2001 (7) TMI 293 - AT - Income Tax

Summary

Issues Involved:
1. Alleged unexplained investments.
2. Inherent lack of jurisdiction in the AO.
3. Validity of search warrant and authorization.
4. Issuance and service of notice under sections 158BC and 143(2) of the IT Act.

Detailed Analysis:

Issue 1: Alleged Unexplained Investments
The assessees challenged the block assessment order dated 30th October 1996, which included alleged unexplained investments in UTI CGGF Units Scheme, Vijaya Bank cash certificates, TDRs, and a residential house. However, the focus of the judgment is primarily on jurisdictional and procedural issues rather than the merits of these investments.

Issue 2: Inherent Lack of Jurisdiction in the AO
The assessees argued that the AO lacked jurisdiction due to:
- Non-issuance/non-service of notice under section 158BC.
- The valuation report used for adding Rs. 10,90,200 was not valid evidence.
- The appellant was not a 'person' subjected to search under section 132(1) as no search warrant existed in his case.
- The mandatory requirement of issuing notice under section 143(2) was not fulfilled.

Issue 3: Validity of Search Warrant and Authorization
The assessees contended that no valid search warrant was issued in their individual names. The Department failed to produce any search warrant in the name of the assessee for searching his premises or person. The Tribunal held that:
- Section 132(1) requires a valid authorization for search, which was absent in this case.
- The search warrant in the name of Brij Kattha company or in the joint name of Shelja Jain and Narendra Kumar Jain for a locker did not justify a search in the individual case of the assessee.
- Any incriminating material found during the search of the company should have led to proceedings under section 158BD, not 158BC.

Issue 4: Issuance and Service of Notice under Sections 158BC and 143(2)
The Tribunal found that:
- No valid notice under section 158BC was issued or served on the assessee, as required by law.
- The Department could not establish the issuance and service of the notice under section 158BC.
- No notice under section 143(2) was issued, which is a mandatory requirement. The absence of this notice rendered the assessment order invalid.

Conclusion:
The Tribunal quashed the block assessment orders for both assessees due to procedural and jurisdictional lapses, including the lack of valid search authorization and failure to issue mandatory notices under sections 158BC and 143(2). Consequently, the appeals were allowed, and the assessment orders were declared null and void.