Case Law Details
Misty Meadows Private Limited versus Union of India and Others (Punjab and Haryana High Court)
Invoking of Section 153A of Income Tax Act merely on the basis of ‘panchnama’ in absence of execution of search u/s 132 of the Income Act
Section 153A of the Income Tax Act, 1961, is a crucial provision dealing with income assessment in cases of search or requisition. It empowers the Assessing Officer to issue notices requiring the furnishing of income returns for specified assessment years. Section 153A starts with a non obstante clause. This article delves into the intricacies of Section 153A, analyzing its application, judicial interpretations, and implications.
The Section 153A of Income Tax Act reads as under:
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 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 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;”
Initiation and conduct of search are the twin requirements for issuing the notice u/s 153A. Initiation of search is sine qua non for issuance of a notice u/s 153A calling for the returns of income. The actual conduct of search is the requirement. Refer- CIT v. Wipro Finance Ltd. [2009] 176 Taxman 233 (Kar). The word ‘search’ is not defined in the IT Act. In the case of Raghu Raj Pratap Singh v. Asstt. CIT [2009] 179 Taxman 73 (Allahabad), it was held as under. “The simple meaning of the word ‘search’ is to explore all over in trying to find something; to examine closely; to examine for hidden articles; to scrutinize; to probe; to put to test; to make an examination, etc., to look or hunt; a thorough examination, etc. In normal course, what the authorised officer is to do, is to find out, detect and unearth the concealed income or wealth for which purpose the warrant of authorisation has been issued.
The word Panchanama is not used as such or defined particularly anywhere in any book of Law, but the same can be read into Section 100 under Chapter VII of The Code of Criminal Procedure, 1973, (Cr.P.C.). 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 MANU/MH/0124/1940 : 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. The State MANU/GJ/0067/1963 : AIR1963Guj145 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 MANU/MH/0222/1978 : (1978)80BOMLR396 , 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”.
The Delhi HIGH COURT in Commissioner of Income Tax Vs. Shri S.K. Katyal, ITA 1198/2008
Decided On: 12.11.2008 observed that – 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 158BE.
In the present case, we find that challenge is to the very initiation of proceedings at the initial stage; search under Section 132 of the Act and jurisdiction of the assessing officer by initiating proceedings under Section 153A of the Act which needs to be examined. The validity of initiating search proceedings cannot be examined by the Appellate Authority as is already held in Chandra Kishor Jha; OPTO Circuit India Limited; M/s. J. M. Trading Corporation, and Sarvmangalam Builders’ cases . The petitioner has challenged the panchnama where its name has been entered and submits that it has already suffered search and seizure earlier resulting in an order passed under Section 153A of the Act and, therefore, proceedings again initiated under Section 153A were wholly unwarranted. The exercise of power under Section 153A based on panchnama was not available.
The Honable Court observed that there is no authorisation issued to conduct search and seizure relating to the petitioner. The panchnama prepared at Gurgaon office of M3M India Limited only reflects the name of the petitioner company. Apanchnama would be a document which has to be prepared recording articles, material and objects which may be seized as incriminating documents at the time of conducting search of premises. Mentioning of the name of any company in the panchnama would only reflect that documents relating to that company were found during the search at the premises. A panchnama, therefore, cannot be treated to mean authorization issued to the authorities under Section 132 of the Act.
Held- Thus, we conclude that based on the name being mentioned in the panchnama alone cannot be a conclusion that there was authorisation to conduct search against the petitioner under Section 132 of the Act and the authorisation to conduct search was only against M3M India Limited having their registered office. If during search in their premises any incriminating articles/ documents/ objects or any material relating to the petitioner was recovered, which is found to be sufficient for the purpose of reassessment by the assessing officer, he was required to follow the procedure laid down under Section 153C of the Act.
FULL TEXT OF THE PUNJAB AND HARYANA HIGH COURT JUDGMENT
CASE CITATION- PUNJAB AND HARYANA HIGH COURT in the case MISTY MEADOWS PRIVATE LIMITED VERSUS UNION OF INDIA AND OTHERS, CWP No. 5139 of 2024 (O&M),Dated: – 13-5-2024 ( Assessment year 2011-12)
JUDGEMENT
The petitioner by way of this writ petition seeks quashing of the search proceedings and consequent panchnama dated 24.07.2016 and 19.09.2016 drawn against it by respondent nos. 2 and 3; further prayer to quash the notice dated 05.01.2018 issued by respondent no. 4; and the assessment order and notice of even dated 07.02.2024 issued by the respondents raising a demand for the assessment year 2011-2012 of a sum of Rs. 3,29,49,65,089/- under Section 156 of the Income Tax Act, 1961 (hereinafter to be referred as ‘the Act’).
