Income Tax Appeal No. 243 of 2015, Income Tax Appeal No. 244 of 2015, Income Tax Appeal No. 245 of 2015, Income Tax Appeal No. 246 of 2015

Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani, JJ.

Abhinav Mehrotra, for the Assessee.
Subham Agarwal, for the Revenue.

JUDGMENT

Tarun Agarwala,J.- The present appeals relate to the assessment years 2003-04 to 2006-07. All the appeals raise the same question and are being decided together.

2. A search and seizure operation under Section 132 of the Income Tax Act (hereinafter referred to as the "Act") was carried out on 19.4.2006 at the business and residential premises of Sri Brij Mohan Pandey and his family members (hereinafter called the "Pandey Group"). This Pandey Group was engaged in the business of manufacture of Kattha and Khaini and was also in the business of trading of Kattha and Khaini and other raw materials used in the manufacture of Pan Masala. On the same day, a search was also conducted at the factory premises of the assessee-appellant at E-1, E-13, Site-1, UPSIDC Industrial Area, Rania, Kanpur Dehat. Incriminating material against the assessee-appellant was found at their factory premises and also at the premises of Anurag Pandey of the Pandey Group. The incriminating documents found at the premises of Anurag Pandey was labelled as BK-16, 17, 18, 19 and LP-2. The incriminating documents, which were seized at the factory premises of the assessee-appellant were labelled as BK-2, BK-5, BK-5 and BK-5.

3. On the basis of the search, proceeding against the assessee-appellant was initiated under Section 153A of the Act. During the course of the proceeding, the Income Tax authority found that the warrant of authorisation issued under Section 132 of the Act was in the name of "Shivam Gram Udyog Sansthan Pvt. Limited" and was not in the name of the appellant, namely, "M/s Shivam Gram Udyog Sansthan". Since the warrant of authorisation was issued in the name of a wrong entity, the Income Tax authority suo moto dropped the proceedings initiated under Section 153A of the Act.

4. On the basis of the incriminating documents, found against the assessee at the premises of Anurag Pandey, a satisfactory note was prepared indicating that the competent authority was satisfied that proceedings under Section 153C of the Act should be initiated against the appellant in relation to the documents, so seized, at the premises of Anurag Pandey. Accordingly, notices under Section 153C read with Section 153A of the Act were issued to the appellant. The satisfactory note, so prepared for initiation of the proceeding under Section 153C of the Act, is as under:

"A search & seizure operation u/s. 132 of I.T. Act, 1961 was carried out on 19.04.2006 at the business and residential premises of Shri Brij Mohan Pandey and his family members. This group (Pandey Group) is engaged in business of manufacturing/ production of Kaththa and Khaini and trading of Kaththa, Khaini and raw material used in manufacturing of Pan Masala. The assessee group also has a Petrol Pump in the name of Yandana Filling Station on G.T. Road towards Fatehpur. During the course of search and seizure operation, various books of accounts, documents and loose papers were found and seized. The details of relevant documents/loose papers are as under:-

Panchnama dated 19.04.2006 drawn at premises No.53/12, Naya Ganj, Kanpur covered u/s 132 of the I.T.Act, 1961.

In the case of M/s Shivam Gramodyag Sansthan, above details and books of accounts were found and seized during the course of search and seizure operation at premises No.53/12, Naya Ganj, Kanpur vide Panchanama dated 19.04.2006, for the purpose of verification and investigation of the entries appearing in these books of accounts and to ascertain the true and correct income of M/s Shivam Gramodyag Sansthan (AOP), action U/S.153C of the I.T.Act, 1961 is required in the case of the assessee.

In view of these facts, I am satisfied that it is a fit case for initiation of proceeding U/s.153C. Accordingly, proceeding under Section 153C read with 153A are being initiated in the case of assessee for A.Y. 2001-02 to 2006-07 and notice under Section 153C read with 153A is being issued for the verification and assessment of correct income of the assessee.

5. The proceeding under Section 153C of the Act was subsequently dropped by the assessing authority by an order dated 31.12.2008. The said order is extracted hereunder:
"A search and seizure operation u/s 132 of the Income Tax Act, 1961 was conducted on 19.04.2006 in the residential and business premises of Pandey Group of cases. The search period for assessment relates to the Financial Year 2006-07 relevant to A.Y. 2007-08 and previous six assessment years i.e. from A.Y.2001-02 to 2006-07.

