Valid search information under tax law required for seizure; illegal search cannot sustain block assessment or defeat writ jurisdiction.

A search under section 132(1) requires information that is relevant, tangible and capable of supporting a bona fide reason to believe that assets represent undisclosed income; a bare communication that cash was found with the assessee was insufficient, so the search authorisation was without jurisdiction. A block assessment under Chapter XIV-B read with section 158BC/144 cannot survive where it rests on an illegal search, because the special assessment machinery is triggered only by a lawful search; the consequential assessment and demand were therefore unsustainable. The writ petition was maintainable despite the search being at Chennai and the existence of an appellate remedy, because part of the cause of action arose in Delhi and the impugned action was alleged to be wholly without jurisdiction.

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Issues: (i) Whether the information received from the CBI furnished a valid basis for the formation of belief under section 132(1) of the Income-tax Act, 1961, for authorising search and seizure of the cash found with the petitioner. (ii) Whether an assessment made under Chapter XIV-B read with section 158BC/144 of the Income-tax Act, 1961, could survive when the underlying search was jurisdiction and void ab initio. (iii) Whether the writ petition was maintainable before the Delhi High Court despite the search having taken place at Chennai and despite the availability of an alternative appellate remedy.

Issue (i): Whether the information received from the CBI furnished a valid basis for the formation of belief under section 132(1) of the Income-tax Act, 1961, for authorising search and seizure of the cash found with the petitioner.

Analysis: The power under section 132 can be exercised only when the authorised officer possesses information and, in consequence of that information, has reason to believe that the person is in possession of money or other assets representing undisclosed income. The information must be relevant, tangible, and capable of supporting the statutory belief; mere rumour, suspicion, or a bare intimation is insufficient. On the material placed, the only basis for action was a general communication that cash had been found with the petitioner during a CBI enquiry. The petitioner also stated on oath that the amount belonged to the company's recorded cash and that it was being carried for business purposes. The record did not disclose any adverse finding from the survey of the company's books, and no material was shown to connect the cash with undisclosed income.

Conclusion: The authorisation under section 132(1) was not supported by valid information and the search and seizure were without jurisdiction, in favour of the assessee.

Issue (ii): Whether an assessment made under Chapter XIV-B read with section 158BC/144 of the Income-tax Act, 1961, could survive when the underlying search was jurisdiction and void ab initio.

Analysis: Chapter XIV-B applies only where there is a valid search under section 132. A void search cannot be treated as the foundation for block assessment proceedings. Once the search itself is held illegal, the consequential proceedings, including the block assessment and demand raised thereunder, cannot stand. The special machinery for block assessment is triggered only by a lawful search, and an unlawful search destroys the jurisdictional basis for invoking that machinery.

Conclusion: The block assessment was unsustainable and liable to be quashed, in favour of the assessee.

Issue (iii): Whether the writ petition was maintainable before the Delhi High Court despite the search having taken place at Chennai and despite the availability of an alternative appellate remedy.

Analysis: A part of the cause of action arose within Delhi because the petitioner was assessed there, the company's books were kept there, a survey was conducted there, and the block assessment proceedings were also linked to the Delhi-based tax administration. The existence of an appellate remedy does not bar writ jurisdiction where the impugned action is wholly without jurisdiction and affects legal rights directly. The objections of lack of territorial jurisdiction and alternative remedy therefore did not prevent the Court from entertaining the petition.

Conclusion: The writ petition was maintainable and the preliminary objections were rejected, in favour of the assessee.

Final Conclusion: The Court held that the search authorisation lacked the statutory foundation of valid information and that the consequential block assessment could not be sustained, while also rejecting the procedural objections and granting restitution of the seized amount.

Ratio Decidendi: For a search under section 132(1), the information must have a rational nexus with undisclosed income and be sufficient to support a bona fide reason to believe; a mere intimation that cash was found in a person's possession is not enough, and any block assessment founded on an illegal search is void.

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