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TMI Blog2008 (6) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AO latest by 31st Aug., 2001, but the same was passed on 29th Sept., 2001 i.e., beyond limitation therefore. the same is illegal, bad in law and void ab initio hence, be ordered to be quashed. 2. Without prejudice to above, the alleged consequential warrant of authorization of search signed by the Addl. Director of IT (Inv.) dt. 13th Aug., 1999, in the name of Dr. D.P. Agarwal, for search of locker at Bahraich executed on 7th Sept., 1999 is illegal, bad in law and void ab initio, as the learned Addl. Director of IT (Inv.) was not authorized after 30th Sept., 1998 to sign the warrant of search and/or authorize any IT authority for carrying out any search within the meaning of s. 132(1) of the IT Act, 1961, therefore, the whole proceedings being illegal and void ab initio were non est for the purpose of extension of limitation provided under s. 158BE of the IT Act, 1961, hence the block assessment passed on 29th Sept., 2001 under s. 158BC of the IT Act, 1961, be ordered to be quashed." 3. It was submitted in the petition that the ground raised by the assessee in cross-objection is purely legal in nature and, therefore, the same deserves to be admitted. On this petition, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Director of IT (Inv.). Assessee's main grievance is regarding limitation for passing the assessment order as per the provisions of s. 158BE. In this regard, learned counsel submitted that the Tribunal has to examine whether the warrant of authorizations, issued subsequent to initiation of proceedings were valid or not. He pointed out that in paras 67 and 68, the Tribunal in the case of Promain Ltd. has observed as under: "67. It is well settled that, as a general rule, the issue of validity of exercise of power by an authority can be raised in any proceedings including a collateral proceeding. However, it is also well settled that the validity of exercise of power by an authority can be set up in the collateral proceedings only when there is lack of inherent jurisdiction on the part of the authority exercising the power. If the authority possesses the necessary power but while exercising the power exceeds or abuses the power, then it cannot be said that the authority lacks inherent jurisdiction. In the first category of case, challenge to the validity of the exercise of power can be raised in collateral proceedings also. In the second category of cases collateral attack was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Promain Ltd. was primarily concerned with the initiation of search proceedings and not with the issue of examining the question of limitation being extended or not on account of subsequent alleged warrant of authorization not being executed by the competent authority. We, therefore, proceed to decide this issue. 8. As far as the two warrants of authorization signed and executed on 23rd Aug., 1999 by the Addl. Director of IT (Inv.) are concerned, learned counsel for the assessee has referred to the decision of the Hon'ble Allahabad High Court in the case of Raghuraj Pratap Singh & Ors. vs. Asstt. CIT (Writ Petn. No. 5731 of 2004) [reported at (2009) 222 CTR (All) 153-Ed.], wherein, it was held that warrant of authorization issued by the Addl. Director of IT (Inv.) was invalid. Therefore, in view of the decision of the Hon'ble Allahabad High Court in the case of Raghuraj Prasad, both the warrants of authorization were invalid. However, these warrants of authorization are of little consequence in the present context because limitation for passing the block assessment order is to be decided with reference to the date of execution of last warrant of authorization. 9. Admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that since the post of "Jt. CIT" came into force w.e.f. 1st Oct., 1998, a separate authorization from CBDT was required as per s. 132. 