Commissioner of Income Tax vs Devesh Singh CIT Vs Yogendra Singh

R.K. Agrawal, J.—Finding conflict of views expressed in two sets of cases decided by different Co-ordinate Benches of this Court, a Division Bench vide order dt. 20th Oct., 2011 had referred these cases to the Larger Bench to resolve the controversy in question, which is of public importance. In Writ Petn. No. 5731 (MB) of 2004, Raghuraj Pratap Singh and Others Vs. Assistant Commissioner of Income Tax, , a Division Bench of this Court had held that warrant issued in joint names does not suffer from any infirmity and it could have been done. On the other hand another Division Bench of this Court In IT Appeal No. 21 of 2009, Commissioner of Income Tax (Central) Vs. Smt. Vandana Verma, , had held that joint warrant could not have been issued and it would be incumbent upon the authority to issue warrant in individual name and if the warrant has been issued in the joint names, the assessment will have to be made collectively in the names of both the persons in the status of AOP (association of persons)/BOI (body of individuals). The decision rendered in the case of Smt. Vandana Verma (supra) has been followed by this Court in IT Appeal No. 30 of 2011, CIT vs. Smt. Madhu Chawla, decided on 23rd Aug., 2011.

The Hon''ble Chief Justice vide order dt. 15th Dec., 2011 has been pleased to constitute this Bench to decide the matter.

Facts of the case

IT Appeal Nos. 99, 101, 103, 104, 109 and 110 of 2010 have been filed by the Revenue against the order dt. 25th May, 2010 passed by the Tribunal in favour of Sri Devesh Singh whereas IT Appeal Nos. 100, 102 and 105 to 108 of 2010 have been filed against the Tribunal''s order dt. 25th May, 2010 passed in favour of Sri Yogendra Singh. All the appeals relate to the asst. yrs. 2001-02 to 2006-07.

As all these appeals relate to the joint warrant issued in the names of Sri Yogendra Singh alias Maniya Singh, Sri Devesh Singh and Sri Devendra Singh alias Lalu Singh and the appeals before us relate to only Sri Devesh Singh and Sri Yogendra Singh and the facts being common, we give the facts of IT Appeal No. 99 of 2010 relating to Sri Devesh Singh.

A search and seizure operation under s. 132 of the IT Act, 1961, hereinafter referred to as "the Act", was carried out in the premises of Singh Group of cases, Singh Niwas, Nawabganj, Unnao on 10th Nov., 2006. Residential premises of Sri Yogendra Singh alias Maniya Singh, Devendra Singh alias Lalu Singh and Devesh Singh were searched in which warrant was issued jointly in the names of aforementioned three persons. Several incriminating material and documents were found during search operation and they were seized. An inventory was prepared and the Panchnama was drawn jointly in the names of all the three persons mentioned above. Pursuant to the search and seizure operation, a notice under s. 153A of the Act was issued to the respondent-assessee on 13th Sept., 2007. Photostat copies of the documents and papers seized during the search and seizure operation were also provided to the respondent-assessee. In response to the notice under s. 153A of the Act, the respondent-assessee filed his return of income. The assessment for the asst. yr. 2002-03 was completed at Rs. 9,94,350.

Feeling aggrieved the assessee preferred an appeal before the CIT(A)-III, Lucknow. The CIT(A) vide order dt. 24th Dec., 2009 had allowed the appeal on the preliminary ground that as the warrant of authorisation was issued in the joint names of the assessee and two other persons and the proceeding under s. 153A of the Act was initiated in the case of the appellant as individual and the assessment has also been made in the capacity of an individual, in view of the law laid down by this Court in the case of Smt. Vandana Verma (supra), the warrant having been issued in the names of all the three persons jointly, the assessment could not have taken place in the name of an individual.

