TaxTMI 
TaxTMI 
2013 (4) TMI 366
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....ining approval of the Commissioner of Income Tax? (2)Whether Income Tax Appellate Tribunal hearing the appeal under Section 253 (1B) of the Act can direct the department to produce the 'satisfaction note' to examine the satisfaction of the Competent Authority under the Act authorising the search?. 3. The Writ Petition No. 223 of 2000 has been filed by Director of Income Tax (Investigation), Kanpur with prayers to quash the order dated 29.11.1999 of Income Tax Appellate Tribunal under Section 255 (4) and the order dated 14.2.2000 passed by the Judicial Member (Third Member) of the Tribunal to which the matter was referred on account of difference of opinion between two Members, on the question, that the Tribunal can, while hearing the appeal, consider the validity of the search operations. The revenue has also challenged the opinion of the third Member of the Income Tax Appellate Tribunal under Section 255 (4) of the Act which constituted majority opinion, holding that the Assessing Officer can call for and scrutinize the validity of the 'satisfaction note', when called upon to do so by assessee, and which can also be scrutinized by Appellate Authority including the Tribunal. The ....
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.... conducted on him under Section 132 of the Act, and Assessing Officer while completing a block assessment under Chapter XIV-B of the Act can in law call for the 'satisfaction note' forming reason to believe as envisaged by sub-section (1) of section 132 of the Act, examine its validity and provide the copy thereof to the assessee? (ii) Whether, in the event of a demand for providing of such 'satisfaction note' forming reason to believe not being met and its non-examination by the Assessing Officer, the Appellate Tribunal during the hearing of the first appeal under section 253 (1) (b) of the I.T. Act, 1961 can act similarly and direct the department to produce such material before it? 9. The third Member heard the matter and passed a detailed order on 29.11.1999 in which he expressed opinion, the relevant extract of which is quoted as follows:- "7.5.......Now since the fulfillment of any of the conditions or existence of any of the circumstances listed in clause (a) or (b) or (c) is wholly dependent on the existence of fact material it could not be accepted that an authority acting as quasi judicial authority or an appellate authority, which strictly speaking, may not be Courts ....
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....t of the AO to make an assessment of block period is an executive act in exercise of powers vested by virtue of provisions of s.120 of the Act and the AO has no reason or right to challenge such empowerment but the moment the AO proceeds to exercise his power to make assessment of a block period, his action partakes the character of a quasi-judicial act by a quasi-judicial authority and as far as the proceedings for making an assessment of a block period are concerned, the moment the AO decides to proceed by way of issuing a notice under s.158BC of the Act, the quasi-judicial proceedings are put in motion and it is at this stage of the matter that the AO is supposed to apply his quasi-judicial mind and should not proceed with closed mind. The moment the AO is supposed to apply his quasi-judicial mind, he can and is duty bound to go into the question of existence of a search action under s.132 of the Act having taken place in accordance with law which in turn extends his jurisdiction to go into the question of existence of any of the circumstances for satisfaction of any of the conditions stipulated in cl. (a) or (b) or (c) of sub-s (1) of s.132 irrespective of the fact as to whethe....
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....icro Land vs. ACIT 67 ITR 446 (Bangalore Bench of ITAT in deciding the matter). 11. The third Member also relied upon Union of India vs. Sheo Shankar Sita Ram 1995 ITR 523 in which this Court has held that an officer or authority upon whom jurisdiction has been conferred to make an order judicially has to act independently. The communications between the officer empowered to impose penalty and the higher authorities in regard to assessment or penalty proceedings could not be held to be communications made in official confidence because in law these authorities are not entitled to exchange opinions or advice in regard to judicial proceedings. Reference was made to Ajit Jain vs. Union of India and others (2000) 242 ITR 302 in which it was held "It is exiomatic that search under Section 132, as contemplated in the Chapter has to be a valid search. An illegal search is no search and as a necessary corollary in such a case Chapter XIV-B would have no application. The judgment was affirmed by the Supreme Court in Union of India vs. Ajit Jain and another (2003) 260 ITR 80. 12. Shri Bharat Ji Agarwal, appearing for the revenue submits that the same question later came up for consideratio....
