1. This is a 1st appeal by the assessee under section 253(1)(b) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act' for brief), against the order dated 30th of September, 1997 rendered by the Ld.
Assistant Commissioner of Income-tax, Central, Allahabad, under section 158-BC/143(3) of the Act for the block period 1-4-86 to 14-9-96.
2. The first ground which has been taken by the assessee and which is in the nature of a serious preliminary ground challenging the very jurisdiction of the assessing officer in making the assessment is proposed to be disposed of firstly, runs as under : "Because the search operation cannot be said to have been validly initiated on 14-9-96 in the case of the appellant, as there existed no material (prior to the authorisation) which could lead to the formation of belief that his case fell in any of the 3 categories mentioned in Section 132(1) of the Act and consequently the block assessment order passed in pursuance of such proceedings is wholly illegal and without jurisdiction." 2.1 It is this preliminary ground alone which as also submitted by both sides is proposed to be disposed of by this order first as it would determine the Tribunal's jurisdiction to call for the records relating to the reasons authorising the search on which shall depend the manner in which the hearing of the appeal on the remaining grounds shall proceed.
3. Elaborate submissions in respect of this ground were made by Shri S.K. Garg, F.C.A. and Shri Bharatji Agarwal, Senior Standing Counsel.
4. Assessee before us is an individual, engaged in the medical profession, inter alia, running a premier private hospital by the name "Jeevan Jyoti" in the holy town of Allahabad. He (and his establishments) were subjected to search under section 132(1) of the Act on 14-9-1996. As per the department, during this search, cash jewellery and other valuables, apart from the stock of medicines and various other documents were found by the search party. Block assessment was completed in respect of the aforesaid period under the provisions of Chapter XIV-B of the Act, which is in challenge before us.
5. In support of the preliminary objection raised, Shri S. K. Garg, Ld.
counsel for the assessee made manifold submissions. Making a preface, he submitted that Chapter XIV-B of the Act, which was introduced w.e.f.
1-7-1995 brought about significant changes in the assessments relating to search. While sections 132 and 132A still survived, the necessity of passing any order under sub-section (5) and consequently appeal before the CIT under sub-section 12 of Section 132 of the Act was dispensed with. In the submission of Shri Garg, a block assessment had to be completed strictly in accordance with the provisions of Chapter XIV-B, which provided special procedure for assessment of search cases. It was a complete and exhaustive code by itself. Elaborating, it was contended that it required taking of various steps. The 1st being a search should have been conducted under section 132 or books of accounts etc., requisitioned under section 132A of the Act. The second, the Assessing Officer to serve a notice to the assessee subjected to search requiring him to furnish the details of his total income including the undisclosed income for the block period, within the specified period of 15 days. The third, determination of the undisclosed income of the block period as laid down in section 158BB of the Act, the provisions of sections 142(2), 143(3) and 144 so far as applicable, to apply. It was only then that finally the Assessing Officer would pass an order of 'assessment' on the basis of the determination by him of the undisclosed income for the block period with the previous approval of the Commissioner of Income-tax, as provided by section 158BG, within the period prescribed by section 158BE of the Act.
6. Shri Garg submitted that the term "assessment" used by the Legislature conveyed something special and was not equivalent to an order in the general sense. It had various components and stages. The sine qua non for the completion of the assessment, to state succinctly although being slightly repetitive were, (a) a search conducted under the provisions of section 132, (b) requisite notice issued to the assessee thereafter, (c) the determination of undisclosed income made by the prescribed Assessing Officer within the stipulated period, finally to culminate in an assessment order with the previous approval of the Commissioner. Shri Garg strenuously submitted that if any of these links was missing or legally deficient, it would vitally affect the assessment order making it bad and ineffective in law. It is on the analogy of this stand that he submitted that the assessee was legally entitled to challenge all these stages which went to form and complete the assessment order. Elucidating further and with reference to the first step, he submitted that an assessee was legally vested with the right to challenge that either no search had taken place respecting him or that the conditions for conducting search did not exist. He thereafter invited our attention to the relevant portion of section 132(1) of the Act submitting that the search could be conducted only in consequence of an information in the possession of one of the officers specified by this provision who should have 'reason to believe' that either of the 3 conditions enumerated in clauses (a), (b) or (c) of sub-section (1) of section 132 existed. He submitted that none of these conditions existed in the assessee's case. In this connection it was contended by him that the reason for saying so was not in any vacuum but founded on concrete facts. In so far as clause (a) of section 132(1) was concerned, the assessee was never issued any summons or notice for producing any document etc. and as such there could not have been any omission or failure on his part in doing so. About clause (b) of the same provision, Shri Garg submitted that since no summons or notice had been issued, there could not have been a situation, occasion or provocation justifying on facts or in law the recording of a conclusion by the authorising officer to say that if such summons or notice was issued, it would not be complied with. In saying so, the assessee was strengthened by the fact that he had been is returns of income regularly and assessed thereon excepting for the period 1-4-96 to 14-9-96 which was part of the previous year ending 31-3-97, return for which became due towards the middle of the calendar year 1997 this is much after the search. Left with clause (c) of section 132(1) of the Act alone, Shri Garg contended that since the assessee was not possessed of any money, bullion, jewellery or other valuable article or thing which could represent any undisclosed income or property, it was impossible that the authorised officer could have "reason to believe" to act for the purposes of authorising a search under section 132(1) of the Act. He submitted that the assessee's case was not on a thin ice and vehemently contended that he should be provided with the material, namely, the satisfaction note made, on the basis of which, the authorising officer acted under sub-section (1) of section 132 in authorising the search. Shri Garg submitted that it is not as if the assessee wake up only before the 'Appellate Tribunal'. This material was demanded by him from the very beginning. In this regard, he firstly made reference to a petition addressed by the assessee on the 1-8-1997 to the Assessing Officer, copy available at pages 27 to 31 of his paper book wherein at internal page 2 it was categorically submitted that "there existed no material (prior to the authorisation) which could lead to the formation of belief that the case of the assessee fell in the category of ....". Reference was thereafter made to page 36 of the Paper Book, being another petition dated 8-8-1997 to the Assessing Officer wherein the first paragraph itself the validity of search operations was challenged. Lastly, reference was made to page 183, vet another petition dated 15-9-1997, addressed to the Assessing Officer where similar challenge was made stating that the assessee had been fully participating in the block assessment proceedings and had filed his return and would need a copy of the 'satisfaction note' authorising the search operation under section 132(1) of the Act.
7. Shri Garg contended that both on factual basis and in law the assessee was fully entitled to know the reasons which actuated the competent authority to form "reason to believe" for authorising the search. In this connection he placed reliance on a decision of the jurisdictional High Court in the case of K. M. Bansal v. CIT [1992] 195 ITR 247/[1991] 59 Taxman 463 (All.) and submitted that although this decision related to the provisions of section 148 of the Act, yet its analogy applied on all fours to the facts of the present case. As per this decision, to eliminate the possibility of an arbitrary action, an officer who is required to record reasons was equally bound to give reasons, which inter alia could be looked into by a superior authority to satisfy himself that action had not been initiated arbitrarily. It was, however, open to him to withhold the name of informants and/or identify of sources if it was thought necessary to protect the sources and informants as per which after the assessee had participated in the proceedings if asked for, the reasons for forming the belief should be disclosed to him. Shri Garg also submitted that despite having taken objection from the beginning about the non-existence of the 'reason to believe' with the competent officer authorising search and furnishing of the 'satisfaction note' recorded by him, the Assessing Officer developed a cold feet, maintained a stoic silence and even did not consider it necessary to devote any time to deal with this aspect of the matter having far reaching consequences.
8. On the question as to whether the existence or non-existence of reasons or material for the formation of the requisite belief of the competent authority being challenged before the Appellate Tribunal, Shri Garg submitted that once specific right to appeal had been granted by the Statute to the assessee under section 253(1)(b) of the act, as per which the block assessment framed could be challenged, any of the stages which went to form the assessment one of which was that a search must have been conducted under the provisions of section 132 of the Act, the Tribunal had the legal competence, rather a duty (if called upon) to adjudicate the controversy raised by the assessee. In support of this, he made various submissions. He firstly drew an analogy from the provisions of section 246(1)(b) of the Act which, inter alia, conferred power on the first appellate authority to hear an appeal against an order of re-assessment under section 147 of the Act and under which every aspect of the matter including the existence or the quality of the reasons recorded for the re-opening could be challenged by an assessee. In this connection reliance was placed on two decisions in Sheo Nath Singh v. AAC [1971] 82 ITR 147 (SC) and Chhugamal Rajpal v. S. P. Chaliha 9. On a query raised by the Bench that while there was no dispute that the existence of "reason to believe" as envisaged by section 132(1) of the Act was justiciable, the proper forum from times immemorial has been a petition under Article 226 of the Constitution of India and not the first or second appeal provided under the Income-tax Act, Shri Garg submitted that this position held good only till before chapter XIV-B was enacted in his submission in the earlier provisions relating to the completion of assessments whether it be section 143(3) or 144 of the Act, the Legislature has not drawn any distinction for the completion of assessments in search cases and in cases otherwise, while Chapter XIVB has specifically provided a procedure for the completion of an assessment, but only as a result of search under section 132. Laying special stress to the words "where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person" appearing in section 158BC of the Act, Shri Garg submitted that they acted as a preface for the Assessing Officer to act in taking the second step of issuing notice and proceed further to be able to complete an assessment. He, therefore, submitted that the conduct of a valid search under section 132 of the Act was a condition precedent for the Assessing Officer to assume jurisdiction to take subsequent steps to complete the assessment in accordance with the special procedure prescribed. Shri Garg further submitted that this being so there was absolutely no reason as to why the assessee could not challenge the validity of the search before the Appellate Tribunal during first appeal. In the same breath he added that there was no reason as to why the Tribunal being a regular court of First appeal for Block assessments could not adjudicate such a controversy, if raised. In his submission, if done so by the assessee, it was a duty cast on the Tribunal to decide the issue. Shri Garg also submitted that the Appellate Tribunal was the most proper legal forum where the assessee in view of the statutory change ref erred to supra could legally agitate this issue. He also submitted that there was no point to drive an assessee to file a petition for the redressal of this vital and fundamental grievance before the High Court under Article 226 of the Constitution and stall the hearing of the appeal because the issue went to the root of the matter and affected the disposal of the appeal on merits. Shri Garg further submitted that assuming but not admitting even if an assessee was forced to file a petition under Article 226 of the Constitution of India, it is liable to be thrown on the ground that he had an equally efficacious remedy, in taking such a plea before the Appellate Tribunal. In this connection reliance was placed on the ratio of a jurisdictional High Court's decision in Ram Mohan Rastogi v. Union of India [1987] 163 ITR 17 where the court in the wake of a much weaker situation of law held that in view of the remedy available to an assessee under section 132(ii) writ would not lie under extraordinary provisions of Article 226 of the Constitution of India before the High Court. No doubt thereunder 'satisfactory note' recorded by the authorising officer could not have been demanded, the counsel submitted, but added that with the sea change the scope had widened in the form of first appeal to the Appellate Tribunal by Chapter XIV-B the decision assumed greater significance to canvass the assessee's right to make complete and meaningful challenge in the appeal before the Tribunal.
10. The Ld. counsel for the assessee also submitted that even for argument sake if the Tribunal were not found to be specifically vested with the right of hearing, such a plea under the provisions of Chapter XIV-B read with section 254(1)(b) of the Act it must be considered that a right to appeal should be construed "reasonably". If done so, it would also go to confer such power in the Appellate Tribunal. In support of this, reliance was placed by him on a decision of the Apex Court in the case of CIT v. Ashoka Engg. Co. [1992] 194 ITR 645. Shri Garg also contended that it is always not necessary to provide an appeal against all the aspects of a matter. Exemplifying, he contended that if the special procedure for the completion of a block assessment provided for the issue of a notice, the factum of such notice or its contents, to say that it did not confirm to the legal requirements, could be challenged during appeal although no appeal was specifically provided on these individual points. He also submitted that 'audi alteram partem' rule which had since assumed the character of a fundamental right also required a person should not be condemned unheard and there was no reason that on this count also the assessee should not be provided with the satisfaction note recorded by the competent authority authorising the search, which seriously affected the life and property of the concerned citizen. On this aspect, reliance was placed by Shri Garg on the celebrated decision of the Summit Court in the case of Maneka Gandhi v. Union of India AIR 597. Shri Garg also submitted that an assessment could not be equated with a normal order. He referred to the definition of the term 'assessment' as given in section 2(8) of the Act and placed reliance on a decision of the High Court of Punjab in Hazari Mal Kuthiala v. ITO [1956] 30 ITR 500 and another decision of the Apex Court in A. N.Lakshman Shenoy v. ITO [1958] 34 ITR 275. Shri Garg also submitted that the mere fact that the search was authorised by an officer who was much superior to the Assessing Officer in the hierarchy of the Income-tax authorities did not bind the hands of the Assessing Officer in any manner in not questioning the existence of reasons to believe for authorising it. In this connection reliance was placed on two decisions in Sheo Nath Singh's case (supra) and Chhugamal Rajpal's case (supra).
