TMI Blog2005 (6) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... to the validity of the exercise of power can be raised in collateral proceedings also. In the second category of cases collateral attack was not to be allowed. The authority issuing a warrant of authorization has the necessary power to do so by virtue of the provisions of section 132. If in exercising that power the authority acts without material or comes to conclusions about existence of conditions mentioned in clause (a), (b) or (c) of section 132(1) of the Act based on extraneous reasons or irrelevant material then it would be a case of an error within the jurisdiction of the authority. It is an error within the jurisdiction because the statute has already conferred the jurisdiction to the designated officers to issue warrant. Hence, an error or arbitrariness in issuing a warrant is within the jurisdiction and not without. Such error can be rectified only in appropriate proceedings and not in any collateral proceedings. Our conclusion that remedy against improper exercise of power in initiating search by issuance of warrant of authorization lies in the form of seeking issue of a writ also gets support from the decision of Hon'ble Delhi High Court in the case of Ajit Jain [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, answer the question referred to this Special Bench in negative, i.e., in favour of the Revenue and against the assessee. As regards the remaining two limbs, i.e., conduct of search and conclusion of search, anomalies and infirmities therein, if any, do not go to vitiate the search action and the Tribunal can look into these aspects to the extent relevant for disposing of the appeal against the block assessment as discussed above. In our opinion, the Tribunal also has the power to call for the production of warrant of authorization and other documentary evidence to ascertain that the search in fact was initiated and conducted in a given case to verify this jurisdictional fact, if so challenged by the assessee and if so thought fit by the Tribunal in the facts and circumstances of the case. Before we part with this order, we may touch upon one incidental issue raised by Shri C.S. Aggarwal. Relying on the decision of the Hon'ble Andhra Pradesh High Court in the case of V. V. Trans-Investments (P.) Ltd. v. CIT [ 1993 (12) TMI 52 - ANDHRA PRADESH HIGH COURT] and that of the Hon'ble Supreme Court in the case of ITAT v. Dy. CIT [ 1996 (1) TMI 5 - SUPREME COURT] , he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing before a Division Bench of the Tribunal i.e. 'D' Bench, New Delhi. During the course of hearing, it was noticed by the Members constituting the Division Bench that the assessee-company has challenged, inter alia, the validity of search conducted under section 132 in its appeal and the question involved for consideration was whether the Income Tax Appellate Tribunal has powers to adjudicate upon the issue relating to the validity of search conducted under section 132 while disposing of the appeal against the block assessment. It was also noticed by the Division Bench that in a Third Member decision in the case of Dr. A.K. Bansal v. Asstt. CIT [2000] 73 ITD 49, the Allahabad Bench of ITAT has held that in the event of assessee challenging the validity of search under section 132 on the ground of non-existence of any circumstances/conditions enumerated in clause (a), (b) or (c) of sub-section (1) of section 132 or challenging the very factum of search on the ground that there was no search warrant in his case, the Assessing Officer as well as Tribunal not only have the powers but are duty bound in exercise of their quasi-judicial powers to adjudicate upon the matter a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramaiah Reddy v. Asstt. CIT [2003] 87 ITD 439 and taking note of the same, a reference was made to the Hon'ble President to constitute a Larger Bench of five Members to consider and decide this question of law. Accordingly, the Hon'ble President constituted this Special Bench consisting of five Members to decide the said question. 4. Sr. Advocate Shri C.S. Aggarwal initiated the arguments on behalf of the assessee. He submitted that although no appeal has been provided either under section 246A or 253 against the warrant of authorization purportedly issued under section 132(1) and the assessee thus has remedy in filing a Writ Petition before the High Court challenging the said authorization, when the assessee seeks to challenge the assessment made under section 158BC as a result of search, he can very well dispute the validity of search on the basis of non-issue of warrant of authorization or even on the basis of issue of authorization which was not valid. He submitted that the dispute thus pertains to the validity of assessment made under Chapter XIV-B and not per se to the validity of search conducted under section 132(1). According to him, the block assessment can be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to see that the provisions of the said Chapter have been properly applied inasmuch as there is a warrant of authorization issued against the assessee and the same is validly issued based on such reasons as are required to initiate action under section 132(1). He also submitted that the assessee is not denying or disputing the position that no separate appeal is provided