2009 (10) TMI 52 - HC - Income Tax

Warrant of authorization - Search and seizure block assessment - ITAT hold that assessment was not justified simply because the warrant of search was not in the single name of the assessee but included the name of her husband also held that - the warrant of authorization must be issued individually by the Director/Commissioner at the time of issuing the same. If the same is not issued individually then assessment cannot be made in an individual capacity as done by the Assessing Officer in the instant case. The warrant was issued jointly as stated hereinabove so the assessment will have to be made collectively in the name of both the persons in the status of AOP/BOI. Thus the Tribunal has rightly held that assessment could not be framed in an individual capacity but it should be framed either as association of persons or as body of individual.

Summary

Issues Involved:
1. Validity of the assessment based on a joint search warrant.
2. Legality of assessing an individual when the search warrant was issued jointly.

Detailed Analysis:

Issue 1: Validity of the Assessment Based on a Joint Search Warrant

The primary issue revolves around whether the assessment was justified given that the search warrant included both the names of the assessee and her husband. The Court examined the provisions of Section 132(1)(c) of the Income Tax Act, 1961, which allows authorized officers to search premises if they have reason to believe that any person is in possession of undisclosed income or assets. The Court emphasized that the term "any person" is crucial and should be interpreted in the context of the Act.

The Court noted that the warrant of authorization was issued jointly in the names of the assessee and her husband, indicating that the authorities believed both were in possession of undisclosed assets. The Court highlighted that if the authorities had reasons to believe that the assessee and her husband had undisclosed assets separately, they should have issued separate warrants.

Issue 2: Legality of Assessing an Individual When the Search Warrant Was Issued Jointly

The Court delved into the definition of "person" under Section 2(31) of the Income Tax Act, which includes various entities such as individuals, Hindu undivided families, companies, firms, and associations of persons (AOP) or body of individuals (BOI). The Court discussed the interpretations of these terms in various judicial precedents, emphasizing that an "individual" refers to a single natural person, while an "association of persons" or "body of individuals" involves a group of people joining for a common purpose.

The Court concluded that since the search warrant was issued jointly in the names of the assessee and her husband, the assessment should have been made collectively in the status of AOP or BOI, not individually. The Tribunal had correctly held that the assessment could not be framed in an individual capacity but should be framed either as an association of persons or as a body of individuals.

Conclusion

The Court upheld the Tribunal's decision, setting aside the assessment orders made in the individual capacity of the assessee. The Court allowed the assessing authority to proceed and pass a fresh assessment order in accordance with the law, if desired. The appeal was dismissed, affirming that the assessment based on a joint search warrant must be made collectively, not individually.