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2007 DIGILAW 2277 (RAJ)

Commissioner of Income v. Smt. Chitra Devi Soni

2007-11-29

MUNISHWAR NATH BHANDARI, N.P.GUPTA

body2007
JUDGMENT 1. Aggrieved by the order dated September 17, 2002, passed by the Tribunal, Jodhpur Bench, Jodhpur, in IT(SS)A No. 7/JP/1997, the Revenue has preferred this appeal. 2. While the defects were overruled by this court on August 6, 2003, and admitting the appeal, the following substantial questions of law were framed : "1. Whether for having recourse to assessment for the block period under Chapter XIV-B, a valid search under section 132 is a condition precedent and mere fact of search is not enough to give jurisdiction to the Assessing Officer to have recourse to the provisions under Chapter XIV-B ? 2. If so, whether, in the facts and circumstances of the present case, the Tribunal was right to hold that the search conducted in the present case was invalid ?" 3. The facts giving rise to the present appeal are that the assessee, Chitra Devi, filed an appeal before the Tribunal challenging the validity of the assessment order being violative of the principles of natural justice. The assessee contended that the assessment order is bad in law for the reason that the same was passed on the belief of the assessing authority without disclosing any material as is required under section 132 of the Income-tax Act. According to the assessee, there was no material with the Director to form the belief as is required under the provisions of section 132(1) and in the absence of any material to this effect the assessment order passed is not maintainable and, therefore, the assessment order deserves to be set aside. 4. The Tribunal in appeal decided the said issue, after referring to the various judgments on the issue, as to whether the Tribunal is having jurisdiction to examine the validity of the authorisation based on reasons duly recorded in writing for search when the same is challenged before the court/Tribunal. According to the Tribunal, the Revenue was given various opportunities to produce the material to show that authorisation was based on the existence of reasons about there being one or more of the circumstances enumerated in section 132(1)(a) to (c), as is required under section 132(1) of the Income-tax Act. According to the Tribunal, the Revenue was given various opportunities to produce the material to show that authorisation was based on the existence of reasons about there being one or more of the circumstances enumerated in section 132(1)(a) to (c), as is required under section 132(1) of the Income-tax Act. It was stated that on October 12, 2001, the appeal was adjourned to December 21, 2001, for the purpose of production of record showing authorisation being based on the existence of reasons about there being one or more of the circumstances enumerated in section 132(1)(a) to (c). Then the matter was further adjourned to February 12, 2002, however, when the material was not produced the matter was further adjourned to March 19, 2002, and, finally, when the Revenue could not produce the record showing authorisation being based on existence of reasons about there being one or more of the circumstances enumerated in section 132(1)(a) to (c), the arguments were heard on March 19, 2002, and March 27, 2002. Even during the course of arguments also, record containing existence of material which may have given reasons to believe the competent authority about existence of any one or more of the circumstances postulated under section 132(1)(a), (b) and (c) could not be produced, rather the representative appearing for the Revenue showed his helplessness to produce the record before the Tribunal. Thus, the Tribunal after granting ample opportunity to the Revenue for production of the record decided the issue holding that in the absence of authorisation being based on reasons required under section 132(1) of the Income-tax Act search was not valid, which otherwise was taken as a basis for the purpose of passing the order by the assessing authority. Even the factum of authorisation based on reasons has not come on record. In those circumstances, the Tribunal passed the order to the effect that search was not valid in the absence of authorisation based on reasons, as required by section 132(1), and consequentially, the block assessment was held to be illegal. 5. It has been argued by counsel appearing for the Revenue that the Tribunal cannot look into the validity of the search, as conducted under the provisions of section 132 of the Income-tax Act. 5. It has been argued by counsel appearing for the Revenue that the Tribunal cannot look into the validity of the search, as conducted under the provisions of section 132 of the Income-tax Act. It was urged that the Tribunal is having no jurisdiction or competence to look into this aspect, and therefore, the judgment rendered by the Tribunal is without jurisdiction, and goes beyond their competence, and the only question, which has been pressed finally is, regarding the competence of the Tribunal to declare a search to be illegal or to be invalid. 6. Per contra, counsel appearing for the assessee submitted that when the basic foundation, as called by the Tribunal, to show even existence of the authorisation to be based on existence of one or more of the reasons required under section 132(1) of the Income-tax Act is not in existence, then the Tribunal had held the assessment of the block period to be illegal, while holding the search to be without valid authorisation. It was submitted that in section 158B, the definition of block period is given, which reads as under : "158B. In this Chapter, unless the context otherwise requires- (a) 'block period' means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted under section 132 or any requisition was made under section 132A and also includes the period up to the date of the commencement of such search or date of such requisition in the previous year in which the said search was conducted or requisition was made : Provided that where the search is initiated or the requisition is made before the 1st day of June, 2001, the provisions of this clause shall have effect as if for the words 'six assessment years', the words 'ten assessment years' had been substituted ;" 7. It is contended that a perusal of the above definition shows that the block period means the period comprising of the previous years, (such number of years as may be prescribed from time to time) preceding the previous year, in which search was conducted under section 132, or any requisition was made under section 132A. It is contended that a perusal of the above definition shows that the block period means the period comprising of the previous years, (such number of years as may be prescribed from time to time) preceding the previous year, in which search was conducted under section 132, or any requisition was made under section 132A. Thus, for attracting this provision, it is necessary that a search is required to be conducted under section 132, and obviously, for conducting such search, authorisation is required to be given only if the concerned competent authority has reasons to believe about existence of one or more circumstances enumerated in clauses (a) to (c) of section 132(1), as required under the said provision, and in the absence of authorisation, based on reasons, as required under section 132, the "block assessment" itself cannot be made. In view of the argument raised above, it was prayed that the judgment of the Tribunal deserves to be maintained. 