in the Act against the use of power under section 132(1) by the concerned Departmental Authorities. The case of the assessee, however, is that if such power is not invoked in accordance with law, he can certainly dispute/challenge the same in the appellate proceedings as the right of the assessee gets affected only when an assessment is made under Chapter XIV-B. 7. Shri Aggarwal further submitted that a similar issue had arisen for consideration before the Hon'ble Chandigarh Bench of ITAT in the case of Raj Kumar Gupta and in its order dated 4-9-2001 in IT (SS) Appeal No. 38 (Chd. of 1997), the Tribunal held that it is entitled to go into the validity of search. He submitted that this order of the Tribunal has been upheld by the Hon'ble Punjab Haryana High Court by dismissing the appeal filed by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h warrant have been properly satisfied. 9. Reliance was placed by Shri C.S. Aggarwal on the decision of Jodhpur Bench of ITAT in the case of Ashok Kumar Soni v. Dy. CIT [2001] 72 TTJ (Jodh.) 323 wherein it was held that irregular and improper exercise of power for issuance of search warrant can be scrutinized and examined judicially by the Tribunal in the appellate proceedings before it and although sufficiency of satisfaction/belief for issuing such warrant is not justiciable, the factum of very existence of such satisfaction/belief is justiciable. He also placed reliance on the decision of Jodhpur Bench of ITAT in the case of Chitra Devi v. Asstt. CIT [2002] 77 TTJ (Jodh.) 640 wherein it was held that the Tribunal has the jurisdiction as also the duty to examine the validity of authorization for search when the same is challenged before it and it can adjudicate on such examination as to whether the jurisdictional conditions precedent for issuance of authorization of search did exist or not. He pointed out that in the said case before the Tribunal, record containing the reasons for formation of belief as postulated under section 132(1) was not produced by the Department despite sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid and the assessment completed under Chapter XIV-B in pursuance of such invalid search is liable to be quashed. 11. As regards the decision rendered by Bangalore Special Bench of ITAT in the case of C. Ramaiah Reddy v. Asstt. CIT [2003] 87 ITD 439, Shri Aggarwal submitted that the same cannot be considered as the precedent or ratio decidendi on the issue under consideration mainly because the issues raised before the Special Bench in the said case were different and the issue as is specifically raised for consideration before the Special Bench in the present case was not there directly for consideration of the Bangalore Special Bench. He invited our attention to the three questions referred to the Bangalore Special Bench of the ITAT by the Hon'ble President to show that the issue relating to validity of search and especially the Tribunal's power to go into that aspect was not specifically referred to by the Hon'ble President. 12. Advocate Shri V.H. Patil appearing for M/s. First Global Stock Broking Pvt. Ltd. as intervener submitted that Chapter XIV-B prescribing special procedure for assessment of search cases was introduced in the statute by the Finance Act, 1995 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction recorded by the competent authority. He also contended that even if the recording of such satisfaction by the competent authority is assumed to be an administrative Act for the sake of argument, other administrative acts of similar nature are being challenged regularly before the High Court in the Writ Jurisdiction. He submitted that even the Bangalore Special Bench of ITAT also reckoned the power of the Tribunal to go into the validity of search, but ultimately circumscribed such examination which was totally unjustified. In support of his contentions, he also relied on the decision of Allahabad Bench of ITAT in the case of Dr. A.K. Bansal and that of Hon'ble Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik [2002] 253 ITR 534. 13. Shri M.S. Syali, Sr. Advocate appearing on behalf of Maharani Kam Sundri as Intervener submitted that acts done by a Court which has no jurisdiction either over the person, the cause or the process are said to be 'coram non judice' and such acts have no validity. He invited our attention to a copy of order of Hon'ble Delhi High Court in the case of Ashok Chawla placed at page Nos. 37-43 of his paper book and submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions specified in clauses (a), (b) and (c) of section 132(1) were not satisfied. However, once such case is made out, the Tribunal having inherent and plenary powers as held by Hon'ble Supreme Court in the case of ITO v. M.K. Mohammed Kunhi [1969] 71 ITR 815, has ample jurisdiction to go into this aspect and examine the issue relating to validity of search. 