Shri Sunil Shripati Mane, Kolhapur V. Assistant Commissioner of Income Tax(Central), Circle, Kolhapur, Kolhapur

ITSSA 114/PUN/2022

AI Insights

The case involves Shri Sunil Shripati Mane, who appealed against the orders of the CIT(A), Pune-11, which were based on proceedings under section 153C read with section 144 of the Income Tax Act, 1961, for the assessment year 2010-2011. The primary legal contention was whether the appellant, being the 'searched' party, could be subjected to section 153C proceedings, which are typically applicable to persons other than the 'searched' person. The Tribunal examined the legal provisions and precedents, including a relevant Karnataka High Court decision, and concluded that the proceedings were correctly applied. Additionally, the Tribunal dismissed the appellant's challenge to the addition of unsecured loans, citing insufficient evidence to substantiate the loans' genuineness and creditworthiness.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 138031 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-06-2023
• Appeal Filed By: Assessee
• Order Result: DismissedDismissed
• Bench Allotted: B
• Next Hearing Date: 12-04-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2022
• Other Referred Cases: [2023] 146 taxmann.com 553 (Kar.) Sunil Kumar Sharma vs. DCIT, [2013] 40 taxmann.com 365 (Del.) MDLR Resorts (P.) Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gift; Search and seizure; Period of limitation; Block assessment; Time period of passing order; Set aside
• Section: 132; 153A; 264; 2(A); 22; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “B” BENCH : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI GD PADMAHSHALI, ACCOUNTANT MEMBER I.T.(S.S.)A.No.114/PUN./2022 Assessment Year 2010-2011 Shri Sunil Shripati Mane, Shree Kamal House, Near Gram Panchayat Office, 1 st Lane, Ujalawadi, Tal Karveer, Kolhapur-416 004. Maharashtra. PAN ALIPM5772A vs. The ACIT (Central) Circle, C.S.No.622/623, 1 st Floor, Off. Unit F/1/A&B, Shrikant Heights, Shahupuri Kolhapur PIN – 416 001. Maharashtra. (Appellant) (Respondent) For Assessee : Shri Pramod S Shingte For Revenue : Shri Sardar Singh Meena, CIT & Shri M.G. Jasnani Date of Hearing : 13.04.2023 Date of Pronouncement : 28.06.2023 ORDER PER SATBEER SINGH GODARA, J.M. : This assessee’s appeal for assessment year 2010- 2011, arises against the CIT(A), Pune-11, Pune’s Din and Order No. ITBA/APL/S/250/2022-23/1044888506(1), dated 24.08.2022, involving proceedings u/s. 153C r.w.s.144 of the Income Tax Act, 1961 (in short “the Act”). Heard Both the parties. Case file perused. 2. Learned counsel proposes a pure legal question first of all that the both the learned lower authorities have erred in law and on facts in framing sec.153C assessment despite the fact that this taxpayer, in fact, happens to the “searched” 2 I.T.(S.S.)A.No.114/PUN./2022 party himself. Mr. Shingte invited our attention to the Assessing Officer’s corresponding panchanama dated 20.12.2014 indicating that the assessee had been duly searched. And also that his search statement had also been recorded. Mr. Shingte files before us [2023] 146 taxmann.com 553 (Kar.) Sunil Kumar Sharma vs. DCIT that sec.153C proceedings would not be exigible in case of the searched party as the same is meant to be invoked only in case of a person not covered in the search action. 3. Learned CIT-DR has filed before us a copy of the corresponding warrant dated 17.12.2014 wherein the assessee’s name nowhere figures as the “searched” person as the same had been issue in the name of Shri Jayant Govind Patil u/sec.132 of the Act. Mr. Meena submits therefore, that both the learned lower authorities have rightly proceeded against the assessee u/s.153C of the Act after recording the corresponding satisfaction(s) dated 14.07.2016. He invited our attention to the clinching facts emerging from sec.153C satisfaction(s) against the assessee that he was found to be owner in possession of not only cash but also other incriminating material. 4. We have given our thoughtful consideration to the foregoing legal issue and find no merit in the assessee’s arguments. It is an admitted fact that the assessee’s reliance 3 I.T.(S.S.)A.No.114/PUN./2022 is only on the corresponding entry(ies) in the panchanama that the search had been executed in his case and at the premises in question i.e., “Kamal House near gram panchayat office”. The same admittedly goes against the contents of the search warrant which stand un-rebutted from the assessee’s side. We do not see any other material in the case file. Faced with the situation, we quote sec.153C of the Act to observe that even if a search is conducted at a premises of a third person who is not covered in the warrant, he would only be proceeded u/sec.153C and not u/sec.153A of the Act. Sec.153C also makes it explicitly clear that the relevant proceedings are initiated against a “person” other than the “searched person”. We further find that case law [2013] 40 taxmann.com 365 (Del.) MDLR Resorts (P.) Ltd. vs. CIT also holds that a “search” in itself only triggers sec.153A proceedings and, even if there is some lapse in drawing the panchanama, the latter would not affect the former’s validity triggering sec.153A process as follows : “15. In order to decide/determine the first contention relating to validity of notice under Section 153A, we would like to reproduce the provisions of Section 153A:— "153A. Assessment in case of search or requisition.