8. We have considered the rival submissions of the parties and scanned the matter carefully. 9. At the outset, it may be noticed that it is not in dispute that the assessment in question has been made under Chapter XIV-B, for the "block period". Obviously, under Chapter XIV-B, the assessment can be made for a "block period" and the previous year, in which search was conducted. Then, a look at the opening section of the Chapter, being section 158B, as quoted above, shows that it clearly gives the definition of "block period" and the basic ingredient of the term "block period" is that it relates to certain number of years relating to and relevant to, the search conducted under section 132, or requisition made under section 132A. Since, in the present case, we are not concerned with the eventuality under section 132A, the obvious conclusion is that there should be a search conducted under section 132. Since, in the present case, we are not concerned with the eventuality under section 132A, the obvious conclusion is that there should be a search conducted under section 132. In that view of the matter, the provisions of section 132 are required to be looked into and a look thereat shows that the opening language of sub-section (1) thereof contemplates the 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) and in that event the competent authority mentioned in clauses (A) and (B) can authorise the authorities mentioned in these two clauses to conduct the search. Consequent upon such authorisation, the authority authorised may undertake the actions mentioned in further clauses of section 132. We may at this stage, therefore, gainfully quote the provisions of section 132(1) and clauses (A) and (B) thereof, which read as under : " 132. Consequent upon such authorisation, the authority authorised may undertake the actions mentioned in further clauses of section 132. We may at this stage, therefore, gainfully quote the provisions of section 132(1) and clauses (A) and (B) thereof, which read as under : " 132. (1) Where the Director General or Director or the Chief Commissioner of Income-tax or the Commissioner of Income-tax or any such Joint Director or Joint Commissioner of Income-tax as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents, has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,- (A) the Director General or Director or the Chief Commissioner or Commissioner, as the case may be, may authorise any Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) such Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer. . ." 10. . ." 10. A bare reading of the above quoted clauses leaves no manner of doubt, in view of the use of word " then", that the action of authorising search, provided under clauses (A) and (B) has of necessity to be preceded by the existence of the requirements of the other part of said section, as quoted above. In other words, existence of reason to believe, in consequence of information in possession of the officer, mentioned in sub-section (1), about the existence of one or more of the eventualities catalogued in clauses (a) to (c) is the sine qua non to entitle the authority to make authorisation, as required by clauses (A) and (B). The obvious consequence is that if the requirement of sub-section (1) about the existence of the reason to believe, consequent upon the information in 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 any search is conducted in pursuance of the authorisation issued in the absence of requisite sine qua non, the search cannot be said to be a " search" under section 132 of the Act, as contemplated by the provisions of section 158B of the Act. 11. The above being the legal position, 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 section 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 section 132(1). We are conscious of the fact that it is not open to us or the court to go into the question of sufficiency of the reasons on the basis of which the competent authority may have had entertained the reason to believe the existence of one or more of the eventualities under clauses (a) to (c), but then the question as to whether there at all existed any material to have the reason to believe, even purportedly, consequent upon information in his possession, with the competent authority is the matter which can definitely be looked into by the Tribunal so also by this court as the absence would vitiate the entire action. 12. We may at this place refer to a judgment of this court in Kusum Lata v. CIT (1989) 180 ITR 365 , wherein the Division Bench of this court has taken the view that the court cannot go into the sufficiency of the information or the material. All that has to be seen is as to whether some material in fact existed or not for coming to the opinion and to have the reason to believe that any person is in possession of any undisclosed income or property. Obviously, as to whether the circumstances contemplated by clauses (a) to (c) existed or not. 13. In that view of the matter, if we proceed to examine the present case, a perusal of the impugned order shows that the Revenue was given sufficient time to produce the record which may be containing the relevant material including information in possession of the competent authority on the basis of which he may have entertained the reason to believe the existence of one or more of the eventualities covered by clauses (a) to (c) of section 132(1). However, even after availing of more than ample opportunities, the representative of the Revenue ultimately showed his helplessness to produce the record, and, therefore, even the factum of existence of authorisation based on reason to believe which might have been entertained consequent upon information in possession of the authority also could not come on record. However, even after availing of more than ample opportunities, the representative of the Revenue ultimately showed his helplessness to produce the record, and, therefore, even the factum of existence of authorisation based on reason to believe which might have been entertained consequent upon information in possession of the authority also could not come on record. That being the position, in our view, the learned Tribunal was fully justified in holding that when the authorisation to conduct the search based on reasons germane to section 132(1) does not exist the search becomes invalid with the obvious conclusion that the assessment order based on such search cannot stand and was rightly set aside. Even at the cost of repetition, it may be observed that in the absence of a legal search, in accordance with the provisions of section 132, " block period" or the previous year in which the search was conducted cannot be said to have come into existence and, therefore, if any assessment order is passed based on such search, it obviously cannot stand. 14. The result of the aforesaid discussion is that both the questions so formulated in the order dated February 8, 2003, are answered against the Revenue and in favour of the assessee. 15. The appeal thus has no force and the same is dismissed. *******