2. Brief facts which have been culled out from the pleadings are that against the petitioner company search and seizure operation was conducted under Section 132 of the Act on 30.06.2011. Pursuant to the search proceedings, the assessments for A.Y. 2006-07 to 2012-13 were framed. Notice under Section 153A of the Act was issued on 28.12.2012 and the petitioner company was asked to furnish the return of total income including the undisclosed income. Final assessment was framed under Section 153A of the Act vide Assessment Order dated 28.02.2014. The returned income of Rs. 70,15,770/- was accepted.
3. It is submitted that thereafter in 2016 a search and seizure operation was conducted against M3M India Limited company at its office at Paras Twin, Tower-B, 6th Floor, Golf Course Road, Sector-54, Gurgaon, which was its registered office and business premises. However, while preparing panchnama drawn at the Paras Twin Tower-B, Gurgaon, name of the petitioner company was also added although it is asserted that no authorization for search and seizure under Section 132 of the Act was issued in the name of the petitioner nor any search or seizure was conducted at the premises or registered office of the petitioner company, which was situated at Shop No. 4/36, DDA Market, Dakshin Puri Extension, New Delhi-110062 with effect from 02.05.2011. It is stated that the office premises were known to the respondent authorities as it was existing from A.Y. 2011-2012 at the time of search and seizure conducted against the petitioner.
4. The petitioner has asserted in pleadings that it owned 75 acres of land at Bhiwadi (Rajasthan). In AY 2011-12, it had entered into separate development agreement dated 07.09.2010 with five independent companies and raised a security deposit of Rs. 2 crores from each company towards the development of the land, these facts were recorded by the petitioner in its book of accounts and disclosed in its annual financial statements and were noticed at the time of search and seizure conducted against the petitioner. At the time of assessment order dated 28.02.2014, no adverse remarks pertaining to transaction for development of land at Bhiwadi was mentioned. It is stated further that search and seizure of residential premises of promoters of M3M India Limited at different places was also conducted in 2016 but no search of premises of the Director of the petitioner company was conducted.
5. In the panchnama dated 24.07.2016 and 19.09.2016, which was prepared for search at Paras Twin Tower (supra), the name of the petitioner company was mentioned and it was alleged by revenue that there were incriminating documents found during the search and also in an independent search of one Gaurav Jain, who had been earlier Ex-Vice President of the company and had resigned and disassociated from the company on 12.11.2014, where certain details were found relating to the petitioner on cloning of his laptop. On the said basis a notice under Section 153A of the Act was issued for AY 2011-12 on 05.01.2018 and a questionnaire dated 27.08.2018 was also issued. Another questionnaire was issued on 29.10.2018 for AY 2011-12 wherein queries were raised with regard to development of land situated at Bhiwadi (Rajasthan). It is stated that five companies, which have entered into development agreement with the petitioner company, had subsequently entered into separate agreements with ten other companies and had received a total amount of Rs. 396 crores and therefore, SCN under Section 153A was issued to show cause as why the amount of Rs. 10 crores and entry of Rs. 396 crores should not be assessed as undisclosed income in the hands of the petitioner.
6. Reply was filed and the petitioner raised objections relating to issuance of notice to it under Section 153A of the Act. The petitioner thereafter also moved settlement application before Interim Board for Settlement but it rejected the application on 29.03.2023 under Section 245D (4) of the Act. Addendum order was issued on 31.03.2023 whereafter the assessing officer issued letter to the petitioner on 09.09.2023 and subsequent letters for reassessing their income.
7. The petitioner has filed response on 27.11.2023 asking to provide incriminating material revealing undisclosed income. The respondents informed stating about the search conducted at the house of Gaurav Jain on 16.07.2016 where incriminating material was found from his laptop and also at the office where the panchnama was prepared.
8. The petitioner company submitted its response on 24.01.2024, 29.01.2024 and 30.01.2024 raising objections regarding the proceedings initiated under Section 153A of the Act to be without jurisdiction and without authority in law. The petitioner has been served with a show cause notice dated 30.01.2024 for addition of income of Rs. 400/- crores for AY 2011-12 as payment made to entities from undisclosed sources and an order has been passed on 07.02.2024 concluding assessment proceedings under Section 153A read with Section 153D of the Act.