He also contended that if any contrary view was taken, it will render the provisions relating to appeal before the Tribunal otiose. Shri Garg also submitted that there was absolutely no reason as to why an assessee would be compelled to become selective in making challenge to assessment. In the last, it was submitted that even if there was a slight ambiguity/doubt about the competence of the Tribunal to adjudicate such a controversy, as held by the High Court of Bombay in Oudh Sugar Mills Ltd. v. CIT [1996] 222 ITR 726, the provision in question should be interpreted in favour of the subject 225 ITR 638 (sic) and CIT v. Poddar Cements (P.) Ltd. [1997] 226 ITR 625 (SC). Shri Garg also contended that assuming, though not admitting if the power canvassed to be possessed by the Tribunal did not expressly exist, the doctrine of implied authority be invoked and the Assessing Officer who was vested with the jurisdiction to pass an assessment order should be held to have the implied power of going into all aspects of the assessment including validity of search, a fact mentioned in the panchnama which even as per the Ld. Senior Standing Counsel was made available to the designated Assessing Officer to convey and inform him with the requisite knowledge about the search. In this connection reliance was placed on the following case law : 4. Nathu Ram Welji Bhai Vyas v. Mrs. Luxmibai Lunkaranji Chandak [1983] 139 ITR, 948 (Bom.) and 5. Prem Prakash Tripathi v. CIT [1994] 208 ITR 461/75 Taxman 107 (All.).
11. Strongly opposing, Shri Bharatji Agarwal, Learned senior standing counsel contended that the question about the validity of search was in point of time prior to the initiation of assessment proceedings and had nothing to do with the formation of the assessment order. Referring to the provisions of section 158BC, Shri Agarwal submitted that various steps for the completion of a bloc assessment did not visualise anything relating to search, which term had been used only to show a matter of fact to convey that the procedure prescribed by this section shall be followed in a case where a search had been conducted under section 132 of the Act. The search, Shri Agarwal submitted, was a pre-assessment stage. Elucidating, the Ld. Senior Standing Counsel submitted that the appeal to the Appellate Tribunal was provided only against an assessment order framed under the provisions of Chapter XIV-B and as pointed out by him since the search was not a part of the assessment, the Tribunal did not have the jurisdiction to adjudicate any controversy or objection raised by an assessee in respect thereof.
According to him, the position that was obtainable in respect of such a challenge before the codification of chapter XIV-B still held good, i.e., an assessee if he so choose could file a petition under Article 226 of the Constitution of India to assail the search itself. Further that the provisions relating to search remained in tact excepting that the rendition of an order under section 132(5) or its appeal under sec.
132(12) were dispensed with.
12. In reply to the contention of the assessee that even where a matter had reached the CBDT, an Assessing Officer could go into it, Shri Agarwal submitted that this pertained to the reopening of an assessment where the reasons had to be recorded by the Assessing Officer but were to be submitted to the C.B.D.T. as the reopening of the assessment was for a very early period. This approval was considered necessity by the Legislature for a variety of reasons including administrative exigency.
The Appellate Authority could go into such reasons, its legal quality and validity mainly because the reasons were recorded by none else than the Assessing Officer himself. This too was permissible as the reasons so recorded formed the basis for reopening and making the fresh assessment by the Assessing Officer.
13. Shri Agarwal also submitted that the question of validity of search was outside the purview of the Appellate Court, i.e., the Appellate Tribunal in this case because firstly section 253(1)(b) provided an appeal only against the assessment order and secondly the assessment order which was completed under the provisions of Chapter XIV-B of the Act was only procedural in nature. From this analogy it emerged that if the Assessing Officer could not have gone into the validity of the search, the Appellate Tribunal was in no better legal position to do so.
14. To a query put by the Bench that if the jurisdiction of the Assessing Officer started only after the search why section 158BC started with the words "where any search has been conducted under section 132" and not with the word "after", instead of the word "where'. To this, Shri Agarwal submitted that while it could be said that if the word "after" had been used it might have been better, even when the word "where" had been used by the Legislature it did not make any difference whatsoever as in both the situations the happening of event of search had already become a fait accompli. Similarly to one another query that if an assessee could challenge that no assessment could be made on him as no search was conducted in relation to him, Shri Agarwal submitted that a notice as envisaged by clause (a) of section 158BC had to be issued only to "such person" who had been subjected to search and that being so by this statutory provision itself an assessee could show that no search had been conducted on him and, therefore, he was not liable to suffer the consequences of such notice.
15. To the non-adjudication of the issue by the Assessing Officer despite being raked up several times by the assessee, Shri Agarwal submitted that it should be impliedly taken to have been rejected by the Assessing Officer particularly in view of the fact that it was abundantly clear that the Assessing Officer had no jurisdiction to decide this question. The Ld. Counsel gave an analogy. According to him, suppose the constitutional vires of any of the provisions of the Income-tax Act had been challenged by the assessee before the Assessing Officer while there is no doubt that it would be better if he had stated that being the creation of a statute he had no legal authority to consider its vires but even in a situation where he had kept quite, his reticence would not make even the slightest difference because it is too well known that such a challenge could not be made before any statutory authority. He, therefore, submitted that in this case also while it would have been certainly better if the Assessing Officer had devoted some time to discuss this aspect of the matter, yet not doing so will not at all effect the quality of the assessment order. Shri Agarwal also did not agree with the proposition of the invocation and applicability of the 'doctrine of implied authority', canvassed by Shri Garg, Shri Agarwal with reference to certain authorities also contended that no words could be added in the language used by a statute and as such in the opening sentence of section 158BC of the Act in place of "search", the phrase "valid search" could not be substituted.
Elucidating, it was contended by him that even the use of material found as a result of illegal search was permissible. With a view to gather the intention of the statute, he thereafter referred to memorandum explaining the provisions of Chapter XIV-B, in the Finance Bill, 1995 found in 212 ITR 345.(St). He also submitted that once the intention of the statute was clear it had to be accepted.
16. In reply, Shri Garg reiterating his submissions contended that he also agreed with the learned Senior Standing Counsel that once the intention of the Legislature was clear, it had to be implemented but it was impermissible to say that the term "search" used by the Legislature in section 158BC would not mean a valid search and could convey even an illegal search, notwithstanding the fact that the material found even during an illegal search is liable to be used but which was altogether a different aspect of the matter.
16.1 We have given our most anxious consideration to this ticklish and vexed issue, which we are fully conscious, has far and wide ramifications, after going through the entire gamut of the relevant material to which our attention was invited and weighty and deft submissions made by both the sides.
17. To begin with, there is no denial to the legislative change brought about by the enactment of Chapter XIV-B of the Act with effect from the 1-7-1995 to provide for a complete and exhaustive procedure for dealing with the assessment of search cases. The title of this chapter reads as "special procedure for assessment of search cases." Exhaustive, we say, as it appears to take care in detail of all situations necessary for the completion of this special type of assessment, subject however to the reference to certain other provisions of the Act, such as sections 142(2), 143(3) 144 and last but not the least section 132. To this extent, as per the rules of reading and interpreting laws, these sections get bodily lifted and stood incorporated in this special chapter.
18. An important change brought about by the aforesaid legislative amendment is the dispensing with of the assessee's right to make objections in respect of the seized articles etc. under section 132(5) and consequently the appeal provision before the CIT(A) envisaged by sub-section (11) of section 132 of the Act. Another one to point out here is the providing of a regular first appeal before the "Appellate Tribunal" in section 253(1)(b) of the Act, eliminating the intermediately stage of appeal before the CIT(A).
19. Now taking the bull by its hems, let us bring here section 158BC, the opening words of which perhaps provide the real key to the controversy. To repeat, they read "where any search has been conducted under section 132" etc. Dissecting these words, one perhaps cannot run away from saving that the subsequent events/words appearing in the aforesaid provision would come into play or become operative only if the situation contemplated, namely, where a search and that too under section 132 of the act has been conducted, the assessing Officer would, subject to other stipulations in the provision, complete an assessment.
The short controversy which, thus, survives is as to whether the assumption of jurisdiction by the Assessing Officer to complete the assessment is subject to an information simplicitor, from any quarter, however high it may be, that the search was conducted or his satisfaction more particularly when challenged, that a search which was conducted was not of the type as was contemplated by section 132 of the Act. The in Formation of the search as has been fairly submitted by the Ld. Senior Standing counsel is conveyed to the assessee through the relevant Panchnama. Let us examine for a minute what this document is.
A copy thereof is found at pages 37-38 of the second paper book filed by the assessee. Apart from various columns it states (A) warrant in the case of ... (B) warrant to search .... composition of search party, name and complete address of Panchas, the fact of showing of the warrant of authorisation to the assessee and certification to the effect that a search of the mentioned place was carried out and the list of the valuables and documents etc. found. The document is signed by the A.D.I. (Investigation) apart from other persons. It appears rightly urged on behalf of the assessee that once a copy of the panchnama was provided to the assessee, he had a legal right to question and challenge all aspects incorporated therein including the narration that warrant of authorisation (in this case dated 10th September, 1996) was issued under section 132 of the I.T. Act, 1961 and corresponding provisions of the Wealth-tax Act. The mention of the issue of this warrant under section 132 of the I.T. Act, 1961, in our opinion, further goes a long way in upholding the submission made on behalf of the assessee that such warrant should conform to the requirements of section 132 of the Act, as per which, to repeat, a search could have been directed only when one of the three conditions mentioned by clause (a), (b) or clause (c) of sub-section (1) of section 132 existed. The submission made by the Ld. Senior Standing counsel particularly with reference to the decision of the Bangalore Bench in the case of Micro Land Ltd. v. Asstt. CIT [1997] 67 ITD 446 (copy filed) that the Bench had directed the department to place warrant for its perusal only on an objection taken that there had existed no search warrant and that it was for a very limited purpose, in our opinion, does not help the department much, as the decision in any case is a pointer to the acceptance of the assessee's stand that the Appellate Tribunal could go behind the search. If so, we are unable to appreciate as to why, in the event of a challenge by the assessee, the Assessing Officer could not call for the satisfaction note to see that it recorded and conformed to the requirements of sub-section (1) of section 132 of the Act. In saying so we are fully aware and conscious that the rank of the officer authorising a search is mostly fairly higher in the hierarchy than the Assessing Officer but we should not ignore the clear dichotomy of the executive status of a man vis-a-vis, the judicial/quasi-judicial powers, if any, with which he may be vested. In this connection, reference could usefully be made to a few judicial decisions on which reliance was placed on behalf of the assessee. The one is a decision of the High Court of Kerala in the case of C. S. Kesavan v. Stale of Kerala [1989] 176 ITR 375, wherein the Hon'ble Court observed at page 379 as under : "Before parting with the case I would like to impress upon the Government the illegal and arbitrary step taken by it in initiating disciplinary action against an officer in regard to the order passed by him in the discharge of his judicial function. Officers entrusted with such duties must be given freedom to discharge their judicial duties in accordance with their judicial discretion. They should not be placed under the threat of disciplinary action for the judicial orders passed by them." 20. Reference could then be usefully made to a decision of the Summit Court in the case of Orient Papers Ltd. v. Union of India AIR 1969 SC 49 (copy placed) at pages 1-5 of the assessee's compilation of judgments etc.) where their Lordships of the Apex Court observed as under : "8. If the power exercised by the Collector was a quasi-judicial power - as we hold it to be - that power cannot be controlled by the directions issued by the Board. No authority however high placed can control the decision of a judicial or a quasi-judicial authority.