—(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is 4 I.T.(S.S.)A.No.114/PUN./2022 initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, 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 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 5 I.T.(S.S.)A.No.114/PUN./2022 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 rules 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 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.—For the removal of doubts, it is hereby declared that,— 6 I.T.(S.S.)A.No.114/PUN./2022 (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 16. Section 153A is a non obstante provision which is invoked in case of a person where the search is initiated against him under Section 132 of the Act or books of accounts or other documents or any other assets which are requisitioned under Section 132A after 31st May, 2003. The section requires the Assessing Officer to issue notice under Section 153A of the Act, requiring the assessee in whose case search was initiated to file return of income for six assessment years in the prescribed form and thereupon the Assessing Officer is required to assess or reassess the total income of the said six years. Pending proceedings for regular or reassessment proceedings in respect of the six assessment years abate subject to sub-section (2). 17. What is noticeable that the mandate and language Section 153A(1) does not make any reference to panchnama or the date of panchnama. It does not state that the panchnama is a pre-condition for invoking the said Section. The words used by the Legislature are "search is initiated 7 I.T.(S.S.)A.No.114/PUN./2022 under Section 132 ......" The word 'initiate' means to commence or start. The section is invoked and applicable when the search is 'initiated'. In other words, the section ticks of and comes into play when the search commences or is undertaken against a person. The expression 'initiate' had come up for interpretation before the Karnataka High Court in CIT v. Wipro Finance Ltd. [2010] 323 ITR 467/[2009] 176 Taxman 233 in relation to Sections 158BC, 158BD etc., and it was observed that as per the dictionary meaning, the said word refers to beginning, commencement or start of proceedings. Reference was made to the decision of the Supreme Court in Om Prakash Jaiswal v. D.K. Mittal AIR 2000 SC 1136, wherein expression 'initiate any proceedings for contempt' in Section 20 of the Contempt of Courts Act 1971, was interpreted. It was held that the word 'initiate' means introductory steps or action or first move. Black's Law Dictionary was referred to and it was observed that 'initiation of contempt proceedings' takes place when the court applies its mind to allegation and decides to direct the alleged contemnor under Section 17 to show-cause as to why he should not be punished. Thereafter, reference was made to different factual situations. In Wipro Finance Ltd's case (supra), it was accordingly observed :— "24. It is the settled principle that while assigning meaning to any expression in any provision of a statute, 8 I.T.(S.S.)A.No.114/PUN./2022 the context under which the particular expression is used has to be borne in mind. Therefore, bearing in mind the context in which the expression 'search initiated' has been used under various sections of IT Act including ss. 158BA(1), 158BC, 158BD, 158BE(1)(a) and (b) and 253A(1)(a) and (b) and also in the light of examining the dictionary meaning of the word 'initiate' as extracted by the High Court of Rajasthan at para No. 34 of its judgment in the case of Rajasthan Udyog v. State of Rajasthan AIR 1978 Raj. 31 referred to supra and also in the light of the above observations of the Hon'ble Supreme Court in the case of Om Prakash Jaiswal v. G.K. Mittal AIR 2000 SC 1136 we may safely assign to the expression 'search initiated'; the meaning 'search taken' or 'search commenced' or 'making beginning of the search'. If this is meant by expression 'search initiated' it cannot be held that the only signing of the authorizations by the Director of IT, Bangalore, on 30th Dec., 1996 to make a search in the premises of the respective assessees would amount to 'initiation of search'. The signing of the authorizations' would at best amount to 'taking of the decision by the said authority to initiate search' in the premises of respective assessees but not initiation of search itself." 