Submissions of the Petitioner
9. Learned counsel for the petitioner submits that action of the respondents in entering the name of the petitioner in the panchnama dated 24.07.2016 and 19.09.2016 was wholly illegal, unjustified and without any authorization as there was no material to form an opinion to initiate a fresh search for AY 2011-12 against the petitioner-assessee, after the final assessment order had been passed under Section 153A of the Act, though sanction and authorization to conduct search under Section 132 can be said to have been issued nor any such authorization letter has been placed on record. Merely on the basis of making entry of name of the petitioner company in the panchnama prepared at the registered office of another company, power under Section 153A of the Act could not have been invoked afresh against the petitioner.
10. It is further submitted that the provisions of Section 292CC (1)(ii) of the Act which allow authorization in the name of more than one person cannot be said to have been invoked as there is no authorization available on record. If any incriminating material would have been recovered relating to the petitioner company, the panchnama should have mentioned the name of petitioner company only with reference to the material and not as if the search was being conducted against the petitioner. Hence, the proceedings initiated against the petitioner company afresh under Section 153A of the Act are wholly vitiated and deserves to be declared as void ab initio and non-est.
11. Learned counsel for the petitioner further submitted that all the material had been disclosed and recorded in the books of accounts after the final return of income submitted in terms of the search and seizure and subsequent proceedings conducted against the petitioner under Section 153A of the Act in 2012. The returned income of Rs. 70,15,770/- was accepted after the assessment order was passed on 28.02.2014. Thus, fresh proceedings under Section 153A of the Act were not permissible. If any new material was found while conducting search, the only procedure available with the respondents to conduct fresh assessment was under Section 153C of the Act. He submits that in fact there was no new material available and the record relating to the land transactions of Bhiwadi were already mentioned in the record and it is a case of mere change of opinion which cannot be allowed to be sustained.
12. It is further submitted that new material alleged to have been recovered from the cloning of laptop of Gaurav Jain, is without compliance of Section 65B of the Indian Evidence Act and no conclusions can be drawn on the basis of such inadmissible documents. Thus, the action of the respondents is without jurisdiction.
13. Learned counsel for the petitioner further submits that the procedure laid down under Section 153C of the Act was sacrosanct and submits that if a particular procedure has been laid down under the statute, the respondents were obliged to conduct themselves accordingly and a different procedure cannot be adopted. Further submits that the order of imposing Rs. 400/- crores by issuing a fresh assessment order under Section 153A of the Act is based on complete non application of mind. He submits that there is no flow of proceeds of such money traceable to the books of accounts of the petitioner and the addition stands already made on protective basis in the books of accounts of other company. The amount received was only Rs. 10 crores and the remaining amount of Rs. 396 crores was received and assessed separately for the other companies. However, the respondents have put the entire additions on the petitioner company as undisclosed income.
14. Learned counsel for the petitioner relies on judgments of Hon’ble the Supreme Court in Income Tax Officer vs Seth Brothers (1969) 74 ITR 836 (SC); a Coordinate Bench of this Court in Harmel Singh vs Union of India (1993) 204 ITR 334 (P&H),Hon’ble the Supreme Court in Chandra Kishor Jha vs Mahavir Prasad and others 1999 (8) SCC 266,Bombay High Court in ITA No. 581 of 2009 – Commissioner of Income Tax vs M/s. J. M. Trading Corporation, against which Special Leave Petition (Civil) No. 31208 of 2010 was dismissed on 29.10.2010, judgment of Delhi High Court in ITA No. 943 of 2015 – Commissioner of Income Tax III vs Sarvmangalam Builders & Developers Private Limited; and ITA No. 60 of 2017 Principal Commissioner of Income Tax, Central-2, New Delhi vs Subhash Khattar; judgment of Hon’ble the Supreme Court in OPTO Circuit India Limited vs Axis Bank and others 2021 (6) SCC 707, judgment of Gujarat High Court in Principal Commissioner of Income Tax vs Hitesh Ashok Vaswani (2023) 459 ITR 610 (Gujarat); and Hon’ble the Supreme Court in Principal Commissioner of Income Tax vs Abhisar Buildwell Private Limited (2023) 454 ITR 212 (SC).
