TaxTMI 
TaxTMI 
2018 (2) TMI 111
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....er referred to as 'Revenue') both have come in appeal before this Court and hence both appeals have been heard together and are being decided by this common judgment. 2. Sri Ravi Kant, Senior Advocate assisted by Sri Rahul Agarwal, Advocate have appeared on behalf of Assessee and Sri Manish Goel, Advocate has put in appearance on behalf of Revenue. 3. Revenue's appeal was admitted on the following substantial questions of law:- (1) Whether on the facts and in the circumstances of the case, Tribunal was right in holding that authorization for search issued under section 132 and on the basis of which search was conducted against Assessee, was invalid, and if so, whether notice issued under section 158 BC of Act, 1961 to Assessee was invalid? (2) Whether notice dated 8.5.1997 issued under section 158 BC was invalid because material requisitioned under section 132-A of Act, 1961 was not available to Income Tax Department till that date? (3) Whether Appellate Tribunal was right in holding that notice dated 8.5.1997 was invalid because it did not specify status of Assessee? (4) Whether Appellate Tribunal was right in holding that noti....
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.... materials i.e. Bilty books, ledgers, Gunny bags of Supari etc. Search commenced at 11:30 hours on 27.11.1996 and completed at 17:30 hours on the same day. 6. A punchnama was prepared by Central Excise authorities after making search at premise No. 133/283. This search had taken place at 11 hours on 27.11.1996 and concluded at 20 hours on the same day. Cash of Rs. 1,70,20,000/- was also found by Central Excise authorities. 7. Third premises i.e. 133/174, A.T.P. Nagar, Kanpur Nagar was also searched by the said authorities. Then another premises No. 133/111 M Block, Kidwai Nagar, Kanpur was also searched on 27.11.1996 and Panchnama was prepared. 8. Assessee is a partnership firm engaged in the business of transportation of goods. Its Head Office is situated at 133/225 Transport Nagar, Kanpur and Branch at 133/283 Transport Nagar, Kanpur. Besides, Assessee has Branches spread over across the country. 9. A warrant of authorisation was issued on 28.11.1996 for conducting search under Section 132 of Act, 1961 at the premises of M/s. Verma Transport Company and Lucknow Banda Transport Company. 10. Income Tax Authorities searched at the premises of Assessee at 133/283 Trans....
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....der dated 28.11.1997. 14. Assessee filed regular return on 11.11.1997 for the period 1.4.1996 to 26.11.1996 for Assessment Year(hereinafter referred to as 'A.Y.') 1997-98. 15. ACIT/AA made assessment order dated 28.11.1997 under Section 158 BC/144 of Act, 1961 at total income of Rs. 3,12,97,430/-. The undisclosed income assessed by ACIT/AA is as under: (a) Cash found by Central Excise Department in the raid conducted on 27.11.1996 from premises No. 133/283. Rs.1,70,20,000/ Cash Found during search by the Income- tax Department on 28.11.1996 from the same premises, i.e. 133/283. Rs.13,05,180/- Total Rs.1,83,25,180/- (b) Excess of cash to the extent of Rs. 1,08,195/- seized by the Central Excise Department. Rs. 1,08,195/- (c) Unreconciled stock of Supari Rs. 70,99,839/- (d) Unexplained investment in cloth Rs. 5,04,000/- (e) Unexplained investment in trucks Rs. 10,50,000/- (f) Income of the assessee from 1.4.96 to 28.11.1996 Rs. 38,70,219/- (g) Unexplained investment in house property No. 133/225 Rs. 3,40,000/- 16. Assessee preferred appeal against aforesaid order of assessment which has been partly allow....
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....a Roadways i.e. Assessee, while authorisation and other documents prepared by Income Tax authorities were in the name of "M/s. Verma Transport Company". (f) Computation by ACIT/AA ought to be year wise but it has made computation for the entire Block period which is illegal. (g) ACIT/AA made additions without permitting Assessee to participate in investigation/enquiry and without supplying documents relied for making such additions. (h) Assessee failed to explain Rs. 65,59,302/- to prove that same related to Rameshwar Dayal Shiksha Samiti and therefore, ACIT/AA rightly made addition of said amount. (i) No proper and thorough enquiry was made by ACIT/AA, may be on account of paucity of time or carelessness or non-cooperation by Assessee. (j) In case of Block Assessment, Section 145 is not applicable and hence there was no scope of best judgment assessment. 18. Sri Manish Goel, learned counsel for Revenue assailed order of Tribunal contending that it has erred in law in observing that there was no valid warrant of authorisation for making search at the premises of Assessee and findings in this regard are perverse. He submitted that ther....
