TMI Blog2005 (6) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [ 2003 (1) TMI 97 - SC O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion 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 contended that an appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 and consequently, call for the records of concerned authorities leading to the issue of authorization of search and can satisfy itself with regard to authorization having been issued in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, 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 made only in the case where search has been conduced and since a valid search is a condition precedent for acquiring jurisdiction in order to proceed with the assessment under section 158BC, the assessee is entitled to challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Revenue against the same under section 260A and as per the information available with the assessee, no appeal against the said judgment of Hon'ble Punjab Haryana High Court has been filed by the Revenue before the Hon'ble Supreme Court. Relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 specific directions given by the Tribunal and on the basis of such failure on the part of the Department, the Tribunal proceeded to infer that there in fact did not exist reasons with the competent authority to entertain belief reasonably and honestly regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garwal 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 and since the assessment for the block period assessing undisclosed income has now to be made in the cases where search has been conducted, the validity of search has become of vital importance. He submitted that since the block assessment under Chapter XIV-B is made cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 submitted that the powers of the Tribunal to go into all the aspects of search including its validity have been recognized even by the jurisdictional High Court. He contended that the Assessing Officer has no jurisdiction to proceed under Chapter XIV-B for completing the assessment for the block peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 or sufficiency as held by Hon'ble Apex Court it is liable to be quashed on the ground of mala fides, dishonesty or corrupt purpose. He contended that even if such order is passed in good faith and with the best of intention to further the process of legislation which confers the power, since the authority has to act in accordance with and within the limits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity 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. Mohammed Kunhi [1969] 71 ITR 815 and in order to make the right of appeal against the block assessment proceedings effective, the assessee should be entitled to challenge the validity of search as well. In support of this contention, he also cited the decision of Hon'ble Gujarat High Court in the case of CIT v. Shivabhai B. Patel [1999] 239 ITR 919 and that of Hon'ble Rajasthan Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radictory 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 for lifting the PO can be recorded even after the assessment has been completed, the Special Bench recognized that this created a logical problem; it was 'a hen and egg syndrome' (i.e. a chicken-first or egg-first dilemma); the Special Bench held that an assessment order should normally be passed only after the 'last panchnama' (chronologically last panchanama) is written, but in the case contemplate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 clearly indicates that the only legally recognizable panchanama is the one written at the time of the initial entry of the authorized officers into a particular building of a particular assessee and alternatively the concept of 'panchanama' can be totally disregarded and the period of limitation can be ascertained from the execution of last search warrant. According to him, the Tribunal in order to decide the issue relating to execution of authorization has necessarily to go into the actual conduct o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast 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 Rules would lead to the conclusion that the limitation period would run from the execution of the last of the authorizations for search (and not from the date of the last 'panchnama')? Question 7: Whether a harmonious reading of section 158BE(1), Explanation 2 to section 158BE, section 132, section 132B, rule 112, and rule 112C would lead to the conclusion that any search becomes 'executed' when the authorized officers make their first visit to a premises, stay as along as they wish, seize whatever articles they need under section 132(1)(iii), make a deemed seizure of any other ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ze 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 exercise of all or any of the powers conferred on certain authority or for performance of certain functions by them under the Act or under the directions issued by the CBDT. He took us through the relevant provisions contained in Chapter XIII-C titled 'Powers' and submitted that section 131 deals with purely administrative or executive powers conferred on various authorities mentioned in that Chapter. He pointed out that section 132 is enacted in this Chapter to confer powers of search and seizures only on the authorities mentioned therein and these powers, he emphasized, are essentially of executive/administrative nature. He contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 validity of a search and thus the question before this Special Bench is no longer res integra but stands concluded. He submitted that it is, therefore, wrong on the part of the assessee to urge that the decision of the Special Bangalore Bench does not deal with this question. 