That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the appellate authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the appellate authorities are judges in their own cause; yet when they are called upon to decide disputes arising under the Act they must act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others. Then it is a misnomer to call their orders as their judgments; they would essentially be the judgments of the authority that gave the directions and which authority had given those judgments without hearing the aggrieved party.
11. It is regrettable that when administrative officers are entrusted with quasi-judicial functions, often times they are unable to keep aside administrative considerations while discharging quasi-judicial functions. This Court as well as the High Courts had repeatedly tried to impress upon them that their two functions are separate; while functioning as quasi-judicial officers they should not allow their judgments to be influenced by administrative considerations or by the instructions or directions given by their superiors." Reference could also be made to another decision of the Apex Court in the case of Sirpur Paper Mills Ltd. v. CWT [1970] 77 ITR 6 from where the following passage is reproduced for guidance.
"The power of revision conferred on the Commissioner by section 25 of the Wealth-tax Act, 1957, is not administrative, it is quasi-judicial.
In the exercise of that power the Commissioner must bring to bear an unbiased mind, consider impartially the objections raised by the aggrieved partly, and decide the dispute according to procedure consistent with principles of natural justice : he cannot permit his judgment to be influenced by, matters not disclosed to the assessee, nor by dictation of another authority.
The orders, instructions and directions of the Central Board contemplated by section 13 of the Wealth-tax Act, 1957, may control the exercise of the power of the officers of the department in matters administrative but not quasi-judicial. The proviso to the section does not imply that the Board may give any directions or instructions to the Wealth-tax Officer or to the Commissioner in the exercise of his quasi-judicial functions." 21. If we have rightly read these learned judgments, it appears to us that while authorising the search under section 132 of the Act is an administrative Act which certainly could not be examined by any authority lower in the administrative ladder. However, no sooner such information is passed on to the Assessing Officer in the process of the completion of an assessment through the Panchnama, his capacity rolls from administrative to judicial/quasi-judicial functions, which he is called upon to carry out strictly in terms of the mandate of the relevant provisions of law and as held so by umpteen number of decisions of various High Courts and the Apex Court. This being so, we find it totally devoid of force to agree to a position where the Assessing Officer in the exercise of his judicial/quasi-judicial functions is loaded to treat the contents of the Panchnama/factum of search as sacrosanct/gospel's truth debarring him from examining the existence of the requisite conditions/validity etc. much more so when they are in serious challenge by the assessee. We also have no hesitation in concurring with the learned counsel for the assessee that the power to call for discovery and inspection, compelling the production of books of account and other documents etc. are fully vested in the Assessing Officer by virtue of clauses (a) to (d) of sub-section (1) of section 131 of the Act. Incidentally such discovery and inspection etc. could be made by the Assessing Officer "for the purposes of this Act". This term, as submitted by the learned counsel for the assessee was interpreted to mean as "for the purpose of assessment" in the case of ....... in New Central Jute Mills Co. Ltd. v. Dwijendralal Brahmachari [1973] 90 ITR 467, a decision of a Single Judge of the Calcutta High Court, affirmed by a Division Bench of that Court as in 112 ITR 568. This being so, the Assessing Officer fully appears to be equipped in law to inspect the documents connected with the search, no matter they emanate from authorities which were administratively head and shoulder above him.
22. We also find sufficient force in the submission made by Shri Garg that even it for argument's sake one could say that the Assessing Officer and consequently the Appellate Tribunal were not possessed of the express authority to call for the "satisfaction note" etc. to satisfy themselves about the existence of the grounds leading to the grant of authority by the authorising officer to search an assessee, and issue a search warrant, "doctrine of implied authority" be invoked to hold so. We say so as the Assessing Officer who is vested with the legal jurisdiction to pass an assessment order must be held to have the implied power of going into all aspects of the assessment, including validity of search, a fact mentioned in the Panchnama, which document even as per the Ld. Senior Standing counsel was made available to the Assessing Officer for conveying and informing him of the requisite knowledge about the search. In saying so, we are supported by various case laws. The first reference could be made to a decision of the Apex Court in the case of Smt. Shambhu Narain Singh (supra) where their Lordships of the Apex Court observed as under at page 142 : "It is well recognised that where an act confers a jurisdiction, it impliedly also grants the power of doing all such acts or employing such means as are essentially necessary to its execution." We are aware that the Hon'ble Judges also gave a caution for the exercise of such authority in the following manner : "But before implying the existence of such a power the court must be satisfied that the existence of that power is absolutely essential for the discharge of the power conferred and not merely that it is convenient to have such a power." but would say that to read such a power with the Assessing Officer and consequently to the 'Appellate Tribunal' is not a matter of convenience but is thought and considered to be essential for the formation of an assessment order. Further, as observed by us, the Assessing Officer's jurisdiction in law starts only in a case where a search has been conducted under section 132 of the Act, and the conduct of a search itself is under serious challenge by a citizen afortiori there is no reason as to why he should be driven to multiple proceedings and told that in spite of the sea change in the procedure relating to the search cases, inter alia, providing for a regular appeal before the Appellate Tribunal, he should go to the High Court and file a petition under section 226 of the Constitution of India. We also visualise and see an avoidable delay in such an eventuality inasmuch as suppose an assessee is told like this, can he not submit before the Assessing Officer or the Appellate Tribunal that "look here, sir, since I seriously challenge about the existence of any legal grounds or justify the authorising of a search in my premises, I want to file or have filed a petition under Article 226 of the Constitution of India and till such time a decision on such petition comes, the Assessing Officer or the Appellate Tribunal, as the case may be, must wait because there was no point in finalising the assessment or the appeal, as the case may be, as if I (the assessee) succeed before the High Court, an altogether different procedure would have to be adopted rendering the assessment or the Appellate proceedings, as the case may be, almost meaningless and infructuous." We, therefore, say that by invoking the doctrine of implied authority this power has to be read to exist with the Assessing Officer.
23. Reliance could then be placed on another decision of the Summit Court in the case of National Tobacco Co. (supra). Their Lordships, the Supreme Court in this case observed as under : "It is well established rule of Construction that a power to do something essential for the proper and effectual performance of the work which a Statute has in contemplation may be implied." (para 30).
"The rule of Construction that where a mode of performing a duty is laid down by law, it must be performed in that mode or not at all is subservient to the basic principle that courts must endeavour to ascertain the legislative intent and purpose and then adopt a rule of construction which effectuates rather than one that may defeat these. Moreover, the rule of prohibition by necessity implication could be applied only where specified procedure is laid down for the performance of a duty." (para 31) In yet another case, considered to be landmark judgment, their Lordships of the Supreme Court in M. K. Mohammed Kunhi's case (supper) observed as under : "... The argument advanced on behalf of the appellant before us that in the absence of any express provisions in sections 254 and 255 of the Act relating to stay of recovery during the pendency of an appeal, it must be held that no such power can be exercised by the Tribunal, suffers from a fundamental infirmity inasmuch as it assumes and proceeds on the premise that the statute confers such a power on the Income-tax Officer who can give the necessary relief to an assessee. The right of appeal is a substantive right and the questions of fact and law are at large and are open to review by the Appellate Tribunal. Indeed, the Tribunal has been given very wide powers under section 254(1), for it may pass such orders as it thinks fit after giving full hearing to both the parties to the appeal. If the Income-tax Officer and the Appellate Assistant Commissioner have made assessments or imposed penalties raising very large demands and if the Appellate Tribunal is entirely helpless in the matter of stay of recovery, the entire purpose of the appeal can be defeated if ultimately the orders of the departmental authorities are set aside.
It is difficult to conceive that the Legislature should have left the entire matter to the administrative authorities to make such orders as they choose to pass in exercise of unfettered discretion.
The assessee, as has been pointed out before, has no right to even move an application when an appeal is pending before the Appellate Tribunal under section 220(6) and it is only at the earlier stage of appeal before the Appellate Assistant Commissioner that the Statute provides for such a matter being dealt with by the Income-tax Officer. It is a firmly established rule that an express grant of statutory power carries with it by necessary implication the authority to use all reasonable means to make such grant effective (Sutherland's Statutory Construction, third edition, articles 5401 and 5402). The powers which have been conferred by section 254 on the Appellate Tribunal with widest possible amplitude must carry with them by necessary implication all powers and duties incidental and necessary to make the exercise of those powers fully, effective.
In Doma's Civil Law (Cushing's edition), Volume 1, at page 88, it has been stated : 'It is the duty of the judges to apply the laws, not only to what appears to be regulated by their express dispositions, but to all the cases where a just application of them may be made, and which appear to be comprehended either within the consequences that may be gathered from it.
Maxwell on Interpretation of Statutes, eleventh edition, contains a statement at page 350 that "where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution. Cui jurisdictio data est, ea quoque concessa esse videntur, sine quibus jurisdictio explicari non potuit." An instance is given based on ex parte Martin that "where an inferior court is empowered to grant an injunction, the power of punishing disobedience to it by commitment is impliedly conveyed by the enactment, for the power would be useless if it could not be enforced.'" 24. Deriving strength from the legal principles enunciated by the Apex Court in those judgments, we are of the view that the Assessing Officer should be read to possess an implied power in a search case to go into the various stages which led to an administrative decision, authorising a search and the "issuing of an authorisation warrant." Even at the cost of repetition it may be stated that the fact that the rank of the authorising officer was far superior to that of the Assessing Officer, should not either dissuade or deter him in exercising such authority by acting as a quasi-judicial functionary under the Statute, as the comparison of the administrative ranks is not only not relevant but wholly irrelevant in reading/ascribing the powers to a judicial or quasi-judicial authority. If the opposite view was held to be correct, perhaps no serious administrative matter of the Union Government or of the State Governments, decisions taken in the name of the President of India or the Governor of a particular State could be challenged before any court of law although which is done day-in and day-out before the lowest to the highest courts, the scores of thousands of cases pending before them to serve as ample testimony thereof. It also appears useful to make reference of two other decisions one of the Bombay High Court and the other of the jurisdictional High Court going through which it would emerge that the decision of the Apex Court in M. K. Mohammed Kunhi's case (supra) acted as a prelude for holding that for effective discharge of appellate powers; the CIT(A) had also implied powers to grant stay etc.
25. The Bombay High Court in the case of Nathuram Weljibhai Vyas (supra) Chandok held that it was well recognised that where an act confers a jurisdiction, it impliedly also grants the power of doing all such acts or implying all such means as are essentially necessary to its execution. In that case where the Rent Controller was acting in an inquiry under clause 13(3) of the Rent Control Order and was specifically required to "hear the parties", i.e., to record the evidence of the parties and the evidence of the witnesses which the parties may choose to adduce, the power to summon a witness at the instance of the party, the High Court held, would be necessarily implied in the power to "hear the parties".
26. Similarly in the case of Prem Prakash Tripathi (supra), the Allahabad High Court held with reference to the law laid down by the Apex Court in M. K. Mohammed Kunhi's case (supra) that the Commissioner (Appeals) must be held to have the power to grant stay which was incidental or ancillary to its appellate jurisdiction. On the strength of these decisions, we reiterate that the Assessing Officer must be deemed to possess the implied power to go through the reasons which existed and led to the grant of the authority with the authorising officer to order search and issue authorisation warrant. Such a power in our well considered opinion is absolutely essential and necessary for the effective making of an assessment order. Law vests the Assessing Officer power to discovery and production of documents etc.
under section 131 of the Act.
27. We are, therefore, of the view that the Assessing Officer and consequently the appellate forum, namely, the 'Appellate Tribunal' are under a legal obligation in the event of a challenge made by the assessee (as in the present case) in respect of the validity of search, to call for the relevant records and also provide a copy of the "satisfaction note" or any other document(s) if it/they is/are given different name/names, giving details of the material forming "reason to believe" authorising the search. The department is directed through the Ld. D.R. to produce such material before the Tribunal by ..... and provide copy thereof to the Ld. counsel for the assessee. The department, if they so desire, would however be at liberty to withhold the names of the informants with a view to protect the sources as per which information in respect of the activities and assets etc. of the assessee, leading to the formation of such "reason to believe" was formed.