11. As against the above, learned Departmental Representative referred to Circular No. 772 dt. 23rd Dec., 1998 (cl. 5) reported in (1999) 151 CTR (St) 9 : (1998) 235 ITR (St) 42 to submit that it is a case of re-designation of authority and not of fresh appointment. He submitted that since it was a case of re-designation only, the CBDT Circular F. No. 286/343/1989-IT (Inv.) II, dt. 11th Oct., 1990, authorizing all Dy. Director of IT (Inv.), posted under Directors General of IT (Inv.), all Dy. Directors of IT (Inv.), posted under Directors of IT (Inv.) and all Dy. CIT in charge of income-tax ranges including special ranges to carry out the search, continued to be applicable with reference to Jt. CIT as he was only re-designated in place of Dy. CIT and, therefore, the Jt. CIT was fully authorized to sign the warrant· of authorization. In this regard, he referred to p. 4430 from Chaturvedi & Prithisaria's Income-tax Law (Fifth Edition) and pointed out that the authority that is authorized to issue warrant of authorization is as under: "Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tt. Director Asstt. Director or Dy. Director ------------------------------------------------- Dy. CIT Jt. CIT ------------------------------------------------- Dy. Director Jt. Director ------------------------------------------------- 5.3 Clause (7A) of s. 2 of the IT Act contained the definition of AO has been amended to include the re-designated authorities as above. 5.4 Clause (9A) of s. 2 of the IT Act has been amended to include Dy. CIT in the definition of Asstt. CIT. 5.5 Clauses (19A) and (19C) of s. 2 of the IT Act have been amended to exclude the authorities of the Addl. CIT and Addl. Director of IT from the definitions of the Dy. CIT and the Dy. Director. 5.6 Two new clauses, namely, (28C) and (28D) have been inserted in s. 2 of the IT Act, to define Jt. CIT and Jt. Director. 5.7 Sec. 116 of the IT Act has been amended by inserting cl. (cca) to add a new class of IT authorities, namely, the Jt. Director of IT or the Jt. CIT. 5.8 Identical amendments have also been made in the WT Act, Interest-tax Act, GT Act and the Expenditure-tax Act. 5.9 These amendments have taken effect from 1st Oct., 1998." Thus, the alternate submission of learned Departmental Repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -The words 'and Addl. CITs' were added by the Finance Act, 1970 w.e.f. 1st April, 1970. 1977-In cl. (c) at the end, the words 'CIT(A)' were inserted by the Finance (No. 2) Act, 1977, w.e.f. 10th July, 1978. 1987-The section, as originally enacted, and amended from time to time, was substituted by the present one by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1988. 1994-Clause (cc), as at present, was inserted by the Finance Act, 1994 w.e.f. 1st June, 1994, consequent upon the creation of a new class of IT authorities, Addl. Directors of IT, Addl. CITs and Addl. CIT(A). 1998-The Finance (No. 2) Act, 1998 inserted cl. (cca) w.e.f. 1st Oct., 1998, consequent upon the creation of the posts of Jt. Directors of IT or Jt. CITs. If we analyse the provisions of s. 116 with reference to Circular No. 772 noted above, we find that by the amendments made upto 1977, the authorities were only inserted in the section. However, by Direct Tax Laws (Amendment) Act, 1987, the authorities were substituted. Thereafter, again by further amendments made in 1994 and 1998, the new authorities were only inserted in this section. Therefore, we have to first see as to how the IT authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may require, shall also be made: ------------------------------------------------- (1) (2) ------------------------------------------------- Asstt. CIT Asstt. CIT or Dy. CIT ------------------------------------------------- Asstt. Director Asstt. Director or Dy. Director ------------------------------------------------- Dy. CIT Jt. CIT ------------------------------------------------- Dy. Director Jt. Director" ------------------------------------------------- Thus, submitted authorities now find place in s. 116. In order to further appreciate this aspect we have to consider the amendment to s. 117 made by the same Direct Tax Laws (Amendment) Act, 1987. Sec. 117 was substantially amended in 1987 and authorities specifically mentioned in s. 117 were eliminated and in its place new s. 117 empowered the Central Government to appoint such persons as it thinks fit to be IT authorities. In this regard, we refer to the provisions of s. 117, which deals with appointment of IT authorities. The legislative history of this section is as under: "Sec. 117 corresponds to ss. 5(1A) to 5(3A) of the 1922 Act which read: 5. IT authorities (1)......... (1A) The Central Government ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 977-The words 'CIT' were inserted before the words 'Addl. CIT' by the Finance (No. 2) Act, 1977 w.e.f. 10th April, 1978. 