Submissions of the Respondents
15. Learned counsel for the respondents has supported the action of the revenue and submits that apart there being an alternative remedy available and the petitioner having already preferred an appeal during the pendency of the present appeal, the petitioner should be relegated to the appellate forum. She asserts that as the name of the petitioner company was mentioned in the panchnama prepared on 24.07.2016 and 19.09.2016, it would be presumed that there was authorization for search under Section 132 of the Act as against the petitioner. She submits that the respondents have reasons to believe that there had been non-disclosure on the part of the petitioner and, therefore, they only chose to search the premise of registered office of M3M India company even for locating the incriminating material against the petitioner company. She submits that conditions enumerated of clause (a) (b) and (3) of Section 132 of the Act were satisfied. The search operation ought not to be interfered with by this Court as the same denies opportunity to the revenue to derail the layering money as the same ought not to be entertained after passing of the assessment order.
16. It is further submitted that the petitioner cannot be allowed to question the search after participation in pursuance to the search under Section 132 of the Act and submits that the petitioner had moved an application under Section 245C (1) of the Act before the Income Tax Settlement Commission, which was rejected on 29.03.2023 on the ground that the disclosure is not full and true and there is a deficiency in explaining the facts gathered by the department. The order of assessment is, thus, also appealable and on that count the respondents have objected to.
17. Learned counsel for the respondents further submitted that as the panchnama mentioned the name of the petitioner upon search if any documents are received, the proceedings were required to be conducted under Section 153A(1) of the Act alone and there was no occasion to resort to provisions of Section 153C of the Act. It is further submitted that the petitioner has filed return on 29.01.2018 and notices along with questionnaire under Section 143 (2) and 143 (1) of the Act were initiated whereafter the petitioner approached the Income Tax Settlement Commission. Another notice was issued on 04.01.2024 along with documents. The petitioner did not submit its reply on merits of the case. The Assessing Officer held that the accommodation entries were provided by the companies, which were accepted by the operators as well as the Directors, whose statements were recorded, which too provided to the petitioner. The incriminating documents reflected that the companies were clearly linked and the transactions were cleared through the paper companies after affording opportunity to the petitioner, the assessment order was passed, which does not warrant any interference.
18. Learned counsel for the respondents relies on Dr. Partap Singh and another vs Director of Enforcement Foreign Exchange Regulation and others 1985 (3) SCC 72; Banda Development Authority, Banda vs Moti Lal Agarwal and others 2011 (5) SCC 394; Union of India and others vs M/s Agarwal Iron Industries 2014 (15) SCC 215; Principal Director of Income Tax (Investigation) and others vs Laljibhai Kanjibhai Mandalia 2022 (10) SCALE 100;judgment of Orissa High Court in M/s Shiva Cement Limited and others vs Director of Income Tax (Inv.), Bhubaneswar and others 2021 (439) ITR 92 and Civil Appeal arising out of SLP (C) No. 8867 of 2022 – PHR Invent Educational Society vs UCO Bank and others decided on 10.04.2024.
19. We have heard learned counsel for the parties and have carefully gone through the judgments cited by learned counsel for the petitioner as well as learned counsel for the respondents.
20. The jurisdiction of this Court under Article 226 of the Constitution of India has wide aptitude. However, time and again Hon’ble the Supreme Court and various High Courts have refused to entertain the petitions where we find that there is an efficacious remedy or considering that the questions complicate examination of facts, we are relegating the petitioner to appeal. However, this would not mean that the remedy under Article 226 is ousted. In a recent judgment Godrej Sara Lee Limited vs Excise and Taxation Officer-cum-Assessing Authority 2023 AIR (SC) 781,while considering the case travelling from this Court, Hon’ble the Supreme Court has held as under:-
“5. A little after the dawn of the Constitution, a Constitution Bench of this Court in its decision reported in 1958 SCR 595 (State of Uttar Pradesh vs. Mohd. Nooh) had the occasion to observe as follows:
“10. In the next place it must be borne in mind that there is no rule, with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. It is well established that, provided the requisite grounds exist, certiorari will lie although a right of appeal has been conferred by statute, (Halsbury’s Laws of England, 3rd Edn., Vol. 11, p. 130 and the cases cited there). The fact that the aggrieved party has another and adequate remedy may be taken into consideration by the superior court in arriving at a conclusion as to whether it should, in exercise of its discretion, issue a writ of certiorari to quash the proceedings and decisions of inferior courts subordinate to it and ordinarily the superior court will decline to interfere until the aggrieved party has exhausted his other statutory remedies, if any. But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies. ***”
6. At the end of the last century, this Court in paragraph 15 of the its decision reported in (1998) 8 SCC 1 (Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Others)carved out the exceptions on the existence whereof a Writ Court would be justified in entertaining a writ petition despite the party approaching it not having availed the alternative remedy provided by the statute. The same read as under:
(i) where the writ petition seeks enforcement of any of the fundamental rights;
(ii) where there is violation of principles of natural justice;
(iii) where the order or the proceedings are wholly without jurisdiction; or
(iv) where the vires of an Act is challenged.