1. I have carefully gone through the order proposed by the Learned Judicial Member, Brother Agrawala, on the preliminary issue involved in this appeal. I also have the benefit of discussion with my Learned Brother in an endeavour to arrive at an agreed order but I am unable to persuade myself to concur with his conclusion that during the course of assessment proceedings under section 158BC(b) of the Income-tax Act, 1961, the Assessing Officer and consequently while deciding the appeal against his order of assessment under section 158BC(c) of the Act, in exercise of powers conferred by clause (b) of sub-section (1) of section 253 of the Act, the Appellate Tribunal, are under legal obligation to call for the relevant records and provide a copy of the "satisfaction note" recorded by the designated authority to authorise the search under section 132(1) of the Income-tax Act and/or any other document(s) to the assessee, if the validity of the search is in challenge by the assessee.
2. It may be recorded at the outset that I would be confining in expressing my views only on those aspects of the matter on which the proposed order of the learned Judicial Member is founded.
3. The controversy in this case mainly revolves round the purport and scope of the provisions of Chapter XIV-B of the Act. Therefore, before venturing to give reasons for dissenting with the learned Judicial Member, I consider it necessary to refer to the objectives of introducing Chapter XIV-B, which can be gainfully used as an aid to interpretation.
3.1 Chapter XIV-B of the Act was brought on the Statute Book by the Finance Act, 1995 with effect from the 1st July, 1995. It provides for a special procedure for assessment of search cases. With a view to finding out the objects of introducing the provisions of this new procedure, which have been referred to more than once by the Learned Sr. Standing Counsel in his arguments, we can turn to the budget speech of the Hon'ble Finance Minister delivered on 15-3-1995 on the floor of the Parliament. Part 'B', para 71, in [1995] 212 ITR 87 (St.), runs as under : "71. Hon'ble Members are aware that the searches conducted by the Income-tax Department are an important means of unearthing black money. However, undisclosed incomes have to be related to the different years in which the income was earned and as such assessments are unduly delayed. In order to make the procedure more effective, I am proposing a new scheme under which undisclosed income detected as a result of search shall be assessed separately at a flat rate of 60 per cent. An appeal against the order can be filed directly, before the Income-tax Appellate Tribunal." The above speech and clause (32) of the notes on clauses of the Finance Bill, 1995, spell out that the Government's own perception in regard to the new provisions is to devise a procedure for assessment in search cases which is cost effective, efficient and meaningful.
4. Chapter XIV-B of the Act, as the heading itself indicates, lays down a "special procedure for assessment of search cases". The new procedure is concerned only with the "assessment" of search cases and everything else relating to search and seizure action continues to be governed by the existing section 132 of the Act, read with Rule 112 of the Income-tax Rules, 1962. Hence, even after the introduction of the new procedure, there has to be a warrant of authorisation issued by a competent authority, execution of the warrant by an authorised officer and seizure in accordance with the procedure laid down in section 132, read with Rule 112, except that there will be no order under section 132(5) or under section 132(7) and consequently no proceedings under sections 132(11) and 132(12) of the Act. What is, therefore, novel about the said scheme is that it lays down a new procedure for making an assessment in a case where search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A of the Act after the 30th day of June, 1995. While it cannot be disputed that Chapter XIV-B has made far reaching changes, yet in my considered opinion, these changes even though very significant, are only procedural in nature and do not effect the substantive character of an 'assessment'. Even if the words of the opening sentence of section 158BC are dissected, as has been suggested by the Learned Judicial Member in para 19 of his proposed order, one can only reach a conclusion that conducting of a search under section 132 or requisitioning of books of account, other documents or assets under section 132A in the case of any person, is a stage anterior to the exercise of jurisdiction by the Assessing Officer for service of a notice under clause (a) of the said section to "such person". In this connection, the use of the word 'then' at the end of the main provisions of section 158BC and before start of clause (a) which is followed by clauses (b), (c) and (d), is very significant. I fully agree with the Learned Senior Standing Counsel that the reference of 'search' in sections 158BA and 158BC is only to convey as a matter of fact that the procedure laid clown in Chapter XIV-B shall be applicable because a search has been conducted under section 132(1) or books of account etc. have been requisitioned under section 132A of the Act.
Thus, despite introduction of Chapter XIV-B, it is not within the domain of an Assessing Officer to go behind the 'search' except satisfying himself that in the case before him either a search had been conducted undersection 132 or documents etc. had been requisitioned undersection 132A of the Act, which is a condition precedent for serving a notice by the Assessing Officer on "such person" in terms of clause (a) of section 148BC of the Act.
5. Coming to the supply of copy of 'Panchnama' to the Assessing Officer in which, besides various other details, there is a mention of issuance of a search warrant under section 132 of the Income-tax Act and certification of carrying out a search, copy of which was supplied to the assessee also, which fact, according to the Learned Judicial Member, warrants upholding of the submission made on behalf of the assessee that he had a legal right to question and challenge the validity of the search and when so done, the Assessing Officer in his judicial/quasi-judicial capacity could look into the fact whether the warrant conforms to the requirement of section 132 of the Act, I would only like to point out that though rule 112(2) of the Income-tax Rules prescribes the forms for the warrant of authorisation under section 132(1)/132(1A), yet neither the Income-tax Act nor the Rules prescribe any particular format for Panchnama. It appears that the form in use is standardised by the Department for the sake of administrative convenience and uniformity and also keeping in view the various details required to be taken note if as per provisions of section 132 of the Act and Rule 112 of the Rules. A copy of the Panchnama is supplied to the Assessing Officer only to apprise him of the factum of search having taken place and seizure etc. made during the course of the search. Copy of it is supplied to the assessee for his record. This procedure was being followed even in the pre-Chapter XIV-B stage and has not witnessed any change. So far as the legal provisions in this regard are concerned, sub-rules (7), (8), (9) & (10) of Rule 112 only require the preparation of an inventory by the authorised officer of the things seized etc. Sub-rule (11) requires the authorised officer to convey the books of account, other documents, if any, seized by him in the course of search made by him and the package or packages, if any, referred to in sub-rule (10) to the concerned Income-tax authority, so that he could proceed in the matter further. Copy of inventories is given to the assessee in compliance to the provisions of these Rules.
Therefore, not much could be read from this document, namely, the Panchnama, the handing over of which to the assessee is in the nature of receipt in token of books of account, assets etc. found and seized during the search from the assessee's premises. It does not in any way bestow a right on the assessee to question and challenge before the Assessing Officer, the validity of the warrant of authorisation.
5.1 The forwarding of copy of Panchnama to the Assessing Officer is only an innocuous step as a sequel to which the Assessing Officer could take steps to make the assessment. The factum of receipt of the Panchnama by the Assessing Officer in which there is a mention of the issue of a search warrant does not authorise the Assessing Officer to call for the 'satisfaction note' of the authorising Officer with a view to going into the question whether the search which was authorised, satisfied the requirements of clauses (a) or (b) or (c) of section 132(1) or not. This limitation/constrain of the Assessing Officer is not because in the hierarchy of the Income-tax authorities he is much lower to the person who is authorised to order search but because the law does not authorise him to enter into this arena. In law, as it existed before the introduction of Chapter XIV-B, there were no provisions to authorise the Assessing Officer even though he was vested with the same Judicial/quasi-judicial power, to go into the validity of the search. Introduction of the provisions of Chapter XIV-B has not made any difference whatsoever in the powers of the Assessing Officer in this behalf because, as is mentioned above, his jurisdiction starts only after a search is conducted.
5.2 The Kerala High Court decision in the case of C. S. Kesavan (supra) from which observations of their Lordships have been extracted by the Learned Judicial Member, lays down a legal proposition that Officers entrusted with quasi-judicial powers have freedom to decide the issues between citizens and Government independently but this proposition is subject to the condition that the issues have to be decided in accordance with law. The law laid down by this decision is that if the Officers exercising quasi-judicial functions decide issues against the interest of the Government, the relevant orders could be challenged before the competent authority but the Officers cannot be subjected to disciplinary proceedings. Since under the Income-tax Act, the Assessing Officer, even while exercising judicial/quasi-judicial power does not have the authority to examine the validity of the search, as has been held by me above, this decision is of no assistance for the view expressed by the learned Judicial Member. The Summit Court decision in the case of Orient Papers Ltd. (supra), from which two paragraphs have been extracted in the proposed order of the Learned Judicial Member, is an authority for the proposition that the directions issued even by a superior administrative authority, which are not covered by Rule, cannot be binding on an authority acting in quasi-judicial capacity and that the officers while functioning as quasi-judicial authority should not allow their judgments to be influenced by administrative considerations or by the instructions or directions given by their superiors. To some what similar effect is the other decision of the Summit Court in the case of Sirpur Paper Mill Ltd. (supra), dealing with the question whether, while exercising quasi-judicial power for disposing of a revision petition, the Commissioner could seek instructions from the Central Board of Direct Taxes. The Hon'ble Court answered the question in negative and set aside the order passed by the Commissioner, for disposal in accordance with law and uninfluenced by any instructions or directions given by the Board. These decisions, in my opinion, do not in any way lend support to the view of the Learned Judicial Member that the Assessing Officer, while discharging his judicial or quasi-judicial functions, can exercise an authority which is not bestowed on him by law.
6. As regards the power of discovery and summoning of documents etc.
conferred on the Assessing Officer under section 131 of the Act and the reasoning of the Learned Judicial Member with reference to the two decisions of the Hon'ble Calcutta High Court in New Central Jute Mills Co. Ltd.'s case (supra) and Dwijendra Lal Brahmachari v. New Central Jute Mills Co. Ltd. [1978] 112 ITR 568, to the effect that the powers vested by Section 131 of the Act in an Assessing Officer are to be exercised "for the purposes of this Act" interpreted to mean "for the purposes of assessment", in my opinion would also not matter much inasmuch as even with this interpretation the exercise of powers would have to be limited to the making of the assessment alone and not for the purpose of any enquiry, even enough raked up by the assessee, in respect of something which had nothing to do with the assessment and fell within the realm of pre-assessment stage. Incidentally, the ratio of the aforesaid two decisions is that the statutory powers under section 131 can be exercised only after proper application of mind in regard to the question of relevancy of the material with reference to assessment.
7. I would like to reiterate that there is no provision of law to provide the assessee the "reasons" for authorising the search. Such plea could also not be accepted on principles of equity, because the Assessing Officer himself is not in possession of this information. In any case, the disclosure of the information is bound to affect or hamper the investigation, which would be against the public policy.
This is so because many a times, the source of information could easily be inferred from the reasons recorded by the authorising Officer and the other material referred to by him. Generally the information is collected on the promise of secrecy and to avoid embarrassment to the person converting the information, the material could not be disclosed to the assessee. Moreover when the Assessing officer made investigation during the course of assessment proceedings, if the assessee is in possession of information on account of which search is conducted, there is every likelihood of some manipulated device being adopted by such person to give a different orientation to the relevant facts.
8. Coming to the question whether the existence or non-existence of reasons or material for the formation of the requisite belief by the Authorising Officer could be challenged before the Appellate Tribunal, I have only to say that the scope of an appeal has to be considered in the light of words used in the Statute, no doubt in a reasonable, practical and liberal manner. Sub-section (1) of section 253 grants a right of appeal to an assessee aggrieved by any of the orders listed in clauses (a) to (c) to the Appellate Tribunal. Clause (b), which is relevant for our purposes, reads, an order passed by an Assessing Officer under clause (c) of section 158BC." A plain reading of this provision would show that the Appellate Tribunal can adjudicate upon only those issues, which arise out of the order of the Assessing Officer. The scope of the order of the Assessing Officer is, as per provisions of clause (c) of section 158BC, confined to the determination of the undisclosed income of the block period in accordance with Chapter XIV-B and determination of tax payable on the basis of the assessment. I have already opined that in framing the assessment, the Assessing Officer has no jurisdiction to go into the material and evidence that has led to the authorisation of the search.
In my opinion, no analogy can be drawn from the fact that in an appeal under section 246(1)(b) the first Appellate Authority is conferred with powers to look into the nexus of reasons recorded for re-opening the assessment under section 147 of the Income-tax Act with the escapement of income. I say so because the recording of reasons under section 148(2) for reopening an assessment is an act of the Assessing Officer and requires his satisfaction and not the satisfaction of some other Authority over whom the first Appellate Authority does not have any jurisdiction. In fact, the recording of reasons is part of the satisfaction of the Assessing Officer that income chargeable to tax has escaped assessment. It is a part of the process of the assessment proceedings itself. It follows that if the Assessing Officer did not have jurisdiction over a matter or which was not relevant for passing an order by him under section 158BC(c) of the Act, in appeal against that order, the Tribunal also as a first Appellate Authority could not have any jurisdiction over it.
