2014 (10) TMI 573 - HC - Income Tax

Court upholds search warrant validity, deems assessment order and notices valid under Sections 158BC and 158BD.

The Court dismissed the petition, holding that the search warrant was valid for the premises, and the petitioners participated in the proceedings without ... Validity of authorization of issue u/s 132 – Notice issued u/s 158BD – Petition filed in the name of individual persons and not in the capacity of heirs of deceased person - Held that:- So far as challenge to the warrant of authorization issued u/s 132 of the Act and to quash the assessment order dated 11.09.2003 framed u/s 158BC of the Act is concerned, it is mainly on the ground that the warrant of authorization issued u/s 132 of the Act was in the name of a dead person i.e. Late Shri Girishbhai K. Mehta and therefore, the warrant of authorization issued u/s 132 of the Act and subsequent assessment order dated 11.09.2003 framed u/s 158BC of the Act are illegal – Relying upon Commissioner of Income Tax – III Versus M/s. Calcutta Knitwears, Ludhiana [2014 (4) TMI 33 - SUPREME COURT] - as such the search warrant was issued for the premises, however such authorization was in the name of the head of the family – Late Shri Girishbhai K. Mehta - However, as such the search warrant was with respect to the premises i.e. 9, “Gayatri”, Motinagar Society and as part of the search in Nirma Group - at the time of search of the premises, the petitioner No.1 infact signed the panchnama, claiming to be the heir of deceased person - Not only that even thereafter when the proceedings u/s 158BC of the Act came to be initiated, no protest was raised by the petitioners and on the contrary, the returns of the income for the block period was filed on 03.10.2002 and the same was also signed by the petitioner No.1 and thereafter the assessment order determining the income as “NIL” has been passed on 11.09.2003 - when the search warrant was issued, it was for the premises and as such as a part of search in Nirma Group, it cannot be said that search warrant was null and void as sought to be contended on behalf of the petitioners. Whether during the search u/s 132 of the Act, the AO finds that any undisclosed income belongs to any person other than the person with respect to whom the search was made u/s 132 of the Act or whose books of account or other documents or any assets were requisitioned u/s 132A of the Act is traced out, the proceedings u/s 158BD of the Act against any other person, other than the person with respect to whom the search was made would be permissible and/or maintainable or not –Held that:- As decided in Commissioner of Income Tax – III Versus M/s. Calcutta Knitwears, Ludhiana [2014 (4) TMI 33 - SUPREME COURT] the courts while interpreting the provisions of fiscal legislation should neither add nor subtract a word from the provisions of instant meaning of the sections - any taxing statute should ordinarily be read, understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative animation - nothing is to be read in, nothing is to be implied; one can only look fairly at the language used and nothing more and nothing less - while interpreting the machinery provision, the courts would interpret a provision in such a way that it would give meaning to the charging provisions and that the machinery provisions are liberally construed by the courts - machinery provisions must, be so construed as would effectuate the object and purpose of the statute and not defeat the same. For invoking a block assessment, there must be a search conducted u/s 132 of the Act, or documents or assessed requisitioned u/s 132A and the AO is satisfied that there exists any undisclosed income which may belong to other person other than the person with respect to whom the search was conducted or requisition was made - the word used under section 158BD of the Act is “where the AO is satisfied that any undisclosed belongings to any person, other than the person with respect to whom search was made under section 132” and it does not say that “where the AO is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom the valid and legal search was made under section 132” - Under the circumstances and assuming without prejudice to the findings with respect to the authorization u/s 132 of the Act, that the search was against a dead person and not valid, in that case also, the block assessment proceedings initiated under section 158BD of the Act by the impugned notices cannot be said to be illegal and/or contrary to the provisions of the statute - as such all the conditions / requirements of section 158BD of the Act are satisfied – thus, the petitioners are not entitled to any reliefs more particularly with respect to the challenge to the notices u/s 158BD of the Act – Decided against assessee. Issues Involved:1. Legality of the warrant of authorization issued under Section 132 of the Income Tax Act, 1961.2. Validity of the assessment order framed under Section 158BC of the Act.3. Validity of the notices issued under Section 158BD of the Act.Detailed Analysis:1. Legality of the Warrant of Authorization Issued Under Section 132 of the Income Tax Act, 1961:The petitioners argued that the search warrant issued under Section 132 in the name of a deceased person was patently bad and illegal. They contended that none of the prerequisites for issuing authorization under Section 132 were satisfied since the deceased person had passed away long before the search operation was conducted. The petitioners relied on decisions from the Punjab & Haryana High Court to support their claim that the search operation was invalid as it was conducted against a deceased person.The respondent countered that the search warrant was issued for the premises as part of a search in the Nirma Group, and it bore the name of the head of the family, the deceased person, but was effectively for the premises. The respondent further argued that the petitioners had acquiesced to the search by signing the panchnama and filing returns without protest.The Court held that the search warrant was for the premises and part of the search in the Nirma Group, and thus, it could not be said that the warrant was null and void. The Court found that the petitioners had participated in the proceedings without protest, which further validated the search warrant.2. Validity of the Assessment Order Framed Under Section 158BC of the Act:The petitioners contended that the assessment order under Section 158BC was illegal as it was based on an invalid search warrant. They argued that a valid search under Section 132 is a sine qua non for invoking block assessment proceedings under Chapter XIVB. They relied on several Supreme Court decisions to support their claim that the assessment order must be quashed if the search warrant is found to be illegal.The respondent argued that the assessment proceedings were rightly initiated as a consequence of the authorization under Section 132. They pointed out that the petitioners had filed returns and accepted the jurisdiction of the Assessing Officer without protest.The Court held that even assuming the search warrant was invalid, the assessment order under Section 158BC could not be invalidated on this ground alone. The Court noted that the petitioners had participated in the assessment proceedings without protest and had filed returns, which indicated their acceptance of the jurisdiction and the process.3. Validity of the Notices Issued Under Section 158BD of the Act:The petitioners argued that the notices under Section 158BD were illegal as they were based on an invalid search warrant. They contended that Chapter XIVB would not be applicable if the search under Section 132 was held to be invalid.The respondent countered that Section 158BD is an independent provision that deals with the undisclosed income of any other person. They argued that the satisfaction of the Assessing Officer regarding the undisclosed income of another person was sufficient to initiate proceedings under Section 158BD, irrespective of the validity of the original search warrant. The respondent relied on the Supreme Court decision in Calcutta Knitwears to support their argument.The Court held that Section 158BD does not require a valid search under Section 132 for its invocation. The Court emphasized that the provisions of Section 158BD are machinery provisions intended to assess the undisclosed income of persons other than the one searched. The Court found that the satisfaction of the Assessing Officer regarding the undisclosed income of the petitioners was sufficient to initiate proceedings under Section 158BD, and thus, the notices were valid.Conclusion:The Court dismissed the petition, holding that the petitioners were not entitled to any reliefs. The search warrant was deemed valid as it was for the premises, and the petitioners had participated in the proceedings without protest. The assessment order under Section 158BC and the notices under Section 158BD were also held to be valid. The Court emphasized that Section 158BD does not require a valid search under Section 132 for its invocation, and the satisfaction of the Assessing Officer regarding the undisclosed income of another person is sufficient to initiate proceedings under Section 158BD.