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....warrant was not supposed to be served upon Assessee. It is for the guidance and information of search team so that they may conduct search at the requisite place. In the present case, search was authorised to be conducted at the premises of Assessee which was actually conducted and material seized therein belong to Assessee. Therefore, Tribunal erred in holding that warrant of authorisation under Section 132 of Act, 1961 was not validly issued. He also contended that warrant of authorisation of search and seizure is an administrative function and not open for judicial review before Tribunal, hence, Tribunal had no jurisdiction to examine proceedings of search carried out by Income Tax Authorities at the premises of Assessee under Section 132 of Act, 1961. 21. It was lastly contended that on the basis of information received from Central Excise Authorities when they found incriminating material and also huge cash at the premises of Assessee, in search conducted on 27.11.1996, Commissioner of Income Tax validly issued warrant of authorisation for search under Section 132(1) and it can not be said that there was non-application of mind on the part of Commissioner. He argued that Tr....
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....ssession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property),then,-- (A) the Director General or Director or the Chief Commissioner or Commissioner, as the case may be, may authorise any Deputy Director, Deputy Commissioner, Assistant Director, Assistant Commissioner or Income-tax Officer, or (B) such Deputy Director, or Deputy Commissioner, as the case may be, may authorise any Assistant Director, Assistant Commissioner or Income-tax Officer, (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to-- (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, ....
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....ry or other valuable article or thing in respect of which an officer has been authorised by the Director General or Director or any other Chief Commissioner or Commissioner or any such Deputy Director or Deputy Commissioner as may be empowered in this behalf by the Board 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 Chief 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." (emphasis added) Procedure for block assessment. 158BC. Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then, (a) the Assessing Officer shall serve a notice to such person requiring him to furnish, within such time, not being less than fifteen day, as may be specified in the notice, a return in the prescribed form and verified in the same manner as a return ....
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....or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been or would not be disclosed for the purposes of the Indian Income-tax Act, 1922, or the Income-tax Act, 1961 And whereas I have reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing have been kept and are to be found in godown 133/225 Transport Nagar, Kanpur (specify particulars of the building/place/vessel/vehicle/aircraft); This is to authorise and require you as per reverse......." 27. The contents of warrant of authorisation except the underlined portion which is hand written, are in Printed form. 28. Copies of Panchnama dated 29.11.1996, order under Section 132(3) and order under Second proviso to section 132(1) of Act, 1961(Provision of Act, 1961) were also placed before Tribunal, wherein address mentioned reads as under:- "M/s. Verma Transport Company(Roadways) 133/225 Transport Nagar(Kanpur)" 29. Tribunal has observed that since warrant of authorisation was in the name of M/s. Verma Transport Company, M/s. Lucknow-Banda Transport Company....
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....dated 28.11.96 (paper 67-70 of the Paper Book of the deptt.), which contains following entries: (A) Warrant in the case of M/s Verma Transport Co. and Lucknow Banda Transport Co., 133/283, Transport Nagar, Kanpur. (B) Warrant to Search - M/s Verma Transport Co. and Lucknow Banda Transport Co. 133/283, Transport Nagar, Kanpur." 30. It is in this background that Tribunal held that no search was conducted at "M/s. Verma Roadways" on the basis of warrant of authorization issued in the name of "M/s. Verma Transport Company, Lucknow-Banda Transport Company" and there was no warrant of search under Section 132(1) against Assessee. It has also noticed that so far as Department of Excise was concerned, admittedly search was conducted at the premises of "M/s. Verma Roadways" and entire material, cash collected, related to "M/s. Verma Roadways" i.e. "Assessee". Tribunal accordingly held that no warrant of authorization for conducting search under Section 132(1) of Act, 1961, was issued in the name of Assessee i.e. "M/s. Verma Roadways" and hence all consequential action such as seizure, notice under Section 158BC of Act, 1961 and Block Assessment in the hands of "M/s. Ver....
