Mahendra Auto Services (AOP) Vs ACIT (ITAT Pune)
For issuing notice u/s 158BC, there has to be a search in the case of ‘any person’, then the Assessing officer shall serve a notice to ‘such person’. It means notice u/s 158BC can be issued to only such person who has been searched u/s 132 of the Act. Search under section 132 of the Act cannot be without warrant of Authorisation. In the case under consideration, as narrated in the earlier paras, there was no warrant of Authorisation in the name of Mahendra Auto Service, AOP of Prithviraj Shinde, Rajendra Shinde, Bhikan Shelke, Bharat Pawar, Gopinath M Wadi, Ashokkumar Sangtani. The department was not aware about any business activity carried on by these 6 persons together. The Department had information only about four persons. Therefore, there is no satisfaction by the department prior to search about impugned business activity of 6 person together. Without satisfaction there cannot be any warrant of authorization.Therefore, we are of the considered opinion that the department had no information about joint business activity of these impugned 6 persons , department had no information about impugned AOP of 6 person and there was no warrant of Authorisation in the name of Mahendra Auto Service, AOP of Prithviraj Shinde, Rajendra Shinde, Bhikan Shelke, Bharat Pawar, Gopinath M Wadi, Ashok kumar Sangtani, therefore, on the facts and circumstances of this case the impugned notice issued u/s 158BC on the impugned AOP of 6 persons is void ab initio. Therefore, the Assessment order passed u/s 158BC rws 143(3) against the impugned AOP is bad in law. The Warrant of Authorisation issued in the name of Mahendra Auto Service, Avadhan Dhule, at the most may be inferred as warrant against the Mahendra Auto Service AOP of the four persons whose names have been mentioned by the ADIT in his report which is reproduced in earlier para.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-1, Nashik, dated 15.02.2016for the Block Period 01.04.1987 to 10.07.1997.The Assessee raised following grounds of appeal:
“1. In the facts and circumstances of the case and in law, the learned C.I.T.[A] has failed to appreciate that since the satisfaction recorded by ADIT [Inv] before issuance of search warrant was in the name of AOP consisting of four persons, the impugned assessment made on deemed AOP consisting of six persons u/s 158 BC[c] of the I.T. Act 1961 was contrary to the provisions of law. The impugned assessment order passed by the learned Assessing Officer being bad in law, void ab initio, null and void and being without jurisdiction the learned CIT [A] ought to have be annulled the same.
2. The learned CIT [A] has failed to appreciate that the search warrant dt.28/04/1997 was issued in the name of M/s Mahendra Auto Service without specifying the status and the name of the owner/s. In the circumstances the impugned assessment order framed by the learned Assessing Officer on deemed AOP consisting of six persons u/s 158 BC[c] of the I.T. Act 1961 was bad in law, void ab initio, null and void and being without jurisdiction the learned CIT[A] ought to have annulled the said assessment order.
3. Since there was no search warrant in the name of the appellant assessee, the impugned block assessment order framed by the learned Assessing Officer u/s 158BC[c] r.w.s. 143[3] of the I.T. Act 1961, without following the procedure as prescribed u/s 158BD of the I. T. Act 1961 was patently illegal, bad in law and without jurisdiction and the entire assessment proceedings being vitiated the learned C.I.T.[A] ought to have annulled the said assessment order.
4. In the facts and circumstances of the case and in law, the learned C.I.T.[A] has erred in holding that an amount of Rs.35.00 lacs was income of the appellant assessee as was allegedly evidenced by seized diaries for the period 01/04/1997 to 10/07/1997, in spite of the fact that the said income was offered for taxation by the individual members in their respective hands in addition to their other incomes. The said addition being arbitrary, perverse, and devoid of merits the same may please be deleted.
5. In the facts and circumstances of the case and in law, the learned C.I.T.[A] has erred in holding that an amount of Rs.35.00 lacs was income of the appellant assessee as was allegedly evidenced by seized diaries for the period 01/04/1997 to 10/07/1997, in spite of the fact that the said income was offered for taxation by the individual members in their respective hands in addition to their other incomes. The said addition being arbitrary, perverse, and devoid of merits the same may please be deleted.
6. The appellant submits that the learned CIT [A] in his appellate order dt.10/03/2005 vide Para No. 17.1 on Page No. 18 held that since there was no AOP in existence prior to 01/04/1997, the income disclosed by the individual members of the AOP in their individual returns cannot be taxed as undisclosed income of the AOP the same should be deleted. In the circumstances the observation of learned CIT[A] in Para No. 18 on Page No.30 that in the result, the appeal is dismissed is erroneous and hence the same may please be deleted with all consequential reliefs.
7. Without prejudice to the above grounds of appeal and by way of an alternate submission the appellant submits that since the learned Assessing Officer has failed to issue and serve notice u/s 158BC[c] of the I.T.Act 1961, upon all the alleged six members of the deemed AOP, the impugned block assessment order framed by the learned Assessing Officer is bad in law, patently illegal, void ab initio and null and void and without jurisdiction and hence the same may please be annulled.
8. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.”
Additional Ground of appeal:
Since there was no valid Panchanama in the case of the appellant at the time of alleged search and seizure action, the impugned assessment order is bad in law, void ab initio, null and void and without jurisdiction and hence the same may please be annulled.
2. Brief facts of the case are that this is the second round of litigation before the ITAT. There was a search under section 132 of the Act on 10.07.1997 in Mahendra Auto Services. In this case, the assessment order was passed in the name of M/s.Mahindra Auto Services, Avdhan, Dhule in the status of AOP under section 158BC r.w.s 143(3) of the Act for the Block Period 01.04.1987 to 10.07.1997. The following persons were held as Members of the AOP in the assessment order:
1. Shri Prithviraj Chandrakant Shinde
2. Shri Bhikan Bapurao Shelke
3. Shri Rajendra Popat Shinde
4. Shri Bharat MaharuPawar
5. Shri Gopinath M.Wadi
6. Shri Ashokkumar Bhavandas Sangtani
The total undisclosed income was Rs.1,60,39,500/- as per the assessment order.
2.1 Mr. Mahendrakumar Jamnadas Mehta was made dealer by Hindustan Petroleum Corporation Ltd for Petrol and Disel Pump. As per the statement of Mahendra J Mehta he was having Petrol Pump at Chalisgaon Cross Road Dhule, and Disel Pump at Mumbai Agra Road Dhule. He had given it to Mr.Rajendra Shinde in 1995 and then to Gopinath wadi for running.
3. Aggrieved by the Assessment Order, the assessee filed an appeal before the ld.CIT(A)-II, Aurangabad. The ld.CIT(A) passed the order on 10.03.2005.
4. Aggrieved by the order of ld.CIT(A), the assessee filed an appeal before the ITAT Pune Bench. Before the ITAT, the assessee raised legal ground that since there was no search warrant in the name of appellant assessee the impugned block assessment order is bad in law. The ld.Co-ordinate Bench admitted the additional ground which was legal ground. The ld.Co-ordinate Bench vide its order dated 31.03.2009 in ITA 1302/PN/2005 restored the issue to the ld.CIT(A) to ascertain all the relevant facts and information as the confidential information related to the satisfaction recorded prior to the search was with the Department.
5. The ld.CIT(A) vide its order dated 15.02.2016 held as under:
“Information given by the ADIT & AO clearly states that the satisfaction was recorded by the authorities. In view of this fact, it is clear that there was specific material in the knowledge of Revenue authorities to initiate search proceedings and the material indicated that there was association of 4 persons in the activity that was carried out. The action of the AO is upheld.”
6. Aggrieved by the said order of the ld.CIT(A), the assessee has filed appeal before this Tribunal.
7. The ld.Authorised Representative(ld.AR) for the assessee submitted written submission:
“2) A search action u/s 132(1) was conducted on the premises of a Diesel Pump owned by ‘M/s. Mahendra Auto Services’at Highway No.3, Avdhan, Dhule on 10.07J997. The search warrant is enclosed on pages 25 & 26 of Paper Book whereas the Panchanama drawn in the name of ‘M/s. Mahendra Auto Services’ is enclosed on pages 38 – 44 of P.B.
3) As per the legal records, ‘M/s. Mahendra Auto Services was the proprietary concern of one, Mr. Mahendra J. Mehta. Copy of agreement entered by Mr. Mahendra J. Mehta in the capacity of Proprietor of ‘M/s. Mahendra Auto Services’ with M/s. Hindustan Petroleum Corporation Ltd. is enclosed on pages 76 – 86 of P.B.
4) In the course of search action conducted on ‘M/s. Mahendra Auto Services’,the Dept.-recorded the statement of the owner of the diesel pump, Mr. Mahendra J. Mehta u/s 132(4) of the Act (refer pages 54 – 62 of P.B.). In his statement, Mr. Mehta (Proprietor of ‘M/s. Mahendra Auto Services’) stated that although he was the owner of the searched diesel pump named ‘M/s. Mahendra Auto Services’,due to his ill health, he had let out the operations of the Diesel Pump to one, Mr. Rajendra Shinde from the year 1995 onwards upto 12.01.1997 and subsequently, vide agreement dated 13.01.1997, he had let out the operations of the Pump to one, Mr. Gopinath Wadi at a monthly rent of Rs.3,000/- received by his proprietary concern, ‘M/s. Mahendra Auto Services’.
5) In the course of the search action, certain diaries were seized which contained notings of unaccounted profit earned from the operations of the said Diesel Pump for three months i.e. May, June and July, 1997. As per the said notings, the above undisclosed profit from Diesel Pump in each of the three months, was distributed among six individuals (not including Mr. Mahendra Mehta) in a fixed ratio as under:
