2010 (9) TMI 1111 - HC - Income Tax

Assessment completed u/s 158BC(c) - search u/s 132 - block assessment - authorization issued - HELD THAT - We do not see any merit in this contention. Initiation of proceedings for block assessment commences with a search u/s 132. It is settled law that the search to be conducted should be strictly in accordance with law. If an authorization is issued in the name of two persons and if block assessment order to be passed, it should be passed in the name of two persons. If the order is passed in the name of an individual and not in respect of both the persons mentioned in the authorization, on the face of it the proceedings initiated and the assessment order passed is illegal. No further enquiry requires to be done in this aspect. In that view of the matter, even if such objection is not taken on the earlier occasion, the assessee has a right to challenge the order on that ground before the Tribunal which he has done. We do not find any substance in this contention, accordingly we do not see any merit in this appeal. No substantial question of law arisen for consideration. Accordingly the appeals are rejected at the stage of admission.

Summary

Issues:
Challenging Income Tax Appellate Tribunal's order and Assessment order based on judgment of Allahabad High Court in Vandana Verma case, Joint search warrant leading to individual assessment, Authorization issued in the name of two persons but assessment made in the name of individuals, Entertaining objection for the first time before Tribunal, Legality of assessment order in such cases.

Analysis:
The High Court heard two appeals by the Revenue challenging the orders passed by the Income Tax Appellate Tribunal and the Assessment order. The issue arose due to the cases of two assessees, one being a proprietor of a corporation engaged in the trade of edible oil and Vanaspati, and the other being part of the Sainik Group of cases. Both cases involved a search and seizure action leading to assessment under section 158BC(c) of the Act. The Tribunal remanded the matters back to redo the assessments, which were later challenged by the assessees.

In both cases, the search warrants were in joint names, but the assessment orders were made in individual names, leading to a contention that the assessment should have been made collectively in the name of both persons as an Association of Persons or Body of Individuals. The Tribunal relied on the judgment of Allahabad High Court in the Vandana Verma case, which emphasized the importance of individual authorization for assessment. The High Court agreed that if the authorization is issued in the name of two persons, the assessment should also be made in the name of both persons collectively.

The Revenue contended that the objection regarding the joint warrant and individual assessment was not raised earlier and should not have been entertained by the Tribunal. However, the High Court clarified that the initiation of block assessment proceedings should strictly adhere to the law, and any discrepancy in authorization and assessment renders the proceedings illegal. Therefore, the assessee had the right to challenge the order on that ground before the Tribunal, even if not raised earlier. The High Court found no merit in the Revenue's contentions and rejected the appeals at the stage of admission, stating that no substantial question of law arose for consideration in this matter.