2014 (1) TMI 499 - HC - Income Tax

Validity of block assessment on non-issue of warrant - Held that - If any person other than the one named in the warrant is searched and such incriminating material is seized, which belongs to his person and not the person in respect of whom the warrant is issued, if that person is to be assessed for the Block period, there should be a warrant issued in his name and in respect of the premises because, search and seizure is a condition precedent for passing a Block Assessment Order. A person, who is searched and from whom the incriminating material is seized relates to that person, if there is no warrant issued for search and seizure, that cannot be made the basis for a Block Assessment Order - The warrant was issued in the name of Sri. D.T.S. Rao Assessee (son of Shri D.T.S. Rao) was residing in the same premises. Therefore, it was open for the authorities to search and seize incriminating materials from him pertaining to his father Sri.D.T.S. Rao - If any incriminating material is found in the possession of Sri.D.T.S. Rao, relating to his son, then they could have proceeded u/s 158BD - After search and seizure of the assessee, they found materials pertaining to the assessee - The Authorities have rightly held that the Block Assessment Order passed in relation to the assessee and search is one without jurisdiction Decided against Revenue.

Summary

Issues:
1. Validity of block assessment order without a warrant issued in the name of the assessee.

Analysis:
The High Court judgment pertains to an appeal by the revenue against a tribunal's decision deeming a block assessment order as lacking jurisdiction due to the absence of a warrant issued in the name of the assessee. The search warrant was issued in the name of D.T.S.Rao, while his son, the assessee, resided in the same premises. The tribunal found that the block assessment of the assessee under Section 158BC of the Income Tax Act was illegal due to the warrant not mentioning the assessee's name. However, the panchanamas from the search indicated that the search encompassed the assessee's premises, belongings, and activities. The High Court concurred that the block assessment order lacked jurisdiction as the warrant did not include the assessee's name, rendering the search without proper authorization. The court dismissed the appeal, affirming the tribunal's decision.

The substantial question of law addressed was whether authorities were justified in passing a block assessment order under Section 158BC without a search warrant issued in the name of the assessee. The revenue contended that the authorities had the right to search and seize materials from any person present during the search, even if not named in the warrant. However, the court emphasized that for a block assessment order to be valid, a warrant must be issued in the name of the person being assessed, as search and seizure are prerequisites. The court highlighted that incriminating material seized must relate to the person named in the warrant for a valid assessment under Section 158BC.

The judgment clarified that when incriminating material seized pertains to the person named in the warrant, Section 158BD allows authorities to proceed against that person. In this case, the warrant was in D.T.S.Rao's name, but materials seized related to the assessee. The court emphasized that for a valid block assessment order, the warrant must be issued in the name of the person being assessed. Since the incriminating materials seized related to the assessee and not D.T.S.Rao, the block assessment order was deemed without jurisdiction. The court upheld the tribunal's decision and dismissed the appeal, emphasizing the importance of proper authorization in search and seizure activities for block assessments under the Income Tax Act.