Dr. Mansukh Kanjibhai Shah vs. ACIT (ITAT Ahmedabad)

S. 153A order void if s. 132 search warrant in improper status. Assessee can retract admission of undisclosed income

A survey u/s 133A was conducted on 28.10.04 at the premises of a charitable trust of which the assessee was the managing trustee. The assessee admitted unaccounted income of Rs. 1.93 crores. Search u/s 132 was conducted on 29.10.2004 and cash of Rs. 1.93 crores was found and seized. The search warrant was in the names of “K. M. Shah Charitable Trust, Mansukhbhai K. Shah” (the trust and the assessee). The assessee retracted the admission on 24.12.2004. An assessment order u/s 153A was passed in which the said sum was assessed in the hands of the assessee. The assessee challenged the s. 153A order on the ground that the warrant was not in his name and there was no search u/s 132, he could not be assessed u/s 153A. The CIT (A) upheld the assessment with the finding that as a search u/s 132 had been conducted in the name of the assessee, the s. 153A proceedings were valid. On appeal by the assessee, HELD allowing the appeal:

(i) In order for the AO to assume jurisdiction u/s 153A, it is essential that (a) The warrant of authorization must be issued in the name of the assessee, (b) It must be served on the assessee and (b) a search has to be conducted on the assessee;

(ii) The warrant of authorization u/s 132 was issued in the name of “K. M. Shah Charitable Trust, Mansukhbhai K. Shah“. This cannot be regarded as a warrant of authorization issued in the name of assessee in his individual capacity. The search cannot be regarded as conducted against the assessee in his individual capacity. The assessee’s name appears in the warrant and panchnama as the Managing Trustee of the Trust and not in his individual capacity. When a warrant is issued in joint names, an assessment in individual capacity/status is invalid (Vandana Verma (All) followed). Consequently, the s. 153A proceedings were invalid;

(iii) Also, though the assessee admitted on oath that the amount deposited in the accounts of the Trust was his unexplained personal money, this was not conclusive as it had been retracted. An assessee is entitled to show that the admission was not correct or true. (Pullangode Rubber 91 ITR 18 (SC) & Kishanlal Shivchand 88 ITR 293 (P&H) followed). No independent or corroborative evidence was found to show that money deposited in the bank account of the Trust belonged to the assessee in his individual capacity (the Trust enjoyed exemption u/s 11).