Stock and Profit on Sale of Unaccounted Stock:The assessee contested the addition made on account of alleged unaccounted stock and profit on its sale. This issue was rendered redundant due to the invalidity of the Section 153A proceedings.10. Additions Due to Alleged Negative Stock:The assessee challenged the addition made due to alleged negative stock. This issue was rendered redundant due to the invalidity of the Section 153A proceedings.11. Non-Allowance of Exemption under Section 10AA:The assessee argued that the exemption under Section 10AA was incorrectly disallowed. This issue was rendered redundant due to the invalidity of the Section 153A proceedings.12. Violation of Principles of Natural Justice:The assessee claimed that the assessment was made in gross violation of the principles of natural justice. The tribunal's finding of the invalidity of the Section 153A proceedings addressed this issue.13. Imposition of Interest under Sections 234B and 234C:The assessee disputed the imposition of interest under Sections 234B and 234C. This issue was rendered redundant due to the invalidity of the Section 153A proceedings.14. Initiation of Penalty Proceedings under Section 271(1)(c):The assessee challenged the initiation of penalty proceedings under Section 271(1)(c). This issue was rendered redundant due to the invalidity of the Section 153A proceedings.Conclusion:The tribunal allowed the appeals, holding that the assessment orders under Section 153A were invalid due to the absence of a valid search and panchnama in the assessee's name. Consequently, all other grounds raised by the assessee were rendered redundant. The appeals were allowed, and the assessment orders were quashed.