IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : G : NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
ITA No.196 to 198/Del/2011
Assessment Years : 2002-03 to 2004-05
ACIT, Vs. Sarvmangalam Builders &
Central Circle-2, Room No.323, Developers Pvt. Ltd.,
ARA Centre, Jhandewalan Extn., 6, Community Centre,
New Delhi. Saket,
New Delhi.
PAN : AADCS6296A
CO Nos.115 to 117/Del/2011
Assessment Years : 2002-03 to 2004-05
Sarvmangalam Builders & Vs. ACIT,
Developers Pvt. Ltd., Central Circle-2, Room No.323,
6, Community Centre, ARA Centre, Jhandewalan Extn.,
Saket, New Delhi.
New Delhi.
PAN : AADCS6296A
(Appellant) (Respondent)
Assessee By : Shri Gautam Jain, Advocate
Department By : Shri Ramesh Chandra, CIT, DR
ORDER
PER A.D. JAIN, JUDICIAL MEMBER:
These are Department's appeals and Assessee's Cross Objections for
Assessment Years 2002-03 to 2004-05 against the orders dated 21.10.2010
passed by the Ld. CIT(A)-III, Delhi.
ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
2. The sole ground raised by the Department in all these appeals is that
the Ld. CIT (A) has erred in restricting the disallowance of ` 17,33,118/- to `
70,000/- (for Assessment Year 2002-03) and deleting the disallowance of `
14,91,332/- (for Assessment Year 2003-04) and of ` 11,17,420/- (for
Assessment Year 2004-05) made by the Assessing Officer in accordance with
Rule 8D of the IT Rules, read with Section 14A of the Income-tax Act. For
Assessment Year 2004-05, another ground has been taken, as per which, the
Ld. CIT (A) has erred in deleting the addition of ` 1,80,53,000/- made by the
Assessing Officer on account of undisclosed income on the basis of seized
documents.
3. The common Cross Objections raised by the assessee for all these
three years are as follows:-
"1. That the learned Commissioner of Income Tax (Appeals) III, New
Delhi has erred both in law and on facts in upholding the assessment
u/s 153A/143 (3) of the Act despite the fact that proceedings were
without jurisdiction since no search has been conducted on the
assessee as its name was not mentioned in any of the panchnama.
2. That the learned Commissioner of Income Tax (Appeals) has
failed to appreciate that until and unless, there is a panchnama drawn
in the name of the appellant, it cannot be held that there is a search
conducted under section 132 (1) of the Act so as to assume jurisdiction
under section 153A of the Act. In view of the decision of Hon'ble
Tribunal in the case of J.M. Trading Corporation vs. ACIT reported in 20
SOT 489 upheld by Bombay High Court in judgment dated 29.06.2009
in ITA No.276/2009.
3. That the learned Commissioner of Income Tax (Appeals) has
further erred both in law and on facts is failed to appreciate that,
disallowance made of Rs.17,33,118/- by invoking section 14A read with
rule 8D of the Income Tax Rules was without jurisdiction and, beyond
the scope of the assessment made u/s 153A/143 (3) of the Act."
4. Since they raise a jurisdictional issue going to the root of the matter, at
first, we are taking up the first two Cross Objections raised by the assessee.
As per these Cross Objections, no search having been conducted on the
assessee, as its name was not mentioned in any of the Panchnamas, the
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ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
proceedings were without jurisdiction and so, the Ld. CIT (A) has erred in
upholding the assessments framed under Sections 153A/143 (3) of the IT
Act.
5. In this regard, the Ld. CIT (A) has observed that the assessee had
challenged the jurisdiction of the Assessing Officer u/s 153A of the IT Act on
two grounds, i.e., that there was no search warrant issued in the name of the
assessee and that no panchnama was drawn in its name; that the Assessing
Officer had held the name of the assessee company was written in the
warrant issued for the search of the premises at 3rd Floor, Global Arcade, MG
Road, Gurgaon and, as such, the objection of the assessee that no search
warrant was issued in its name, was not correct; that she [Ld. CIT (A)] was of
the view that once a search is initiated by the issuance and execution of a
search warrant, the Assessing Officer is in its jurisdiction to issue a notice u/s
153A of the Act; and that thus, the Assessing Officer had valid jurisdiction to
make an assessment u/s 153A of the Act.