28. Shri G.C. Sharma further submitted that there is no authority of any High Court to support an answer to the question under consideration in the affirmative that is against the Revenue and even in the case of Ajit Jain v. Union of India [2002] 242 ITR 302 (Delhi), this question did not arise for consideration directly or indirectly. He contended that the decision rendered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee. As regards the decision of Chandigarh Bench of ITAT in the case of Raj Kumar Gupta, he submitted that search in that case was found to have been conducted on the basis of warrant of authorization issued to a Third Party and not to the assessee and neither the warrant of authorization nor any material regarding the reasons for initiating search in the case of the assessee was produced by the Revenue before the Tribunal. He contended that in those facts and circumstances of that case, the Tribunal held that no search was conducted in the case of the assessee and the Assessing Officer had no jurisdiction to frame an assessment under Chapter XIV-B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 cited on behalf of the assessee, Shri Sharma submitted that no warrant of authorization issued in the name of the assessee was produced by the Revenue for the examination of Tribunal despite the fact that the assessee in that case had filed an affidavit stating that no search warrant was executed in her name and in these peculiar facts of that case, Jaipur Bench of the ITAT took the view that the block assessment proceedings were invalid. He contended that even the other decisions of the Tribunal cited on behalf of the assessee are not decisive of the question referred to this Special Bench and moreover, the operation of the order of Allahabad Bench of Tribunal in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 Assessing Officer cannot go into validity of authorization and so also the Tribunal sitting in appeal on the order of the Assessing Officer. 35. In this regard, he referred to the Notification No. 354 issued by the CBDT on 3-12-2001 placed on record by the Revenue and invited our attention to the following portion thereof:- "In exercise of the powers conferred by sub-section (1) and sub-section (2) of section 120 of the Income-tax Act, 1961 (43 of 1961) and in supersession of S.O. No. 703(E), dated 6-9-1989 and any order issued by the Directors General of Income-tax (Inv.), so far it relates to the jurisdiction of Directors, the Central Board of Direct Taxes hereby: (a) direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.) includes highly secret papers regarding not only the information but also informer and since these documents contain privileged communication protected from perusal of any appellate authority, the same cannot be produced in the open Court as such a production of document may pose threat to the life of the informer. He pointed out that even during the course of writ proceedings before the High Court, such documents are produced for perusal of the judges in the Chamber. 39. Shri C.S. Aggarwal, in the rejoinder, submitted that it is for the Revenue to establish that a valid search has been conducted in the assessee's case and such valid search has to be shown from warrant of authorizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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., conduct of search and conclusion of search, they do not have direct bearing on the validity of search because once the conditions for the exercise of the powers under section 132(1) are satisfied and the power is exercised bona fide and in furtherance of the statutory duties of the authorities, any error or mistake on the part of the authorities in the matter of conduct and conclusion do not go to vitiate the exercise of the said power. 42. A useful reference in this regard can be made to the decision of Hon'ble Madhya Pradesh High Court in the case of Naraindas v. CIT [1984] 148 ITR 567 wherein it was held that any irregularity in the course of entry, search and seizure committed by the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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. Shiva Swamy touching the various aspects involved in the conduct of search relating to Panchnama etc. are not within the scope of the question specifically referred to the Special Bench for consideration and decision and the same need not be dealt with by us. Nevertheless, we will touch upon these aspects at the appropriate stage just to clarify the position further. 44. During the course of hearing before us, various decisions of the higher forum have been cited from the side of the assessee and it was contended that the question under reference to this Special Bench has already been answered by the High Courts in the affirmative and to the effect that the Tribunal does have powers to adjudicate upon the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Counsel for the Revenue, such stand taken by the Revenue, if any, would not be able to give such powers to the Tribunal if the same otherwise are not conferred upon it under the Statute. It, therefore, follows that there is no decision of any High Court, at least amongst those cited before us, wherein the question now referred to the Special Bench has been answered directly and specifically and this issue is still res integra which has to be considered and decided independently by the Special Bench. 