Search and seizure – Assessment in search cases – Validity – Assessment completed on date of search – No incriminating material found during search – Invocation of section 153A not valid – Assessment order and consequent demand notice set aside

Search and seizure – Assessment in search cases – Validity – Assessment completed on date of search – No incriminating material found during search – Invocation of section 153A not valid – Assessment order and consequent demand notice set aside

A search and seizure operation was conducted u/s 132 at the assessee’s residential premises and on a locker jointly held with another person. According to the panchanama prepared for the search and seizure, nothing was found or seized. A notice was issued to the assessee u/s 153A. The assessee requested the A.O. to treat the original return of income as the return filed in response to such notice. Thereafter, notices u/s 143(2) and 142(1) were issued. Although nothing was found during the course of the search, the order passed u/s 143(3) read with section 153A referred to the cash book found during the survey conducted two weeks prior to the date of search, and stated that during the course of the search operation it was found that the assessee company had made expenditure during the year which was paid in the mode of cash of beyond the prescribed limit of Rs. 20,000 or above in a single day to a single party. The A.O. also disallowed the payments made to the cultivators and hamalis and accordingly raised a demand u/s 156 along with interest.

The Orissa High Court allowed the writ petition filed by the assessee challenging the order and held as under:

‘i) The assessment u/s 153A pursuant to a search u/s 132 has to be on the basis of incriminating material gathered or unearthed during the course of the search.

ii) The order passed u/s 143(3) read with section 153A was without jurisdiction. The order did not refer to any document unearthed during the course of the search conducted u/s 132. Therefore, the assumption of jurisdiction u/s 153A for assessment of the A.Y. 2015-16 was without legal basis. The panchanama of the search proceedings unambiguously showed that nothing incriminating was recovered in the course of the search. The assessment order and the consequential demand notice u/s 156 are set aside.’