6. Challenging the aforesaid observations of the CIT (A), it has been
contended before us on behalf of the assessee that the Ld. CIT (A) has gone
wrong in rejecting the valid objections raised by the assessee in this regard;
that even as per assessment order, a search and seizure action u/s 132 of
the Act was carried out on Vipul Group of cases on 01.06.2006; that notices
u/s 153A of the Act was issued and served on the assessee on 21.02.2007;
that the assessee, vide letter dated 01.12.2008, addressed to the Assessing
Officer, had submitted that the proceedings were without jurisdiction, since
no search had been conducted on the assessee; that neither any warrant of
authorization u/s 132 (1) of the Act had been served on the assessee nor any
Panchnama had been drawn in its name and that in the absence of any
search having been conducted, the proceedings were without any
jurisdiction; that the Assessing Officer has himself not denied the absence of
the assessee's name in the Panchnama; that the Assessing Officer has made
two observations in this regard, i.e., in the Warrant of Authorization executed
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ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
at 3rd Floor, Global Arcade, MG Road, Gurgaon (Party B-7), the name of the
assessee company M/s Sarvmangalam Builders & Developers Pvt. Ltd. was
appearing and that further, the residence of the Director, Shri Punit Beriwala
was also covered during the search operation; that the Assessing Officer
observed that in these facts, the proceedings u/s 153A had been rightly
initiated in the case of the assessee and the objection of the assessee
challenging the validity of the assessment proceedings was being rejected;
in its written submissions before the Ld. CIT (A) (copy at APB 125-139), the
assessee had taken a specific objection to the aforesaid action of the
Assessing Officer; the matter had been remitted by the Ld. CIT (A) to the
Assessing Officer; the Assessing Officer had filed a remand report; the
assessee's rejoinder to such remand report is contained at APB 179-181; that
therein, the assessee had taken a further objection that premises searched
was occupied by the Vipul Group of Companies and the assessee's Director
was also a Director in the Vipul Group of Companies; that neither of the
authorities below has decided the assessee's objection that since there is no
Panchnama in the assessee's name, no jurisdiction u/s 153A of the Act could
have been invoked; and that further, even if the decision of the authorities
below be taken to be correct qua the rejection of the assessee's challenge to
the validity of the assessment proceedings, since the premises searched is
not owned by the assessee, again, no jurisdiction u/s 153A of the Act could
be invoked against the assessee. For the proposition that since the premises
searched does not belong to the assessee, no jurisdiction u/s 153A of the Act
could have been invoked, the ld. Counsel for the assessee has placed
reliance on the decision of the Mumbai Bench of the Tribunal in the case of
`J.M. Trading Corporation vs. ACIT', 20 SOT 489 (Mum), wherein, it was held
that where a search is carried out at the premises owned by the assessee,
but rented to any concern, the same does not prove conduct of search as
enumerated u/s 132 of the Act. It has been pointed out that vide order dated
29.06.2009, the Hon'ble High Court of Bombay, in the case of `CIT vs. J.M.
Trading Company' in ITA No.589 of 2009 (copy at CLPB 200), dismissed the
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ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
appeal filed by the department against the aforesaid Tribunal Order. It has
further been pointed out that vide order dated 06.09.2010, the Hon'ble
Supreme Court, in `CIT, Mumbai vs. M/s J.M. Trading Corporation Ltd.' in CC
No.13456/2010 (copy at CLPB 201), has dismissed the objection for special
leave to appeal filed by the department against the aforesaid judgement and
order of the Hon'ble High Court of Bombay. In this regard, the ld. Counsel for
the assessee has further sought to place reliance on `Jindal Stainless Steels
Ltd. vs. ACIT, Central Circle-6, New Delhi', 120 ITD 301 (Del) and `Dr.
Mansukh Kanjibhai Shah vs. ACIT, Central Cir.2', 129 ITD 376 (Ahm).
