TaxTMI 
TaxTMI 
2016 (10) TMI 1361
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....ppeals. 2.1. During hearing, the ld. counsel for the assessee, Shri Manish Sanghvi, strongly advocated that panchnama does not contain the name of the assessee for which our attention was invited to the panchnama, prepared in the name of 'Shri Manoj Punamiya & Group', by asserting that under the Income Tax Act, 1961, there is no concept of group. It was canvassed that the inventory of accounts, books, etc, prepared on 24/12/2009, and prohibitory orders u/s 132(3) of the Act were also only in the name of Shri Manoj Punamiya alone and not the present assessee. It was clarified that the assessee has no nexus with the premises searched/surveyed by the Department. It was empathetically contended that none of the documents, claimed to be seized, belongs to the assessee. It was asserted that no search was ever conducted upon the assessee, hence, the proceedings u/s 153A of the Act are bad in law and void. The ld. counsel for the assessee took us to various pages of the paper book and also the copy of panchnama drawn by the Department. The ld. counsel also invited our attention to the finding contained in the impugned order (as mentioned at page-4), wherein, the assessee in response to ....
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....tes, platinum bars, silver Ignots, Gold bar, Gold jewellery, cut and polish diamonds, recycled plastic granules, etc. The assessee declared income of Rs.4,325/- in its return filed on 20/10/2004, accompanied by audited statement of accounts, which was accepted by intimation u/s 143(1) of the Act dated 01/07/2005. 2.5. An action u/s 132 of the Act was carried out at the residential premises of one Shri Manoj Punamiya (in his individual/personal capacity) on 31/10/2009 and thereafter on 24/12/2009, wherein, seventeen papers, were claimed to be found and seized. The copy of panchanama along with inventory of papers, found and seized, is matter of record. Pursuant to said action, notice u/s 153A was issued on 27/12/2010. The assessee challenged the initiation of proceedings u/s 153A of the Act. It is noteworthy that as abundant caution, the assessee filed return in response to notice u/s 153A on 24/08/2011, declaring total income at Rs.4,325/-, as was originally declared in return of income filed u/s 139(1) of the Act. The assessment was completed purportedly u/s 143(3) r.w.s. 153A on 29/12/2011 making certain additions. 2.6. The validity of initiation of proceedings u/s 153A of ....
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.... on 31.10.2009. Yours faithfully, ( Sunil S Deshpande ) Deputy Commissioner of Income-tax Central Circle-7( 1), Mumbai. Copy to: The Pr.CIT Central - 4, Mumbai The Addl. CIT Central Range - 7, Mumbai. Deputy Commissioner of Income-tax Central Circle-7( 1), Mumbai . 2.8. If the aforesaid letter is analyzed, it is noted that the ld. CIT-DR asked the concerned DCIT, Central Circle-7(1), Mumbai, to provide the copy of the duly executed warrant of authorization u/s 132(1) of the Act r.w.r. 112(1) of the Income Tax Rules,1962 in form no.45 mentioning the name and address of the assessee and a copy of the panchnama prepared on the conclusion of the search at the premises of the assessee. Vide aforesaid letter, on verification of record, the ld. DCIT informed that above documents are not available on record and the only material available pertains to survey action u/s 133A of the Act on the assessee on 31/10/2009. We have carefully perused the documents produced before us and we have observed that the warrant of authorization u/s 132 of the Act read with Rule 112 (1) of The Income Tax Rules, 1962 (hereinafter the "Rules") was duly prepared by the DIT(....
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....isions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : Provided also that the Central Government may by rules8 made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six a....
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....sment year relevant to the previous year in which search was conducted u/s 132 or requisition was made u/s 132A of the Act. Thus, it can be said that the provision of section 153A of the Act makes it clear that in the case of a person on whom a valid search is initiated u/s 132 or books of accounts or other documents or any asset are requisitioned u/s 132A, the Assessing Officer shall issue a notice upon such person. The expression clearly relates to a person in respect of whom search u/s 132 has been initiated or as section 153A after 31st day of March 2003. The ratio laid down in Ramesh D. Patel (2014) 362 ITR 492(Guj.) supports our view. In that event the Assessing Officer shall:- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section....
