Block assessment jurisdiction fails when the assessee was not searched and section 158BD was not followed.

A block assessment under section 158BC is valid only against the person searched under section 132. Here, the search warrants were issued in the names of the partners, not the assessee, which was a separate regular income-tax assessee. Because the Revenue assessed the assessee under section 158BC without following section 158BD, the tribunal held that the assessment suffered from a jurisdictional defect and could not stand. The block assessment order was therefore quashed in favour of the assessee.

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Issues: Whether a block assessment under section 158BC of the Income-tax Act, 1961 could be sustained against an assessee when no search warrant was issued in its name and the procedure under section 158BD was not followed.

Analysis: The assessee was not the person searched under section 132 of the Income-tax Act, 1961. The search warrants stood in the names of its partners only, while the assessee was a separate regular income-tax assessee. The statutory scheme of Chapter XIV-B requires assessment under section 158BC in the case of the searched person, whereas section 158BD governs undisclosed income belonging to any other person. Since the assessment against the assessee was completed under section 158BC without compliance with section 158BD, the assessment suffered from a jurisdictional infirmity and could not be treated as a valid block assessment. The tribunal followed prior decisions taking the same view on identical facts.

Conclusion: The block assessment order was invalid and was quashed in favour of the assessee.

Final Conclusion: The appeal succeeded because the assessment was made under the wrong block-assessment provision despite the absence of a search warrant in the assessee's name.

Ratio Decidendi: A block assessment can be made under section 158BC only against the person searched under section 132, and where the assessee is a different person, the Revenue must proceed under section 158BD; failure to do so vitiates the assessment.

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