7. On the other hand, the Ld. DR, opposing the Cross Objection raised by
the assessee, has made oral submissions and written submissions has been
filed as well. It has been contended that undisputedly, no statement of facts
was filed before the Ld. CIT (A), though it is statutory requirement to do so
and, therefore, the Tribunal is precluded from hearing objection raised by the
assessee; that even otherwise, no cross appeal was filed by the assessee to
the appeal filed by the department and it is only that the assessee has come
up by way of the Cross Objections which shows the change of mind of the
assessee; that as per Section 153A of the Act, a notice thereunder needs
must be issued where a search is `initiated' u/s 132; that in the present case,
the assessee's name was mentioned in the Authorisation Warrant; that so,
the search was validly initiated; that therefore, the notice u/s 153A was
validly issued; that apropos the High Court Order (supra) in the case of `J.M.
Trading', the department's appeal was dismissed as no question of law was
found to be involved; that therefore, this order is of no help to the assessee;
that even the Tribunal order in the case of J.M. Trading (supra) does not aid
the case of the assessee on facts, since, in that case, the premises searched
was owned by the assessee, but it had been rented to another concern,
which is not the case herein; that apropos the assessee's objection of there
being no Panchnama in the assessee's name, as per Section 153A(2) of the
Act, execution of authorization is deemed executed on the conclusion of the
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ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
search as recorded in the last Panchnama drawn; that therefore, unless
there is a Panchnama, the machinery, as provided u/s 153A cannot be set in
motion; that the signatures of the witnesses and the
assesses/representatives of the assesses on the seizure memos and
Panchnama, etc., is the proof of the search having been conducted at the
premises occupied/used by theassessees in response to valid Warrant of
Authorization; that the search is considered to be initiated once the warrant
has been issued by the competent authority and the authorized officers had
entered the correct premises to execute the search warrant; that in `M/s
Rajat Trade Com India Pvt. Ltd.', 120 ITD 48 (Indore), wherein a joint warrant
of authorization was issued in the name of M/s Rajat Gems & Jewellers (P)
Ltd. and M/s Rajat Trade Com India Pvt. Ltd., but the name of M/s Rajat Trade
Com India Pvt. Ltd. was not mentioned in the Panchnama drawn at the
premises, it was held that in the event of Warrant of Authorisation being in
the joint names of the assesses of the group, it was not necessary to write all
the names in the Panchnama; that therefore, drawing of separate
Panchnama in the names of all the persons mentioned in the Warrant of
Authorisation is not necessary; that as per `CIT vs. Dr. C. Balakrishnan Nair',
282 ITR 158 (Kar), it is not sacrosanct that the Panchnama must contain all
the names of the persons whose names are otherwise mentioned in the
search authorization and the non-mentioning of names of all the assessees
mentioned in the Warrant of Authorisation can at the most be said to be an
inadvertent mistake or oversight or irregularity, which cannot hold the entire
search proceedings as invalid; that this view is also supported by the Hon'ble
Supreme Court in the case of `M/s Seth Brothers and Others', 1970 AIR 292
(SC); that Section 292-CC of the Act also talks about only authorization u/s
132 of the Act and not Panchnama; that according to Section 292-CC, if the
Warrant of Authorisation has been issued in many names, the assessment or
re-assessment proceedings are required to be made separately in the name
of each of the persons mentioned in the authorization; that this shows that
the basis for determining the authority of the proceedings u/s 153A is the
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ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
existence of the name in the Authorisation Warrant and not the Panchnama;
that therefore, absence of some names in the Panchnama, which otherwise
figure in the Warrant of Authorisation, is not fatal for the framing of
assessment u/s 153A of the Act; that if for the sake of convenience, instead
of mentioning all the names of the persons, the proceedings are concluded
by drawing a Panchnama, wherein, after mentioning one or two names out of
the many names mentioned in the Warrant of Authorisation, the word `etc.'
is written by the Authorised Officer, the proceedings u/s 153A will not get
vitiated; and that in the Warrant of Authorisation issued in the case of the
assessee, a copy whereof is at APB 177-178, the name of the assessee has
been specifically mentioned.
