FAZAL ABDUL WAHAB SARANG, MUMBAI V. D.C.I.T. CENTRAL RANGE - 36, MUMBAI

ITA 1456/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8876 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 04-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Keywords: Invalid notice; Search and seizure
• Section: 143(3); 133A; 153A; 32; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 1456/MUM/2012 (ASSESSMENT YEAR: 2008-09) SHRI FAZAL SARANG VS. DCIT, CENTRAL RANGE 36 302, SHABNAM APT., 33, S.V. ROAD, OPP. LAKDI MARKET ANDHERI (W), MUMBAI 400048 AAYAKAR BHAVAN M.K. ROAD MUMBAI 400020 PAN AABPS9385F APPELLANT RESPONDENT APPELLANT BY: SHRI PIYUSH CHHAJED RESPONDENT BY: SHRI MS. S. PADMAJA DATE OF HEARING: 22.12.2016 DATE OF PRONOUNCEMENT: 04.01.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 41, MUMBAI DATED 21.12.2011 FOR A.Y. 2008-09. 2.1 IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING REVISED GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER ERRED IN ASSUMING JURISDICTION U/S. 153A OF THE INCOME TAX ACT AND CONSEQUENTLY PASSING THE ORDER U/S. 143(3) R.W.S. 153A. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF RS.29,46,650/- ON THE BASIS OF LOOSE SL IP FOUND DURING THE COURSE OF SEARCH AT APPELLANTS BROTHERS PREMI SES, WITHOUT APPRECIATING THAT THE SAID TRANSACTION NEVER MATERI ALIZED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF RS.82,075/- BEING DIFFERENTIAL VALUE OF THE AMOUNT INVESTED IN MUTUAL FUND AND THE REDEMPTION VALUE WH EN THE MAJOR INCOME WAS EXEMPT FROM TAX BEING LONG TERM CA PITAL GAIN. ITA NO. 1456/MUM/2012 SHRI FAZAL SARANG 2 2.2 BY WAY OF LETTER DATED 07.08.2015, THE ASSESSEE SUBMITS THAT GROUND NO. 1 OF THE REVISED GROUNDS (SUPRA) HAS BEEN RAISE D FOR THE FIRST TIME AND HAS PRAYED FOR ADMISSION OF THE SAME, FOR CONSIDERA TION AND ADJUDICATION IN THIS APPEAL, SINCE IT IS A LEGAL GROUND AND GOES TO THE VERY ROOT OF THE JURISDICTIONAL ISSUE THEREIN. THE ASSESSEES PETITI ON FOR ADMISSION OF THE ABOVE GROUND [I.E. GROUND NO. 1 OF THE REVISED GROU NDS (SUPRA)] HAS BEEN DULY CONSIDERED. AFTER HEARING BOTH SIDES ON THE IS SUE, WE ARE OF THE VIEW THAT IN THE INTEREST OF EQUITY AND JUSTICE, THIS GR OUND BE ADMITTED FOR CONSIDERATION IN THE APPEAL, BEING A LEGAL GROUND W HICH GOES TO THE VERY ROOT OF THE MATTER IN RESPECT OF THE ASSESSEES CHA LLENGING THE ASSESSING OFFICERS (AO) ASSUMPTION OF JURISDICTION UNDER SEC TION 153A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AND PASSING THE ORDER OF ASSESSMENT THEREAFTER UNDER SECTION 143(3) R.W.S. 153A OF THE ACT. WE, ACCORDINGLY ADMIT THIS GROUND FOR CONSIDERATION AND ADJUDICATIO N IN THIS APPEAL. WE HAVE ALSO HEARD THIS APPEAL ON THIS GROUND NO. 1. 