2010 (2) TMI 263 - HC - Income Tax

Search - Block Assessment - The Tribunal held that the Additional Director was not authorized to issue search warrant and consequently the search warrant became invalid as did the assessment which followed thereafter. In view of the fact that the entire proceeding were invalid. Held that- in view of the amendment, the order was liable to be set aside and the matter was remitted to the Tribunal to consider the appeal filed by the assessee as well as by the Revenue on all the other ground urged by the party.

Summary

Issues:
1. Validity of search warrant issued by Additional Director of Income-tax (Investigation).
2. Impact of Finance (No. 2) Act, 2009 amendment on the validity of the assessment.
3. Revival of appeals before the Tribunal.

Issue 1: Validity of search warrant issued by Additional Director of Income-tax (Investigation)

The case involved appeals arising from a common order passed by the Income-tax Appellate Tribunal related to the block assessment period from April 1, 1989, to June 23, 1999. The assessee contended that the warrant of authorization issued by the Additional Director of Income-tax (Investigation) was unauthorized, rendering the subsequent assessment invalid. Citing precedent, the Tribunal held that the Additional Director lacked the authority to issue search warrants, leading to the invalidation of the assessment and the entire proceedings. Consequently, other grounds raised by both the assessee and the Revenue were not considered by the Tribunal.

Issue 2: Impact of Finance (No. 2) Act, 2009 amendment on the validity of the assessment

The Revenue pointed out that the Finance (No. 2) Act, 2009 introduced an amendment to section 132(1) with retrospective effect from June 1, 1994, empowering the Additional Director to issue warrants of authorization. Considering this amendment, the court set aside the impugned orders and remitted the matters back to the Tribunal. This decision allowed the revival of the Revenue's and the assessee's appeals before the Tribunal on all grounds initially raised by the parties.

Issue 3: Revival of appeals before the Tribunal

In light of the Finance (No. 2) Act, 2009 amendment, the court directed the Tribunal to reconsider the appeals filed by both the assessee and the Revenue on all the grounds previously urged. The order passed by the court was without prejudice to the assessee's right to challenge the constitutional validity of the amendment introduced by the Finance (No. 2) Act, 2009. Consequently, the appeals were disposed of based on these terms, ensuring a fresh consideration of the issues before the Tribunal.

This detailed analysis of the judgment provides insights into the key issues addressed by the court, including the validity of the search warrant, the impact of legislative amendments, and the revival of appeals for further consideration.