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....of Criminal Procedure 1898 was upheld observing that a power of search and seizure is in any system of jurisprudence an overriding power of State for the protection of social security and that power is necessarily regulated by law. A search by itself is not a restriction on the right to hold and enjoy property though a seizure is a restriction on the right of possession and enjoyment of property seized. Rather, that is only temporary and for the limited purpose of investigation. A Bench of 8 Judges of Supreme Court in the judgment delivered by Hon'ble B. Jagannadhadas observed that power of search and seizure is in any system of jurisprudence an overriding power of the State for protection of social security and that power is necessarily regulated by law. 36. Similar power of search and seizure under Section 41 of Madras General Sales Tax of 1969 was upheld in Commissioner of Commercial Taxes vs. Ramkishan Shrikishan Jhaver, (1967) 66 ITR 664. Court held that an officer empowered by Government was entitled to effect search and seize goods and articles as provided in that section. It also held that in the taxing statute, Legislature is empowered to make provisions which would....
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.... by Court. If the conditions for exercise of the power are not satisfied, proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of statutory duties of Tax Officers, any error of judgment on the part of Officers will not vitiate the exercise of power. Act and Rules do not require that warrant of authorization should specify particulars of documents and books of accounts. A general authorization to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requirements of Act and Rules. It is for the officer making search, to exercise his judgment and seize or not to seize any documents or books of account. 38. In Pooran Mal Etc. vs. Director of Inspection(Investigation) of Income Tax Mayur, (1974) 93 ITR 505 (SC) constituted validity of Section 132 was challenged. While upholding its validity Court observed:-Court held that it is a well-known fact of our economic life that huge sums of unaccounted money are in circulation endangering its very fabric. In a country which has adopted high rates, of taxation, a major portion of unaccounted money should normally fill the Government coffers. In....
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....ion in statute nor support of the Constitution contemplating exclusion of material collected in an illegal search. 41. Court referred to an earlier Constitution Bench decision in A.K. Gopalan vs. State of Madras, AIR 1950 SC 27 that where fundamental law is not limited, either in terms or by necessary implication, general powers conferred upon legislature cannot declare a limitation under the notion of having discovered something in the spirit of the Constitution which is not even mentioned in the instrument. Referring to Evidence Act, 1871, Court observed that neither said Act nor any other similar law in force does exclude relevant evidence on the ground that it was obtained under an illegal search or seizure. 42. What is important, therefore from the above authorities, is that emphasis of Court was on the necessity of recording reasons in support of reasonable belief contemplated by Section 132. Law does not require even disclosure or communication of such reasons to a person in respect whereof such reasonable belief is suggested to be recorded by the concerned authorities. 43. In Kuruma vs. Queen, (1955) A.C. 197 (Privi Council) it was observed that evidence is admissi....
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....h was authorized because of information allegedly gathered about receipt of approximately Rs. 30 crores by assessee from land acquisition department. Discreet enquiries were made and it was revealed to the department that house property at Anand Lok was under demolition and an apartment building was to be constructed there. For those apartments, secret bookings were alleged to have been made and money was received by family members of the petitioners. The note of Respondents No. 2 & 3 there stated that the petitioners did not disclose receipt of compensation in income tax returns. The High Court noticed that the receipt of money by the petitioners was known to department and failure to return income because of the belief of the petitioner that it was not taxable, could not have been a ground for issuing an authorization under Section 132(1) of the Act. It is noticed that non filing of return may give right or jurisdiction to the respondents to invoke provisions of Section 147 and 148 but it was not a case where money was received surreptitiously or the department did not have knowledge. The other ground about failure to disclose immovable properties in the return has been found equ....
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....eason was found not in addition to reasons contained in note of recommendation put up by other respondents and Delhi High Court has found that satisfaction of said authority only was relevant and needed to be examined." 47. In Union of India vs. Agarwal Iron Industries (2015) 370 ITR 180 (SC) validity of warrant of authorization issued under Section 132 was challenged on the ground that it was issued mechanically, arbitrarily and for total non-application of mind. Court held that competent authority is to issue warrant for authorisation for seizure on the basis of formation of opinion which is reasonable, prudent and would form for arriving at a conclusion to issue a warrant. It is done by way of an interim measure. The search and seizure is not confiscation. Articles seized, are the subject matter of enquiry by Competent Authority after affording opportunity of hearing to the person from whose custody the same has been seized. 48. From the aforesaid discussion what transpires is that search and seizure operations which were conducted in the light of powers exercised in the statute are controlled by such statute. For the purpose of Section 132, competent authority while autho....
