CA Sandeep Kanoi
The Hon’ble Gujarat High Court in the case of CIT Vs. Ramesh D. Patel, Tax Appeal No.347 of 2013 and other appeals) has considered an issue that where search warrant was not issued in the name of the assessee, then the AO will have no jurisdiction to assess him under section 153A of the Income Tax Act. The question framed by the Hon’ble Gujarat High Court in the case of Ramesh D. Patel (supra) read as under:
“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 ?”
After reproducing the finding recorded by the Tribunal, the Hon’ble Court has made the following observations:
‘I 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 1 53B of the Act were invalid. We have no reason to interfere with the order passed by the Tribunal. Section 1 53A 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 1 53B of the Act provides for time limit for completion of assessment under section 1 53A. 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.”
A bare perusal of section 153A would indicate that this section provides that notwithstanding anything in section 139, 147, 148, 149, 151 and 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 AO shall (a) issue notice to such person ……….(b) assess or reassess the total income. The condition precedent for taking action under this section that search ought to have been initiated under section 132 of the Income tax Act upon that person. The learned DR appearing on behalf of the Revenue did not dispute with regard to this proposition. Her contention was that once on the members of the HUF search action has been initiated, then, the HUF as a whole would also be covered under this section. Before considering this argument, let us take note of the authorization.
Name of the HUF, who is separate taxable entity, is no where available in the Panchnama. It is also pertinent to note that all the members of the HUF were not covered under the search action. In section 153A, nowhere it has been provided that if the search is conducted on the partners, in their individual cases, then the firm would automatically deem to have been covered under search action. Similarly, there cannot be any implied search action on the HUF merely on the ground that some of the individual members of the HUF were covered under the search action. For invoking jurisdiction, there cannot be any implied operation of law. It should be specific and direct. Thus, no search was conducted on the HUF, and therefore, no order under section 153A ought to be passed.