16. Reliance was placed by Mr. Syali on the decision of Hon'ble Supreme Court in the case of Berium Chemicals Ltd. v. CLB AIR 1967 SC 295 wherein it was held that the words 'reason to believe' or 'in the opinion of' do not always lead to the construction that the process of entertaining 'reason to believe' or 'the opinion' is an altogether subjective process not lending itself even to a limited scrutiny by the court that such 'reason to believe' or 'opinion' was not formed on relevant facts or within the limits or within the restrains of the statute as an alternative safeguard to rules of natural justice where the function is administrative. He pointed out that although an order passed in exercise of powers under statute cannot be challenged on the ground of propriety ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tend that question of jurisdiction can be raised at any time even during the course of collateral proceedings. He contended that when validity of reopening can be challenged in the reassessment proceedings before the Assessing Officer even if such reopening was approved by Chief CIT on being satisfied himself about the escapement of income, there is no reason why validity of initiation of search under section 132(1) cannot be challenged in the block assessment proceedings. Reliance was also placed by him in this regard on the decision of Hon'ble Delhi High Court in the case of Mrs. Kailash Suneja v. Appropriate Authority [1998] 231 ITR 318 wherein it was held that Appropriate Authority having acted in an arbitrary fashion in arriving at the fair market value of properties ignoring the sale instance of comparable properties and relying On sale instances of properties situated far away from subject properties, by making adjustments for plus and minus factors in a whimsical manner, the orders for pre-emptive purchase had to be quashed. 18. Shri Syali finally contended that right of appeal has to be made effective as held by Hon'ble Supreme Court in the case of ITO v. M.K. Moha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search. 20. Shri Shiva Swamy, learned counsel appearing for M/s. Anuradha Timber Estates as intervener mainly attempted to assail the order of the Bangalore Special Bench of ITAT in the case of C. Ramaiah Reddy and that too on the various issues relating to Panchanama. He submitted that several conclusions drawn by the Tribunal in the said order on these issues are contrary to the Statute, self-contradictory and illogical. In this regard, he highlighted the following aspects: (i) The Bangalore Special Bench was of the view that in every case of search there should necessarily be a panchnama whereas it is nowhere stated in the Income-tax (IT) Act or in the IT Rules that in every case of search there should be a panchanama. (ii) The Bangalore Special Bench held that it is the duty of the authorized officer to record the conclusion of search in the last panchnama whereas it is nowhere stated in the IT Act or in the IT Rules that an authorized officer should record the conclusion of search in a panchnama. (iii) When the assessee and the interveners in Bangalore pointed out to the Bangalore Special Bench that under section 132(8A) a Prohibitory Order (PO) can be lifted and a panchnama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 158-BE(1) and Explanation 2 to that section are interpreted harmoniously, the same will lead to the conclusion that if there is more than one authorization for search in the case of the same person, the date of execution of the 'last' of such authorizations must be taken as the starting point for ascertaining the limitation period. In this regard, his contention was that since the word 'Panchanama' is not defined and there is also no need to write a panchanama in each and every case or to record the conclusion of a search in the panchanama under the statute, provisions of Explanation 2 to section 158BE(1) should be ignored completely. For proper appreciation of the concept of 'execution of authorisation', he relied on the decision of Hon'ble Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik [2002] 253 ITR 534 wherein it was held that the search comes to an end when the search party leaves the premises after carrying with it the seized material and thus the authorization for search is fully implemented and execution is complete. 22. Shri Shiva Swamy also contended that a harmonious reading of all the relevant provisions cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry meaning is inappropriate? Question 2: Without prejudice to the above question, whether there is a legal requirement for an authorized officer to prepare a 'panchanama' for recording any activity that takes place during the search? Question 3: Whether there is a legal requirement that an authorized officer should record the conclusion of a search in any 'panchanama' or in a chronologically 'last panchanama'? Question 4: Whether the expression the authorization referred to in subsection (1) appearing in Explanation 2 to section 158BE refers to the last of the authorizations for search already mentioned in section 158BE(1)? Question 5: Whether it is possible to state that the limitation time should start from the 'last panchanama' when the last panchanama itself can be prepared after the assessment order has been completed in the circumstances envisaged in section 132(8A), section 132(9A), section 132B(1)(i), section 132B(1)(ii), section 132B(1)(iii), section 132B(3), and Rule 112C of the Income-tax Rules? Question 6: Whether a harmonious reading of section 158BE, Explanation 2 to section 158BE, section 132, rule 112, and rule 112C of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e term 'Seizure' includes taking possession of any article or thing by putting a lock or a seal? 24. Shri Shiva Swamy submitted that none of the above questions raised by him deal with the administrative discretion exercised by the Departmental Officers in the course of a search and since the same relate to the interpretation of certain provisions of the Income-tax Act and the Income-tax Rules, they can always be raised before an Appellate Tribunal. 