8. We have heard the parties on these preliminary objections raised by
the assessee. The issues involved are two-fold as to whether in the
absence of the assessee's name being mentioned in the Panchnama,
jurisdiction u/s 153A of the Act was not validly invoked and as to whether
since the premises searched was not owned by the assessee, the search
conducted was not a search as envisaged u/s 132 of the Act, thereby
vitiating the invocation of jurisdiction u/s 153A of the Act.
9. So far as regards the first question, we find force in the contentions of
the department. Clearly, the Warrant of Authorisation contains the name of
the assessee. That being so, absence of the assessee's name in the
Panchnama is not fatal to the conduct of the search. If the authorization is
valid, absence of the name of the assessee in Panchnama will not render the
search operation invalid, if other requirements of law are fulfilled. In `M/s
Rajat Tradecom (P) Ltd. vs. DCIT, 2 (1), Indore', 120 ITD 48 (Indore), it has
been held that for applicability of Section 153A, the initiation of search is
necessary; that Section 153A would be applicable where, inter alia, a search
is initiated u/s 132; and that therefore, before invoking the provisions of
Section 153A, it would be necessary to comply with the provisions contained
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ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
in Section 132 (1). In the present case, since the Warrant of Authorisation
contains the name of the assessee, such provisions are amply complied with.
In view of the above, this objection of the assessee, i.e., C.O. No.2, is
meritless and is rejected and the observations of the Ld. CIT (A) in this
regard, as contained in para 5 of the impugned order, are rejected.
10. Coming to the other question raised by the assessee, the department
has raised a preliminary objection in this regard, to the effect that this issue
was never raised before the authorities below and, therefore, the Tribunal
cannot go into it at this stage. This, however, is not found to be correct. This
issue was raised before the ld. CIT (A), by way of the Assessee's rejoinder
dated 20.05.2010 (PB 179-183, at PB 181, para 6) to the Assessing Officer's
Remand Report. The relevant portion thereof is as follows:-
"It is submitted that, this premises namely Global Arcade, MG Road,
Gurgaon is not premises of the appellant as is otherwise evident from
the caption of the order of assessment wherein the premises of the
appellant has been stated as Community Centre, Saket, New Delhi.
This is also seen from the return of income filed by the appellant for
the instant assessment year, copy of which is placed at pages 8 to 23
of Paper Book and further, from the notice under section 153A of the
Act which is placed at page 24 of Paper Book. It will be seen that in
none of the above, it has either been alleged and in fact, could not
have otherwise been alleged that premises at 3rd Floor, Global Arcade,
MG Road, Gurgaon was premises of the appellant company and since
the premises at 3rd Floor, Global Arcade, MG Road, Gurgaon was not
premises of the appellant company, it could not be validly held that
any search was conducted on the appellant company. In fact, it
appears this was the very reason, whereby no panchnama has been
prepared in the name of the appellant company and, thus no search
was conducted on the appellant company. In view thereof, it is
respectful submission of the appellant that the comments of the
learned Assistant Commissioner of Income Tax are arguments in
despair and are not supported by any valid, legal justification much
less factual substance. The appellant here, seeks to refer to the
judgment of the Mumbai Bench in the case of J.M. Trading Corporation
vs. CIT reported in 22 SOT 489 wherein it has been held that, even if
search carried out on the premises owned by the assessee but rented
to any concern, the same does not any implication as a proof of
conduct of search on the appellant. It was further held that, mere
mentioning name in the Panchnama does not lead to a conclusion that
search was conducted on the assessee. A copy of the said decision is
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ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
placed at pages 79 to 94 of Paper Book. The principles laid down in the
aforesaid judgment are squarely applicable to the facts of the case of
the appellant and hence, it is respectful submission of the appellant
that by no stretch of imagination, it could either held much less
conclude that there was any valid initiation of proceedings under
section 153A of the Act on the appellant and hence, assumption of
jurisdiction to initiate proceedings under section 153A of the Act and
framing of assessment under section 153A/143 (3) of the Act are not in
accordance with law and hence unsustainable. Further, so far as the
merits of the case, the appellant apart from judicial decisions cited
earlier, also seeks to rely upon the recent decision of the Mumbai
Bench in the case of Anil P Khimani in ITA No (s) 2855 to
2860/Mum/2008 for Assessment Year 1999-2000 to 2004-05 and,
Meghmani Organics Ltd. vs. DCIT reported in 36 DTR 187 (Ahd) are
being enclosed (pages 6 to 13 and, 14 to 27 to this submissions)
herewith to submit that, in absence of any material found as a result of
search of the appellant, no addition could have been otherwise made
in the order of assessment made under section 153A/143 (3) of the
Act.