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..... Thakur,J.and Hon'ble Badar Durrez Ahmed, J.(as their Lordships then were). Court in M.B. Lal Vs. Commissisoner of Income-Tax (supra) held:- "Any appeal before the Tribunal against the block assessment made under section 158BC does not take within its fold questions touching the validity of the search conducted under section 132 of the Act.Whether or not the conditions precedent for a search stipulated under clauses (a), (b) and (c) of section 132(1) of the Act were satisfied in a given case falls beyond the scope of assessment proceedings instituted under section 158 BC of the Act or any statutory appeal preferred against the order made under that provision. If the petitioner was keen to test the validty of the said proceedings, his remedy lay in a writ petition under article 226 of the Constitution." 52. A Division Bench of this Court also in CIT vs. Dr. A.K. Bansal(supra) considered this very question, whether correctness of search and seizure under Section 132 can be raised before Assessing Officer or Appellate Authorities, and agreeing with five-members Bench of Income-Tax Appellate Tribunal, Delhi's judgment in Promain Ltd. vs. Deputy CIT(2006) 281 ITR(AT....
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....so look into the consequence of the search namely the completion of assessment for the purpose of computing the period of limitation under section 158BE. It may also examine as to when the last of the authorizations was executed for the purpose of calculating the limitation. The Tribunal may also look into the findings of the Assessing Officer on the action of the search party, namely, identification, preparation of inventory, seizure, etc. The Assessing Officer or the Appellate authority, however, cannot look into the validity of the search by calling for the warrant of authorization and examining the records authorising search for the purpose of an enquiry whether the search was valid." 54. The findings recorded in paragraphs 24 and 25 have been agreed in paragraph- 26 in entirety. Paragraph 26 of the judgment in CIT vs. AK Bansal(supra) : "26. We entirely agree with the reasoning given in Promain Ltd. vs. Deputy CIT 2006 (281) ITR (80) 107 Delhi [SB], the Deputy Commission of Income-tax as well as the decisions of Punjab and Haryana High Court, Madhya Pradesh High Court, Rajasthan High Court and the Delhi High Court which have on more than on occasion held that in he....
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....so Panchnama etc. is the same where the Assessee had its office or godown, as the case may be, search and seizure operation was conducted at the premises of assessee and material, documents, cash etc. collected also belong to assessee. Assessee never raised any objection either at the time of search and seizure or thereafter. Moreover, even before the Assessing Officer, when notices were issued, Assessee sought time to file return. Thus, here is not a case where the validity of search and seizure itself was in question but the question is whether authorization, search and seizure and subsequent proceedings all relate to assessee or not and if there was any difference in mention of title/'name of Assessee in authorization or Panchnama, whether it will be of any substance and would vitiate entire proceedings against the Assessee. We may reiterate again that premises is same. Title/name of the person mentioned in the authorization issued by competent authority has some similarity but description is not that of assessee but it is different. The title mentioned in authorization as also in Panchnama prepared by search and seizure team though different, but search was conducted at the....
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....the basis of material collected in search and seizure operations, ACIT/AA was justified in proceeding to make assessment under Section 158BC. 59. In Assistant Commissioner of Income Tax, Chennai vs. A.R. Enterprises, (2013) 350 ITR 489(SC) Court held that condition precedent for invoking Block Assessment is a search conducted under Section 132 of documents or assets requisitioned under Section 132 A. In respect to the present case, whose search is conducted under Section 132, Block Assessment can be carried out following procedure under Section 158 BC but if in search and seizure of a person, undisclosed income belonging to any other person is found then Section 158 BD has to be resorted. 60. Supreme Court has held in catena of authorities including CIT vs. Vatika Township (P) Ltd., 2015(372) ITR 392 that Chapter XIV B is a complete code in itself providing for self-contained machinery for assessment of undisclosed income for the block period of 10 years or 6 years, as the case may be. Even, the payment of tax on undisclosed income is governed by Section 113. In view of Section 158BA(2) of Act, 1961 this rate is 60%. The scheme therefore, under Section 143 is integrated, conn....