25. In reply, Shri G.C. Sharma, learned Special Counsel appearing for the Revenue, submitted that for deciding the issue raised before this Special Bench, it is necessary to recognize the distinction between an administrative/executive power conferred on a specific authority appointed under the Income-tax Act and the judicial functions to be performed by such authority. He submitted that the Assessing Officer performs the function of determining the taxable income and consequent liabilities attached thereto of a particular assessee for a particular year and nothing more. He pointed out that section 116 of the Act specifies the classes of the Income-tax Authority for the purposes of the Act whereat section 120 provides for exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified period is established, the Assessing Officer has to proceed to frame the assessment as provided in Chapter XIV-B and the Tribunal has no power to pronounce as an Appellate Authority upon the validity of search and nullify the assessment made under Chapter XIV-B. He contended that the Assessing Officer is not authorized under the Act to question in assessment proceedings the validity of search and it therefore follows that the Tribunal is also not competent to decide that question. 27. Shri G.C. Sharma pointed out that similar submissions were made before Delhi Bench of the ITAT in the case of Virinder Bhatia v. Dy. CIT [2001] 79 ITD 340 and Division Bench of the Tribunal was pleased to accept the propositions urged on behalf of the Revenue. He submitted that the Special Bench of ITAT at Bangalore has endorsed this decision of Division Bench in the case of C. Ramaiah Reddy wherein similar question has been decided in favour of the Revenue after having considered that such pronouncement was necessary to pronounce upon the questions referred in that case. He contended that Bangalore Special Bench has distinctly held that the Tribunal has no power to pronounce upon the validi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of authorization was issued and whether the conditions for issuance of the search warrant were satisfied. He submitted that all that the Assessing Officer or the appellate authorities including tribunal can see/check from the record is as to whether the search had been initiated within the prescribed period for the purposes of framing a block assessment. 30. As regards the decision of Hon'ble Delhi High Court in the case of Ajit Jain relied upon by the learned counsel for the assessee, Shri G.C. Sharma submitted that the same is not an authority to canvass an answer to the question raised before the Special Bench. He contended that the passage of the said decision only lays down that alternate remedy is not a bar to issuance of a writ under Article 226 and it has not been held by the Hon'ble Delhi High Court that there is an alternative remedy of challenging the validity of a search before the appellate authority. He also contended that the arguments raised by the Counsel on behalf of either of the parties before the High Court do not lay down any proposition and it, therefore, cannot be regarded as ratio decidendi as sought to be canvassed by the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) cannot be compared with the reopening of an assessment under section 147 by issue of a notice under section 148 because the reasons are recorded and subsequently reassessment is framed by the Assessing Officer while performing functions of a quasi-judicial authority whereas the reasons under section 132(1) are recorded not by the Assessing Officer but by an independent authority competent to issue warrant under section 132 which is purely an executive action. He contended that the Tribunal is merely a quasi-judicial authority and such quasi-judicial authority has no control over exercise of an executive power by an authority prescribed in the Act for that purpose. According to him only the High Court has the power and the authority to examine the validity of search by examining whether the pre-conditions for the issuance of a warrant of authorization based on existence of reasons to believe as recorded were not satisfied in a given case and a quasi-judicial authority such as Tribunal cannot examine the validity of an executive action and usurp the powers of writ vested in the Hon'ble High Courts under Article 226 of the Constitution. 32. As regards the case of Urmila Lamba c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entitled to see the authorization of search and passes an order accordingly, the department is ready to produce the same for the perusal of members of the Tribunal. He, however, contended that if at all it is to be held that the Tribunal can direct the production of warrant of authorization, it should not be laid down as a rule but this can appropriately be done only after filing an affidavit by the assessee as per rule 10 of ITAT Rules. 