3. GROUND NO. 1 VALIDITY OF THE AOS ASSUMPTION OF J URISDICTION UNDER SECTION 153A OF THE ACT AND CONSEQUENT PASSIN G OF THE ORDER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 153 A 3.1 IN THIS GROUND, THE ASSESSEE HAS CHALLENGED TH E VALIDITY OF THE AOS ASSUMPTION OF JURISDICTION BY ISSUE OF NOTICE UNDER SECTION 153A OF THE ACT AND CONSEQUENT PASSING OF THE ORDER OF ASSESSMENT U NDER SECTION 143(3) R.W.S. 153A OF THE ACT DATED 27.12.2010. ACCORDING TO THE LEARNED A.R. OF THE ASSESSEE IT IS EVIDENT FROM PAGE 1 OF THE ORDER OF ASSESSMENT THAT THE AO INITIATED ASSESSMENT PROCEEDINGS ON A FACTUALLY ERRONEOUS BASIS, I.E. THAT A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT ON, AMONG OTHERS, THE ASSESSEE ALSO ON 24.02.20 09. IT IS SUBMITTED THAT THE CORRECT FACTUAL POSITION IS THAT NO SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT ON THE ASSESSEES PREMISES ON 2 4.02.2009, BUT ONLY A SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CAR RIED OUT AT THE ASSESSEES PREMISES ON THAT DAY. IT IS CONTENDED BY THE LEARNED A.R. OF THE ASSESSEE THAT IN VIEW OF THESE UNDISPUTED FACTS ON RECORD, THE AOS ASSUMPTION OF JURISDICTION BY ISSUE OF NOTICE UNDER SECTION 153A OF THE ACT WAS INVALID AND THEREFORE IT FOLLOWS THAT THE CONSE QUENT ORDER OF ITA NO. 1456/MUM/2012 SHRI FAZAL SARANG 3 ASSESSMENT FOR A.Y. 2008-09 PASSED UNDER SECTION 14 3(3) R.W.S. 153A OF THE ACT VIDE ORDER DATED 27.12.2010 IS ALSO VOID AB INITIO. FURTHER, IN THIS CASE, ON EARLIER OCCASIONS WHILE HEARING THE ASSESS EES APPEALS FOR ASSESSMENT YEARS 2006-07 AND 2007-08, INSPITE OF TH E DIRECTIONS OF THE BENCH, REVENUE WAS NOT ABLE TO PRODUCE A COPY OF TH E WARRANT OF AUTHORISATION FOR CONDUCTING SEARCH UNDER SECTION 1 32 OF THE ACT IN THE CASE ON HAND TO ESTABLISH/PROVE THAT THE ASSESSEE W AS SEARCHED ON 24.02.2009 AS STATED BY THE AO IN THE ORDER OF ASSE SSMENT. IN FACT, THE AOS LETTER DATED 30.11.2016, A COPY OF WHICH WAS P LACED ON RECORD, CLEARLY ACKNOWLEDGES THE INABILITY OF THE DEPARTMENT TO PRO DUCE THE WARRANT OF AUTHORISATION FOR SEARCH UNDER SECTION 132 OF THE A CT AND ONLY CONFIRMS THE FACT A SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CONDUCTED AT THE ASSESSEES PREMISES ON 24.02.2009. IN SUPPORT O F THE PROPOSITION, THAT IN THE ABSENCE OF A WARRANT OF AUTHORISATION BEING ISSUED TO CONDUCT SEARCH ACTION UNDER SECTION 132 OF THE ACT ON THE A SSESSEE IN THE CASE ON HAND, THE PREREQUISITE CONDITIONS FOR ISSUE OF NOTI CE UNDER SECTION 153A OF THE ACT WERE ABSENT, CONSEQUENTLY THE AO COULD NOT HAVE ASSUMED PROPER AND LAWFUL JURISDICTION UNDER SECTION 153A OF THE A CT AND THEREFORE VALID ORDER OF ASSESSMENT FOR A.Y. 2008-09 COULD NOT HAVE BEEN PASSED UNDER SECTION 153A OF THE ACT. THE LEARNED A.R., INTER AL IA, PLACED RELIANCE ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. RAMESH D. PATEL (2014) 42 TAXMANN.COM 540 (GUJARAT), WHICH IS STATED TO BE ON SIMILAR FACTS. IT IS PRAYED THAT IN THE LIGHT OF TH E ADMITTED AND UNCONTROVERTED FACT THAT NO SEARCH UNDER SECTION 13 2 OF THE ACT WAS CONDUCTED ON 24.02.2009 IN THE CASE ON HAND, THE NO TICE ISSUED UNDER SECTION 153A OF THE ACT LACKING LEGAL SANCTION, WAS AN INVALID NOTICE AND ORDER OF ASSESSMENT PASSED CONSEQUENT THERETO UNDER SECTION 143(3) R.W.S. 153A OF THE ACT FOR A.Y. 2008-09 IS INVALID AND IS TO BE QUASHED. 