1987-Sec. 117 was substituted for the earlier section, as originally enacted and amended from time to time, by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1st April, 1988. At that time, sub-s. (2) did not contain the words 'or Dy. CIT' at the end which was inserted by the amendment. The object of the substitution of the new provisions was explained by the Board in a circular as under: "7.1-Appointment and control of IT authorities (ss. 117 and 118) Under the old provisions of s. 117 of the IT Act. The appointing authorities and the various authorities to be appointed by them were specified in detail. As a result, every time a change was required to be made, it became necessary to amend the Act. The Amending Act, 1987, has, therefore, substituted a new section for the existing one to eliminate the elaborate description of appointing authorities and the authorities that can be appointed by them. The new section empowers the Central Government to appoint such persons as it thinks fit to be IT authorities. It further empowers the Central Government to autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1998, reproduced above, the Dy. CIT was only substituted by Jt. CIT and, therefore, it was not a case of fresh appointment, and, therefore, no fresh circular was issued. The erstwhile IAC got substituted by Dy. CIT. The Dy CIT had duly been appointed as per Government notification. Once the legislature has substituted a duly appointed authority then erstwhile authority is to be taken as re-designated authority. Learned counsel has referred to s. 2(28C), according to which Jt. CIT meant a person appointed to be a Jt. CIT. His contention is that there should be a fresh appointment. However, in our opinion, this plea is to be considered with reference to s. 2 of the Direct Tax Laws (Amendment) Act, 1987. Thus, authorities who were designated as Dy. CIT upto 30th Sept., 1998 became Jt. CIT w.e.f. 1st Oct., 1998 because reference to the erstwhile authorities was changed as per the Table noted above. As already mentioned earlier Dy. CIT was substituted by Jt. CIT by s. 3 of Finance (No. 2) Act of 1998, therefore, the then authority designated as Dy. CIT became Jt. CIT and, therefore, unless fresh appointment of Dy. CIT was made, it could not find place in s. 116. For this, we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T authorities. In this regard, we have earlier referred to the Government notification by which fresh appointment order was issued appointing the authorities mentioned in the said notification. Therefore, since fresh appointment of Dy. CIT was made, CBDT had duly authorized the Dy. CIT for carrying out necessary searches as per provisions of s. 132 by notification dt. 11th Oct., 1990. But since Jt. CIT had only substituted Dy. CIT, therefore, in our opinion, no fresh notification was required in view of s. 24 of the General Clauses Act and the circular dt. 11th Oct., 1990 continued to be applicable to the substituted authorities viz., Jt. CIT and Jt. Director of IT. Therefore, on this aspect, the Bench required both the sides to advance arguments with reference to s. 24 of the General Clauses Act. The written submissions have been filed by the learned CIT (Departmental Representative) and the reply to the same has been filed by the learned counsel for the assessee which is on record. 15. This brings us to issue No. 4 which is whether the circulars dt 11th June, 1979 and 11th Oct., 1990 continued to be applicable with reference to substituted authorities or not in view of s. 24 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the staled circumstances, even after the Act under which it was issued is repealed. Thus, the issue whether s. 24 of General Clauses Act is applicable to amendments or not is no more res integra. 18. Now coming to the issue regarding authorization by CBDT to the Jt. CIT, admittedly, no fresh circular of CBDT specifically authorizing Jt. CIT has been brought on record, but in our opinion, s. 24 of General Clauses Act fully protects the applicability of notification dt. 11th Oct., 1990. In view of s. 24 of the General Clauses Act, no fresh notification was required because, as noted above, Dy. CIT upto 30th Sept., 1998 became the Jt. CIT by virtue of legislative amendment by the Finance (No. 2) Act, 1998 and, therefore, all the powers which vested in Dy. CIT automatically got vested in Jt. CIT. No fresh empowerment in this behalf was required. One more important argument advanced by learned counsel has to be dealt with. Learned counsel relying on the decision of the Hon'ble Rajasthan High Court in the case of Keshri vs. Bodhraj AIR 1951 Raj 45 submitted that the provisions of s. 24 of General Clauses Act are not applicable in case of vesting of jurisdiction. In order to proper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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