Appellate Tribunal : Powers : Search : Block assessment : S. 132 and S. 158B of Income-tax Act, 1961 : Tribunal can look into validity of search : Authorisation for search not valid : Consequent search and block assessment also not valid : Tribunal justif

57. Appellate Tribunal : Powers : Search : Block assessment : S. 132 and S. 158B of Income-tax Act, 1961 : Tribunal can look into validity of search : Authorisation for search not valid : Consequent search and block assessment also not valid : Tribunal justified in setting aside block assessment order.

[CIT v. Smt. Chitra Devi Soni, 313 ITR 174 (Raj.)]

In the appeal before the Tribunal against the block assessment order the assessee contended that there was no material with the Director to form the belief as was required u/s.132(1) of the Income-tax Act, 1961 and therefore the search and the block assessment order were not valid. The Tribunal held that the search was not valid in the absence of authorisation based on reasons as required u/s.132(1) and consequently the block assessment was illegal.

On appeal by the Revenue challenging the jurisdiction of the Tribunal to look into the validity of search the Rajasthan High Court upheld the decision of the Tribunal and held as under :

“(i) Since the assessment in the present case is made under Chapter XIV-B and when it was specifically challenged by the assessee, that the circumstances contemplated by S. 132(1) did not exist, this is a matter which goes to the root of the matter about jurisdiction of the assessing authority to proceed under Chapter XIV-B, the Tribunal was very much justified, and had jurisdiction to go into the question as to whether the search was conducted consequent upon the authorisation having been issued in the background of the existence of eventualities and material mentioned in 132(1).

(ii) The basic ingredient of the term ‘block period’ u/s.158B of the Income-tax Act, 1961, is that it relates to a certain number of years relating to and relevant to the search conducted u/s.132. The conclusion is that there should be a search conducted u/s.132. S. 132 contemplates existence of certain eventualities, in the event of existence whereof, the competent authority should have reason to believe the existence of the circumstances mentioned in clauses (a) to (c) of S. 132(1). The consequence is that if the requirement of Ss.(1) about the existence of the reason to believe consequent upon the information in the possession of the concerned authority is not satisfied there could possibly be no authorisation, irrespective of the fact that it may have been made and in turn if a search is conducted in pursuance of the authorisation issued in the absence of the requisite sine qua non the search cannot be a ‘search’ u/s.132 of the Act, as contemplated by the provisions of S. 158B of the Act.

(iii) The Revenue failed to produce records containing relevant material including information in the possession of the competent authority, on the basis of which it had entertained the reason to believe the existence of one or more of the eventualities covered by clauses (a) to (c) of S. 132(1). In the absence of a legal search, in accordance with provisions of S. 132 the ‘block period’ or the previous year in which the search was conducted could not be said to have come into existence and therefore any assessment order based on such search could not stand.

(iv) The Tribunal was justified in holding that when the authorisation to conduct the search based on reasons germane to S. 132(1) did not exist the search became invalid and that the assessment order based on such search could not stand and had rightly set it aside.”