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....search was carried out at the residence of the partner but block assessment was made u/s 158BC, 158BD of the Act, upon the firm, the Hon'ble High Court held that procedure laid down u/s 158 BD has to be followed, thus, the ratio laid down by Hon'ble jurisdictional High Court supports the case of the assessee. The ratio laid down in J.M. Trading Corporation vs ACIT (2008) 20 SOT 489 (Mum.), which was upheld by the Hon'ble jurisdictional High Court in ITA No. 589 of 2009 holding that provisions of section 153A are only applicable in a case, where valid search is conducted against the assessee u/s 132 of the Act, supports the case of the assessee. 2.14. For fair conclusion, we are also reproduced hereunder the provision of section 132 and 132 A of the Act for ready reference:- "132. (1) Where the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to ....
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....r receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a no....
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....on to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the [Principal Director General or] Director General or [Principal Director or] Director or any other [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner 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 [Principal Chief Commissioner or] Chief Commissioner or [Principal 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.] (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) or sub-section (1A) and it shall be....
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....ing of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (5) [***] (6) [***] (7) [***] (8) The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment under section 153A or clause (c) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or Director General or [Principal Director or] Director for such retention is obtained : Provided that the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner,[Principal Director General or] Director General or [Principal Director....
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....apply, so far as may be, to searches and seizure under sub-section (1) or sub-section (1A).] (14) The Board may make rules in relation to any search or seizure under this section ; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer- (i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available ; (ii) for ensuring safe custody of any books of account or other documents or assets seized. Explanation 1.-For the purposes of sub-section (9A), "execution of an authorisation for search" shall have the same meaning as assigned to it in Explanation 2 to section 158BE. Explanation 2.-In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Incometax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in ....
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....r in this section and in sub-section (2) of section 278D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer. (2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. (3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132Bshall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may....
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....that an assessment u/s 153A is different from regular assessment. The section can be invoked only when a valid search is initiated u/s 132 or books of accounts, other documents or any assets are requisitioned u/s 132A after 31/05/2003. The provision of section 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the later deals with search and seizure and the former deals with assessment in case of search, thus, the two are inextricably linked with each other, which implies that existence of books of accounts, incriminating documents, or unaccounted assets is or are sine qua non for making the additions in the assessments under this provision. Therefore, if nothing is found during the course of search, the additions in the assessment or reassessment u/s 153A is not only erroneous but also serves no purpose. It can be précised that the assessment or reassessment u/s 153A arises only, when a valid search has been initiated and conducted. The provisions of section 153A of the Act makes it clear that only in the case of a person on whom, a valid search is initiated, u/s 132 or books of accounts or other documents or any assets ....
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....dation of search relates to a definite person who is to be subjected to search. If the contrary is the fact situation, the same would amount to serious lapses and would be in clear violation of the provisions contained in section 132(1) of the Income-tax Act, 1961, as it does not stand the test of section 132 of the Income-tax Act, 1961. Therefore, the most serious content of the warrant of authorization is the name and description of the person whose premises, etc., are sought to be searched. 9. The Punjab and Haryana High Court in Jagmohan Mahajan v. CIT [1976] 103 ITR 579 (Punj. & Har.), held that a search authorized in the absence of material necessary to form the requisite belief under section 132(1) on the basis of blank warrant of authorization signed by the Commissioner of Income-tax was illegal and no order under section 132(5) on the basis of such a search could be made. 10. The Delhi High Court in Ajit Jain's case [2000] 242 ITR 302 (Delhi) held that it is axiomatic that search under section 132 has to be a valid search. An illegal search is no search and as a necessary corollary in such a case Chapter XIV-B would have no application. This judgment of t....
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....r shall after issuing notice assess or reassess the total income of such person for six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition made. The legislative intent is clear from the use of expression "such person" in clause (a) of section 153A. The expression clearly relates to a person in respect of whom search under section 132 has been initiated as section 153A itself provides. Thus to exercise powers under section 153A in the case of a person the mandatory requirement is that there must be initiation of a search as contemplated under section 132 or requisition under section 132A in respect of such person. The word "person" appearing in section 132 and in section 153A is one and the same person. Thus the person, in respect of whom search under section 132 is initiated, must be the same person against whom notice under section 153A is to be issued for making assessment/reassessment under that section." The Hon'ble Apex Court in the case of Union of India v. Ajit Jain ((2003) 260 ITR 80(SC), (2003) 129 Taxman 74(SC) ) held that initiation of valid search is a pre-requisite for frami....