34. Shri Sharma also contended that the case laws relied upon by Advocate Shri Syali are with reference to different Acts and in the context of altogether different provisions which are not at all pari materia with the provisions of section 132(1). In this regard, he submitted that the Tribunal is not a Court in strict sense and a decree also is materially different from the authorization issued by the DI under section 132(1). According to him, warrant of authorization cannot be equated to decree and only if the authority issuing the warrant of authorization lacks inherent jurisdiction, this aspect can be raised before the Assessing Officer. However, if such authorization is issued by a competent authority in exercise of its jurisdiction, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e President for the consideration of Special Bench and since the issues sought to be raised by him are not within the scope of question specifically referred to by the Hon'ble President to this Special Bench, the same cannot be entertained. He submitted that many issues raised by him relating to irregularity or infirmities during the course of search, in any case, can be gone into by the Tribunal depending on the facts and circumstances of each case. 38. As regards the issue of examining the material before the Director of Income-tax (Investigation) in coming to the conclusion that the aforesaid case was fit for search and seizure operation, Shri G.C. Sharma stated that such an action on the part of Tribunal will amount to usurping the writ jurisdiction of the High Court or the Supreme Court in the garb of exercising its appellate jurisdiction. Moreover, the powers exercised in this regard by the competent authority resulting in initiation of search are purely of administrative nature which is beyond the scope of appellate jurisdiction. According to him, there is one more vital aspect which should be considered is that the material before the Director of Income-tax (Inv.) inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the same in the form of fourteen questions for the consideration of the Special Bench. It is, however, worthwhile to note here that the question referred to for the consideration of the Special Bench in that sense is very specific inasmuch as it deals with the powers of the Tribunal to adjudicate upon the issue relating to the validity of search conducted under section 132 and that too while disposing of the assessee's appeal filed against the block assessment. 41. The scope of the question referred to this Special Bench is thus limited to a consideration of the issues relating to the validity of search conducted under section 132 and those aspects which have a direct bearing on the validity of search can only be looked into while answering the said question. In this regard, it is pertinent to note that the search action under section 132 has three limbs, i.e., initiation of search, conduct of search and conclusion of search. Insofar as the validity of search is concerned, the first limb, i.e., initiation of search, which includes all the action culminating into issue of warrant of authorisation, assumes significance and relevance. As regards the other two limbs, i.e., cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than fifteen days without handing them over to the ITO, and taking away of number of documents from petitioners' premises without their knowledge and consent is clearly an arbitrary exercise of power and, therefore, the whole action taken under section 132 is vitiated. Nevertheless, the preponderance of judicial opinion clearly suggests that the subsequent error/infirmities in the conduct or conclusion of search do not invalidate the search if the same is initiated after satisfactory compliance of the conditions stipulated in the exercise of the power under section 132(1) and such power is exercised bona fide in furtherance of statutory duties of the authorities. It, therefore, follows that what essentially is to be seen to ascertain the validity of search is the valid initiation of search in accordance with the provisions of section 132(1) and if such initiation is based on satisfaction of the conditions stipulated in the said provision, the other aspects involved in the conduct of search need not be gone into since the infirmity therein, if any, does not result in vitiating the search action. We are, therefore, of the view that the various issues sought to be raised by Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same on merits. It is worthwhile to consider here that appeal before the Tribunal and writ before the High Court are not mutually exclusive remedies in the strict sense. 46. Before us, it has been pointed out on behalf of the assessee that in some of the cases, it was submitted on behalf of the Revenue itself that the assessee has an alternative remedy available in the form of filing an appeal before the Tribunal in which all the issues including the issue relation to validity of search could be raised. It is, however, observed that such stand was taken by the Revenue before the High Court in the limited context of maintainability of writ petitions filed by the assessee and that too by stating that the petitioner has an efficacious alternative remedy against the block assessment order by way of appeal to the Tribunal which can be availed of. It was, thus, never submitted by the Revenue before the High Court that the Tribunal has a power to adjudicate upon the issue relating to the validity of the search