2007 (2) TMI 170 - HC - Income Tax

Validity of search and seizure operation u/s 132(1) - Assessment u/s 158BC - Whether the validity of a requisition u/s 132A in pursuance of an authorisation issued under that section can be decided by the Tribunal in an appeal before it u/s 254 ? - HELD THAT - In our considered opinion, the jurisdiction exercised by the statutory authority while hearing the appeal cannot enter into the justifiability of an action u/s 132A of the Act. To elaborate whether the order passed by the Commissioner is without jurisdiction or not cannot be the subject-matter of assessment as the same does not arise in the course of assessment. Therefore, neither the Assessing Officer nor the appellate authority can dwell upon the said facet. We may note with profit, it would not be a jurisdictional fact within the parameters of assessment proceeding or an appeal arising therefrom. It can only partake of the nature and character of adjudicatory fact to the limited extent whether such search and seizure had taken place and what has been found during the search and seizure. The validity of search and seizure, in our considered opinion, is neither jurisdictional fact nor adjudicatory fact and, therefore, the same cannot be dwelled upon or delved into in an appeal. The submission of Mr. Nema that the Tribunal having been constituted under article 323 of the Constitution can delve into, we are disposed to think, is an unacceptable proposition in law especially in the teeth of the provision contained under section 253 of the Act. Consequently, we conclude and hold that the appeal is sans merit and accordingly stands dismissed without any order as to costs.

Issues Involved:
1. Whether the validity of a requisition under section 132A in pursuance of an authorization issued under that section can be decided by the Income-tax Appellate Tribunal in an appeal before it under section 254 of the Income-tax Act?

Issue-Wise Detailed Analysis:

1. Validity of Requisition under Section 132A:
The core issue is whether the Income-tax Appellate Tribunal (ITAT) has the jurisdiction to decide the validity of a requisition under section 132A of the Income-tax Act, 1961, in an appeal under section 254. The facts reveal that a search was conducted at the residential premises of the appellant-assessee by the Lokayukt under section 13(1)(e) of the Prevention of Corruption Act, 1988. Subsequently, the seized documents were requisitioned by the Commissioner of Income-tax under section 132A, and a notice under section 158BC was issued, leading to the completion of the assessment.

2. Tribunal's Jurisdiction and Scope:
The Tribunal faced a difference of opinion between its members on whether it had the jurisdiction to scrutinize the validity of the authorization under section 132A. The Third Member concluded that the Tribunal does not have the jurisdiction to examine the legality of the authorization issued under section 132A, as it is an administrative act and not subject to the Tribunal's appellate review.

3. Arguments by Appellant:
The appellant argued that the requisition under section 132A was invalid because the properties were taken from the police before a court order regarding custody, making the entire assessment proceeding illegal. The appellant cited several cases, including Orient Paper Mills Ltd. v. Union of India and Rajesh Kumar v. Deputy CIT, to support the argument that the principles of natural justice were violated.

4. Arguments by Revenue:
The Revenue contended that any illegality in the action under section 132A should be challenged through a writ petition under article 226 of the Constitution of India, not in an assessment appeal. The Revenue relied on cases like CIT v. Garware Nylons Limited and Princess Usha Trust v. CIT to argue that the Tribunal does not have jurisdiction over such matters.

5. Legal Provisions:
The court examined sections 132A, 158BC, 246A, and 253 of the Income-tax Act. Section 132A deals with the power to requisition books of account, etc., while section 158BC outlines the procedure for block assessment. Section 246A lists appealable orders before the Commissioner (Appeals), and section 253 specifies appeals to the Tribunal.

6. Judicial Precedents:
The court referred to various judicial precedents, including Orient Paper Mills Ltd., Amandeep Singh, and Sadruddin Javeri, to distinguish between administrative and quasi-judicial actions. The court noted that the decisions cited by the appellant were distinguishable as they arose from writ petitions under article 226, not from assessment appeals.

7. Conclusion:
The court concluded that the Tribunal does not have jurisdiction to examine the validity of the authorization under section 132A in an appeal under section 254. The validity of the search and seizure is neither a jurisdictional fact nor an adjudicatory fact within the parameters of assessment proceedings or an appeal arising therefrom. Therefore, the appeal was dismissed as lacking merit.

Final Judgment:
The appeal was dismissed without any order as to costs, affirming that the Tribunal cannot delve into the validity of the authorization under section 132A in an assessment appeal.

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