2011 (11) TMI 58 - HC - Income Tax

Validity of search warrant - Assesse appealed that warrant of authorization had been issued by the Joint Director of Income Tax (Investigation), who was not authorized to issue a search warrant - By virtue of The Finance (No.2) Act, 2009, an amendment has been introduced in section 132 (1) with retrospective effect from 01.10.1998 whereby the Joint Director has also been empowered to issue warrants of authorization - Therefore held that impugned order be set aside - revenue s appeal before the Tribunal gets revived and so does the assessee s appeal - Appeal stands disposed off.

Summary

Issues:
1. Validity of search warrant issued by Joint Director of Income Tax (Investigation)
2. Impact of retrospective amendment in section 132(1) by The Finance (No.2) Act, 2009

Issue 1: Validity of Search Warrant
The case involved appeals arising from a common order passed by the Income Tax Appellate Tribunal related to the block assessment period from 01.04.1989 to 17.12.1999. The assessee contended that the warrant of authorization issued by the Joint Director of Income Tax (Investigation) was invalid, rendering the subsequent assessment invalid and liable to be quashed. Citing a previous court decision, the Tribunal held that the Joint Director lacked the authority to issue search warrants, leading to the invalidation of the search warrant and the assessment. Consequently, other grounds raised by both the assessee and the revenue were not examined by the Tribunal due to the primary invalidity of the proceedings.

Issue 2: Impact of Retrospective Amendment
The revenue pointed out before the High Court that a retrospective amendment in section 132(1) introduced by The Finance (No.2) Act, 2009 empowered the Joint Director to issue warrants of authorization. Consequently, the High Court set aside the impugned order and remitted the matters back to the Tribunal for reconsideration of all grounds raised by both the assessee and the revenue. The High Court's decision revived the revenue's appeal and the assessee's appeal on all points initially presented before the Tribunal. Additionally, the High Court clarified that the order passed did not prejudice the assessee's right to challenge the constitutional validity of the retrospective amendment introduced by The Finance (No.2) Act, 2009 regarding the empowerment of the Joint Director to issue warrants of authorization.

In conclusion, the High Court disposed of the appeals based on the considerations of the validity of the search warrant issued by the Joint Director and the impact of the retrospective amendment in section 132(1) introduced by The Finance (No.2) Act, 2009. The decision highlighted the importance of proper authorization in search warrant issuance and the need for a reevaluation of the appeals in light of the legislative changes affecting the authority to issue warrants of authorization.