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.... that non compliance to the provisions of the Act by the Authorized Officer, such searches are invalid and illegal. No search was conducted against the assessee as the premises occupied by the assessee were not entered upon and searched by the Authorized Officer...." 2.16. The ITAT, Bangalore in D T S Rao v. ACIT (2007) 106 ITD 569(Bang. Trib) which was affirmed by Hon'ble Karnataka High Court in the case of (2012) 23 taxmann.com 352(Kar. HC), held as under: " 28. In view of Explanation 2 to section 158BE, execution of search warrant is to be inferred from the date recorded in respect of conclusion of search in the last panchnama. Panchnama is not defined in the IT Act. However, section 100 of Cr.PC governs the conducting of search. As per section 100(4) of Cr.PC the authorized officer to make search is required to call upon two or more independent and respectable inhabitant of the locality in which the place to be searched is situated. Search is to be made in the presence of these two respectable inhabitants list of things to be seized and placed where these have been found is to be prepared and such list is to be signed by the authorized officer and the two witnes....
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....under section 132(3) was not valid on 25-4-1996. When order under section 132(3) was not extended beyond sixty days then lifting of such prohibitory order vide panchnama dated 24-4-1996 has no legal sanction, when violation of order under section 132(3) can result into punishment with rigorous imprisonment then, communication of extension of order under section 132(3) is a must. Hence, panchnama dated 25-4-1996 is not a valid panchnama. 38. Search comes to an end when the last panchnama is drawn. It is date of such panchnama which is relevant for determining the period of limitation for passing the order under section 158BC by the Assessing Officer. Accordingly, the Assessing Officer is required only to find out the date when the last panchnama with reference to last authorisation is drawn and nothing beyond that. Hence, the Tribunal can examine the date when last panchnama was drawn. It will be relevant to quote from pg. 51 in the case of Promain Ltd. (supra) : "It is, however, pertinent to mention about the significance of the panchnama. The panchnama is a document which is prepared in the presence of panchas (respectable local witnesses) containing the items fo....
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.... last of the panchnama drawn as under: "153BTime-limit for completion of assessment under section 153A '*** (2) The authorisation referred to in clause (a) and clause (b) of subsection (1) shall be deemed to have been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued;" 2.17. Thus, the search will be deemed to be concluded on the basis of last panchnama drawn in relation to the person in whose case the warrant of authorization has been issued and in the instant case , we have observed that no panchnama was drawn against the assessee so it can be concluded that search against the assessee got vitiated as no panchnama was ever prepared against the assessee. The search is a serious invasion into the privacy of the person infringing on fundamental rights as enshrined in Article 21 of the Constitution of India and the same cannot be lightly carried out by the State in an casual or lax manner. The Revenue has prepared the Panchnama in the name of 'Manoj B Punmia and group' while there is no concept of word 'grou....
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.... of what they witness is known as the panchnama. The word 'nama', refers to a written document. Its type is usually determined by the word which is combined with it as a suffix. Examples being, nikahnama (the written muslim marriage contract), hiba-nama (gift deed, the word hiba meaning - gift), wasiyat-nama (written will) and so on. So a panchnama is a written record of what the panch has witnessed. In Mohan Lal v. Emperor AIR 1941 Bom. 149, it was observed that 'the panchnama is merely a record of what a panch sees'. Similarly, the Gujarat High Court in the case of Valibhai Omarji v. State AIR 1963 Guj 145 noted that 'a Panchanama is essentially a document recording certain things which occur in the presence of Panchas and which are seen and heard by them.' Again in The State of Maharashtra v. Kacharadas D. Bhalgar (1978) 80 Bom LR 396, a panchnama was stated to be 'a memorandum of what happens in the presence of the panchas as seen by them and of what they hear'. 16. We have examined the meaning of the word panchnama in some detail because it is used in Explanation 2(a) to Section 158BE of the said Act although it has not been defined in ....
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.... and the assessment u/s 153A of the Act is bad in law hence liable to be quashed. Why, despite a 'search', we observe a 'notice' u/s 153C as well as a survey being conducted on the assessee in the present case. 3. Now, we shall take up the cross appeals for A.Y. 2005- 06, 2006-07 and 2007-08. In these appeals also, the identical jurisdictional issue has been raised by the assessee and the Revenue has challenged restricting the disallowance made on account of unexplained purchases to 50%, thereof, in view of the foregoing discussion made in A.Y. 2004-05, since, we have declared the proceedings u/s 153A as null and void, these appeals for impugned assessment years have also remained for academic interest only. Since, the basis for making the assessment/reassessment has been declared as null and void, therefore, the same ratio will be applicable to the appeals of the Revenue also, consequently, dismissed, therefore, these appeals are also decided in favour of the assessee. 4. So far as merits of the case is concerned, we have observed that there was a search conducted against the assessee company by Revenue on 31-10-2009 which was held by us to be vitiated. There was no incrimin....
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....esh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other postsearch material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (....