Allahabad High Court
Asstt.Commissioner, Income Tax vs P.N. Sanyal on 9 December, 2013
Bench: Uma Nath Singh, Ritu Raj Awasthi
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
Court No. - 1
Case :- INCOME TAX APPEAL No. - 21 of 2004
Appellant :- Asstt.Commissioner, Income Tax
Respondent :- P.N. Sanyal
Counsel for Appellant :- D.D.Chopra
Counsel for Respondent :- Jaspreet Singh
Hon'ble Uma Nath Singh,J.
Hon'ble Ritu Raj Awasthi,J.
Order (Oral)
We have heard learned counsel for parties and considered the arguments as well as pleadings.
On 28.05.1995, Railway Police recovered an amount of Rs.4,04,500/- from the possession of assessee while he was traveling in a train. That information was passed on to the Income Tax Department on 28.06.1995 itself. Next day on 29.06.1995, the Railway Police sent another intimation to the Income Tax Department along with a copy of FIR and statement of Shri P.N. Sanyal. In the statement, the assessee had submitted that he was acting as a commission agent and the recovered money in his possession was out of that income. Moreover, his statement recorded by the Railway Police contradicted another statement that he had taken money from his friends about whom he had given only a part information. However, he also told that he had not paid any income tax in the year 1994-95. Thus, the Railway Police was not satisfied with the explanation given by the assessee regarding cash amount recovered from his possession.
In this view of the matter, the Director Inspection (Investigation) Income Tax, Kanpur, on 03.07.1995 issued warrant of authorization under Section 132A of the Income Tax Act for requisition of books of account etc. by way of production/search and seizure. The warrant was executed on 23.08.1995 when the amount under assessment was seized by the Department. Resultantly, the proceedings under Section 158BC were initiated on 11.09.1995 which finally culminated in block assessment for the period 01.04.1995 to 23.08.1995 at a total income of Rs.29,02,711/-. Being aggrieved by the block assessment, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT). By the impugned order dated 23.12.2003, the block assessment was quashed by the Tribunal with the observation that the Department will be at liberty to take appropriate proceedings to bring to tax any income in respect of any of the assessment years covered by the block assessment order as per provisions of the law. Against the said order dated 23.12.2003 passed in ITA No.1701/Alld./96 [P.N. Sanyal vs. The ACIT Investigation Circle, Lucknow], the Department has filed this appeal through Assistant Commissioner of Income Tax with following questions of law:
"(a) Whether under the facts and in the circumstances of the case, the ITAT was justified in law in substituting its belief in place of belief formed by the Director of Income Tax (Investigation) for the purpose of search warrant u/s 132 A and thereby holding the search invalid and quashing the assessment order.
(b) Whether seizure of cash by the Railway Police after the respondent failed to furnish any satisfactory reply leading to form opinion that the seized money was unaccounted was not direct and relevant material before Director investigation to form a reasonable belief for the purpose of section 132 A of IT Act and ITAT could not have gone into adequacy of these reasons.
(c)Whether under the facts and in the circumstances of the case, the learned ITAT was in justified in law equating the facts of the instant case with that of the apex Court's judgment in case of Shri Ajit Jain vs. Union of India reported in 260 ITR 80 (S.C.)."
However, upon hearing learned counsel for parties, vide order dated 01.10.2010, a coordinate Division Bench of this Court of which one of us (Hon'ble Ritu Raj Awasthi, J) was a member, formulated only one substantial question of law. The said order containing substantial question of law reads as:
"After hearing the counsel for the parties, the following substantial question of law are framed:
(1)Whether in an appeal preferred against the block assessment made in pursuance of the search conducted by the Income Tax Department, the validity of the search can be gone into by the Income Tax Appellate Tribunal?
The learned counsel for the appellant has also relief upon a judgment in the case of M.B. Lal Vs. Commissioner of Income Tax, 2005, 279 I.T.R. 298 Delhi, wherein similar controversy has been decided.