3.2 PER CONTRA, THE LEARNED D.R. FOR REVENUE PLACED RELIANCE ON THE ORDER OF THE AO IN THIS REGARD. IT WAS ALSO CONTENDED THA T IN VIEW OF THE PROVISIONS OF SECTION 292BB OF THE ACT, EVEN THOUGH ADMITTING THAT ISSUE OF THE NOTICE UNDER SECTION 153A OF THE ACT DATED 05.1 0.2009 WAS NOT WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE FACT THAT THE ITA NO. 1456/MUM/2012 SHRI FAZAL SARANG 4 ASSESSEE HAD APPEARED/COOPERATED IN THE ASSESSMENT PROCEEDINGS, WITHOUT RAISING ANY OBJECTION IN THIS REGARD, BEFORE COMPLE TION OF THE ASSESSMENT PROCEEDINGS, PRECLUDES IT FROM TAKING OBJECTION IN THE MATTER IN ANY PROCEEDINGS UNDER THE ACT. 3.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE FACTS OF THE MATTER AS EMERGE FROM THE R ECORD ARE THAT ADMITTEDLY ONLY A SURVEY UNDER SECTION 133A OF THE ACT WAS CON DUCTED AT THE ASSESSEES PREMISES ON 24.01.2009. THE AO, HOWEVER, IN THE IMPUGNED ORDER OF ASSESSMENT FOR A.Y. 2008-09 HAD ERRONEOUSL Y STATED THAT A SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT IN THE ASSESSEES PREMISES ON 24.02.2009, WHEN SEARCH OPERATIONS WERE CARRIED OUT IN THE CASE OF HICONS & PRANAY GROUP OF CASES. THIS STATEMENT OF THE AO W AS CONTRADICTED BY THE AO HIMSELF LATER ON IN THE ORDER OF ASSESSMENT WHERE HE STATES THAT DURING THE SURVEY UNDER SECTION 133A OF THE ACT CAR RIED OUT AT THE PREMISES OF ASSESSEE IN THE CASE ON HAND A STATEMEN T ON OATH WAS RECORDED BY THE ASSESSEE. ACCORDING TO THE ASSESSEE , SINCE IT IS NOT ESTABLISHED BY REVENUE THAT ANY SEARCH PROCEEDINGS UNDER SECTION 132 OF THE ACT WERE CARRIED IN THE ASSESSEES CASE ON 24.0 2.2009, THE AO HAD NO LEGAL SANCTION FOR ASSUMING JURISDICTION TO ISSUE T HE NOTICE UNDER SECTION 153A OF THE ACT DATED 05.10.2010; WHICH WERE INVALI D AND REQUIRED TO BE QUASHED. 3.3.2 IT IS SEEN FROM THE RECORDS BEFORE US THAT TH E BENCH OFFERED REVENUE AMPLE/SUFFICIENT OPPORTUNITIES TO PRODUCE THE WARRA NT OF AUTHORISATION ISSUED FOR CONDUCTING SEARCH UNDER SECTION 132 OF T HE ACT IN THE CASE ON HAND ON 24.02.2009 AS STATED BY THE AO IN THE IMPUG NED ORDER OF ASSESSMENT. WE FIND THAT DESPITE THESE OPPORTUNITIE S, REVENUE FAILED TO PRODUCE THE SAME AND IN REPORT DATED 30.11.2016, TH E AO HAS ONLY CONFIRMED THAT AS PER THE APPRAISAL REPORT, SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AT THE ASSESSEES B USINESS PREMISES ON 24.02.2009 AND A STATEMENT OF THE ASSESSEE WAS RECO RDED ON THAT DAY. IN THIS FACTUAL MATRIX OF THE CASE, AS DISCUSSED ABOVE , WE CONCLUDE THAT NO ITA NO. 1456/MUM/2012 SHRI FAZAL SARANG 5 SEARCH WARRANT WAS ISSUED AUTHORISING SEARCH UNDER SECTION 132 OF THE ACT IN THE CASE ON HAND ON 24.02.2009. REVENUE HAS BEEN UNABLE TO CONTROVERT THIS VIEW AS EXPRESSED BY US. 