xxx xxx xx
8. That apart, we may also usefully refer to the decisions of this Court reported in (1977) 2 SCC 724 (State of Uttar Pradesh & ors. vs. Indian Hume Pipe Co. Ltd.) and (2000) 10 SCC 482 (Union of India vs. State of Haryana).What appears on a plain reading of the former decision is that whether a certain item falls within an entry in a sales tax statute, raises a pure question of law and if investigation into facts is unnecessary, the high court could entertain a writ petition in its discretion even though the alternative remedy was not availed of; and, unless exercise of discretion is shown to be unreasonable or perverse, this Court would not interfere. In the latter decision, this Court found the issue raised by the appellant to be pristinely legal requiring determination by the high court without putting the appellant through the mill of statutory appeals in the hierarchy. What follows from the said decisions is that where the controversy is a purely legal one and it does not involve disputed questions of fact but only questions of law, then it should be decided by the high court instead of dismissing the writ petition on the ground of an alternative remedy being available.
9. Now, reverting to the facts of this appeal, we find that the appellant had claimed before the High Court that the suo motu revisional power could not have been exercised by the Revisional Authority in view of the existing facts and circumstances leading to the only conclusion that the assessment orders were legally correct and that the final orders impugned in the writ petition were passed upon assuming a jurisdiction which the Revisional Authority did not possess. We find, the orders impugned were passed wholly without jurisdiction. Since a jurisdictional issue was raised by the appellant in the writ petition questioning the very competence of the Revisional Authority to exercise suo motu power, being a pure question of law, we are of the considered view that the plea raised in the writ petition did deserve a consideration on merits and the appellant’s writ petition ought not to have been thrown out at the threshold.”
Thus, in view of the above, this Court under Article 226 of the Constitution of India would be well within its jurisdiction to entertain the petitions where it has to examine whether the power exercised for conducting search and seizure is by duly competent authority. This Court would also entertain petitions where the challenge is to the jurisdiction exercised by the authority also in cases where there is interpretation of the provisions of the Income Tax Act. In the appeal, even if a final order has been passed and provisions of appeal is available, since the appellate authority would not be able to examine the aforesaid aspect, writ petitions would still lie and the concerned assessee cannot be ousted merely because final order has been passed.
21. Keeping in view the exceptions carved out in Whirlpool Corporation vs Registrar of Trade Marks, Mumbai and others (1998) 8 SCC 1,we reject the submissions of the respondents and proceed to examine the contentions of the petitioner on merits.
22. In the present case, we find that challenge is to the very initiation of proceedings at the initial stage; search under Section 132 of the Act and jurisdiction of the assessing officer by initiating proceedings under Section 153A of the Act which needs to be examined. The validity of initiating search proceedings cannot be examined by the Appellate Authority as is already held in Chandra Kishor Jha; OPTO Circuit India Limited; M/s. J. M. Trading Corporation, and Sarvmangalam Builders’ cases (supra).
23. The petitioner has challenged the panchnama where its name has been entered and submits that it has already suffered search and seizure earlier resulting in an order passed under Section 153A of the Act and, therefore, proceedings again initiated under Section 153A were wholly unwarranted. The exercise of power under Section 153A based on panchnama was not available.
24. In M/s Seth Brothers’ case (supra),Hon’ble the Supreme Court has held as under:-
“The section does not confer any arbitrary authority upon the revenue officer. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorization in favour of a designated officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the tax-payer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorizes it to be exercised. If the action of the officer issuing the authorization, or of the designated officer is challenged the officer concerned must satisfy the Court about the regularity of his action.
If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises a designated officer to enter and search premises for books of account and documents relevant to or useful for any proceeding under the Act, the Court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken, provided the officer has in executing the authorisation acted bona fide.”
25. In the present case, we find that there is no authorisation issued to conduct search and seizure relating to the petitioner. The panchnama prepared at Gurgaon office of M3M India Limited only reflects the name of the petitioner company.
