2012 (5) TMI 308 - AT - Income Tax

Validity of block assessment - Legality of search and seizure - jurisdiction of the AO - no warrant of authorization in the individual name of the assessee - jurisdiction to pass the order u/s. 158BC - held that - no individual warrant of authorisation was issued and warrant of authorisation of search was in the joint names, therefore keeping in view the ratio laid down in the aforesaid referred to cases, we are of the view that in the present case the assessment framed u/s. 158BC is not maintainable - Decided in favor of the assessee

Summary

Issues Involved:
1. Validity of the search warrant and the subsequent block assessment.
2. Excessive income assessment.
3. Levy of surcharge in block assessment.
4. Jurisdiction of the Assessing Officer (AO) based on the search warrant's name.

Detailed Analysis:

1. Validity of the Search Warrant and Subsequent Block Assessment:
The primary issue was the legality of the search warrant issued under Section 132 of the Income-tax Act, 1961. The assessee argued that the search was illegal as the conditions specified under Sections 132(1)(a) and (b) did not exist, and there was no material to induce a reason to believe that the assessee possessed undisclosed assets. The Tribunal noted that the warrant was issued in the joint names of three individuals, not individually. Citing the Hon'ble Karnataka High Court in P.J. Kumar and the Allahabad High Court in Vandana Verma, it was held that a joint warrant does not authorize individual assessment. Hence, the block assessment was deemed invalid.

2. Excessive Income Assessment:
The assessee contended that the income assessed was excessive and should be reduced to the actual amounts found during the search, which included cash, investment in machinery, and gold jewelry totaling Rs. 21,60,710. The Tribunal did not provide separate findings on this issue as the block assessment itself was annulled on legal grounds.

3. Levy of Surcharge in Block Assessment:
The assessee challenged the surcharge levied in the block assessment, arguing that surcharge is applicable only on regular assessments and not on block assessments under Section 113 of the Act. The Tribunal did not address this issue separately due to the annulment of the assessment on legal grounds.

4. Jurisdiction of the Assessing Officer Based on the Search Warrant's Name:
The assessee raised an additional ground challenging the AO's jurisdiction, arguing that the warrant was not in the individual name but in joint names, thus the AO lacked legal jurisdiction to pass the order under Section 158BC. The Tribunal admitted this additional ground, referencing the Supreme Court's judgment in National Thermal Power Co. Ltd. v. CIT, which allows new legal grounds if they arise from existing facts on record. The Tribunal held that the joint warrant did not authorize individual assessment, thus annulling the assessment.

Conclusion:
The Tribunal annulled the block assessments for both assessees, citing the invalidity of the search warrant issued in joint names and the subsequent lack of jurisdiction for individual assessment. The appeals were allowed, and no separate findings were provided on the merits of the case or the issue of excessive income and surcharge due to the annulment of the assessments.