3.3.3 SECTION 153A OF THE ACT PERTAINS TO ASSESSMEN TS TO BE CARRIED OUT IN CASE OF SEARCH UNDER SECTION 132 OR REQUISITION UND ER SECTION 132A OF THE ACT. SUBSECTION (1) OF SECTION 153A PROVIDES THAT N OTWITHSTANDING ANYTHING CONTAINED IN SECTIONS 139, 147, 148, 149, 151 AND 1 43 OF THE ACT, IN THE CASE OF A PERSON IN WHOSE CASE SEARCH IS INITIATED UNDER SECTION 132 OF THE ACT OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASS ETS ARE REQUISITIONED UNDER SECTION 132A OF THE ACT AFTER 31.05.2003, THE AO SHALL ISSUE NOTICE REQUIRING SUCH PERSON TO FURNISH THE RETURNS OF INC OME FOR AND ASSESS OR RE-ASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR I N WHICH SUCH SEARCH WAS CONDUCTED OR REQUISITION IS MADE. IN OUR CONSID ERED VIEW, IN THE LIGHT OF THE FACTUAL MATRIX OF THE CASE AS DISCUSSED FROM PARA 3.1 TO 3.3.2, WE RECORD THE FINDING THAT THERE WAS NO WARRANT OF AUT HORISATION ISSUED TO SEARCH THE ASSESSEES PREMISES ON 24.02.2009 AND RE VENUE WAS UNABLE TO PRODUCE THE SAME, IF ANY, TO CONTROVERT OUR FINDING . THIS WAS SPECIFICALLY REQUIRED IN THE LIGHT OF THE CONTRADICTORY STATEMEN TS MADE BY THE AO IN THE ORDER OF ASSESSMENT WHICH LED TO THE CONFUSION OF W HETHER THE ASSESSEE WAS SUBJECTED TO SEARCH OR NOT. IN THE ABSENCE OF A NY WARRANT OF AUTHORISATION TO SEARCH THE ASSESSEES PREMISES UND ER SECTION 132 OF THE ACT, ON 24.02.2009, THE AO HAD NO JURISDICTION TO I SSUE THE NOTICE UNDER SECTION 153A OF THE ACT DATED 05.10.2009 ISSUED BY HIM; THEREBY RENDERING IT INVALID AND CONSEQUENTLY THE ORDERS OF ASSESSMEN T PASSED UNDER SECTION 143(3) R.W.S. 153A OF THE ACT FOR ASSESSMENT YEAR 2 008-09 SUBSEQUENT TO THE ISSUE OF THAT NOTICE UNDER SECTION 153A OF THE ACT COULD NOT HAVE BEEN PASSED AND THE SAME IS ALSO HELD TO BE VOID ABINITI O AND ACCORDINGLY CANCELLED. IN COMING TO THIS FINDING WE DRAW SUPPOR T FROM THE DECISIONS OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. RAMESH D. PATEL (2014) 42 TAXMANN.COM 540 (GUJARAT), WHICH IS ON SI MILAR FACTS AND IS SQUARELY APPLICABLE TO THE CASE ON HAND. GROUND NO. 1 OF ASSESSEES APPEAL FOR A.Y. 2008-09 IS ALLOWED. ITA NO. 1456/MUM/2012 SHRI FAZAL SARANG 6 3.3.4 WE NOW REVERT BACK TO THE CONTENTION OF THE L EARNED D.R. FOR REVENUE THAT IN VIEW OF THE PROVISIONS OF SECTION 2 92BB OF THE ACT, EVEN THOUGH ADMITTEDLY THE NOTICE ISSUED UNDER SECTION 1 43A OF THE ACT DATED 05.10.2009 WAS NOT WARRANTED AND WRONGLY ISSUED IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE FACT THAT THE ASSESS EE APPEARED/COOPERATED IN ASSESSMENT PROCEEDINGS, WITHOUT RAISING ANY OBJE CTION ABOUT THE NOTICE BEFORE COMPLETION OF ASSESSMENT PROCEEDINGS, PRECLU DES IT FROM TAKING ANY OBJECTION IN THIS REGARD IN ANY PROCEEDINGS UNDER T HE ACT. WITH DUE RESPECT WE ARE UNABLE TO AGREE OR CONCUR WITH THIS PROPOSIT ION/CONTENTION PUT FORTH BY THE LEARNED D.R. THE PROVISIONS OF SECTION 292BB OF THE ACT READ AS UNDER: - NOTICE DEEMED TO BE VALID IN CERTAIN CIRCUMSTANCES . 