26. The term panchnama is not defined in the Income Tax Act. A panchnama is a document prepared in the ordinary course at a site of incident. In Mohanlal Bababhai vs Emperor 1941 AIR (Bombay) 149, it was observed that
“The panchnama is merely a record of what a panch sees,”. The search and seizure under the Income Tax 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 or witnesses to the search and seizure are known as the panches. The documentation of what they witness is known the panchnama. The word “nama” refers to a written document and is usually determined by the word which is combined with as a suffix. Example “nikahnama” (marriage certificate), “hibanama” (gift deed), “vasiatnama” (will), “ikrarnama” (agreement/ contract), “kaboolnama” (confession), “vakalatnama” (power of attorney). Similarly in Vallibhai Ummarjit vs State AIR 1963 Gujarat 145, noted that “panchnama is essentially a document recording certain things which occur in presence of panches and which are seen and heard by them”. In State of Maharashtra vs Kachra Dass D. Balgar 1978 (80) Bombay Law Reporter 396 observed that a panchnama was stated to be ‘the memorandum of what happens in the presence of panches as seen by them and of what they hear’.
Thus, we find that the panchnama would be a document which has to be prepared recording articles, material and objects which may be seized as incriminating documents at the time of conducting search of premises. Mentioning of the name of any company in the panchnama would only reflect that documents relating to that company were found during the search at the premises. A panchnama, therefore, cannot be treated to mean authorization issued to the authorities under Section 132 of the Act.
27. Thus, we conclude that based on the name being mentioned in the panchnama alone cannot be a conclusion that there was authorisation to conduct search against the petitioner under Section 132 of the Act and the authorisation to conduct search was only against M3M India Limited having their registered office. If during search in their premises any incriminating articles/ documents/ objects or any material relating to the petitioner was recovered, which is found to be sufficient for the purpose of reassessment by the assessing officer, he was required to follow the procedure laid down under Section 153C of the Act.
28. In Nazir Ahmad vs King Emperor 63 Indian Appeals 372, wherein the Privy Council held as under:-
“The rule which applies is a different and not less well recognized rule-namely, that where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden. This doctrine has often been applied to Courts-Taylor v. Taylor (1875) 1 Ch.D 426.”
In Rao Shiv Bahadur Singh and another vs State of Vndhya Pradesh AIR 1954 SC 322 and State of U.P. vs Singhara Singh and others AIR 1964 SC 358, the aforesaid principle was again reiterated by Hon’ble the Supreme Court.
29. Section 153C of the Act provides as under:-
Section 153C (1) in The Income Tax Act, 1961 – Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to,
a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A :
Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:
Provided further that the Central Government may by rules30 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, 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 and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated.”
30. Thus, we find that a particular procedure has been prescribed, as above. Following the salutary principles of law as laid down in Nazir Ahmad and followed in Rao Shiv Bahadur Singh and Singhara Singh’s cases (supra),we find that the respondents were obliged to compulsorily follow the procedure for reassessment of the petitioner company in the manner as prescribed under Section 153C (1) alone and in no other manner. However, we find that the respondents have invoked and initiated proceedings under Section 153A of the Act, although neither there is any search initiated under Section 132 of the Act as against the petitioner nor it can be said that the search was conducted at its premises. Similar view has been taken by Gujarat High Court in Hitesh Ashok Vaswani and Subhash Khattar’s cases (supra). Thus, the proceedings initiated under Section 153A are found to be vitiated.
31. In Abhisar Buildwell‘s case (supra),Hon’ble the Supreme Court has held as under:-
“12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153 A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/ unabated assessments shall abate.”
32. In J. M. Trading Corporation’s case (supra),the Bombay High Court held as under:-
“The Tribunal has categorically recorded a finding of fact on initiation of the search that non-compliance of 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 Authorised Officer.”
33. Thus, when there was no search conducted under Section 132 and 132A of the Act as against the petitioner and only a panchnama reflects the name of the petitioner prepared at the registered office of M3M India Limited, the action of the respondents in passing second assessment order on 07.02.2024 on the basis of notice under Section 153A dated 05.01.2018 is held to be unjustified and without jurisdiction. Once the search and seizure was conducted and assessment order dated 28.02.2014 was passed by invoking Section 153A of the Act for the AY 2006-07 to 2012-13, fresh order without conducting search and seizure operation would not be sustainable in law. In view of the aforesaid findings and conclusions, we are satisfied that the entire proceedings initiated under Section 153A of the Act including notice issued on 05.01.2018 are liable to be quashed.
35. Accordingly, the writ petition is allowed and the notice dated 05.01.2018; assessment order and demand notice dated 07.02.2024 are quashed and set aside, and the proceedings are held to be non-est.
36. All pending applications shall stand disposed of.
37. No costs.
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