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

[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.”