Feeling aggrieved, the Revenue preferred an appeal before the Tribunal, Lucknow Bench "A", Lucknow, which vide order dt. 25th May, 2010 had dismissed the appeal. The assessments in respect of other years as also of other persons named in the warrant of authorisation met with the same fate in the appeals preferred by the respective assessee before the CIT(A), who allowed the appeals on this preliminary ground, which order has also been upheld by the Tribunal.

All the appeals have been admitted vide order dt. 9th Dec., 2010 on the following substantial question of law.

Whether the warrant of authorisation could have been issued jointly and if so, assessment could have been made against AOP or individually ?

Rival submissions

We have heard Sri D.D. Chopra, learned counsel appearing for the Revenue.

Sri Chopra submitted that by the Finance Act 2012, s. 292CC has been inserted with retrospective effect from 1st April, 1976, which provides that it shall not be necessary to issue an authorisation under s. 132 of the Act separately in the name of each person where the authorisation has been issued mentioning therein more than one person. He, thus, submitted that the order passed by the CIT(A) as also by the Tribunal ought to be set aside and the CIT(A) should decide all the appeals on merits.

Legislative amendment

We do not feel it proper to go into the question as to which view expressed by the two sets of Division Benches is the correct one as we find that after the decision of this Court in the cases of Smt. Vandana Verma (supra) and Smt. Madhu Chawla (supra), the Parliament stepped in and by cl. 107 of the Finance Bill, 2012 [(2012) 248 CTR (St) 1 : (2012) 67 DTR (St) 1], a new s. 292CC was sought to be inserted with retrospective effect from 1st April, 1976. It had an overriding effect. It provides as follows :

Insertion of new s. 292CC--After s. 292C of the IT Act, the following section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1976, namely :

292CC. Authorisation and assessment in case of search or requisition.--(1) Notwithstanding anything contained in this Act,--

(i) it shall not be necessary to issue an authorisation under s. 132 or make a requisition under s. 132A separately in the name of each person;

(ii) where an authorisation under s. 132 has been issued or requisition under s. 132A has been made mentioning therein the name of more than one person, the mention of such names of more than one person on such authorisation or requisition shall not be deemed to construe that it was issued in the name of an AOP or BOI consisting of such persons.

(2) Notwithstanding that an authorisation under s. 132 has been issued or requisition under s. 132A has been made mentioning therein the name of more than one person, the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorisation or requisition.

In the Notes on Clauses of the Finance Bill, 2012 it has been stated as follows:

Clause 107 of the Bill seeks to insert s. 292CC in the IT Act relating to authorisation and assessment in case of search or requisition.

It is proposed to insert aforesaid new s. 292CC so as to provide that notwithstanding anything contained in this Act, it shall not be necessary to issue an authorisation under s. 132 or make a requisition under s. 132A separately in the name of each person.

It is further proposed that where an authorisation under s. 132 has been issued or requisition under s. 132A has been made mentioning therein the name of more than one person, the mention of such names of more than one person on such authorisation or requisition shall not be deemed to construe that it was issued in the name of an AOP or BOI consisting of such persons.

It is also proposed to provide that notwithstanding that an authorisation under s. 132 has been issued or requisition under s. 132A has been made mentioning therein the name of more than one person, the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorisation or requisition.

These amendments will take effect retrospectively from 1st April, 1976 and will, accordingly, apply to the asst. yr. 1976-77 and subsequent assessment years.

In the Memorandum Explaining the Provisions in Finance Bill, 2012, necessity of introducing s. 292CC has been explained as follows :

Under the existing provisions of s. 132 and s. 132A, an authorization can be issued or a requisition can be made, as the case may be, where the Director General or the Director in consequence of information in his possession has reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing (hereafter referred to as undisclosed income or property), then, he may authorize any Addl. Director or Dy. Director, etc., to enter and search any building, place, vehicle, etc. and seize any such books of accounts, other documents, undisclosed property, etc.

Where a search is initiated under s. 132 or requisition is made under s. 132A, assessment is to be completed under the provisions of s. 153A or s. 153C (and if search was prior to 31st May, 2003 under Chapter XIV-B of the Act) or s. 143(3), etc.

