Commissioner of Income Tax vs Smt. Ram Devi

We have heard Shri R.K. Upadhyay for the revenue. Shri Rajesh Gupta appear for the Respondent-Assessees.

These Income Tax Appeals u/s 260A of the Income Tax Act 1960, (the Act) arise out of the orders of the Income Tax Appellate Tribunal (ITAT) dated 24.8.2010 following the Division Bench judgment of this Court in Commissioner of Income Tax v. Smt. Vandana Verma (2011) 330 ITR 533 (All), in which it was held that since the warrant of authorisation u/s 132(1) of the Act was issued in the joint names of Shri Shiv Nath Gupta and Smt. Ram Devi, who were husband and wife living together in a single premises, it was not open for the A.O. to assess Smt. Ram Devi alone on the basis of the assets and documents seized during the course of search by invoking the provisions of Chapter XIV-B, in an individual capacity.

The ITAT has quashed the assessment order on the ground that the assessment order in the name of individuals could not be made when the warrant of authorisation was issued in the joint names of Shri Shiv Nath Gupta and Smt. Ram Devi Gupta.

The revenue has raised following questions of law to be considered by this Court:

Whether the Hon''ble ITAT was justified in law in dismissing the revenue appeal by ignoring the legal position that in order to be assessed in the status of AOP/BOI there should exist any evidence establishing the status of the Assessee as AOP/BOI as No. evidence has neither been found during the course of search nor submitted by the Assessee.

Whether the Hon''ble ITAT was justified in law in dismissing the appeal of the department by ignoring the settled position of law as held by the various courts, including apex court, that in order to be an AOP there must be a volition on the part of members forming the AOP to produce profit from a common source of income. In the present case neither there was any such evidence found nor submitted by the Assessee.

Whether the Hon''ble ITAT was justified in law in creating a status of AOP de-novo ignoring the fact that essential ingredient required for existence on an AOP is not found during the course of search. Therefore, mere putting more that one name in an instrument like warrant of search, cannot substitute for any evidence to establish formation of AOP. The ITAT has thus erred in disregarding the ratio laid down by the Hon''ble Jurisdictional High Court in the case of Raghuraj Pratap Singh and Ors. v. ACIT (2008) 307 itr 450 (Alld.).

Whether the Hon''ble ITAT was justified in disregarding the provisions of Section 153A which require proceedings to be initiated in case of persons searched u/s 132 of the Income Tax Act.

Whether the Hon''ble ITAT was justified in law in wrongly applying the ratio of judgment in the case of CIT v. Smt. Vandana Verma as the facts and circumstances of the instant case are different from the facts and circumstances of the instant case. The Tribunal having accepted in para 5 of the order, the fact that search has been conducted in the case of Sri Shyam Babu Gupta, Smt. Priyambada Gupta, Shiv Nath Gupta, Shiv Chandra Gupta, Satish Chandra Gupta, Mahesh Prasad Gupta, Smt. Ram Devi, Smt. Renu Gupta, Smt. Vijay Luxmi and Ors. could not have concluded that the assessment should be made in the name of A.O.P."

Shri R.K. Upadhyay has relied upon judgments in Raghu Raj Pratap Singh v. Asst. CIT (All) (2008) 307 ITR 450 (All) and Madhupuri Corporation Vs. Prabhat Jha, Deputy Director of Income Tax (Investigation), , in support of the legal issues.

We have gone both the decisions and find that whereas the judgment in Raghu Raj Pratap Singh (supra) related to the validity of search and seizure and the recovery of materials from the bank, the judgment in Madhupuri Corporation (supra) rendered by the Gujarat High Court, relates to the retention of the seized documents and books and accounts beyond the statutory period of 15 days. The Gujarat High Court held that such illegality would not vitiate the evidence collected during such search.

We are informed by Shri R.K. Upadhyay, that the judgment in Smt. Vandana Verma''s case (supra) has been challenged in the Supreme Court by the revenue in SLP (Civil) No. 18366 of 2010 (C.I.T. v. Vandana Verma) in which notices have been issued and thereafter fresh steps were directed to be taken up on 4.8.2011 fixing 15.9.2011.

In the instance case before us in pursuance to the warrant of authorisation issued by the Director of Income Tax (Investigation), Kanpur u/s 132 of the Income Tax Act, 1961, search and seizure operations were carried out at the residential and business premises of Shri Shyam Babu Gupta, Smt. Priyamvada Gupta, Shivnath Gupta, Shiv Chandra Gupta, Satish Chandra Gupta, Mahesh Prasad Gupta, Smt. Ram Devi, Smt. Renu Gupta, Smt. Geeta Gupta, Smt. Vijay Luxmi and Ors. located at Old Katra, Allahabad on 17.5.2005 and also a survey u/s 133-A was conducted in some business premises of the group. As per provisions of Section 153A(b), the assessment of six preceding assessment years (block period) was required to be made from the search. Accordingly, notices were issued to the Assessees. The A.O. passed separate assessment orders for Shri Shiv Nath Gupta and Smt. Ram Devi.

The Assessee challenged the assessment order before the Commissioner of Income Tax (A) in appeal who allowed partial relief vide order dated 18.2.2009.

The ITAT held following the judgment in Smt. Vandana Verma''s case (supra) that when the warrant of authorisation was jointly issued in the name of several persons, the assessment should have been framed in the status of AOP/BOI only and not on the individual status of the Assessee.

We do not find that the Tribunal has committed any error in law in relying upon the judgment in Smt. Vandana Verma''s case (supra) in which it was held that where the search operations are carried out in the joint names, the individual assessment could not have been made. The Court has given reasons to reach to such conclusion. They have held that in case, the authorizing authority had information in his possession in consequence of which he had reason to believe that Mudit Verma and Vandana Verma though living in a single premises as husband and wife, possessed undisclosed assets including income separately, then, he might have issued warrant of search individually for conducting the search as both Mudit Verma and Vandana Verma are assessed to income tax in their individual capacity. When warrant of authorization was issued in the joint names it was not open for the assessing authority to assess Smt. Vandana Verma on the basis of the assets and documents seized during the course of search in pursuance of the warrant of authorization which was in the joint names, and that too by invoking the provisions of Chapter XIV-B in an individual capacity. She could be assessed jointly only as AOP of BOI as per the definition of the word "person" under the Income Tax Act.

Since the questions raised in these appeals are covered by the Division Bench judgment of this case in Smt. Vandana Verma''s case and with which we respectfully agree, we need not to decide them all over again.

The Income Tax Appeals are accordingly dismissed. We make it clear that it will be open to the assessing authority to make assessment orders in respect of the Assessees who have been assessed separately as AOP/BOI.