2010 (7) TMI 640 - HC - Income Tax

Search and seizure - The Punjab & Haryana High Court in Jagmohan Mahajan & Ors. vs. CIT, Punjab & Ors., (1976) 103 ITR 579, held that a search authorized in the absence of material necessary to form the requisite belief under Section 132(1) on the basis of blank warrant of authorization signed by the CIT was illegal and no order under Section 132(5) on the basis of such a search could be made - in absence of any search warrant in the name of an assessee, search conducted in its premises is not a valid search as contemplated under Section 132 of the I.T. Act, 1961 to exercise powers under Section 153A in case of a person the mandatory requirement is that there must be initiation of a search as contemplated under Section 132 or requisition under Section 132A of the I.T. Act, 1961 in respect of such person - if the Tribunal comes to the conclusion that there was no search warrant in the name of the appellant as contended by the appellant - assessee, then it would be open to the Department to make assessment in a manner other than Section 153A, if permissible under the law - Appeals are disposed of

Summary

Issues Involved:
1. Validity of search conducted in absence of a warrant in the name of the assessee under Section 132 of the Income Tax Act, 1961.
2. Prerequisite of a valid search for issuing notice for assessment/reassessment under Section 153A of the Income Tax Act, 1961.
3. Justification of the ITAT in remanding the matter to the Commissioner of Income Tax (Appeal) instead of deciding the issue itself.

Issue-wise Detailed Analysis:

1. Validity of Search Conducted in Absence of Warrant in the Name of the Assessee:

The court examined Section 132 of the Income Tax Act, 1961, which empowers authorities to conduct search and seizure operations. It emphasized that the competent authority must have information and reason to believe that the conditions stipulated in sub-clauses (a), (b), and (c) of Section 132(1) exist. The court noted that search and seizure cannot be sustained unless it is clearly shown that it was done by the authority duly authorized and all the conditions precedent in relation thereto existed. The court cited precedents from the Punjab & Haryana High Court and the Delhi High Court, which held that a search without a proper warrant is illegal. The court concluded that in the absence of any search warrant in the name of an assessee, the search conducted in its premises is not a valid search as contemplated under Section 132 of the I.T. Act, 1961.

2. Prerequisite of a Valid Search for Issuing Notice for Assessment/Reassessment under Section 153A:

The court analyzed Section 153A of the Income Tax Act, 1961, which deals with assessment in case of search or requisition. It highlighted that the legislative intent is clear from the use of the expression "such person" in Clause (a) of Section 153A, indicating that the person in respect of whom search under Section 132 has been initiated is the same person against whom notice under Section 153A is to be issued. The court referred to the Supreme Court's judgment in Ajit Jain's case, which held that a valid search is a prerequisite for invoking provisions of block assessment. The court concluded that the initiation of a valid search as contemplated under Section 132 of the I.T. Act, 1961, in the case of a person, is a prerequisite to issue notice for making assessment/reassessment under Section 153A of the I.T. Act, 1961, in respect of such person.

3. Justification of the ITAT in Remanding the Matter to the Commissioner of Income Tax (Appeal):

The court examined the relevant facts and circumstances, noting that the appellant had raised an additional ground before the ITAT regarding the legality of the proceedings under Section 153A due to the absence of a search warrant. The ITAT admitted the additional ground for hearing and directed the Departmental Representative to produce the records of the search. The court observed that the ITAT, after being satisfied that no search warrant was issued against the appellant-Society, remitted the matter to the CIT (A) for fresh hearing, which the court found unjust. The court cited precedents from the Supreme Court and the Allahabad High Court, which held that once materials are available on record, the appellate court should dispose of the case on merit rather than directing a remand. The court concluded that the ITAT should have decided the jurisdictional issue itself after verifying the relevant search records.

Conclusion:

The court directed the ITAT to rehear the matter in light of the legal position highlighted and verify the records regarding the stand taken by the appellant. If the ITAT concludes that there was no search warrant in the name of the appellant, it would be open to the Department to make an assessment in a manner other than Section 153A, if permissible under the law. The appeals were disposed of with no costs.