During the search operation, premises No.E-1, E-13, Site-1, UPSIDC, Industrial Area, Rania, Kanpur was also covered. The warrant of authorisation is in the name of Shivam Gramodyog Pvt.Ltd. The correct name of the assessee is Shivam Gramodyog Sansthan.

Action U/s. 153C of the Income Tax Act, 1961 was initiated and a notice u/s.153C read with 153A was issued in the name of Shivam Gramodyog Sansthan. There exists no case in the name of M/s. Shivam Gramodyag Pvt.Ltd. No satisfaction can be recorded in the proceeding in the name of M/s Shivam Gramodyag Sansthan Pvt. Ltd. As such, action u/s.153C taken is not as per the law.

With the approval of Addl. Commissioner of Income Tax, Central Range, Kanpur, the proceedings initiated U/S.153C are hereby dropped for A.Y.2001-02 to 2006-07. Proceedings u/s.143(3) for A.Y. 2007-08 are also dropped for the same reasons. The directions of Addl. CIT (Central), Kanpur, are to see feasibility of taking action u/s.147 of the Income Tax Act 1961. The same will be examined separately".

6. On the basis of the incriminating material seized at the appellants factory premises, the assessing authority had reasons to believe that some income had escaped assessment and, consequently, was of the opinion that proceeding under Section 147 of the Act should be initiated. The reasons recorded by the assessing authority for reopening the proceeding under Section 147 of the Act is extracted here under:

"REASONS FOR INITIATING PROCEEDINGS UNDER SECTION 147 OF INCOME TAX ACT, 1961 FOR THE A.Y. 2003-04 IN THE CASE OF M/s. SHIVAM GROMODYOG SANSTAHN, 53/6 NAYA GANJ, KANPUR.

09.03.2010
A Search and seizure operation u/s, 132 of the Income Tax Act, 1961 was conducted on 19.04.2006 in the residential and business premises of Pandey Group of cases. The search period for assessment relates to the Financial Year 2006-07 relevant to A.Y. 2007-08 and previous years relevant to six earlier assessment years i.e. from A.Y. 2001-02 to 2006-07.

During the course of search and seizure operation at the Kattha Factory at the premises E-1, E-13, Site-1, UPSIDC Industrial Area, Rania, Kanpur Dehat, books of accounts/documents as per Annexure BK-1 to BK-6 were seized. These are important note books related to the production of Kattha. Assessee has not been found to be filing returns in regular course for relevant assessment year, thus evading the payment of due taxes to the Government. The value of transactions as recorded in the diaries/documents, seized from the assessee premises during the course of search in the form of production, sales and stock prima facie is under relating to F.Y. 2002-03 [relevant to A.Y.2003-04].

The assessee has shown the consumption, sale and closing stock in the Trading & Profit and Loss account as under:

The details as per above table do not match with the details as declared in the Trading & Profit and Loss account. The figures in the seized documents are higher.

Therefore, I have reason to believe that assessee's income which is more than Rs. 1,00 lac, has escaped assessment. The action u/s 147 is being taken with the approval of Learned Commissioner of Income Tax (Central), Kanpur to assess the income escaped from tax.

The approval of Learned CIT (Central), Kanpur is received vide letter F. No. CIT(C)/ KNP/ approv/ u/s.148/ 09-10/2611 dated 05.03.2010.

Accordingly, notice u/s.148 is being issued."
7. Pursuant to the proceeding initiated under Section 147 of the Act, an assessment order was passed. Being aggrieved by the assessment order, the appellant filed an appeal, which was allowed and the assessment order was set aside on the ground that re-assessment proceeding was not valid. The revenue, being aggrieved by the order of the Commissioner of Income Tax (Appeals), filed an appeal before the Income Tax Appellate Tribunal, which was allowed in part and the matter was restored to the first appellate authority for a fresh decision. Thereafter the appellant filed an application under Section 254 of the Act for rectification of certain errors, which application was rejected. The appellant has thereafter filed the present appeal against the order dated 10.12.2014 by which the appeal of the revenue was allowed in part and the matter was remitted to the first appellate authority to decide the appeal on merits.

