High Court dismisses Revenue's appeal on Block Assessment Order due to non-compliance with Income Tax Act

The High Court of Karnataka dismissed the Revenue's appeal challenging the Tribunal's decision to set aside a Block Assessment Order due to non-compliance with Section 158BG of the Income Tax Act. The Court held that the approval by the Joint Commissioner instead of the Commissioner rendered the assessment order void, emphasizing the mandatory nature of the Commissioner's approval for searches conducted before January 1, 1997. The Court ruled that non-compliance with Section 158BG made the assessment order invalid, affirming the Tribunal's decision to set it aside.

---

---

Issues:
1. Validity of the assessment order under Section 158BG of the Income Tax Act.

Analysis:
The High Court of Karnataka heard an appeal by the Revenue challenging the Tribunal's decision to set aside a Block Assessment Order due to non-compliance with Section 158BG of the Income Tax Act. The search conducted at a residential premises led to the seizure of incriminating documents and cash, with the Assessing Authority passing an assessment order in the name of the assessee. However, it was argued that the Joint Commissioner's approval, instead of the Commissioner's approval as required by Section 158BG, rendered the order void. The main question was whether an assessment order contravening Section 158BG remains valid in law.

The Court noted that as per Section 158BG, for searches conducted before January 1, 1997, the Commissioner's approval was mandatory. In this case, the Joint Commissioner had given approval, which was incorrect. The Revenue argued that the violation could be considered a mistake under Section 292B, but the Court disagreed. It emphasized that the legislative intention behind Section 158BG was clear and non-compliance rendered the order a nullity, not merely a mistake. Citing a Bombay High Court judgment, the Court highlighted that these provisions were not procedural but essential for ensuring compliance before passing a Block Assessment Order.

Furthermore, it was argued that since the assessment proceedings began after January 1, 1997, the Joint Commissioner's approval was valid. However, the Court clarified that the crucial date for approval was the initiation of the search under Section 132, not the start of assessment proceedings. Interpreting the law strictly, the Court upheld the Tribunal's decision, stating that non-compliance with Section 158BG made the order invalid in the eyes of the law. Therefore, the appeal by the Revenue was dismissed, affirming the Tribunal's decision to set aside the Block Assessment Order.

---