Mr. Jaspreet Singh, appearing for the respondent prays for and is allowed two weeks time to answer the aforesaid plea.
List this matter after two weeks for further hearing."
Learned counsel for appellant submitted that it is now well settled vide a Five Members Bench of Income Tax Appellate Tribunal, Delhi, in Promain Ltd. v. Deputy Commissioner of Income Tax reported in (2006) 281 ITR (AT) 107 (Del.) (SB) that exercise of power under Section 132 A of the Income Tax Act is an administrative power and not a quasi-judicial power, therefore, it would not fall within the purview of judicial review by the Income Tax Appellate Tribunal. The same view has been upheld by a coordinate Bench of this Court in the case of Commissioner of Income Tax v. Dr. A. K. Bansal (Individual) reported in [2013] 355 ITR 513 (All.). The coordinate Bench while dealing with this aspect has held in paragraphs 22, 23, 24 and 25 as under:
"22. We agree with the reasons given by the Five-Members Bench of the Tribunal in Promain Ltd. v. Deputy Commissioner of Income Tax (supra) that the satisfaction to be reached by the Authority issuing warrant of authorisation is an administrative function. The fact, that the plea has to be entertained by the Authority issuing the warrant only after satisfying itself about the existence of the conditions on which the satisfaction has to be arrived at on the basis of the opinion in their possession and that such satisfaction has to be objective and not subjective, may prompt one to conclude that the power to initiate a search is only a quasi-judicial function. The dividing line after A.K. Kraipak v. Union of India AIR 1970 SC 150 between an administrative power and a quasi-judicial powers is quite thin and is being gradually obliterated. That what was being considered as an administrative power is now being considered as quasi- judicial power. The issue, however, is not of much consequence as there is remedy for an aggrieved person for improper exercise of power to issue such warrant. Whether the power is administrative or quasi-judicial, the duty to act fairly exists, the aggrieved person has a remedy to approach the High Court for any action which is either based on no material or insufficient material or suffers from malafide. The initiation of search by issue of warrant of authorisation is not a subject matter of the assessment. The Assessing Authority cannot go into such questions and consequently the Appellate Authority which has to look into the validity of the assessment order cannot question the validity of the search.
23. The Five-Member Bench of the Tribunal held that the Tribunal cannot adjudicate upon the action of the Director of Investigation/Commissioner of Income Tax under Section 132 (1). It may look into the point, if it was raised before the Assessing Officer regarding the later stages, namely issuance of notice under Section 158BC and preparation of panchnama to satisfy itself that the search was initiated and carried out in case of the person on whom the notice was served. 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 in appeal on the ground that no search was initiated/conducted in the case of the appellant. The Assessing Officer can look into these aspects under Section 148BA unless the case is covered under Section 158BD of the Act.
24. The Five-Members Bench further held that the Tribunal can also look into the findings recorded by the Assessing Officer on the examination of the seized material, and validity of the order under Section 158BB which 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 the search and this evidence will include the statements recorded in the course of search. The Tribunal can also look into the consequence of the search namely the completion of assessment for the purpose of computing the period of limitation under Section 158BE. It may also examine as to when the last of the authorizations was executed for the purpose of calculating the limitation. The Tribunal may also look into the findings of the Assessing Officer on the action of the search party namely identification, preparation of inventory, seizure etc. The Assessing Officer or the Appellate Authority, however, cannot look into the validity of the search by calling for the warrant of authorization and examining the records authorising search for the purpose of an enquiry whether the search was valid.
25. We entirely agree with the reasoning given in Promain Ltd. v. Deputy Commissioner of Income Tax (supra), Deputy Commissioner of Income Tax as well as the decisions of Punjab & Haryana High Court, Madhya Pradesh High Court, Rajasthan High Court, and Delhi High Court which have on more than one occasion held that in hearing an appeal against the order of the assessment, the Tribunal cannot go into the question of validity or otherwise of any decisions for conducting search and seizure. This decision can be challenged in an independent proceedings where the question of validity of order may be gone into.