9 I.T.(S.S.)A.No.114/PUN./2022 18. In view of the aforesaid position, referring to Section 246A, it was held that the assessee (respondents therein) aggrieved by the block assessment order should have filed an appeal before the Commissioner (Appeals) and not before the tribunal. 19. Learned counsel for the petitioners relied upon Section 153B and submitted that the said section prescribes time limits for completing assessments under section 153A etc. Adjudication order under section 153A of the Act has to be passed within 2 years from the end of financial year in which last of the authorization for search under Section 132 or 132A was executed. Section 153B(2) states that the authorization is deemed to have been executed in case of search, on conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case, warrant of authorization was executed. Thus, the time limit for completion of the assessment is reckoned and has to be counted for "search" under Section 132 from the date as recorded in the last panchnama drawn in relation to any person. The contention is that Section 153B(1) & (2), refers to panchnama and when there is no panchnama, proceeding in respect of 22 petitioners cannot be validly initiated under section 153A of the Act. 10 I.T.(S.S.)A.No.114/PUN./2022 20. We have examined Section 153A(1) above and now examine whether in the facts of the present case failure to mention names, affects validity of the notices issued under Section 153A of the Act? 21. The aforesaid contention of the 22 petitioners has to fail in the present cases for several reasons. The said contention was not raised against the first order under Section 153A passed by the Assessing Officer which was made subject matter of challenge in a revision before the Commissioner under Section 264 of the Act. The Commissioner has set aside the first assessment orders under Section 153A of the Act and has passed an order of remand for fresh adjudication vide order dated 16th March, 2012. The petitioners have not questioned and challenged the orders dated 16th March, 2012 and have accepted the same. All panchnamas are dated 31st January, 2008. There are no subsequent or second set of panchnamas in the case of the search warrants against the 22 petitioners. 31st January, 2008 was the date of search as recorded in the warrants of search. The petitioners, including 22 petitioners whose names do not feature in the panchnamas, have not denied that they were subjected to search on 31st January, 2008. It is also not repudiated or contested that several documents/papers relating to the 22 petitioners were 11 I.T.(S.S.)A.No.114/PUN./2022 seized and were included in the list of the seized documents/papers attached to the panchamas. Thus, there cannot be any dispute or debate regarding the question of time limit or limitation period for completion of assessment under Section 153A and indeed the said issue is foreclosed. In the facts of the present case, the contention should be and is rejected. 22. The expression 'panchnama' has not been defined in the Act. Section 132(13) makes provisions of Code of Criminal Procedure 1971 relating to search and seizure applicable to searches under the said section. Sub-section (5) to Section 100 of the said code states that search shall be made in presence of witnesses and list of things seized during the search shall be prepared by the officers or other persons and signed by such present witnesses. A copy of the said list prepared and duly signed by the witnesses shall be delivered to every occupant or person at the place searched, is mandated and required under sub-section (6) to Section 100 of the code. As per the manual prepared by the Revenue relating to search and seizure operations, at the end of search or when it is temporarily concluded, a panchnama is required to be prepared or drawn. It is evidently clear that this document has considerable evidentiary value and should be prepared with care and caution. The panchnama should be exhaustive, record of all events in the same sequence in 12 I.T.(S.S.)A.No.114/PUN./2022 which they have occurred and should specify details like name of person against whom warrant was issued, time of temporary conclusion of search etc. Panchnama should be prepared even in cases where nothing is found or seized in the search. 23. There is certainly lapse and failure to comply with the requirements of search and seizure manual as the panchnama did not contain names of the 22 petitioners and does not record any suspension of search. Even the obstruction and presence of third persons were not mentioned in the panchnamas. But this would not affect the validity of the search. We only record that panchnamas in the present case to this extent are defective, but the search or initiation of search cannot be disputed. However, the respondents should take remedial steps and ensure that such lapses do not occur in future, otherwise similar allegations will get repeated, entailing litigation. 