conducted under section 132 nor the submissions made by them were to that effect either directly or even impliedly. In any case, as rightly submitted by the learned Special Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 132. The word 'initiated' is understood in legal sense as 'commenced' while the word 'conduct' is understood as 'carry on'. If these words are read together, it would mean commencement of search, the actual carrying on/execution of search and completion of search. Therefore, validity of search referred to for consideration of the Special Bench has to be understood with reference to the initiation/commencement of the search, actual conducting of search and final execution of search vis-a-vis the powers/functions/duties of the Assessing Officer under the provisions of Chapter XIV-B. 49. At this stage, it would be appropriate to mention that the right of appeal to any party is not a fundamental or inherent right but only a statutory right as held by the Hon'ble Supreme Court in the case of CIT v. Ashoka Engg. Co. [1992] 194 ITR 645. Therefore, each and every action of an income-tax authority is not appealable unless specific right of appeal is conferred on the aggrieved party. If no right of appeal is conferred against any action of the tax authorities, then such an action can only be challenged before the Hon'ble High Court by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of a person whose undisclosed income is to be assessed. The latter expression is only relevant to see that such search must have been initiated after 30-6-1995. There is a distinction between initiation and conduct of search to which we will refer in the later part of our order. 51. At this stage, it is sufficient to mention that before the issuance of notice under section 158BC, the Assessing Officer is only required to satisfy himself that search was conducted in the case of an assessee and initiated after 30-6-1995 and nothing more. Another aspect of search which is to be seen by the Assessing Officer is the execution of the last authorization as provided in section 158BE. This is relevant only for the purpose of ascertaining the period of limitation for making the block assessment. The last aspect of the search which is to be seen by the Assessing Officer is with reference to the evidence found as a result of the search as provided in section 158BB. This is because the Assessing Officer can use only that evidence which is found as a result of search and such other material which is relatable to such evidence. Apart from these requirements, the Assessing Officer is not requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not include assailing any action of income-tax authority prior to initiation of search. Hence, it has to be held that requirements of clauses (a) to (c) of section 132(1) are not justiciable before the appellate authority. If the assessee is aggrieved by the action of the authority mentioned in section 132(1), then the only remedy available with the assessee is to challenge the same, before the High Court in writ petition under Article 226/227 of the Constitution of India. 54. Another contention of Mr. Aggarwal, the learned counsel for the assessee, is that if the Tribunal can examine the validity of the reasons recorded by Assessing Officer under section 148 then for the same reasons, the Tribunal can also examine the validity of the action of DI/CIT under section 132(1). We are unable to accept this contention also. We have already held that it is only the action of Assessing Officer connected with the assessment proceedings which is assailable before the appellate authority. In the case of re-assessment proceedings, the statute itself provides that Assessing Officer shall record reasons which led him to believe that the income of the assessee had escaped assessment. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities under section 132(1). We are in agreement with the majority view for the reasons given by us. Hence, contrary view taken by various division benches of the ITAT stands overruled. 57. Coming to the High Court judgments, we have already held that none of the judgments relied upon by the learned counsel for the assessee directly decide the issue under consideration. The main thrust of Mr. Aggarwal was on the judgment of jurisdictional High Court in the case of Ajit Jain. In that case, no doubt, it was held that a valid search is a condition precedent for invoking the provisions of Chapter XIV-B but nowhere it was held that an appellate authority can examine the validity of the action of authorizing the search under section 132 as the Hon'ble High Court was examining the validity of such action in the writ petition filed by the assessee and had no occasion to consider the issue pressed before us. We have already held that such action under section 132(1) can only be challenged before the High Court under article 226/227 of the Constitution of India. Therefore, our legal finding that Tribunal cannot look into the validity of action of authorizing the search under section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In these premises, it has been pleaded by him that the order of the Tribunal has been affirmed by the High Court and, therefore, it should be held that the Tribunal can adjudicate upon the action of the tax authorities under section 132(1). The