In a recent Court decision, it has been held that in search cases arising on the basis of warrant of authorisation under s. 132 of the Act, warrant of authorisation must be issued individually and if it is not issued individually, assessment cannot be made in an individual capacity. It was also held that if the authorization was issued jointly, the assessment will have to be made collectively in the name of all the persons in the status of AOP/BOI.

This decision is not in accordance with the legislative intent.

It is accordingly proposed to insert a new s. 292CC in the IT Act to provide that--

(i) it shall not be necessary to issue an authorisation under s. 132 or make a requisition under s. 132A separately in the name of each person;

(ii) where an authorisation under s. 132 has been issued or a requisition under s. 132A has been made mentioning therein the name of more than one person, the mention of such names of more than one person on such authorisation or requisition shall not be deemed to construe that it was issued in the name of an AOP or BOI consisting of such persons;

(iii) notwithstanding that an authorisation under s. 132 has been issued or requisition under s. 132A has been made mentioning therein the name of more than one person, the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorisation or requisition.

These amendments will take effect retrospectively from the 1st day of April, 1976 and will accordingly apply to asst. yr. 1976-77 and subsequent assessment years.

Effect of the retrospective amendment

The Finance Bill, 2012, has been enacted into an Act by the Parliament being Finance Act, 2012.

The effect of insertion of s. 292CC with retrospective effect from 1st April, 1976 is that :

(1) it is not necessary for the authorities to issue an authorisation under s. 132 or requisition under s. 132A of the Act separately in the name of each person;

(2) if an authorisation/requisition has been issued in the names of more than one person it shall not be construed that it was issued in the name of AOP or BOI, consisting of such persons;

(3) if an authorisation has been issued under s. 132 or requisition under s. 132A of the Act in the names of more than one person, the assessment or reassessment can be made separately in the name of each of the person mentioned in the authorisation/requisition.

As the provisions of s. 292CC of the Act have come into force retrospectively i.e. from 1st April, 1976, it shall be deemed that the aforesaid provision was on the statute book i.e. the IT Act, 1961 since 1st April, 1976 and the consequence of issue of a warrant of authorisation under s. 132 of the Act if issued in joint names of more than one person has to be adjudged in the light of the provisions of s. 292CC of the Act.

It is well-settled that any retrospective amendment in the statute has to be taken into consideration while deciding an appeal as the appeal is in continuation of the original proceedings [see : The Commissioner of Income Tax, Hyderabad Vs. Dewan Bahadur Ramgopal Mills Ltd., , The State of Uttar Pradesh and Others Vs. Raja Syed Mohammad Saadat Ali Khan, and Commissioner of Income Tax Vs. Indian Telephone Industries Ltd., ].

Conclusions

In the present case we find that the warrant of authorisation under s. 132 of the Act has been issued on 10th Nov., 2006 in the joint names of three persons. We are, therefore, of the considered opinion that in view of the provisions of s. 292CC, as inserted by Finance Act, 2012 in the statute book i.e. the IT Act. 1961, the assessment made in the individual capacity of each person named in the warrant of authorisation was perfectly within the jurisdiction of the assessing authority and the CIT(A) as also the Tribunal were not justified in annulling the assessment on the ground that if the warrant of authorisation was issued jointly in the names of more than one person, the assessment could not have been made in the capacity of an individual. We, therefore, set aside both the orders passed by the CIT(A) and the Tribunal and remand the matter to the CIT(A) to decide the appeals on merits.

The substantial question of law on which the appeals have been admitted is decided in favour of the Revenue by holding that where the warrant of authorisation has been issued jointly, the assessment can be made individually.

In view of the retrospective effect having been given to s. 292CC of the Act, the law propounded in the cases of Smt. Vandana Verma (supra) and Smt. Madhu Chawla (supra) loses its significance. All the appeals stand disposed of with the aforesaid observation.