9. During the course of arguments, the learned Counsel for the assessee had relied upon the decision of the Bangalore Bench in the case of Microland Ltd. (supra) and in reply the learned Senior Standing Counsel had submitted that the direction of the Tribunal to place before them the search warrant was for a very limited purpose. The only inference drawn by the learned Judicial Member from this decision, as recorded in paragraph 19 of his order, is that "the decision in any case is a pointer to the acceptance of the assessee's stand that the Appellate Tribunal could go behind the search." While confining my comments to this aspect of the aforesaid decision of the Bangalore Bench, I would say that one of the challenges of the assessee in that case was that there was no search warrant in its name and that the Panchnama drawn also did not refer its name. With a view to verifying the fact whether any search warrant was issued in the case of the assessee, the Tribunal looked into the photo copy of the search warrant, from the examination of which it found that there was some scope for suspecting that the name of the assessee was interpolated. It was only then that the Tribunal wanted to inspect the original search records as would be evident from the observations reproduced below : "In the instant case, we feel that the insertion of the name of the assessee in the relevant search warrant might have been made at a later date. For the purpose of removal of our suspicion in that regard only, we wanted to inspect and verify the official records supposed to be maintained in this connection, the claim of privilege on the pall of the Department is certainly unwarranted in view of the above decisions." I, therefore, agree with the learned Senior Standing Counsel that it was in the peculiar circumstances and for a very limited purpose that the Tribunal considered it necessary to look into the original records relating to the search. Of course, the Hon'ble Bench has drawn certain further inferences also but since these have not been taken into account by the learned Judicial Member in his proposed order, I am not offering any further opinion in the matter.
10. Coming to the question as to why the validity or otherwise of the reasons recorded under section 132 could be challenged only by way of a writ petition underarticle 226 of the Constitution of India, I would firstly like to mention that the powers of search and seizure were for the first time conferred on the Income-tax Authorities, for a limited purpose, in 1956 by recasting section 37 of the Income-tax Act, 1922.
When the law was thoroughly revised and a fresh Act was enacted in 1961 (i.e., tilt present Act), the provisions were re-enacted in section 132 as a self contained Code. Thus, the provisions relating to search and seizure have been on the Statute Book for more than four decades. If we can through the Income-tax Reports, we find umpteen number of judgments on the subject. The question whether the authorisation of search which is an administrative act and not a judicial or quasi-judicial act was valid or not has all along been a subject matter of consideration by the Hon'ble High Courts under Article 226 of the Constitution of India.
If there has been a wanton indiscriminate raid, it has always been considered to be an attack on fundamental right of a person and the Courts have always the officer concerned to satisfy them about the regularity of the action. The authority conferred by section 132 of the Act can be exercised only when the specified authority, in consequence of the information in his possession, has reason to believe that the circumstances enumerated in clause (a) or (b) or (c) of sub-section (1) of the said section exist. It is within the competence of the High Court in its extraordinary writ jurisdiction to find out if the required belief existed. If it is found that the action is violative of the provisions of the Act, or malicious or the power under the section is exercised for a collateral purpose, a writ will issue to declare the entire act of search and seizure void ab initio. In this connection, the following observations of the Hon'ble Supreme Court in the oft-quoted judgment in the case of Income-tax Officer, Special Investigation Circle "B", Meerut ITO v. Seth Bros. [1969] 74 ITR 836 (SC) may be conveniently referred to : "Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purpose for which the law authorizes it to be exercised. If the action of the officer issuing the authorization or of the designated officer is challenged, the officer concerned must satisfy the court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the court." "The proceedings were brought before the High Court by way of writ petition under article 226 of the Constitution before any investigation was made by the Income-tax Officers pursuant to the action taken by them. In appropriate cases a writ petition may lie challenging the validity of the action on the ground of absence of power or on a plea that proccedings were taken maliciously or for a collateral purpose." 10.1 Incidentally, it may also be mentioned that the extraordinary jurisdiction under Article 226 of the Constitution can be invoked in the absence of an alternative remedy available in a particular Statute.
Since no remedy by way of appeals/revision is provided by the Income-tax Act with reference to Section 132 of the Act, there is no escape for an aggrieved citizen from going to a Court, which the Appellate Tribunal is not, even if the process of going before the Court may be strenuous and expensive.
11. Coming then to the invocation of the "doctrine of implied authority" with reference to the various case laws of the Apex Court found in the proposed order viz., Shambhu Narain Singh's case (supra), National Tobacco Co.'s case (supra), M. K. Mohammed Kunhi's case (supra) and other case laws I may say that the power held by the learned Judicial Member to be possessed by the Assessing Officer was not necessary much less essentially necessary for the effective execution of the jurisdiction, namely, the completion of an assessment by an Assessing Officer. While making an assessment the power of the Assessing Officer is confined to the determination of income and tax payable thereon, with reference to the materials available or found from any source. His power does not extend to challenging the authority exercised by the Authorising Office undersection 132 of the Act.
Therefore, the "doctrine of implied authority would not extend to assuming the power by the Appellate Tribunal which even the Officer passing the assessment order did not have. True that there is no specific prohibition for attributing such power to an Assessing Officer or Appellate Tribunal but it cannot be said that to grant it would be falling in line with the legislative intent and purpose, necessitating the rule of construction to be applied in favour of its existence. To say that the Appellate Tribunal and the CIT(A) had the power to grant stay in appeals which were pending before them is different than claiming the existence of authority with the Assessing Officer and consequently the Appellate Tribunal to go into the reasons for authorising search, because while the power to grant stay is incidental and ancillary to the exercise of appellate jurisdiction, to find out about the existence of the grounds and material for authorising search with reference to clause (a) or (b) or (c) of sub-section (1) of section 132 of the Act cannot be so regarded. This, in my opinion, would be a substantive power, which could be exercised only if the Legislature specifically vests an Assessing Officer and the appellate body, namely, the Appellate Tribunal with it but not otherwise.
12. In view of the foregoing, I respectfully dissent with my learned Brother on this aspect of the matter and record that no enquiry about the existence of material which led to the formation of belief by the Authorising Officer that the assessee's case fell in any of the three categories mentioned in sub-section (1) of section 132 of the Act could be directed to be made either by the Assessing Officer or by the Appellate Tribunal and consequently the Appellate Tribunal would not be legally justified to direct the Department to produce such material before it and provide copy thereof to the assessee.
A difference of opinion having emerged between the Judicial Member and Accountant Member, who heard the appeal, we hereby state the points on which we differ and refer the matter to the Hon'ble President of the Income-tax Appellate Tribunal for further appropriate action : 1. Whether, in the event of a challenge by the assessee to the validity of search conducted on him under section 132 of the Act, an Assessing Officer while completing a block assessment under Chapter XIV-B of the Act, can in law call for the 'satisfaction note' forming "reason to believe" as envisaged by sub-section (1) of section 132 of the Act, examine its validity and provide a copy thereof to the assessee 2. Whether, in the event of a demand for the providing of such 'satisfaction note' forming "reason to believe" not being met and its non-examination by the Assessing Officer, the Appellate Tribunal during the hearing of the first appeal under section 253(1)(b) of the Income-tax Act, 1961 can act similarly and direct the department to produce such material before it 1. In consequence upon the difference of opinion amongst the Hon'ble Members constituting the Division Bench, the following two questions had been referred for my opinion by the Hon'ble President, Income-tax Appellate Tribunal, acting under section 255(4) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') : "1. Whether, in the event of a challenge by the assessee to the validity of search conducted on him under section 132 of the Act, an Assessing Officer while completing a block assessment under Chapter XIV-B of the Act, can in law call for the 'satisfaction note' forming "reason to believe" as enivisaged by sub-section (1) of section 132 of the Act, examine its validity and provide a copy thereof to the assessee 2. Whether, in the event of a demand for the providing of such 'satisfaction note' forming "reason to believe" not being met and its non-examination by the Assessing Officer, the Appellate Tribunal during the hearing of the first appeal under section 253(1)(b) of the Income-tax Act, 1961 can act similarly and direct the department to produce such material before it ?" 2. I have heard the parties. The assessee's counsel has adopted his submissions advanced before the Division Bench, as contained in paras 5 to 10, and para 16 of the order of the Ld. Judicial Member which, I consider it necessary to reproduce even at the cost of lengthy order.
The submissions advanced are : "... he submitted that Chapter XIV-B of the Act, which was introduced w.e.f. the 1st day of July, 1995 brought about significant changes in the assessments relating to search. While sections 132 and 132A still survived, the necessity of passing any order under sub-section (5) and consequently appeal before the CIT under sub-section 12 of section 132 of the Act was dispensed with.
In the submission of Shri Garg, a block assessment had to be completed in accordance with the Provisions of Chapter XIV-B, which provided special procedure for assessment of search cases. It was a complete and exhaustive code by itself. Elaborating, it was contended that it required taking of various steps. The 1st being a search should have been conducted under section 132 or books of account etc., requisitioned under section 132A of the Act. The second, the Assessing Officer to serve a notice to the assessee subjected to search requiring him to furnish the details of his total income including the undisclosed income for the block period, within the specified period of 15 days. The third, determination of the undisclosed income of the block period as laid down in section 158BB of the Act, the provisions of sections 142(2), 143(3) and 144 so far as applicable, to apply. It was only then that finally the Assessing Officer would pass an order of 'assessment' on the basis of the determination by him of the undisclosed income for the block period with the previous approval of the Commissioner of Income-tax, as provided by section 158BG, within the period prescribed by section 158BE of the Act.
6. Shri Garg submitted that the term "assessment" used by the Legislature conveyed something special and was not equivalent to an order in the general sense. It had various components and stages.
The sine qua non for the completion of the assessment, to state succinctly although being slightly repetitive were, (a) a search conducted under the provisions of section 132, (b) requisite notice issued to the assessee thereafter, (c) the determination of undisclosed income made by the prescribed Assessing Officer within the stipulated period, finally to culminate in an assessment order with the previous approval of the Commissioner. Shri Garg strenuously submitted that if any of these links was missing or legally deficient, it would vitally affect the assessment order making it bad and ineffective in law. It is on the analogy of this stand that he submitted that the assessee was legally entitled to challenge all these stages which went to form and complete the assessment order. Elucidating further and with reference to the first step, he submitted that an assessee was legally vested with the right to challenge that either no search had taken place respecting him or that the conditions for conducting search did not exist. He thereafter invited our attention to the relevant portion of section 132(1) of the Act submitting that the search could be conducted only in consequence of air information in the possession of one of the officers specified by this provision who should have "reason to believe" that either of the 3 conditions enumerated in clauses (a), (b) or (c) of sub-section (1) of section 132 existed.
He submitted that none of these conditions existed in the assessee's case. In this connection it was contended by him that the reason for saying so was not in any vacuum but founded on concrete facts. In so far as clause (a) of section 132(1) was concerned, the assessee was never issued any summons or notice for producing any document etc.
and as such there could not have been any omission or failure on his part in doing so. About clause (b) of the same provision, Shri Garg submitted that since no summons or notice had been issued could not have been a situation, occasion or provocation justifying on facts or in law the recording of a conclusion by the authorising officer to say that if such summons or notice was issued, it would not be consulted with. In saying so, the assessee was strengthened by the fact that he had been filing his returns of income regularly and assessed thereon excepting for the period 1-4-1996 to 14-9-1996 was part of the previous year ending 31-3-1997, return for which be came due towards the middle of the calendar year 1997 this is much after the search. Left with clause (c) of section 132(1) of the Act alone, Shri Garg contended that since the assessee was not possessed of any money, bullion, jewellery or other valuable article or thing which could represent any undisclosed income or property, it was impossible that the authorised officer could have "reason to believe" to act for the purposes of authorising a search under section 132(1) of the Act. He submitted that the assessee's case was not on a thin ice and vehemently contended that he should be provided with the material, namely, the satisfaction note made, on the basis of which, the authorising officer acted under sub-section (1) of section 132 in authorising the search. Shri Garg submitted that it is not as if the assessee wake up only before the 'Appellate Tribunal'. This material was demanded by him from the very beginning. In this regard, he firstly made reference to a petition addressed by the assessee on the 1st of August, 1997 to the Assessing Officer, copy available at pages 27 to 31 of his paper book wherein at internal page 2 it was categorically submitted that "there existed no material (order to the authorisation) which could lead to the formation of belief that the case of the assessee fell in the category of ...". Reference was thereafter made to page 36 of the Paper Book, being another petition dated 8th of August, 1997 to the Assessing Officer wherein the first paragraph itself the validity of search operations was challenged. Lastly, reference was made to page 183, yet another petition dated 15th of September, 1997, addressed to the Assessing Officer where similar challenge was made stating that the assessee had been fully participating in the block assessment proceedings and had filed his return and would need a copy of the 'satisfaction note' authorising the search operation under section 132(1) of the Act.
