2014 (2) TMI 34 - HC - Income Tax

Validity of search conducted - Held that - Relying upon the decision in M.B. Lal v. Commissioner of Income Tax 2005 (9) TMI 64 - DELHI High Court - In hearing an appeal against the order of the assessment, the Tribunal cannot go into the question of validity or otherwise of any decisions for conducting search and seizure. This decision can be challenged in an independent proceedings where the question of validity of order may be gone into - If the petitioner was keen to test the validity of the said proceedings, his remedy lay in a writ petition under article 226 of the Constitution - The issue has been restored for fresh adjudication.

Summary

Issues:
1. Validity of search conducted by the Income Tax Department in relation to block assessment.
2. Whether the Income Tax Appellate Tribunal can adjudicate on the validity of the search conducted by the Department.
3. Whether the exercise of power under Section 132 and 132A of the Income Tax Act falls within the administrative domain or is subject to judicial review.

Analysis:
1. The case involved the recovery of a significant amount from the possession of the assessee by the Railway Police, leading to the initiation of proceedings under Section 158BC for block assessment. The Tribunal quashed the block assessment, prompting the Department to appeal, questioning the Tribunal's interference in the search warrant issued under Section 132A. The Department argued that the Tribunal overstepped its jurisdiction by substituting its belief for that of the Director of Income Tax (Investigation) regarding the search warrant's validity. The Department contended that the seized cash by the Railway Police provided direct and relevant material for the search warrant under Section 132A. The Tribunal's comparison of the case with a Supreme Court judgment was also challenged by the Department.

2. The substantial question of law raised was whether the Tribunal could assess the validity of the search conducted by the Income Tax Department in an appeal against block assessment. Citing precedent, the appellant argued that the power under Section 132A is administrative, not quasi-judicial, thus not subject to judicial review by the Tribunal. The appellant relied on decisions emphasizing that the Tribunal's role is limited to examining the block assessment itself, not the validity of the search and seizure process.

3. The judgment delved into the nature of power under Section 132 and 132A of the Income Tax Act, establishing it as an administrative function based on precedent. The court referenced decisions by the Income Tax Appellate Tribunal and High Courts affirming that the validity of search and seizure actions cannot be questioned in appeals against block assessments. The court emphasized that the aggrieved party has recourse through separate proceedings to challenge the validity of such actions. The judgment highlighted the distinction between administrative and quasi-judicial powers, ultimately setting aside the Tribunal's decision and remanding the case for a fresh consideration limited to the block assessment issue.