When search u/s 132 was not conducted at the registered address of the assessee company, proceeding u/s 153A can not be initiated on the assessee.
In a recent judgment, ITAT Delhi has held that when search u/s 132 was not conducted at the registered address of the assessee company, proceeding u/s 153A can not be initiated on the assessee
ABCAUS Case Law Citation:
4657 (2025) (07) abcaus.in ITAT
Important Case Laws relied upon by Parties:
Abhisar Buildwell reported in 454 ITR 212(SC).
A search and seizure operation u/s 132 of the Income Tax Act, 1961 (the Act) was conducted on a third party/company. The assessee company had sold its shares in the said third party to seven companies at the cost price. Since, the sale price was equal to purchase price of share, no capital gain/loss was disclosed in the return of income of the assessee.
Even though search was not conducted on the assessee company at its registered office address mentioned notice u/s 153A of the Act was issued to the assessee. In response to the said notice, the assessee filed its return .
The said seven investors company were examined by the revenue on the basis of their financials, business, income tax returns, information collected u/s 133(6) of the Act and statements of various related persons and other related information available with the department.
Based on the same, it was concluded by the revenue that the said seven investors company were not genuine investors and the mere accommodation entry providing vehicles which were controlled and used by various entry providers.
From the document impounded from the premises of the search third party, it was concluded by the revenue that the sale consideration received from these seven entities were mere accommodation entries against which cash was being provided by the third party.
The assessment was framed u/s 153A of the Act in the case of the assessee by making addition of the sale consideration as unexplained cash credit u/s 68 of the Act by together with commission expenditure incurred for earning such accommodation entry @ 3%.
The CIT(A) deleted the aforesaid additions by giving a detailed finding and held that the sale consideration received on sale of shares of the searched party from the said 7 entities cannot be treated as unexplained cash credit u/s 68 of the Act and cannot be treated as accommodation entries. Consequentially the estimated commission expenditure @3% on account of alleged accommodation entries was also deleted by the CIT(A).
The revenue was in appeal before the ITAT against the deletion of addition made by the CIT(A) and the assessee filed cross objection on the legality of the assessment framed u/s 153A of the Act.
The assessee contended that no search per se was conducted on the assessee at its registered office address. Accordingly, issuance of notice u/s 153A of the Act to the assessee and consequential framing of assessment u/s 153A of the Act on the assessee was to be declared illegal and void ab initio.
It was also submitted that there was no incriminating material found during the course of search in the premises of the third party qua the subject mentioned addition made in the hands of the assessee. Hence, the additions had been made without the existence of any incriminating material.
The Tribunal observed that it had in another similar case had considered the addition made by the AO u/s 68 of the Act based on impounded material in the form of tally data, wherein, the Tribunal by placing the grounds of revenue.
Further, the Tribunal noted that the assessee had also taken a plea that no search u/s 132 of the Act was conducted at the registered address of the assessee company. In absence of search being conducted on the assessee, proceeding u/s 153A of the Act could not be initiated on the assessee. Accordingly, any action as could be proposed on the assessee could only be u/s 153C of the Act if there is any incriminating material found during the course of search of 3rd person wherein, certain documents/ information belong, relate and pertain to the assessee were found.
The Tribunal further noticed that there was no search carried out / conducted in pursuance of the warrant issued in the name of assessee. The assessee had kept all the books of account and other documents at its registered office. No search operation were carried/ conducted in the said registered office address of the assessee and no panchnama was drawn in the name of the assessee for the said address.
The Tribunal further noted that the address of the registered office had been duly mentioned by the assessee company and by the revenue in all the statutory documents such as regular income tax returns filed, income tax assessment orders, various notices issued by the AO in the course of assessment proceedings, records of Ministry of Corporate Affairs, Govt. of India etc.
Hence, the Tribunal held that there was no valid assumption of jurisdiction u/s 153A of the Act by the AO. The Tribunal placed reliance on the decision of the Hon‟ble Jurisdictional High Court wherein, the Court upheld that the proceedings u/s 153A were bad in law since the premises which were searched under Section 132 were not of the Assessee.
Accordingly, cross objection of the assessee was allowed and appeal of the revenue was dismissed
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