8. In this back drop we have heard Sri Abhinav Mehrotra, the learned counsel for the assessee-appellant and Sri Shubham Agarwal, the learned counsel for the Department.

9. It was contended that a substantial question of law arises, namely, that in case of a valid search under Section 132 of the Act, the assessment, if any, was only permissible under Section 153A or under Section 153C and that no assessment or reassessment was permissible under Section 147 read with Section 148 of the Act. It was also contended that the assessing officer had no jurisdiction to initiate the proceedings under Section 147 read with Section 148 of the Act, on the basis of the same material that was discovered during the search operation as this would amount to a change of opinion.

10. In support of his submission the learned counsel for the appellant has placed reliance upon a decision of this Court in Anand Prakash Agarwal vs. The Commissioner of Income Tax, Manu/UP/1962/ 2014= (2014)367 ITR 526 (Alld) and Chandra Prakash Agarwal vs. Assistant Commissioner of Income Tax and others, 287 ITR 172 on the proposition that the provision of Chapter XIV which provides for a procedure of assessment is a general procedure to be adopted for making assessment whereas the provisions contained in Chapter XIV-B provided for assessment in special cases. It was contended that the provision of Chapter XIV-B has to be resorted to in case where search was conducted under Section 132 of the Act.

11. The learned counsel contended that where a search has been initiated under Section 132 of the Act of the books of account or other documents or assessed or requisitioned under Section 132A of the Act, the assessment can only be made under Section 153C of the Act, i.e., under Chapter XIV-B and not under Chapter XIV of the Act.

12. It was thus contended that having regard to the scheme of various provisions of Chapter XIV-B of the Act the provisions of Chapter XIV of the Act are not attracted. The learned counsel contended that consequently proceeding cannot be initiated under Section 148 of the Act and the same was without jurisdiction. It was also contended that in any case the material or the evidence which was seized under Section 132 of the Act could not be considered in reassessment proceeding under Section 148 of the Act. The learned counsel also relied upon a decision in Ram Ballabh Gupta vs. Assistant Commissioner of Income Tax and others, 288 ITR 374.

13. Having heard the learned counsel for the parties, the proposition advanced by the appellant appears to be attractive, but, we find that the submission cannot be accepted. The appellant is trying to confuse two issues in order to gain undue benefit which cannot be permitted. We find that there were two sets of incriminating documents seized against the appellant. One set of documents, so seized, were found at the appellant's premises and the other set of documents was found at the premises of Anurag Pandey. The materials found at the premises of Anurag Pandey were used to initiate proceedings under Section 153C of the Act, but, were subsequently dropped. These materials have not been used for initiating proceeding under Section 147 of the Act. The materials so used under Section 147 of the Act are the materials which were found at the assessee premises, pursuant to which proceeding under Section 153A of the Act was initiated, but was subsequently dropped on account of the fact that the warrant of authorisation was issued against a wrong person. The materials, so seized, at the appellant premises could be utilised for the purpose of assessment. In this regard a Division Bench of this Court in Dr.Sarad B. Sahai and another vs. Commissioner of Income Tax and others, 235 CTR 596, held as under:-

"The search may have been declared illegal but the post-search assessment has to take place. It is a settled principle of law that even if a search is declared illegal the material found at the time of search can be utilized for the purposes of assessment. Therefore, the co-ordinated post-search investigation and meaningful assessment has to take place. It may be that on account of search being declared illegal, the block assessment under s. 158BC of the Act cannot be made but the regular assessment or the reassessment contemplated under the Act can be made."

14. In the light of the aforesaid, the contention that once proceeding under Section 153C of the Act was dropped, proceeding under Section 147 could not be initiated, is patently erroneous. We find that proceeding under Section 153C was initiated on different set of documents and on separate satisfactory note recorded whereas the proceedings which were initiated against the assessee-appellant under Section 147 of the Act was based on different set of documents.

15. In the light of the aforesaid, we do not find any merit in the appeals filed by the appellant. No substantial question of law arises for consideration. All the appeals are devoid of any merit and are dismissed.