7. Shri Garg contended that both on factual basis and in law the assessee was fully entitled to know the reasons which actuated the competent authority to form "reason to believe" for authorising the search. In this connection he placed reliance on a decision of the jurisdictional High Court in the case of K. M. Bansal v. CIT and others reported in 195 ITR 247 and submitted that although this decision related to the provisions of section 148 of the Act, yet its analogy applied on all fours to the facts of the present case.
As per this decision to eliminate the possibility of an arbitrary action, an officer who is required to record reasons was equally bound to give reasons, which inter alia could be looked into by a superior authority to satisfy himself that action had not been initiated arbitrarily. It was, however, open to him to withhold the name of informants and/or identify of sources if it was thought necessary to protect the sources and informants as per which after the assessee had participated in the proceedings if asked for, the reasons for forming the belief should be disclosed to him. Shri Garg also submitted that despite having taken objection from the beginning about the non-existence of the 'reason to believe' with the competent officer authorising search and furnishing of the 'satisfaction note' recorded by him, the Assessing Officer developed a cold feet, maintained a stoic silence and even did not consider it necessary to devote any time to deal with this aspect of the matter having far reaching consequences.
8. On the question as to whether the existence or nonexistence of reasons or material for the formation of the requisite belief of the competent authority being challenged before the Appellate Tribunal, Shri Garg submitted that once specific right to appeal had been granted by the Statute to the assessee under section 253(1)(b) of the Act, as per which the block assessment framed could be challenged, any of the stages which went to form the assessment, one of which was that, a search must have been conducted under the provisions of section 132 of the Act, the Tribunal had the legal competence, rather a duty (if called upon) to adjudicate the controversy raised by the assessee. In support of this, he made various submissions. He firstly drew an analogy from the provisions of section 246(1)(b) of the Act which, inter alia, conferred power on the first appellate authority to hear an appeal against an order of reassessment under section 147 of the Act and under which every aspect of the matter including the existence or the quality of the reasons recorded for the re-opening could be challenged by an assessee. In this connection reliance was placed on two decisions reported in 82 ITR 347 and 79 ITR 603.
9. On a query raised by the Bench that while there was no dispute that the existence of "reason to believe" as envisaged by section 132(1) of the act was justiciable, the proper forum from times immemorial has been a petition under Article 226 of the Constitution of India and not the first or second appeal provided under the Income-tax Act, Shri Garg submitted that this position held good only till before Chapter XIV-B was enacted. In this submission in the earlier provisions relating to the completion of assessments whether it be section 143(3) or 144 of the Act, the Legislature has not drawn any distinction for the completion of assessments in search cases and in cases otherwise, while Chapter XIV-B has specifically provided a procedure for the completion of an assessment, but only as a result of search under section 132. Laying special stress to the words "where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person" appearing in section 158BC of the Act, Shri Garg submitted that they acted as a preface for the Assessing Officer to act in taking the second step of issuing notice and proceed further to be able to complete an assessment. He, therefore, submitted that the conduct of a valid search under section 132 of the Act was a condition precedent for the Assessing Officer to assume jurisdiction to take subsequent steps to complete the assessment in accordance with the special procedure prescribed. Shri Garg further submitted that this being so there was absolutely no reason as to why the assessee could not challenge the validity of the search before the Appellate Tribunal during first appeal. In the same breath he added that there was no reason as to why the Tribunal being a regular court of First appeal for Block assessments could not adjudicate such a controversy, if raised. In this submission, if done so by the assessee, it was a duty cast on the Tribunal to decide the issue.
Shri Garg also submitted that the Appellate Tribunal was the most proper legal forum where the assessee in view of the statutory change referred to supra could legally agitate this issue. He also submitted that there was no point to drive an assessee to file a petition for the redressal of this vital and fundamental grievance before the High Court under Article 226 of the Constitution and stall the hearing of the appeal because the issue went to the root of the matter and affected the disposal of the appeal on merits.
Shri Garg further submitted that assuming but not admitting even if an assessee was forced to file a petition under Article 226 of the Constitution of India, it is liable to be thrown on the ground that he had an equally efficacious remedy, in taking such a plea before the Appellate Tribunal. In this connection reliance was placed on the ratio of a jurisdictional High Court's decision reported in 163 ITR 17 in the case of Ram Mohan Rastogi, where the Court in the wake of a much weaker situation of law held that in view of the remedy available to an assessee under section 132(ii) writ would not lie under extraordinary provisions of Article 226 of the Constitution of India before the High Court. No doubt thereunder 'satisfactory note' recorded by the authorising officer could not have been demanded, the counsel submitted, but added that with the sea change the scope had widened in the form of first appeal to the Appellate Tribunal by Chapter XIV-B the decision assumed greater significance to canvass the assessee's right to make complete and meaningful challenge in the appeal before the Tribunal.
10. The Ld. counsel for the assessee also submitted that even for argument sake if the Tribunal were not found to be specifically vested with the right of hearing, such a plea under the provisions of Chapter XIV-B read with section 254(1)(b) of the Act it must be considered that a right to appeal should be construed "reasonably".
If done so, it would also go to confer such power in the Appellate Tribunal. In support of this, reliance was placed by him on a decision of the Apex Court in the case of CIT v. Ashoka Engineering Co. reported in 194 ITR 645. Shri Garg also contended that it is always not necessary to provide an appeal against all the aspects of a matter. Exemplify lifing, he contended that if the special procedure for the completion of a block assessment provided for the issue of a notice, the factum of such notice or its contents, to say that it did not confirm to the legal requirements, could be challenged during appeal although no appeal was specifically provided on these individual points. He also submitted that 'audi alteram partem' rule which had since assumed the character of a fundamental right also required a person should not be condemned unheard and there was no reason that on this count also the assessee should not be provided with the satisfaction note recorded by the competent authority authorising the search, which seriously affected the life and property of the concerned citizen. On this aspect, reliance was placed by Shri Garg on the celebrated decision of the Summit Court in the case of Maneka Gandhi v. Union of India reported in AIR 1978 page 597.
Shri Garg also submitted that an assessment could not be equated with a normal order. He referred to the definition of the term 'assessment' as given in section 2(8) of the Act and placed reliance on a decision of the High Court of Punjab and Haryana, reported in 30 ITR 500 at 509 in the case of Hazari Mal and another decision of the Apex Court reported in 34 ITR 275 in the case of A. M. Lakshman at 294. Shri Garg also submitted that the mere fact that the search was authorised by an officer who was much superior to the Assessing Officer in the hierarchy of the Income-tax authorities did not bind the hands of the Assessing Officer in any manner in not questioning the existence of reasons to believe for authorising it. In this connection reliance was placed on two decisions reported in 82 ITR 347 SC the case of Sheonath Singh and 79 ITR 603. He also contended that if any contrary view was taken, it will render the provisions relating to appeal before the Tribunal otiose. Shri Garg also submitted that there was absolutely no reason as to why an assessee should be compelled to become selective in making challenge to assessment. In the last, it was submitted that even if there was a slight ambiguity/doubt about the competence of the Tribunal to adjudicate such a controversy, as held by the High Court of Bombay in 222 ITR 726, the provisions in question should be interpreted in favour of the subject (225 ITR 638 and 226 ITR 625). Shri Garg also contended that assuming, though not admitting if the power canvassed to be possessed by the Tribunal did not expressly exist, the 'doctrine of implied authority' be invoked and the Assessing Officer who was vested with the jurisdiction to pass an assessment order should be held to have the implied power of going into all aspects of the assessment including validity of search, a fact mentioned in the Panchnama which even as per the Ld. Senior Standing Counsel was made available to the designated Assessing Officer to convey and inform him with the requisite knowledge about the search. In this connection, reliance was placed on the following case laws : 4. Nathu Ram Welji Bhai Vyas v. Luxmibai Lunkaranji Chandak 139 ITR P. 948; and 3. The ld. Sr. Departmental Representative, appearing for the revenue, in addition to adopting the arguments made by his predecessor Sr.
Standing Counsel Shri Bharatji Agrawal before the Division Bench - as contained in paras 11 to 15 of the order of the ld. Judicial Member, submitted that his written submissions dated 17th August, 1999 should also be considered. The submissions made by Sr. Standing Counsel Shri Bharatji Agrawal before the Division Bench reads as under : "11. Strongly opposing, Shri Bharatji Agarwal, Learned Senior Standing counsel contended that the question about the validity of search was in point of lime prior to the initiation of assessment proceedings and had nothing to do with the formation of the assessment order. Referring to the provisions of section 158BC, Shri Agarwal submitted that various steps for the completion of a block assessment did not visualise anything relating to search, which term had been used only to show a matter of fact to convey that the procedure prescribed by this section shall be followed in a case where a search had been conducted under section 132 of the Act. The search, Shri Agarwal submitted, was a pre-assessment stage.
Elucidating, the Ld. Senior Standing Counsel submitted that the appeal to the Appellate Tribunal was provided only against an assessment order framed under the provisions of Chapter XIV-B and as pointed out by him since the search was not a part of the assessment, the Tribunal did not have the jurisdiction to adjudicate any controversy or objection raised by an assessee in respect thereof. According to him, the position that was obtainable in respect of such a challenge before the codification of Chapter XIV-B still held good, i.e., an assessee if he so choose could file a petition under Article 226 of the Constitution of India to assail the search itself. Further that the provisions relating to search remained in tact excepting that the rendition of an order under section 132(5) or its appeal under section 132(12) were dispensed with.
12. In reply to the contention of the assessee that even where a matter had reached the CBDT, an Assessing Officer could go into, it, Shri Agarwal submitted that this pertained to the reopening of an assessment where the reasons had to be recorded by the Assessing Officer but were to be submitted to the CBDT as the reopening of the assessment was for a very early period. This approval was considered necessary by the Legislature for a variety of reasons including administrative exigency. The Appellate Authority could go into such reasons, its legal quality and validity Plainly because the reasons were recorded by none else than the Assessing Officer himself. This too was permissible as the reasons so recorded formed the basis for reopening and making the fresh assessment by the Assessing Officer.
13. Shri Agarwal also submitted that the question of validity of search was outside the purview of the Appellate Court, i.e., the Appellate Tribunal in this case because firstly section 253(1)(b) provided an appeal only against the assessment order and secondly the assessment order which was completed under the provisions of Chapter XIV-B of the Act was only procedural in nature. From this analogy it emerged that if the Assessing Officer could not have gone into the validity of the search, the Appellate Tribunal was in no better legal position to do so.
14. To a query put by the Bench that if the jurisdiction of the Assessing Officer started only after the search why section 158BC started with the words "where any search has been conducted under section 132" and not with the word "after", instead of the word "where". To this, Shri Agarwal submitted that while it could be said that if the word "after" had been used it might have been better, even when the word "where" had been used by the Legislature it did not make any difference whatsoever as in both the situation the happening of event of search had already become a fait accompli.
Similarly, to one another query that if an assessee could challenge that no assessment could be made on him as no search was conducted in relation to him, Shri Agarwal submitted that a notice as envisaged by clause (a) of section 158BC had to be issued only to "such person" who had been subject to search and that being so by this statutory provision itself an assessee could show that no search had been conducted on him and, therefore, he was not liable to suffer the consequences of such notice.