47. There arc several cases in which action under section 132(1) has been challenged by the assessee by way of writ petition filed before the various High Courts and the High Courts exercising their writ jurisdiction have gone into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory 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 of Writ Petition under Article 226/227 of the Constitution of India. Reference can be made to the judgment of the Apex Court in the case of Central Provinces Managanese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 where their Lordships at Page 968 of the report held that no appeal lies against improper exercise of the discretion to waive or reduce interest. It was also held that appeal could be filed against the levy of interest only where assessee completely denies to be assessed vis-a-vis the interest. The Hon'ble Calcutta High Court in the case of ANZ Grindlays Bank Plc. v. CIT [2000] 241 ITR 269 held that there is no right of appeal against an order charging interest under section 220(2) of the Act. Recently, the Hon'ble Bombay High Court in the case of Chem Amit v. Asstt. CIT [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment. 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 required to see any other aspect of the search. 52. The major contention raised by Mr. Aggarwal, the learned counsel for the assessee, before us is that a valid search is the foundation for assuming jurisdiction to make the block assessment under the provisions of Chapter XIV-B as held by the Hon'ble Delhi High Court in the case of Ajit Jain v. Union of India [2000] 242 ITR 302 (later on affirmed by the Apex Court in Union of India v. Ajit Jain [2003] 260 ITR 80) and it is, therefore, the duty of the Tribunal to examine whether the conditions specified in clauses (a) to (c) of section 132(1) are satisfied before issuing authorization by the authorities mentioned therein to search the premises of the assessee. We are unable to accept this contention for the reason that the right of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention 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 this action of Assessing Officer is inextricably linked with the initiation of assessment proceedings the same can be assailed before the appellate authority. But in the case of block assessment proceedings, there is no such requirement in law. What the Assessing Officer is required to see that search is initiated and conducted in the case of assessee and nothing more. Therefore, action of DI/CIT under section 132(1) cannot be equated with the action of the Assessing Officer under section 148 for the purpose of determining the scope of the powers of appellate authority. At this stage, we may clarify that there is no dispute to the legal position that action of DI/CIT under section 132(1) is the foundation for commencement of block assessment proceedings and therefore, such action is justiciable. The dispute is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit 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 132(1) is not in conflict with the ratio laid down by the jurisdictional High Court in the above case. For the similar reasons, we hold that the judgment of Kerala High Court in the case of Dr. C. Balakrishnan Nair v. CIT [1999] 237 ITR 70, judgment of Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik [2002] 253 ITR 534 and judgment of Delhi High Court in the case of B.K. Nowlakha v. Union of India [1991] 192 ITR 436, are distinguishable inasmuch as action of authorization under section 132(1) was not in dispute before these High Courts. In fact, these judgments were rendered with reference to the action of search party to which we will refer later on. Besides this, none of the High Court judgments holds that Tribunal as an appellate authority can examine the validity of action of authorization of searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 the mentioned above could not be assessed on any ground whatsoever, No merit. Dismissed." 60. A perusal of the above clearly shows that appeal of the revenue was dismissed on facts and no proposition of law was laid down by their Lordships. It has been clearly observed by the Court that the Tribunal found on facts that there was no satisfaction note recorded by DI before issuing any warrant of authorization. In view of such finding of fact, their Lordships dismissed the appeal. It is the settled legal position that a decision is an authority for the proposition it decides and not what can legally be deduced therefrom. Reference can be made to Full Bench judgment of the Delhi High Court in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 at page 17. Similar view has been expressed by the Hon'ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the administrative authority itself is necessary and only then would there be an occasion for an administrative authority to exercise a quasi-judicial function. 62. The power to initiate a search against any person and to authorize entering of any premises and effect seizure of books of account, money, bullion etc., is a power which the law has conferred on certain authorities referred to under the provisions of section 132 of the Income-tax Act. The exercise of the power under section 132 to initiate a search of a place and effect seizure is subject to fulfilment of two conditions- (a) existence of information in possession of the authority specified in section 132 and (b) their belief on the basis of such information that a person to whom summons is issued to produce books of account and accounts, omits to produce such books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was issued. 