2000 (1) TMI 41 - HC - Income Tax

Issues Involved:
1. Legality of the authorisation u/s 132(1) of the Income-tax Act, 1961.
2. Validity of the subsequent search and seizure.
3. Legality of the block assessment order u/s 158BC/144 of the Act.
4. Territorial jurisdiction of the court.
5. Availability of alternative remedy.

Summary:

1. Legality of the Authorisation u/s 132(1) of the Income-tax Act, 1961:
The petitioner challenged the authorisation dated January 11, 1996, issued by the Director of Income-tax (Investigation), Chennai, u/s 132(1) of the Income-tax Act, 1961, on the grounds that there was no "information" on record to form the belief that the amount recovered represented undisclosed income. The court held that the mere intimation by the CBI about the recovery of cash did not constitute "information" within the meaning of section 132(1) of the Act. The court emphasized that the information must be authentic and capable of giving rise to the inference that a person is in possession of undisclosed income. The court found that the authorisation was issued without proper application of mind and was, therefore, illegal and void ab initio.

2. Validity of the Subsequent Search and Seizure:
The court examined whether the search and seizure conducted on January 11, 1996, were valid. It was noted that the petitioner had provided an explanation for the cash found in his possession, stating it was reflected in the company's books of account. Despite this, the cash was seized, and a survey was conducted u/s 133A of the Act to verify the petitioner's claim. The court found that the intimation by the CBI, without further verification, did not justify the search and seizure. Consequently, the court held that the search and seizure were without jurisdiction and void.

3. Legality of the Block Assessment Order u/s 158BC/144 of the Act:
The court addressed the legality of the block assessment order dated January 31, 1997, issued u/s 158BC/144 of the Act. The court noted that Chapter XIV-B, dealing with the assessment of search cases, requires a valid search u/s 132 as a pre-requisite. Since the search was found to be illegal, the provisions of Chapter XIV-B could not be invoked. Therefore, the block assessment order was quashed.

4. Territorial Jurisdiction of the Court:
The respondents raised an objection regarding the territorial jurisdiction of the court, arguing that the search and seizure were conducted in Chennai. The court held that since the petitioner was a regular assessee in New Delhi, and the block assessment was made by the Assessing Officer in New Delhi, a substantial part of the cause of action arose within the territorial jurisdiction of the Delhi High Court. Thus, the objection was rejected.

5. Availability of Alternative Remedy:
The respondents argued that the petitioner had an alternative remedy by way of an appeal to the Income-tax Appellate Tribunal. The court held that the availability of an alternative remedy is not an absolute bar to the entertainment of a petition under article 226 of the Constitution, especially when the action is wholly without jurisdiction and results in the infringement of a fundamental right. Therefore, the plea of alternative remedy was not accepted.

Conclusion:
The court quashed the impugned authorisation u/s 132, the subsequent search and seizure, and the block assessment order. The respondents were directed to refund the seized amount of Rs. 8.5 lakhs with interest at 12% per annum within four weeks. The petitioner was awarded costs quantified at Rs. 5,000. The judgment clarified that the respondents could take fresh appropriate proceedings to bring to tax any income in respect of the assessment years covered by the block assessment order if otherwise permissible in law.

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