A similar view has also been taken by a Division Bench of Delhi High Court in the case of M.B. Lal v. Commissioner of Income Tax reported in [(2005) 279 ITR 298 (Delhi)]. The Court has discussed the power under Section 132 of the Income Tax Act as under:
"The Tribunal has, as noticed earlier, answered both these questions in favour of the Revenue. It has, relying upon the decision of a Special Bench of the Tribunal at Bangalore in C. Ramaiah Reddy Vs. Deputy Commissioner of Income Tax,MANU/IL/5005/2003, held that the validity of the action taken under section 132 of the Act could not be examined in the appeal filed before it. We see no reason to take a different view. Any appeal before the Tribunal against the block assessment made under section 158BC does not take within its fold questions touching the validity of the search conducted under section 132 of the Act. Whether or not the conditions precedent for a search stipulated under clauses (a), (b) and (c) of section 132 of the Act were satisfied in a given case falls beyond the scope of assessment proceedings instituted under section 158BC of the Act or any statutory appeal preferred against the order made under that provision. If the petitioner was keen to test the validity of the said proceedings, his remedy lay in a writ petition under article 226 of the Constitution. That is precisely what the petitioner did when he challenged the said proceedings, including the authorisation issued for the same before this court in a writ petition that was dismissed by this court by order dated 6th May, 2002. It is true that the writ petition was dismissed on the ground of delay and laches only without touching the grounds of challenge urged by the petitioner-appellant, but it is equally true that directions regarding completion of the assessment proceedings expeditiously were issued by this court to the Assessing Officer in the following words:
"In the notices dated 22.01.2002 the respondents have asked the petitioners to prepare a true and correct return of the total income including the undisclosed income, under the provisions of section 158BC of the Income-tax Act, 1961. Mr. Sharma, the learned senior counsel appearing for the petitioners submitted that the relevant information has already been submitted. In case some information remains to be submitted, the same will be submitted within two weeks from today. The concerned authorities are directed to carry out the assessment proceedings as expeditiously as possible. No further directions are necessary."
On the other hand, Shri Jaspreet Singh, learned counsel for respondent assessee refers to a Division Bench judgment of Rajasthan High Court in the case of Commissioner of Income Tax v. Smt. Chitra Devi Soni reported in (2009) 313 ITR 174, to contend that the special reasons recorded under Section 132 A of the Income Tax Act before ordering issuance of warrant of search and seizure become justiceable once the assessment order is called in question before the appellate authority.
On due consideration of rival submissions, we find that the exercise of power under Section 132 and 132 A of the Income Tax Act is essentially an exercise in administrative domain as settled by a Five Members Bench of Income Tax Appellate Tribunal in Promain Ltd. v. Deputy Commissioner of Income Tax reported in (2006) 281 ITR (AT) 107 (Del.) (SB) which has been upheld by a Division Bench of this Court in the case of Commissioner of Income Tax v. Dr. A. K. Bansal (Individual) reported in [2013] 355 ITR 513 (All.). That view has also been affirmed by Delhi High Court in the case of M.B. Lal v. Commissioner of Income Tax reported in [(2005) 279 ITR 298 (Delhi)]. Moreover, in the judgment of Rajasthan High Court in the case of Commissioner of Income Tax v. Smt. Chitra Devi Soni reported in (2009) 313 ITR 174, we notice that neither the judgment of Delhi High Court nor the judgment of Five Members Bench of Income Tax Appellate Tribunal, Delhi, has been considered.
Thus, placing reliance upon the judgment of Division Bench of this Court which has upheld the judgment of Five Members Bench of Income Tax Appellate Tribunal, Delhi, we set aside the impugned judgment and order dated 23.12.2003 and remand the case for a fresh consideration which shall confine only to the question of block assessment. That issue was not considered and decided by the tribunal and the impugned order has been passed only in respect of search and seizure.
This Income Tax Appeal is thus disposed of in the premises as set out herein above.
Order Date :- 9.12.2013
A. Katiyar
