2025 (6) TMI 1539 - AT - Income Tax

Assessment under Section 153A invalid where search not conducted in assessee's name; reopening quashed and appeal allowed

ACIT, Central Circle-25, Delhi Versus Honey Arora

ITAT (DELHI - AT) held that assessment under section 153A cannot be sustained where the search was not conducted in the name of the assessee. Relying on a ... Assumption of jurisdiction by the AO u/s. 153A - search warrant was not issued in the name of the Assessee HELD THAT:- Assessment under section 153A cannot be upheld in the name of such person in whose case search action is not initiated u/s 132. Hence, the case of the assessee pari materia with the case of Sanjay Jain [2024 (5) TMI 1582 - ITAT DELHI]. The facts and circumstances of the case of the Assessee and those of the said case are identical. We do not find any infirmity in the order of the Ld. CIT(A) quashing the reopening and thus we affirm the same and accordingly, dismissed this issue raised in Revenue’s Appeal. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether assumption of jurisdiction by the Assessing Officer under section 153A is valid where the search-warrant/authorization under section 132 was not issued in the name of the person assessed (alleged mistaken identity) but in the name of other persons/entities, although search activities concluded at the assessed person's premises. 2. Whether absence of panchnama in the name of the assessed person and non-supply of copy of search-warrant, panchnama and seized-material during assessment proceedings affects validity of the search and consequent proceedings under section 153A on grounds of natural justice. 3. Whether assessments framed under section 153A on facts of mistaken identity and lack of warrant in the assessed person's name are rendered void-ab-initio and therefore must be annulled (scope and precedential treatment). 4. Whether departmental instructions (CBDT circulars prescribing monetary threshold for appeals) render Revenue's appeals not maintainable where tax effect in each assessment year is below prescribed threshold and exceptions do not apply. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of assumption of jurisdiction under section 153A when search-warrant under section 132 is not in the assessed person's name (mistaken identity) Legal framework: Section 132 authorizes search based on a warrant of authorization issued in the name of the person to be searched; section 153A provides for assessment where a search has been initiated under section 132. Invocation of 153A presupposes initiation of search in the case of the very person whose assessment is sought to be completed under 153A. Precedent treatment: Coordinate-bench decisions have held that assessments under section 153A cannot be sustained where no warrant of authorization under section 132 was issued in the name of the assessee; such assessments are invalid/void-ab-initio. The Tribunal below followed a recent decision on identical facts which quashed proceedings where the warrant named other persons/entities and not the assessee. Interpretation and reasoning: The Court examined the copy of the warrant(s) and panchnama, finding the warrants issued in other names and panchnama drawn in other names despite search concluding at the assessed person's premises. The Court accepted the proposition that initiation of search against a person is a pre-requisite for invoking section 153A in respect of that person; a warrant naming different persons undermines the statutory foundation for proceedings under section 153A. The factual matrix (warrant and panchnama not in assessee's name; statements and documents referring to another entity/group) indicates mistaken identity or that the search was directed at others, not the assessed person. Where the foundational act (search in the name of the person) is absent, subsequent issuance of notices and framing of assessment under section 153A lacks jurisdictional basis. Ratio vs. Obiter: Ratio - Where no warrant of authorization under section 132 was issued in the name of the person, assumption of jurisdiction and assessment under section 153A in that person's name is invalid. Obiter - Observations on the prudence of search exercise and general statements on use of search powers, while relevant to context, are not the necessary basis for the legal conclusion. Conclusions: The Court held that the AO's assumption of jurisdiction under section 153A was not justified and annulled the assessment framed under section 153A because the search-warrant/panchnama did not name the assessed person; proceedings under section 153A therefore failed the statutory pre-requisite. Issue 2 - Effect of panchnama not being in assessed person's name and non-provision of search-warrant/seized material on natural justice and validity of proceedings Legal framework: Principles of natural justice require communication of material relevant to assessment; statutory scheme envisages record of search (panchnama) and provision of seized material/related documents to the person whose assessment is to be completed, for effective exercise of defence rights. Precedent treatment: Decisions