Income Tax Appellate Tribunal - Mumbai
Jt. Cit vs Latika V. Waman on 27 September, 2004
Equivalent citations: [2005]1SOT535(MUM)
ORDER
P.P. Parikh, A.M. This appeal by the department and the Cross objection of the assessee are directed against the undated order of the CIT (A) passed under section 158BC of the Income Tax Act, 1961 (hereinafter referred to as the Act) for the block period consisting of assessment years 1989-90 to 1999-2000.
2. The grievance of the department is against the deletion of the entire undisclosed income of Rs. 12,60,000 ignoring the fact that the assessees husband was the defactoowner of M/s. Mayur Trading Company and also the fact that it was based on the voluntary declaration of the assessees husband. In her Cross Objection, the assessee has raised a ground to the effect that it was not a valid assessment order as the search warrant was not in the name of the assessee.
3. The assessee, an individual, is the Proprietress of M/s. Mayur trading Company, which is engaged in the wholesale business of potatoes and onions on commission basis and she is regularly assessed to tax. Her husband Shri Vishwamber Waman is the Proprietor of M/s. Warnan Pimple & Co., who also is doing the same business from the same place. There was a search under section 132 of the Act on 18-11-1998 at the premises from which the two businesses were being conducted. Consequent to the search, notice under section 158BC was issued to the assessee in response to which she filed her return for the block period. How much income was disclosed in the said return is not evident from the assessment order. When the assessment proceedings were taken up, the assessee raised an objection stating that proceedings under Chapter XIVB of the Act in her case were uncalled for as the search warrant was not issued in her name but it was in the name of her husband. The assessing officer has dealt with this objection in his order at length. According to him, the provisions of section 158BA(I) speaks of a search initiated under section 132 and seizure from any person. Therefore, according to him, there was no pre-requirement that the provisions of Chapter XIVB could be invoked when the authorization of search was issued against a particular person. He further observed that Chapter XIVB contained machinery provisions and come into play once a search had taken place under section 132 of the Act. Accordingly, he brushed aside the objection of the assessee and proceeded to assess undisclosed income in the hands of the assessee. The assessing officer took note of the statement of assessees husband which was recorded under section 132(4) of the Act. In the said statement, it was averred by Shri Vishwamber Waman that though his wife was the Proprietress of M/s. Mayur Trading Company, he attends the business and also stated that there was a difference in the balance sheet of M/s. Mayur Trading Company to the extent of Rs. 12.60 lakhs. Since the assessee had responded to the notice under section 158BC by filing her return of income and it participated in the proceedings, the assessing officer held that the assessee was estopped from raising any technical objection. So, he brought the difference of Rs. 12.60 lakhs to tax as the undisclosed income of the assessee.
4. The same objection was raised by the assessee before the CIT (A). The CIT (A) held that since the assessee was having her proprietary business at the address which was mentioned in the search warrant, she was covered by the search and hence, the notice under section 158BC was properly issued to her. However, he deleted the entire addition of Rs. 12.60 lakhs on the ground that there was no material which could support the discrepancy in the balance sheet or the inflation of expenses which also was one of the considerations for the assessing officer to make the addition.
5. The learned counsel for the assessee vehemently submitted that since there was no search at all in the case of the assessee, there was no question of applying the provisions of Chapter XIVB at all in her case. She relied on the decision of Allahabad Bench of the Tribunal in the case of Biswanath Prasad 80 ITD 516 (sic). The learned Departmental Representative supported the proceedings undertaken in the case of the assessee but objected to the addition being deleted by the learned CIT (A).
6. We have duly considered the rival contentions and the material on record. Chapter XIVB of the Act provides for a special procedure for assessment of search cases. To that extent, we agree with the assessing officer that the said Chapter contains machinery provisions. Sub-section (1) of section 158BA empowers the assessing officer to assess the undisclosed income in accordance with the provisions of Chapter XIV where a search has been undertaken under section 132 of the Act or where the books of account, other documents or any assets or requisition under section 132 in the case of any person. According to the assessing officer, since there is reference to the expression any personin section 158BA(1), Chapter XIVB applies to any person even where a search has not been conducted on him. In our view, the assessing officer has misread the provision. The assessing officer gets the power to make an assessment under Chapter XIVB as a result of search carried out under section 132 of the Act. As per the provisions of section 132(1), the primary target is the person who is in possession of any undisclosed income. In that event, the search party can enter and search any building, place, vessel, vehicle or aircraft where the undisclosed assets or incriminating documents are likely to be found in relation to such person. Thus, to repeat, the primary target under section 132 is a person in relation to whom any place can be searched by the search party. Once place of a person is searched, it is only in his respect that the assessing officer derives power from section 158BA(I) to make an assessment under Chapter XIVB of the Act. It is not that all persons who are found at the place of search are automatically covered by action under section 132 of the Act, which is primarily against a particular person. We may clarify that other persons at the search place can be covered only when in the course of search they are also found to be in possession of undisclosed assets. To illustrate-Suppose a search warrant is issued in the name of Mr. X. It is reported that Mr. X has boarded a plane. The search party would enter the aircraft in search of Mr. X and to search Mr. X. In that event it would be a serious infringement of the person and private rights of the co-passengers if they are also made automatically covered in the search without any warrant being issued in their names. This cannot be the intention of the provisions of section 132 of the Act. Thus, in the present case when the assessee was not subjected to search by issue of warrant in her name, the assessing officer could not assume any power to make the assessment of undisclosed income under Chapter XIVB of the Act. If in the course of search on Shri Vishwamber, any material incriminating his wife had been found, then the proper course for the assessing officer would have been to issue a notice under section 158BD of the Act. When specific procedures are prescribed for persons who are searched and for other persons in respect of whom incriminanting material is found, the assessing officer cannot arrogate himself to bypass the prescribed procedures and issue notice under section 158BC of the Act on a person who was not subjected to search. Moreover, we also reject the contention of the assessing officer that the assessee could not have raised this objection since she had acquiesced in the proceedings. In our view, the assessee cannot concede jurisdiction to the assessing authority which is not prescribed by law. Her participation in the proceeding was merely a technical compliance of the notice issued by the assessing officer. if she had not complied with the notice, she would have been subjected to further litigation and hence, it was merely a cooperative attitude, which has been reflected on her part, which cannot be equated with conceding of jurisdiction. Therefore, in our considered view, the entire proceedings undertaken by the assessing officer was bad in law and hence, the assessment is quashed.
7. On merits also we do not find any justification to restore the addition, since no enquiry was made by the assessing officer and the addition was made merely on protective basis. In our view, the CIT (A) was justified in deleting the addition.
8. In the result, the appeal of the department is dismissed and the Cross objection of the assessee is allowed.