judgment of the High Court has been perused carefully and the same is also being reproduced for the benefit of this order: The Income-tax Appellate Tribunal vide orders dated September 7, 2001, allowed the appeal of the respondent assessee, Which was filed by him against order dated July 21, 1999 passed by Assessing Officer under section 158(BC) read with section 143(3) of the Income-tax Act and consequently, quashed assessment framed by the Assessing Officer, on the ground that there was no valid search and seizure. While arriving at the conclusion aforesaid, it has been found on facts that there was no satisfaction note recorded by the Director of Investigation before issuing any warrant of authorisation. The revenue did not choose to produce the warrant of authorization issued by the Director of Investigation as well as any other material including satisfaction note of the Director of Investigation authorizing the search. The finding of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion before the jurisdictional High Court since no remedy by way of an appeal is specifically provided in the Statute against the warrant of authorization issued under section 132(1). Shri Aggarwal, on the other hand, has submitted that when the search proceedings are initiated, the entire exercise becomes quasi-judicial and not just administrative. It would be appropriate here to understand the distinction between a judicial and administrative function. A judicial decision is made according to law, i.e., by applying legal rules and principles and mainly guided by legal policy whereas an administrative decision is made according to administrative policy, which in turn is guided by what is expedient and desirable in the interest of public. A quasi-judicial function is an administrative function, which the law requires to be exercised in same respects as if it were judicial. The exercise of the quasi-judicial function is dictated by policy and expediency but requires the authority to follow the principles of natural justice and requires the authority to act fairly and not arbitrarily. Existence of a lis inter parties or a quasi-lis, i.e., existence of a dispute between a person and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax evasion. Going by the purpose of the exercise of this power, there cannot be any opportunity of being heard or being afforded to the person who is to be searched. The only limitation on exercise of this power therefore is that the power should be exercised fairly and not arbitrarily. The existence of conditions for issue of a warrant of authorization to conduct a search can always be questioned only after warrant is issued and a search is carried out in the case of a person who challenges such an action. No preventive action is possible from a person to be searched before an actual search is carried out. In many cases, the material found as a result of search would always justify an action for issue of a warrant of authorization to carry out a search. Even in such cases, the reasons on the basis of which the search was initiated and the material which was sought to be unearthed through a search and the material which is actually found in the course of search, might be different. Therefore, the reasonability or fairness in initiating search cannot in all cases be justified on the basis of the formation of belief as was entertained by the authority when a warrant of authorization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an administrative function or a quasi-judicial function is purely academic in the present context inasmuch as answer to the said question will not have any direct bearing on the issue under consideration before this Special Bench. 66. Before us, Mr. Syali has raised a contention to the effect that block assessment proceedings under Chapter XIV-B are collateral proceedings initiated as a result of action under section 132(1) and since the Assessing Officer acquires jurisdiction to proceed under Chapter XIV-B as a result of search or for that matter a valid search, the jurisdictional aspect relating to validity of search can be set up at the stage of execution in the form of block assessment which is passed in the collateral proceedings. In this regard, he has relied on the decision of Hon'ble Supreme Court in the case of Chiranji Lal Shrilal Goenka wherein it was held that validity of decree which goes to the root of the matter, its validity can be set up even at the stage of execution or in collateral proceedings. 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70. Our conclusion that remedy against improper exercise of power in initiating search by issuance of warrant of authorization lies in the form of seeking issue of a writ also gets support from the decision of Hon'ble Delhi High Court in the case of Ajit Jain which has been subsequently affirmed by the Hon'ble Supreme Court. In the said case, similar action was challenged by the assessee in a writ petition filed before the Hon'ble Delhi High Court and their Lordships of Delhi High Court entertained the writ petition filed by the assessee observing that his case does fall in the category where an action is wholly without jurisdiction and results in infringement of fundamental right. Hon'ble Delhi High Court further observed that while sufficiency or otherwise of the information cannot be examined by the