64. The absence of a lis or a quasi-lis would prompt one to think that the satisfaction to be reached by the authority issuing warrant of authorization is only an administrative function. The fact that the belief has to be entertained by the authority issuing the warrant only after satisfying itself about existence of the three conditions for issue of a warrant mentioned in clauses (a), (b) and (c) of section 132(1) which satisfaction has to be on the basis of information in their possession and such satisfaction has to be objective and not subjective, will prompt one to conclude that power to initiate a search is only a quasi-judicial function. It is therefore, difficult to conclude whether the power is quasi-judicial or purely administrative. Even the Hon'ble Supreme Court in the case of A.K. Kraipak v. Union of India AIR 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oenka 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 proceedings. 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 jurisdication. In the first category of cases, 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 not to be allowed. 68. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 High Court explicitly show that a power of search of a private property or a person is a serious power and exercise of the same without jurisdiction results in the infringement of the fundamental right since it involves violation of the privacy of a citizen. Keeping in view this legal position, it can appropriately be held that it is only the High Court which can examine the validity of search by ascertaining whether the pre-conditions for the issuance of a warrant of authorization based on existence of reasons to believe as recorded were satisfied or not in a given case in exercise of power of writ vested in them under article 226 of the Constitution . 71. Before us, reliance has been placed by Mr. Syali on the decision of Hon'ble Supreme Court in the case of M.K. Mohammed Kunhi to contend that the Tribunal has ample jurisdiction to go into and examine the issue relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 to satisfy himself that search was initiated and carried out in the case of the person on whom notice under section 158BC is to be served. The scope of examination is very limited, i.e., to ascertain that search operation was carried out in the case of such person and nothing more. If the Assessing Officer does not satisfy himself in this regard, then the assessee has the right to object to the validity of the assessment before the appellate authority on the ground that no search was initiated/conducted in the case of the appellant. For example, an authorization under section 132(1) may be only in the name of the company but in the course of such search, the premises of Directors/employees of company are searched by the same search party without obtaining fresh authorization. In such a case, the search in the case of such directors/employees would be without authority of law on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 validity of search nor the assessment since such action occurs after the valid assumption of search/assessment proceedings. The Tribunal may, however, pass such order as it may deem fit in case of any defect/irregularity in such action of search party. 74. The third and perhaps the last stage comes at the time of completing the assessment for the purpose of computing the period of limitation under section 158BE. This section provides that assessment under section 158BC has to be made within one year or two years, as the case may be, from the end of the month in which last of the authorizations for the search under section 132 was executed. Therefore, the Tribunal as an appellate authority, can also examine as to when the last of the authorizations was executed. A search can be said to be executed when it is concluded in terms of section 132. The actions of the search party are enu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 authorized officer may issue restraint order under second proviso to section 132(1). Such restraint is deemed to be a seizure as per the said proviso. Hence, in such a case, the preparation of inventory and panchnama would be relevant and any action of the authorized officer lifting the restraint order would, in our opinion, be irrelevant. The reason is that whatever the search party was required in law to do had been done and nothing more was required. The restraint order is passed not because anything was to be done but because it was not practicable to take physical possession and remove the material to a safe place at the relevant time. As held by Hon'ble Bombay High Court in the case of CIT v. Mrs. Sandhya P. Naik [2002] 253 ITR 534, the authorized officer cannot keep the search proceedings in operation by passing a restraint order under section 132(3) so as to circumvent the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. Trans-Investments (P.) Ltd. v. CIT [1994] 207 ITR 508 and that of the Hon'ble Supreme Court in the case of ITAT v. Dy. CIT [1996] 218 ITR 275, he has contended that an appeal has to be disposed of by the Tribunal as a whole and not in a piecemeal manner. He has also contended that whenever reference is made by the Hon'ble President to the Special Bench, it is the entire appeal which has to be disposed of by the Bench and not just a particular issue raised therein. Shri G.C. Sharma, on the other hand, has contended that it is a convention followed by the ITAT, which is evident from a number of Special Bench decisions, to decide only a particular question or questions as per the reference made by the Hon'ble President to the Special Bench and not the entire appeal. He has further contended that this convention needs to be followed or otherwise it will give rise to many practical problems in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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