have set aside proceedings where requisite documents were not provided or where procedure of search and documentation indicated that search was not conducted in respect of the person assessed. Interpretation and reasoning: The Court noted the assessee's repeated requests for copies of warrants, panchnama and seized material during assessment proceedings and found on record that those documents, insofar as they existed, showed searches and panchnama in names other than the assessee. Although the AO asserted provision of documents in RTI reply, the assessee's consistent contention (and eventual procurement of documents via RTI) indicated non-supply during assessment. The combination of (a) absence of documentary record in the assessee's name and (b) failure to communicate/seize material to the assessee during assessment undermines the fairness and jurisdictional basis of proceedings. Ratio vs. Obiter: Ratio - Failure to provide or inability to justify that required search documentation related to the assessed person was supplyable/was supplied, in circumstances of mistaken identity, supports annulment of assessment under 153A. Obiter - Detailed factual critique of departmental conduct beyond jurisdictional defect. Conclusions: The Court treated the non-provision and the naming discrepancies as reinforcing the view that search proceedings were not initiated against the assessee and that principles of natural justice were infringed; this supported annulment of the assessment under section 153A. Issue 3 - Application of precedent and finality of annulment of assessment under section 153A on identical facts Legal framework: Uniform application of law requires that identical factual patterns be treated consistently; where binding or persuasive coordinate-bench precedent holds assessments invalid for absence of warrant in the assessee's name, same result follows for pari materia facts. Precedent treatment: The Tribunal explicitly followed a recently decided coordinate-bench order which quashed assessments on identical facts (warrant/panchnama naming other persons and not the assessee). The Court also referenced earlier coordinate-bench authority in line with the same legal proposition. Interpretation and reasoning: Finding the facts in parity with the precedent, the Court applied the same legal conclusion - that absence of warrant in the assessee's name renders section 153A proceedings untenable - and held that the assessment must be annulled. The Court distinguished no binding contrary authority on the record and therefore followed the coordinate-bench reasoning. Ratio vs. Obiter: Ratio - Where facts are identical to a prior decision invalidating 153A proceedings for lack of search authorization in the assessee's name, the same result is warranted. Obiter - General commentary on the frequency or propriety of invoking search powers. Conclusions: The Court, following the coordinate-bench precedent on identical facts, annulled the assessment framed under section 153A. Issue 4 - Maintainability of Revenue appeals in light of departmental circular prescribing monetary threshold for appeals Legal framework: Administrative instructions (CBDT circulars) limit institution of departmental appeals by Revenue where tax effect in an assessment year falls below a prescribed monetary threshold, subject to exceptions set out in the circulars. Precedent treatment: The Court applied the circular as an administrative filter; where the tax effect is below threshold and exceptions do not apply, appeals by Revenue may be held not maintainable administratively. Interpretation and reasoning: The Tribunal noted the assertion that tax effect in the relevant assessment years is below the prescribed limit and that the case does not fall within circular exceptions. On that basis, the Tribunal observed that the appeals are not maintainable under the departmental instruction and dismissed the appeals on that ground as an alternative basis. Ratio vs. Obiter: Ratio - Where administrative circular prescribes a monetary threshold and assessed tax effect in each year is below that threshold without applicable exception, departmental appeals may be treated as not maintainable; application of such circular provides a valid alternative ground for dismissal. Obiter - No broader pronouncement on the legal bindingness of such circulars beyond the administrative context. Conclusions: The Court affirmed that, even apart from the jurisdictional annulment of assessments, the Revenue's appeals were not maintainable under the cited departmental circular given the tax-effect thresholds and were therefore dismissed on that alternative ground. Overall Disposition The Court annulled the assessments framed under section 153A for lack of jurisdiction arising from absence of search-warrant/authorization and panchnama in the assessed person's name (mistaken identity), relied on coordinate-bench precedent on identical facts, and dismissed Revenue's appeals; alternatively, the appeals were held not maintainable under the departmental circular limiting appeals below a monetary threshold. Other substantive grounds were left academic and not adjudicated.