Court in writ jurisdiction, the existence of information and its relevance to the formation of the belief is open to the judicial scrutiny because it is the foundation of this condition precedent for exercise of a serious power of search of a private property or person which involves violation of privacy of a citizen. These observations recorded by Hon'ble Delhi H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings under Chapter XIV-B, the Tribunal cannot consider and decide the issue relating to the validity of search even in the exercise of its implied powers which obviously are limited by the express powers conferred on it by the Statute. We, therefore, find it difficult to agree with the contention raised on behalf of the assessee that the Tribunal can look into the aspect of validity of search by exercise of its implied or incidental power. 72. Having held that the Tribunal cannot adjudicate upon the action of the DI/CIT under section 132(1), the next question is whether the Tribunal can examine the validity of any aspect of the search, i.e., from commencement till completion thereof. As already pointed out, the scheme of Chapter XIV-B requires the Assessing Officer to examine such aspects at three stages. The first stage is when the Assessing Officer has to issue notice under section 158BC. At this stage, he is required to satisfy himself that search has been initiated and carried out in the case of an assessee on whom such notice is to be served. In this connection he should see the authorization issued under section 132(1) and the panchnama prepared by the search party so as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 132(1). If it is found that there was no such authorization in the case of the appellant then assessment made under section 158BC would be void ab initio. However, it is clarified that such power of Tribunal is very limited to ascertain the fact as to whether there was any authorization under section 132(1) in the case of the appellant and nothing more. 73. The next stage comes after the assumption of jurisdiction when the Assessing Officer examines the seized material. Section 158BB requires the Assessing Officer to determine the total undisclosed income with reference to the evidence found as a result of search and such other material/information relatable to such evidence. This evidence includes the statement recorded in the course of search. If any, action of the search party with reference to/connected with such evidence is not in accordance with law, the assessee can object to the same before the Assessing Officer who shall deal with the same as per law. Consequently, such action can also be challenged before the Tribunal and the Tribunal shall be within the powers to adjudicate such issue. However, it is clarified that any defect or irregularity would neither vitiate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder under section 158BC by the Assessing Officer. Accordingly, we are of the view that the Assessing Officer is required only to find out the date when the last panchnama with reference to last authorization is drawn and nothing beyond that. The examination of the conduct of search party including the issuing of restraint order/prohibitory order is outside the purview of the Assessing Officer and consequently, outside the purview of the appellate authority. Therefore, the Tribunal can examine the record only with a view to find out the date of last panchnama. 75. It is, however, pertinent to mention about the significance of the panchnama. The Panchnama is a document which is prepared in the presence of Panchas (respectable local witnesses) containing the items found and seized in the course of search. So the Assessing Officer must satisfy himself for the purpose of calculating the period of limitation that the document in question is in reality a Panchnama. There may be a case where inventory is prepared in respect of books of account or valuable articles found in the course of search but taking of or removal of such books of account or valuable article is not practicable. The au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, in our opinion, are not justiciable in an appeal before the Tribunal. The only remedy in this matter lies in the form of seeking issue of a writ from the Hon'ble High Court. We, therefore, answer the question referred to this Special Bench in negative, i.e., in favour of the Revenue and against the assessee. 78. As regards the remaining two limbs, i.e., conduct of search and conclusion of search, anomalies and infirmities therein, if any, do not go to vitiate the search action and the Tribunal can look into these aspects to the extent relevant for disposing of the appeal against the block assessment as discussed above. In our opinion, the Tribunal also has the power to call for the production of warrant of authorization and other documentary evidence to ascertain that the search in fact was initiated and conducted in a given case to verify this jurisdictional fact, if so challenged by the assessee and if so thought fit by the Tribunal in the facts and circumstances of the case. 79. Before we part with this order, we may touch upon one incidental issue raised by Shri C.S. Aggarwal. Relying on the decision of the Hon'ble Andhra Pradesh High Court in the case of V. V ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