7. In view of the above, it is submitted that the assessments
framed may kindly be quashed and in the alternative, disallowances
addition made may kindly be deleted and appeals of the appellant
company be allowed. Should your goodself require any further
information, the appellant is too willing to furnish the same."
11. It cannot be denied that this is an issue pertaining to jurisdiction. It
goes to the very root of the matter. The facts with regard thereto are
available before us. As such, we can very well go into this issue at this stage.
The Warrant of Authorisation (APB page 177-178) shows the address of the
premises to be searched as `3rd Floor, Global Arcade, MG Road, Gurgaon.'
The assessment order as well as the order under appeal have taken note of
the fact of this address being the address of the premisis searched. The
assessee contends that this premises is not owned by it and, therefore, the
search carried out is invalid qua the assessee. The department has not
disputed the factum of the said premises not belonging to the assessee.
Even the document pertaining to the assessee, which was found from this
premises in the search was, as stated by the ld. Counsel for the assessee
before us on query, owned up by the Vipul Group and surrender was made
by them on the basis thereof. Thus, indisputably, there is nothing on record
to connect the assessee with the premises searched. Now, in `JM Trading
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ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
Corporation', 20 SOT 489 (Mum) (supra), it has been observed, inter alia,
that mere search of the premises owned by the assessee but rented to
another concern does not by any implication, prove the conduct of search
against the assessee, in view of the fact that the assessee was not available
at the address searched upon. In the present case, the situation is rather
more in favour of the assessee. Here, it is not that the premises was owned
by the assessee but was rented out. Rather, undisputedly, the premises
searched does not belong to the assessee. The department's appeal in the
case of `JM Trading Corporation' was dismissed in limine for want of
substantial question of law by the Hon'ble High Court of Bombay. While
doing so, the finding of the Tribunal to the effect that non-compliance of the
provisions of the Income-tax Act by the authorized officer renders a search
invalid and illegal. The Hon'ble Supreme Court has also dismissed the SLP
filed by the department. In `Dr. Mansukh Kanjibhai Shah vs. ACIT, Central
Circle-2', 129 ITD 376 (Ahm) (supra) also, since, inter alia, no search
operation was conducted in the premises of the assessee, it was held that
the proceedings u/s 153A of the Act were invalid and bad in law.
12. No decision to the contrary has been brought to our notice.
13. In view of the above discussion, we hold that since no search was
conducted on the premises of the assessee and the search conducted was
conducted on a premises not owned by the assessee, the proceedings u/s
153A of the Act are invalid and bad in law. Accordingly, the orders of the
authorities below are set aside and quashed. Hence, CO No.1 is accepted
and CO No.2 is rejected. CO No.3, being on merits, requires no adjudication.
14. Since the proceedings u/s 153A of the Act and the orders passed by
the taxing authorities had been quashed by us as above, nothing remains for
further adjudication. These being jurisdictional issues going to the root of the
matter, arguments of the parties were heard qua these questions only.
10
ITA Nos.196 to 198/Del/2011
CO Nos.115 to 117/Del/2011
15. In the result, the appeals filed by the department are dismissed and
the Cross Objections filed by the assessee are partly allowed, as above.
The order pronounced in the open court on 14.03.2014.
Sd/- Sd/-
[SHAMIM YAHYA] [A.D. JAIN]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, 14th March, 2014.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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