Section 153A proceedings invalid without search under Sections 132 and 132A against petitioner

Punjab and Haryana HC held that proceedings under Section 153A of the Income Tax Act were invalid where no search was conducted against the petitioner under Sections 132 and 132A. The court found that mere mention of the petitioner's name in a panchnama prepared during search at another company's premises does not constitute authorization for search against the petitioner. A panchnama only reflects documents found during search and cannot be treated as authorization under Section 132. The respondents should have followed reassessment procedure under Section 153C(1) instead. The assessment order based on Section 153A notice was held unjustified and without jurisdiction. Petitioner's appeal was allowed.

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Issues Involved:
1. Validity of Search Proceedings and Panchnama.
2. Jurisdiction to Issue Notice u/s 153A.
3. Admissibility of Evidence.
4. Procedural Compliance u/s 153C.
5. Legality of Assessment Order and Demand Notice.

Summary:

1. Validity of Search Proceedings and Panchnama:
The petitioner challenged the search proceedings and consequent panchnama dated 24.07.2016 and 19.09.2016, arguing that there was no authorization for search and seizure u/s 132 of the Income Tax Act against it. The court concluded that the panchnama prepared at the premises of M3M India Limited, which mentioned the petitioner's name, did not constitute valid authorization for search against the petitioner. The court emphasized that a panchnama is merely a record of what is seen and heard by witnesses during a search and cannot be treated as authorization for search.

2. Jurisdiction to Issue Notice u/s 153A:
The petitioner argued that the proceedings initiated u/s 153A were without jurisdiction as there was no fresh search conducted against it. The court held that since no search was conducted under Section 132 against the petitioner, invoking Section 153A was not justified. The court reiterated that the proper procedure in such cases would be to follow Section 153C if incriminating material related to the petitioner was found during the search of another entity.

3. Admissibility of Evidence:
The petitioner contended that the material recovered from the laptop of Gaurav Jain was inadmissible as it did not comply with Section 65B of the Indian Evidence Act. The court did not delve deeply into this issue, as it found the entire proceedings u/s 153A to be without jurisdiction.

4. Procedural Compliance u/s 153C:
The court emphasized that if incriminating material related to the petitioner was found during the search of another entity, the proper procedure would be to follow Section 153C. The court cited the principle that when a specific procedure is prescribed by law, it must be followed strictly, referencing the doctrine from Nazir Ahmad vs King Emperor.

5. Legality of Assessment Order and Demand Notice:
The court quashed the notice dated 05.01.2018 and the assessment order and demand notice dated 07.02.2024, holding them to be without jurisdiction and non-est. The court concluded that once an assessment order was passed u/s 153A for the AY 2006-07 to 2012-13, a fresh order without conducting a new search and seizure operation was not sustainable in law.

Conclusion:
The writ petition was allowed, and the notice dated 05.01.2018, the assessment order, and the demand notice dated 07.02.2024 were quashed and set aside. The proceedings initiated u/s 153A were held to be non-est.

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