292BB. WHERE AN ASSESSEE HAS APPEARED IN ANY PROCEEDING O R CO- OPERATED IN ANY INQUIRY RELATING TO AN ASSESSMENT O R REASSESSMENT, IT SHALL BE DEEMED THAT ANY NOTICE UNDER ANY PROVISION OF THIS ACT, WHICH IS REQUIRED TO BE SERVED UPON HIM, HAS BEEN D ULY SERVED UPON HIM IN TIME IN ACCORDANCE WITH THE PROVISIONS OF TH IS ACT AND SUCH ASSESSEE SHALL BE PRECLUDED FROM TAKING ANY OBJECTI ON IN ANY PROCEEDING OR INQUIRY UNDER THIS ACT THAT THE NOTIC E WAS (A) NOT SERVED UPON HIM; OR (B) NOT SERVED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPROPER MANNER: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY WHERE THE ASSESSEE HAS RAISED SUCH OBJECTION BEFORE THE COMPL ETION OF SUCH ASSESSMENT OR REASSESSMENT. FROM A PLAIN READING OF SECTION 292BB (SUPRA), IT IS CLEAR THAT IT PROVIDES FOR CERTAIN CIRCUMSTANCES IN WHICH A NOTIC E IS DEEMED TO BE VALID. THESE ARE WHERE A NOTICE FOR ASSESSMENT/REASSESSMEN T WAS: (I) NOT BEEN SERVED UPON THE ASSESSEE; (II) NOT BEEN SERVED UPON HIM IN TIME; (III) SERVED UPON HIM IN AN IMPROPER MANNER. AS PER THIS SECTION, THE ASSESSEE IS PRECLUDED FRO M RAISING ANY OBJECTION IN THIS REGARD IN ANY PROCEEDING UNDER TH E ACT, IF THE ASSESSEE HAS APPEARED IN OR COOPERATED IN SUCH ASSESSMENT/IN QUIRY PROCEEDING. THIS PROPOSITION, HOWEVER, IS TRIGGERED AND HOLDS G OOD/BECOMES APPLICABLE ONLY IF THE SAID NOTICE IS REQUIRED TO B E SERVED UPON HIM . IN ITA NO. 1456/MUM/2012 SHRI FAZAL SARANG 7 OUR CONSIDERED VIEW, THE SAID NOTICE UNDER SECTION 153A OF THE ACT DATED 05.10.2009 ISSUED TO THE ASSESSEE FOR A.Y. 2008-09, IN ORDER TO ENABLE THE AO TO ASSUME VALID JURISDICTION FOR MAKING THE ASSE SSMENT THEREUNDER, WAS NOT THE NOTICE THAT WAS REQUIRED TO BE ISSUED B Y THE AO IN THE CASE ON HAND AS IT IS CLEARLY AND UNDISPUTEDLY ESTABLISHED THAT NO SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE ASSES SEES PREMISES ON 24.02.2009 AS STATED BY THE ASSESSEE. SINCE IT IS C LEARLY EVIDENT THAT THE NOTICE REQUIRED TO BE ISSUED FOR THE ASSESSEE WAS N OT THE ONE ISSUED UNDER SECTION 153A OF THE ACT FOR A.Y. 2008-09, AS WAS AD MITTEDLY ISSUED BY THE AO IN THE CASE ON HAND, THE PROVISIONS OF SECTION 2 92BB OF THE ACT WOULD NOT, IN OUR CONSIDERED VIEW, COME TO THE RESCUE OF REVENUE. WE ACCORDINGLY REJECT THIS ARGUMENT PUT FORTH BY THE LEARNED D.R. 4. IN VIEW OF OUR FINDING WITH REFERENCE TO GROUND NO. 1 IN ALLOWING THE ASSESSEES APPEAL FOR A.Y. 2009-10, THE OTHER GROUN DS RAISED BY THE ASSESSEE ON MERITS DO NOT REQUIRE TO BE ADJUDICATED AT THIS JUNCTURE. 5. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2008- 09 IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JANUARY, 2017. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 4 TH JANUARY, 2016 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -41, MUMBAI 4. THE CIT , CENTRAL- III, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.