15. To the non-adjudication of the issue by the Assessing Officer despite being raked up several times by the assessee, Shri Agarwal submitted that it should be impliedly taken to have been rejected by the Assessing Officer particularly in view of the fact that it was abundantly clear that the Assessing Officer had no jurisdiction to decide this question. The Ld. counsel gave an analogy. According to him, suppose the constitutional vires of any of the provisions of the Income-tax Act had been challenged by the assessee before the Assessing Officer while there is no doubt that it would be better if he had stated that being the statute he had no legal authority to consider its vires but even in a situation where he had kept quite, his reticence would not make even the slightest difference because it is too well known that such a challenge could not be made before any statutory authority. He, therefore, submitted that in this case also while it would have been certainly better if the Assessing Officer had devoted some time to discuss this aspect of the matter, yet not doing so will not at all effect the quality of the assessment order. Shri Agarwal also did not agree with the proposition of the invocation and applicability of the 'doctrine of implied authority', canvassed by Shri Garg. Shri Agarwal with reference to certain authorities also contended that no words could be added in the language used by a statute and as such in the opening sentence of section 158BC of the Act in place of "search", the phrase "valid search" could not be substituted. Elucidating, it was contended by him that even the use of material found as a result of illegal search was permissible. With a view to gather the intention of the statute, he thereafter referred to memorandum explaining the provisions of Chapter XIV-B in the Finance Bill, 1995 found in ITR 212 page 345. He also submitted that once the intention of the statute was clear, it had to be accepted.
16. In reply, Shri Garg reiterating his submissions contended that he also agreed with the learned Senior Counsel that once the intention of the Legislature was clear, it had to be implemented but it was impermissible to say that the term "search" used by the Legislature in section 158BC would not mean a valid search and could convey even an illegal search, notwithstanding the fact that the material found even during an illegal search is liable to be used but which was altogether a different aspect of the matter." 4. The written submissions made by ld. Sr. Departmental Representative Mr. Dogra are as under : "1. The submissions below take into account the views expressed by the counsel of the appellant as incorporated in the order of the judicial member, the rejoinder of the Sr. Standing Counsel of the department and the dissenting judgment of the Accountant Member.
2. The changes brought about by the introduction of Chapter XIV-B into the I.T. Act, do not affect the substantive character of an 'assessment'. Even if the words of the opening sentence of section 158BC are dissected, the only conclusion drawn is that conducting of a search under section 132, or requisitioning of books of account etc. under section 132A in the case of any person, is a stage coming before in time to the stage when the Assessing Officer exercises the jurisdiction for service of a notice under clause (b) of the said section.
3. A search then is pre-assessment stage and appeal to the Appellate Tribunal is provided only against an assessment order framed under the provisions of Chapter XIV-B and since the search is not a part of the assessment, the Tribunal does not have the jurisdiction to adjudicate any controversy or objection raised by an assessee in respect thereof.
4. Supply of a copy of 'Panchnama' to the Assessing Officer and to the assessee with a mention of issuance of a search warrant under section 132 of the I.T. Act does not in any way allow upholding of the submission made by the assessee that he had a legal right to question and challenge the validity of the search warrant and when so done, the Assessing Officer in his judicial/quasi-judicial capacity could look into the fact whether the warrant conforms to the requirement of Section 132. A copy of the Panchnama is supplied to the Assessing Officer only to apprise him of the factum of search having taken place and seizure etc. made during the course of search. Copy of it is supplied to the assessee for his record. This practice was being followed even in the pre chapter XIV-B days. And has not undergone any change. So not much can be read from the 'Panchnama', the handing over of which is in nature of receipt in token of books of account, assets etc. found during the search.
5. Thus the legal significance and implication of Panchnama vis-a-vis the warrant of search is not even equivalent to that of demand notice under section 156 which is a part and parcel of the assessment order which can be challenged before an appellate authority. Thus, a Panchnama does not in any way confer a right on the assessee to question and challenge before the Assessing Officer the validity of the warrant of authorization.
6. In law, as it existed before incorporation of Chapter XIV-B, there were no provisions to authorize the Assessing Officer, even though vested with judicial/quasi-judicial power, to go into the validity of the search. Introduction of Chapter XIV-B has made no difference in these powers. The jurisdiction of the Assessing Officer starts only after search is conducted.
7. Reference to decisions of Calcutta High Court (90 ITR 467 and 112 ITR 568) is of no consequence as they speak of powers vested by section 131 in an Assessing Officer. This exercise of this power is for the purpose of making assessment alone and not for the purpose of any enquiry even though demanded by the assessee, in respect of something which had nothing to do with the assessment and fell in the realm of pre-assessment stage.
8. There is no provision in law to provide the assessee the 'reasons' for authorizing the search. Such request can also not be accepted on principles of equity because the Assessing Officer himself is not in possession of this information. Disclosure of this information could hamper investigation and would be against public policy. Many a times source of information could easily be inferred from the reasons recorded by the authorizing officer. When such information has been obtained on a promise of secrecy it can compromise the credibility, of the department and also deter future informants from coming forward with useful information.
9. Regarding the question whether there was a reasonable belief before the authorizing officer before ordering search and whether the same can be challenged before the Appellate Tribunal, the scope of appeal has to be considered in light of the words used in the statute.
10. A plain reading of the clause 'C' of sub-section 1 of section 253 would show that "Appellate" Tribunal can adjudicate upon only those issues which arise out of the order of the Assessing Officer.
The provisions of clause (c) of section 158BC is confirmed to the determination of the undisclosed income of the period in accordance with Chapter XIV-B. 11. No analogy can be drawn from the fact that in appeal under section 256(1)(b) the first appellate authority is conferred with powers to look into the sources of reasons recorded for reopening of the assessment under section 147. It is so because the recording of reasons under section 148(2) is an act of the Assessing Officer and requires his satisfaction and not the satisfaction of some other authority. Even when the first appellate authority does not have any jurisdiction. In fact, recording of reasons is a part of the assessment proceeding itself.
12. Thus it follows that if the Assessing Officer did not have jurisdiction over a matter which was not relevant for pressing an order under section 158BC(c), in appeal against that order, the Tribunal also as the first appellate authority could not have any jurisdiction in it. Reliance is placed on the decision in the case of J.K. Cotton Spinning and Weaving Mill Company v. CTO reported in (1997) 91 ELT 34 (SC) which states that in air appeal, the appellate authority cannot expand the scope of the appeal challenging the correctness of order of the lower authority, nor can it deal with the matters which were never in issue.
13. Citing by the assessee's counsel the decision of the Bangalore Bench in the case of Micro Land Ltd. ITA No. 117 (Bang.)/1997 does not support the case of the assessee. One of the challenges of the assessee was that there was no search warrant in its name. With the view to verifying the fact whether any search warrant was issued and the Tribunal looked into the photocopy of the warrant. Since there was some suspicion that the name of the assessee was interpolated, the Tribunal wanted to inspect the original search records. Thus the purpose of the Tribunal's requirement was very limited.
14. The only way the reasons recorded under section 132 could be challenged is by way of Writ Petition under Article 226 of the Constitution of India. The question whether the authorization of search, an administrative act and not a judicial or quasi-judicial act, was valid or not has all along been a subject matter of consideration by the Hon'ble High Court under Article 226 of the Constitution.
15. It is within the competence of the High Court in its extraordinary writ jurisdiction to find out if the required 'belief' stipulated under section 132 existed. The extraordinary jurisdiction under Article 226 can be invoked in the absence of an alternative remedy available in a particular statute. Since no remedy by way of appeal/revision is provided by the I.T. Act with reference to section 132, there is no alternative for an aggrieved person from going to a court, even if the process of going before the court is time consuming and expensive.
16. Regarding the 'doctrine of implied authority' power attributed to the Assessing Officer in the contention of the assessee's counsel and that of the Ld. Judicial Member is not required for completion of the required assessment. The power of the Assessing Officer is confined to the determination of income and tax payable thereon with reference to the materials available or found from any source. His power does not extend to challenging the authority exercised by the authorising officer under section 132. Therefore, the doctrine of the implied authority would not extend to assuming power by Appellate Tribunal which even the officer passing the assessment order did not have. The power exercised has to be in line with the legislative intent and purpose. The Appellate Tribunal cannot arrogate to itself any statutory power that was not envisaged or conferred explicitly, upon it by the Legislature in the first place.
17. Had it been the intention of the Legislature to widen the scope of appeal with the introduction of section 158BC in the act it would have provided for it in the relevant section 253(1) itself.
18. Questioning the validity of section 132 by the Appellate Tribunal would amount to trespassing on the territory that has been the exclusive domain of the High Courts by virtue of the power of Article 226.
19. In view of the above narrated facts it is submitted that an Assessing Officer cannot in law call for the 'satisfaction note' forming reason to believe as envisaged by sub-section (1) of section 132 of the I.T. Act, examine its validity and provide a copy thereof to the assessee. And in the event of Assessing Officer not being able to do so that Appellate Tribunal during the hearing of First Appeal under section 253(1)(b) cannot act similarly and direct the department to do so.
20. Since the issue involved in the case is of paramount importance and the verdict in the case would have far reaching legal implications, it is prayed that the decision in the case may be kept in abeyance till the decision of the Special Bench in Delhi regarding the justiciability of the CIT's approval in assessment framed under section 158BC of the I.T. Act, is available. In the alternative the Ld. Member may also consider referring the matter to another Special Bench for elaborate hearings and a comprehensive decision." 5. Since the ld. Senior Departmental Representative in his written arguments dated 17th August, 1999, has prayed for keeping the decision in this case in abeyance on the ground that the issue involved in this appeal was pending before the Special Bench or, in the alternative, for referring the issue to another Special Bench, the case was again fixed and the parties were heard.
6. At the time of hearing, the ld. Departmental Representative was fair enough to concede that the Special Bench at Delhi was not seized of the issue before the third Member, and, therefore, agreed that there was no merit in his request for keeping the decision in abeyance.
6.1 With regard to the request for reference to another Special Bench, when it was pointed out that the third Member has no power to make such a reference and there is no provision for such a reference in the Act also because power to constitute the Bench or Special Bench wholly vests with the President of the Income-tax Appellate Tribunal, the ld.Senior Departmental Representative withdrew his request. In view of these facts and circumstances, the request of the ld. Sr. Departmental Representative as per para 20 of his written arguments (supra) stands rejected.
7. Coming to the questions referred for my opinion (supra), I am of the opinion that to find out the answer to these questions, it is necessary to consider the scheme of the provisions relating to search operation under section 132 of the Act and the provisions for assessments under section 143(3)/144/147 on the one hand and proceedings for assessment of block period under Chapter XIV-B of the Act on the other hand as well as the scope of Articles 32 and 226 of the constitution of India and also the nature of the Tribunal's powers.
7.1 So far as the scheme of assessment under section 143(3), 144, 147, as it existed before the coming of the Chapter XIV-B on the statute, i.e., before 1st July, 1995, is concerned there was no difference between the assessments framed under any of these sections during the ordinary course of assessment proceedings and the assessment framed after the search because in both the situations the assessee was to be taxed at the same rate of income-tax, but, after coming of Chapter XIV-B on the statute, the consequence of search under section 132 leads to different result than the consequences before the coming of the Chapter XIV-B on the statute and the one of the consequence is that as a result of coming of Chapter XIV-B upon the statute an assessee, in whose case search action under section 132 of the Act is taken, is to be taxed at a special rate of 60%.
7.2 On the point of effect of Chapter XIV-B much has been written by the ld. Members constituting the Division Bench in their respective orders, such as, paras 17, 18 and 19 of the order by the ld. Judicial Member and paras 3.1 and 4 of the order of the ld. Accountant Member and I need not repeat the same but would like to state, even at the cost of repetition, some of the important points of difference caused in scope of action under section 132 before and after the coming of the Chapter XIV-B on the statute which, in my opinion, are as under : Consequences of action under section 132 of the Act prior to the coming of Chapter XIV-B on the statute : (i) Reassessment of assessment proceedings for any assessment year were not automatically initiated. It could be only if there was information as a result of search that taxable income has escaped assessment.
(iii) Penalty under section 271(1)(c), if the circumstances so warranted, could be imposed.
(iv) Prosecution under Chapter XXII of the Act, if the circumstances so warranted, could be launched.
(v) There was no obligation on the part of the assessee to furnish the return of income for any of the assessment years, including previous assessment years except in case of initiation of proceedings under section 147 or section 142(1), as the case may be.
(vi) The assessee had no obligation to furnish the so called concealed income in the return to be furnished in consequence upon notice under section 148 or 142(1).
