2013 (12) TMI 604 - HC - Income Tax

Improper authorization u/s 158BG of ground of appeal - Held that - Following Shirish Madhukar Dalvi Vs. Assistant Commissioner of Income Tax & others 2006 (7) TMI 145 - BOMBAY High Court - The provisions of section 158BG are not procedural and and it need to be complied - These provisions are specially inserted into the Act with a specific purpose - Before a Block Assessment Order is passed, certain legal requirements are to be complied - The legislature provides for previous approval so that these harsh provisions are not abused by the Lower Authorities - The noncompliance of said provision cannot be construed as a mistake, defect or omission - If the said provision is not complied, the order passed by the Authority without the previous approval is no order in the eye of law - Decided against Revenue.

Summary

Issues:
1. Validity of the assessment order under Section 158BG of the Income Tax Act.

Analysis:
The High Court of Karnataka heard an appeal by the Revenue challenging the Tribunal's decision to set aside a Block Assessment Order due to non-compliance with Section 158BG of the Income Tax Act. The search conducted at a residential premises led to the seizure of incriminating documents and cash, with the Assessing Authority passing an assessment order in the name of the assessee. However, it was argued that the Joint Commissioner's approval, instead of the Commissioner's approval as required by Section 158BG, rendered the order void. The main question was whether an assessment order contravening Section 158BG remains valid in law.

The Court noted that as per Section 158BG, for searches conducted before January 1, 1997, the Commissioner's approval was mandatory. In this case, the Joint Commissioner had given approval, which was incorrect. The Revenue argued that the violation could be considered a mistake under Section 292B, but the Court disagreed. It emphasized that the legislative intention behind Section 158BG was clear and non-compliance rendered the order a nullity, not merely a mistake. Citing a Bombay High Court judgment, the Court highlighted that these provisions were not procedural but essential for ensuring compliance before passing a Block Assessment Order.

Furthermore, it was argued that since the assessment proceedings began after January 1, 1997, the Joint Commissioner's approval was valid. However, the Court clarified that the crucial date for approval was the initiation of the search under Section 132, not the start of assessment proceedings. Interpreting the law strictly, the Court upheld the Tribunal's decision, stating that non-compliance with Section 158BG made the order invalid in the eyes of the law. Therefore, the appeal by the Revenue was dismissed, affirming the Tribunal's decision to set aside the Block Assessment Order.