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Commissioner Of Income Tax Ii (S) v. Ramesh D Patel Opponent(S)
Factual and Procedural Background
The Revenue filed tax appeals challenging the common judgment of the Income Tax Appellate Tribunal dated 21 September 2012. The appeals concerned assessment orders passed under section 153A of the Income Tax Act, 1961, for different assessment years. [1][2]
The assessee contended that no search had been conducted against him and that the Assessing Officer therefore lacked jurisdiction to pass assessments under section 153A. The Tribunal annulled the assessments for assessment years 2001-02 to 2004-05 after the Revenue failed, despite repeated opportunities, to produce the search warrant or authorization. [2][3] The Revenue challenged the Tribunal’s decision before the Court. [4]
Legal Issues Presented
- Whether the Tribunal was justified in annulling assessments under section 153A in the absence of a search warrant or authorization concerning the assessee. [5]
- Whether the assessee’s failure to challenge the statutory notice within the time prescribed by section 124(3) prevented him from challenging the validity of the assessments. [5]
- Whether the additional limitation question raised in Tax Appeal No. 349 of 2013 required determination. [6]
Arguments of the Parties
Revenue's Arguments
- The Revenue challenged the annulment of the assessments under section 153A and relied on section 124(3), contending that the assessee had not challenged the statutory notice within the prescribed period or before completion of assessment. [5]
Assessee's Arguments
- The assessee argued that he had never been subjected to search proceedings and that the Assessing Officer therefore had no jurisdiction to make assessments under section 153A. [2]
- The assessee relied on Siksha ‘O’ Anusandhan v. CIT for the proposition that section 153A applies only where a search under section 132 has been initiated or books, documents, or assets have been requisitioned under section 132A. [7]
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Siksha ‘O’ Anusandhan v. CIT, 336 ITR 112 (Orissa) | Section 153A permits assessment or reassessment only where a search under section 132 has been initiated or books, documents, or assets have been requisitioned under section 132A. | The Court relied on this principle in confirming that, absent search authorization or requisition, assessments under section 153A could not be sustained. [7][8] |
Court's Reasoning and Analysis
The Court found that the Assessing Officer had made contradictory statements: one assessment order referred to a survey and the absence of a search warrant, while another stated that the assessee had been subjected to search. [9]
Because of this contradiction, the Tribunal gave the Revenue multiple opportunities to produce the search record and authorization. The Revenue failed to do so, leading the Tribunal to conclude that no search warrant existed against the assessee. [9]
The Court explained that section 153A applies, among other circumstances, where a search is initiated under section 132 or books, documents, or assets are requisitioned under section 132A. Section 153B prescribes the time limit for completing assessments under section 153A. [10]
Applying that statutory framework, the Court held that the Tribunal’s factual finding regarding the absence of search authorization was justified and that assessments under section 153A could not have been passed without the required search or requisition. [8]
The Court rejected the Revenue’s reliance on section 124(3). It held that section 124 concerns the territorial jurisdiction of an Assessing Officer and the time limits for objecting to that territorial jurisdiction. It does not validate the inherent jurisdiction to make a section 153A assessment where no search authorization under section 132 or requisition under section 132A existed. [8][11]
The additional limitation issue raised in Tax Appeal No. 349 of 2013 was left open because the assessments had already been held invalid on the section 153A jurisdiction issue. [6]
Holding and Implications
Tax Appeals dismissed. The Court upheld the Tribunal’s annulment of the assessments under section 153A because the Revenue failed to establish that the assessee had been subjected to a valid search or requisition. [8][12]
The direct consequence was that the impugned assessments remained invalid. The limitation question in Tax Appeal No. 349 of 2013 was not decided and was kept open. [6] No broader implications beyond this determination are discussed in the opinion.
ORAL ORDER
(PER: HONOURABLE MR. JUSTICE AKIL KURESHI)
These tax appeals are filed by the Revenue calling in question the common judgment of the Income Tax Appellate Tribunal dated 21.9.2012 Since facts are similar, we may notice them as they arise in Tax Appeal No. 344 of 2013.
The following question has been presented for our consideration:
“Whether the ITAT was justified in law and in facts in annulling the assessment finalized u/s.153A(b) on technical ground that in absence of search warrant, no order can be passed u/s.153A(b) of the Act, without appreciating fact that the assessee did not challenge issue of statutory notice calling for return u/s.153A of Income Tax Act, 1961 within stipulated time or before completion of assessment, in view of section 124(3) of Income Tax Act, 1961?”