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....rounds specifically when such grounds do not fall within the scope of Section 253 of the Income Tax Act, since this issue had not been raised before the assessing authority, held as follows:- "12. We are of the view that the Tribunal when hearing an appeal against the order of assessment, could not go into the question of validity or otherwise of any administrative decision for conducting search and seizure. The same may be subject matter of challenge in independent proceedings where question of validity or otherwise of administrative order could be gone into. The appellate authority was concerned with the correctness or otherwise of the assessment. For the above reasons, we answer the question (a) in favour of the revenue and against the assessee." 14. The Punjab & Haryana High Court relied upon the judgments of Delhi Bench of the Tribunal in Virender Bhatia v. Deputy CIT (2001) 79 ITD 340; Madhya Pradesh High Court in Gaya Prasad Pathak v. Asst. CIT (2007) 290 ITR 128; the view of the Rajasthan High Court in CIT v. Smt. Chitra Devi Soni (2009) 313 ITR 174 and the judgment of its own Court in CIT v. Raj Kumar Gupta ITA No. 50 of 2002 decided on August 21, 2003 by Punjab & Harya....
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....y grounds nor argued the question of validity of search before the Assessing Officer. In appeal under Section 253 (1) the order of Assessing Officer under clause (c) of Section 158BC in respect of search initiated under Section 132 or books of account, other documents or any assets requisitioned under Section 132A may be subject matter of appeal before the Appellate Tribunal. The only matter in appeal is the validity of assessment order which follows after the valid search. The Tribunal, while hearing the appeal under Section 253 (1) (b) has to decide as to whether the determination of the undisclosed income and the tax determined thereon is in accordance with law and is correct. The Appellate Tribunal does not have any power or authority to go beyond the assessment order and has no powers to question the validity of the search. 18. Shri Bharat Ji Agarwal submits that in the present case at that time after the opinion of the 3rd Member the Tribunal was in the process of considering the validity of the search by calling satisfaction note, the revenue prayed for interim orders and that on 7.8.2000 this Court passed following orders:- "Issue notice. Until further orders, the furthe....
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.... and seizure may not vitiate the assessment order, but the very initiation of the proceedings if it is not in accordance with law, the initiation would be without jurisdiction, void and the consequent order would also be void. It is not a curable defect. It is not voidable at the option of the assessee. If he has not challenged the same by way of writ petition under Article 226 of the Constitution, he would not lose his right to challenge the same in an appeal. There cannot be an estoppel against the statute. In this regard it is useful to notice the specific words used in sub-section (1) (b) of section 253, i.e., "an order passed by the Assessing Officer under clause (c) of section 158BC in respect of search initiated under section 132:. The language used by the Legislature tends to show that this appeal provision specifically applies to an assessment order consequent to search initiated under section 132 of the Act. In interpreting fiscal statute, the court cannot proceed to make good deficiencies, if there by any, the court must interpret the statute as it stands, and in case of doubt, in a manner favourable to the taxpayer. When the statute expressly refers to "a search initiat....
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....s no quarrel with the said legal proposition. In the first place, the provisions relating to the block assessment was not in the statute on the day the said judgment was delivered by the apex court. Secondly, prior to the incorporation of the provisions of block assessment for an assessment, search was not a condition precedent. It is in that context it was held even if search and seizure is illegal, the material recovered during such illegal search and seizure could be looked into for the purposes of assessment and act, but that is not possible, in case of block assessment. Even if a return is filed in pursuance of a direction issued under the said Chapter and the material secured during search and seizure which is declared as illegal is looked into, still the order of assessment passed in this proceedings would be a nullity because the very initiation of the proceedings is void. Those materials secured in the illegal search and seizure would certainly be made use of the assessment proceedings under the Act other than the block assessment proceedings and, therefore, the contention that the assessment order would not get vitiated because of illegal search and seizure as it is based....
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.... to be reached by the Authority issuing warrant of authorisation is an administrative function. The fact, that the plea has to be entertained by the Authority issuing the warrant only after satisfying itself about the existence of the conditions on which the satisfaction has to be arrived at on the basis of the opinion in their possession and that such satisfaction has to be objective and not subjective, may prompt one to conclude that the power to initiate a search is only a quasi-judicial function. The dividing line after A.K. Kraipak v. Union of India AIR 1970 SC 150 between an administrative power and a quasi-judicial powers is quite thin and is being gradually obliterated. That what was being considered as an administrative power is now being considered as quasi-judicial power. The issue, however, is not of much consequence as there is remedy for an aggrieved person for improper exercise of power to issue such warrant. Whether the power is administrative or quasi-judicial, the duty to act fairly exists, the aggrieved person has a remedy to approach the High Court for any action which is either based on no material or insufficient material or suffers from malafide. The initiati....