24. Panchnama is an important document because it informs the person from whose premises the articles are seized or the person searched as to the name of the person or the building etc. where the search was carried out and the officers who were authorized and had carried out the search and the articles, if any, seized. We are informed that copy of the warrant of search is only shown to the occupant or persons against whom it is issued and their signatures 13 I.T.(S.S.)A.No.114/PUN./2022 obtained but no copy is furnished to them. Any search and seizure operation invades constitutionally protected and cherished right of privacy. Administrative lapse even of minor nature when there is invasion of the said right does lead to criticism and allegations. It will be salutary and proper that a copy of the search warrant be furnished to the occupant or the person searched. This would curtail any allegation of interpolation, addition of names etc. However, in the facts of the present case, we do not think that the lapse or failure in the panchnamas affects the validity of the search or nullifies notice under section 153A of the Act. It certainly would not affect initiation of search which is the starting point and precondition for invoking Section 153A of the Act. Panchama is drawn when the search stands concluded finally or temporarily. The effect of the said lapse on merits or to the value or degree of importance to be given to the material seized is a matter of appraisal and merits and not a question to be examined and answered in these writ petitions. The view, we have taken finds support from the decisions of the Supreme Court in ITO v. Seth Bros. [1969] 74 ITR 836 and Pooran Mal v. Director of Inspection [1974] 93 ITR 505 (SC). Reference can also be made to the decision of this court in CITv. S. K. Katyal [2009] 308 ITR 168/177 Taxman 380 wherein the expression 'panchnama' was elucidated and explained in the following words :— 14 I.T.(S.S.)A.No.114/PUN./2022 "15. These provisions demonstrate that a search and seizure under the said Act has to be carried out in the presence of at least two respectable inhabitants of the locality where the search and seizure is conducted. These respectable inhabitants are witnesses to the search and seizure and are known as 'panchas'. The documentation 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, nikah-nama (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'. 15 I.T.(S.S.)A.No.114/PUN./2022 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 the Act. A panchnama, as we have seen is nothing but a document recording what has happened in the presence of the witnesses (panchas). A panchnama may document the search proceedings, with or without any seizure. A panchnama may also document the return of the seized articles or the removal of seals. But, the panchnama that is mentioned in Explanation 2(a) to section 158BE is a panchnama which documents the conclusion of a search. Clearly, if a panchnama does not, from the facts recorded therein, reveal that a search was at all carried out on the day to which it relates, then it would not be a panchnama relating to a search and, consequently, it would not be a panchnama of the type which finds mention in the said Explanation 2(a) to section 158 BE." 25. Read in this manner, we do not think that the first contention of the petitioners has any merit and the same is rejected.” 4.1. We accordingly find no merit in the assessee’s arguments challenging validity of sec.153C assessment framed against him by both the learned lower authorities. He fails in the instant legal ground therefore. 16 I.T.(S.S.)A.No.114/PUN./2022 5. We next quote that the outcome of assessee’s sole substantive ground on merits seeking to delete sec.68 addition of Rs.4,54,000/- representing unsecured loans would hardly be any different as he has failed to prove genuineness and creditworthiness of the concerned parties. It rather emerges that neither he could discharge his onus before Assessing Officer as the latter had completed his sec.144 assessment dated 29.12.2016 nor before the CIT(A)'s in the lower appellate proceedings. Faced with the situation, we reject the assessee’s arguments challenging the impugned addition as well. 6. No other ground or argument has been pressed before us. 7. This assessee’s appeal is dismissed in above terms. Order pronounced in the open Court on 28.06.2023. Sd/- Sd/- [GD PADMAHSHALI] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 28 th June, 2023 VBP/- Copy to 1. The applicant 2. The respondent 3. The CIT(A), Pune-11, Pune 4. The Pr. CIT (Central), Pune 5. D.R. ITAT, Pune “B” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches, Pune.