As is apparent from the question itself, the issue pertains to the validity of the assessment orders passed by the Assessing Officer for different assessment years under section 153A of the Income Tax Act, 1961 (‘the Act’ for short). The assessee's contention was that he was never subjected to search proceedings and accordingly, the Assessing Officer had no jurisdiction to pass any order under section 153A of the Act against him. Even when the matter ultimately reached the Tribunal, it allowed the assessee's appeals making following observations:
“2. At the very outset, it was submitted by the Ld. AR of the assessee that no search was carried out in the case of the assessee and therefore all the assessment orders passed by the AO for AY 2001-02 to 2004-05 should be annulled. Ld. DR of the Revenue could not bring on record copy of search warrant for carrying out of search in this case although several opportunities were provided to him for doing so. In the assessment order for A.Y.2001-02, passed by AO u/s.147 r.w.s 144 on 22-12-2006, it is stated by the AO that a survey u/s.133A was conducted at the office premises of the assessee on 19-01-2006 and there is no mention of any search having been carried out in this case. In the assessment order for the same year which was completed by the AO on the same date i.e 14-08-2008 u/s.153(b) r.w.s 143(3) of the Act, it is stated by the AO that a search u/s.132 was carried out in the case of J.K Securities Group of cases and in the case at assessee on 19-01-2006. Hence, we find that observation made by theAO in these two assessment orders for same A.Y are contrary because in the first assessment order dated 22-12-2006, it is stated by the AO that survey was conducted u/s.133A at the office premises of the assessee on 19-01-2006 and in the second order passed by the AO on 14-08-2008, he stated that search was carried out on 19-01-2006 in the case of J.K Securities Group of caes and in the case of this assessee also. In view of these contrary statement of the AO in these two orders passed by him for the same A.Y And in the absence of search warrant having been brought on record by the Ld.DR of the Revenue inspite of allowing several opportunities as recorded in the order-sheet, we are of the considered opinion that the assessment completed by the AO u/s 153(b) for A.Y 2001-02 to A.Y.2004-05 are liable to be annulled because in the absence of search, no assessment can be made u/s.153(b). Therefore all these appeals are allowed i.e IT (SS) A No. 115-118.Ahd/2009.”
It is this order of the Tribunal which the Revenue has challenged in these appeals.
Having heard the learned counsel for the parties, we find from the record that the Assessing Officer had made contradictory statements with respect to the assessee being subjected to search. In one order, he noted that no search warrant was issued against the assessee, while in another order, he recorded that not only M/s. J.K Securities Group, but the assessee was also subjected to search. To clear this confusion, the Tribunal gave multiple opportunities to the Revenue to produce the record of search and authorization. Despite sufficient opportunities, the Revenue could not produce the same. The Tribunal, therefore, concluded that there was no search warrant against the assessee. The Tribunal, therefore held that in absence of any search warrant, the orders passed by the Assessing Officer under section 153B of the Act were invalid.
We have no reason to interfere with the order passed by the Tribunal. Section 153A of the Act pertains to assessment in case of search or requisition. Sub-section (1) thereof provides that notwithstanding anything contained in sections 139, 147, 148, 149, 151 and 153 of the Act, in case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st of May 2003, the Assessing Officer shall issue a notice to such person requiring him to furnish the return of income and 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. Section 153B of the Act provides for time limit for completion of assessment under section 153A.
Learned counsel for the assessee has rightly relied on a decision of the Orissa High Court in the case of Siksha ‘O’ Anusandhan v. CIT, 336 ITR 112 (Orissa) in which it was held that provisions of section 153A make it clear that only in the case of a person where a search was initiated under section 132 or books of account or other documents or any assets were requisitioned under section 132A after 31.3.2002, the Assessing Officer could after issuing a 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 was conduced or requisition was made.
In the present case, the Tribunal came to a factual finding that no search authorization was produced. This was necessary because the Assessing Officer had made contradictory references to the assessee being subjected to search or not. In absence of a search authorization, the Tribunal correctly held that assessment orders under section 153A could not have been passed. Reliance of the Revenue to section 124(3) of the Act would be of no avail. Section 124 pertains to jurisdiction of the Assessing Officers. Sub-section (1) thereof concerns the situation where, by virtue of any order or direction under sub-sections (1) or (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area within the limits of such area. Sub-section (2) of section 124 provides, inter alia, that where a question arises under the said section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief Commissioner, etc. Sub-section (3) thereof provides as under:
“(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer-
(a) Where he has made a return under sub-section (1) of section 115WD or under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 115WE or sub-section (2) of section 143 or after the completion of the assessment whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section ()1) of section 115WH or under section 148 for making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier.”
Thus, section 124 of the Act pertains to territorial jurisdiction of an Assessing Officer vested under sub-section (1) or (2) of section 120. An objection to such jurisdiction can be raised in terms of section 124(2). In terms of sub-section (3) of section 124, right to raise such objection shall be foregone beyond the stages mentioned therein. The said provisions are clearly concerning with the dispute of the assessee with respect to the territorial jurisdiction of the Assessing Officer and has no relevance in so far as the inherent jurisdiction for passing an order of assessment under section 153A of the Act is concerned, when no search authorization under section 132 was issued or requisition under section 132A of the Act was made.
Before closing, we notice that in Tax Appeal No. 349 of 2013, for the assessment year 2005-06, the Revenue has also raised an additional question of limitation which arose out of the judgment of the Tribunal. However, since we confirm the decision of the Tribunal on the limited question of validity of assessment under section 153A of the Act, this question need not be gone into and is kept open.
In the result, Tax Appeals are dismissed.
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