(vii) Even if the concealed income was shown in the return furnished in response to notice under section 148 or 142(1) penalty under section 271(1)(c) could be imposed.
The Consequence of search under section 132 of the Act after coming of Chapter XIV-B on the statute and upto 1st January, 1997 : (i) From the provisions of section 158BC of the Act, it is clear that the re-assessment or assessment proceedings, which culminate in determination of "undisclosed income" are a must and those are automatic. The Assessing Officer has no choice. Once he is informed of the action under section 132 of the Act, he has to serve upon the person, in whose case action under section 132 of the Act has been taken, a notice under section 158BC requiring him to furnish the return as provided under section 142(1)(i) of the Act showing total income, including the undisclosed income of the block period which other means that - (a) the assessee has to file return of income for current year, i.e., for the period upto the date of search as well as for a period of immediate 10 previous years.
(b) There is obligation on the part of the assessee to include the undisclosed income also.
(c) If there is any undisclosed income, either included in the return so filed or is determined as a result of assessment of block period, the income-tax to be charged is @ 60%.
(d) No penalty u/s. 271(1)(c) on the basis of such undisclosed income.
7.3 From the above, it is crystal clear that consequence of search u/s.
132 of the Act after coming of Chapter XIV-B on the statute are quite distinct and different and leads to different results. In view of above, it is obvious that introduction of provisions of Chapter XIV-B of the Act has made the consequences of search action u/s. 132 of the Act quite different and if that be the case, then the proposition that validity of search action u/s. 132 of the Act can be objected to only by way of writ petition under Article 226 of the Constitution of India may not hold good because the provisions of Sec. 132(1) contains two limbs as is evident from the following discussion of the Sec. 132(1), which reads as under : "132. (1) Where the Director General or Director or the Chief Commissioner or Commissioner or any such Joint Director or Joint Commissioner as may be empowered in this behalf by the Board in consequence of information in his possession, has reason to believe that - (a) any person to whom a summons under sub-section (a) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), 7.4 From sub-section (1) of sec. 132, it is clear beyond doubt that the authority empowered to issue search warrant can issue search warrant only if he or she has reason to believe on the appreciation of information or any of the circumstances contained in sub-clause (a) or (b) or (c) of sub-sec. (1) of Sec. 132, meaning thereby that before having reasons to believe and issue a search warrant authority must satisfy itself with respect to the existence of circumstances or satisfaction of the condition enumerated in clause (a) or (b) or (c) of sub-section (1) of Sec. 132 and it is only after the existence of any of these circumstances or satisfaction of any of these conditions, which, of course, are of facts, coupled with conclusion arrived at from such facts that a person can be said to have, if at all he or she has, "reasons to believe" and this in turn suggests that existence of the circumstances or satisfaction of the conditions (supra) is a must.
For example, for the satisfaction of conditions or existence of circumstances listed under clause (a), issuance of a summons u/s. 37 of 1922 Act or u/s. 131 of the Act or a notice under sub-section (4) of Sec. 22 of 1922 Act or under sub-section (1) of Sec. 142 of the Act is a must because it is only after the issuance of such warrant/notice that the assessee can have a chance to omit or fail to comply with. If it is not so, then there is no question of assessee omitting or failing in complying with.
From clause (b) it is evident that the question of circumstances mentioned therein will arise only after the issuance of a summons or a notice as under clause (a) above which again relates to a "fact material".
Similarly, so far as clause (c) is concerned, first of all there should be evidence that a person is in possession of money, bullion, jewellery or other valuable articles or thing, secondly, such article or thing should represent wholly or partly income or property and, thirdly, there is apprehension that such income or property either has not been or would not be disclosed for the purpose of the Act. The analysis clearly shows that it is only the existence of certain facts which is the prime requirement.
7.5 Now, since the fulfilment of any of the conditions or existence of any of the circumstances listed in clause (a) or (b) or (c) is wholly dependent on the existence of fact material it could not be accepted that an authority acting as quasi judicial authority or an appellate authority, which, strictly speaking, may not be courts but certainly are carrying on the judicial functions, cannot go into the issue relating to the existence of such facts material.
7.6 Coming to the scope of Article 226 of the Constitution of India, since I was of the opinion that to find out answer to the question referred for my opinion, it is necessary to consider the scope of Article 226 of the constitution, the parties were given an opportunity to advance their respective submissions as per order sheet entry dated 21st September, 1999, in the light of the following query : "Does article 226 of the Constitution of India debars the subject from taking recourse to the remedial provisions under relevant statute and in the present case under the I.T. Act, 1961, before the various authorities/Appellate authorities, meant for redressal of subject's grievance - including the grievance against violation of its fundamental rights, granted under the Constitution of India; not by the statute itself but by the authorities acting under the relevant statute." 7.8 The assessee's counsel submitted that Article 226 of the Constitution has got two limbs - one for enforcement of fundamental rights and the other for enforcement of other rights. According to him, Article 226 of the Constitution does not debar the subject from taking recourse to the remedial procedure available under the relevant Act - during the enforcement of which the authorities had violated any of the rights of the subject.
The ld. counsel further submitted that Article 226 of the Constitution is meant only for redressal when the violation of fundamental rights is by the Legislative action, i.e., by the enactment itself or by an Ordinance and not when the rights are violated by the authorities acting under a particular legislation/statute. He further submitted that writ u/s. 226 of the Constitution will lie only when the facts are not in dispute. In support of above submissions, he referred to para 18 of the decision in the case of D.L.F. Housing Construction (P.) Ltd. v.Delhi Municipal Corpn. AIR 1976 SC 386 and also to the observations of the Allahabad High Court at page 268 of 176 ITR 261, according to which, if remedy is available under the relevant statute, writ will not lie. Further, referring to Central Provinces Manganese Ore Co. Ltd. v.CIT [1986] 160 ITR 961/27 Taxman 275 (SC), the assessee's counsel submitted that the court, while dealing with the assessee's right to appeal against levy of interest u/s. 215/216 of the act has held that though there is no specific right of appeal against levy of interest but still the assessee can challenge the same in appeal. On the basis of this decision, the assessee's counsel tried to make out the case that even if there is no specific right to appeal under a particular statute, the subject has a right to appeal against any of the action taken under that statute.
8. The ld. Departmental Representative, however, submitted his submissions in writing in the following terms : "In all the submissions made before the Hon'ble I.T.A.T. in the above case, it has been the consistent stand of the department that, the Income-tax Appellate Tribunal has no jurisdiction to go into the validity of search conducted on the assessee under sec. 132 of the I.T. Act and the assessee cannot in law call for the "Satisfaction Note" forming "reason to believe" as envisaged by sub-section (1) of section 132 of the I.T. Act and further the Appellate Tribunal during the hearing of the first appeal under section 253(1)(b) of the I.T. Act, 1961 cannot act similarly and direct the department to produce such material before it.
2. During the course of hearing on 21st September, 99 your honour was pleased to raise the following query for further argument - Does Article 226 of the Constitution of India debar the subject from taking recourse to the remedial provision under relevant statute and in the present case under the I.T. Act, 1961, before the various authorities/Appellate Authorities, meant for redressal of subjects, grievances - including the grievance against violation of its fundamental rights; granted under the Constitution of India; not by the statute itself but by the authorities acting under the relevant statute.
3. With regard to the above query, I have following submissions to make before your honour : Article 226 of the Constitution of India does not debar any assessee from taking recourse to the provisions of the other Act in which any remedy is provided. On the other hand, the High Court generally does not interfere under Article 226 of the Constitution, if an alternative remedy is available under the Act, before any authorities.
4. The question regarding the validity of the reasons recorded under sec. 132 cannot be adjudicated upon in an appeal of the assessee before the Income-tax Appellate Tribunal.
5. The Tribunal has no jurisdiction to go into the question about the validity of the search or the validity of reasons/satisfaction recorded by the D.I./C.I.T. for conducting search u/s. 132(1) and this view of the department is fully supported by the following case laws : (i) Income-tax Officer, Special Investigation Circle 'B', Meerut v. Seth Bros. and others 74 ITR 836 (SC).
(ii) 136 ITR 513 (Alld) : The issue of a search warrant by the Commissioner is not a judicial or quasi judicial act and even if the Commissioner is enjoined to issue a warrant only if there is information in his possession in consequence of which he may form the necessary belief, the matter is not thereby subject to scrutiny by the court.
The issue of a search warrant by the Commr. of Income-tax u/s. 132 of the I.T. Act is not a judicial or quasi judicial act Since by the exercise of power u/s. 132 of the I.T. Act, 1961 a serious invasion is made upon the rights, privacy and freedom of the tax payer, the power must be exercised strictly in accordance with the law and only for the purposes in which the law authorises it to be exercised. If the act on of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the Court about the regularity of its action. If the action is maliciously taken or power of the section is exercised for collateral purposes it is liable to be struck down by the court." 6. The question arises - what does the Word 'Court' in the above stated extract means - In this regard it would be pertinent to quote from the opening lines of the head notes prefaced to the judgment of the Patna High Court in 167 ITR 652 in the case of CIT v. Dr. (Mrs.) Krishna Rana which states : "The Income-tax Appellate Tribunal is not a court, the Tribunal has no power to review its own orders. Hence, the Tribunal cannot be clothed with some incidental powers permitting it to do indirectly what it cannot do directly." The inference drawn here would be that one of the reasons why a Tribunal cannot be a 'Court' because it does not have the power to review or recall its own orders while a Court, say High Court or Supreme Court always have the powers to review or revise their orders. There can be many other reasons why the Tribunal is not a court. Read in conjunction with the ratio of judgment of Seth Bros.
74 ITR 836, it can safely be said that the Tribunal is not qualified to look into matters pertinent to exercise of powers u/s. 132 of the I.T. Act and on the strength of the analogy of the citation in the case of CIT v. Dr. (Mrs.) Krishna Rana, the Tribunal cannot be permitted to deal with the alleged violation of the fundamental rights of the assessee in Commissioner's exercise of power under sec. 132 of the I.T. Act. The issue appears to have been finally clinced in favour of the department through the following judgment in the case of K. S. Venkataraman & Co. Pvt. Ltd. v. State of Madras (Supreme Court) cited on page 112 of 60 ITR on page 113 of the citation just before the unequivocal finding given towards the end of the page, there is an observation. "It is also equally well established that Civil Courts have power to entertain suit in which the question is whether the executive authority has acted ultra vires its powers." Which is turn implies that Appellate Authorities like the Tribunal do not have any such power. The most relevant finding of the above stated judgment is as follows : '(ii) The three authorities under the I.T. Act viz. the Income-tax Officer, Appellate Asstt. Commissioner and the Appellate Tribunal are the creatures of the Act and they function thereunder. They cannot ignore any source of income on the ground that the relevant provisions offend the fundamental rights or are bad for want of legislative competence. The Act does not confer any such right on them. Their jurisdiction is confined to the assessment of the income and the tax under the provisions of the Act. Whether the provisions are good or bad is not their concern. As the Tribunal is a creature of the statute, it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act. The question of ultra vires is foreign to the scope of its jurisdiction.
If an assessee raises such a question the Tribunal can only reject it on the ground that it has no jurisdiction to entertain the said objection or decide on it.' 6. Though there is no need to cite further cases in support of the department's stand but an answer to the Hon'ble 3rd Member's query raised vide note dated 21-9-99 is provided in the head note of the citation on page 469 of ITR 111 in the case of Kausalaya Santhanam v. Agriculture Income-tax Officer, Coimbatore (Madras High Court) - 'when a challenge is made on the basis of the invalidity of the Act which is sought to be invoked by the Commissioner, such a challenge cannot be made before the Commissioner or in Revision Petition filed against the Commissioner's order. A challenge to the validity of the Act can properly be made only in writ proceedings. Therefore, it cannot be contended that in such cases the assessee has alternative remedies by way of appeal or revision which is bar to the maintainability of the Writ Petition." 9. I have considered the rival submissions, facts and circumstances of the case, the decision relied on by the parties, provisions of law, relevant for the decision of the issue in hand and after consideration of the same, am of the opinion that to consider the scope of Article 226 of the Indian Constitution, it is necessary to consider the scope of Article 32 of the Constitution and the fundamental rights of the citizens of India as enshrined in Part-III of the Constitution, which are as under : (ii) Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth (Art. 15).
(iii) Equality of opportunity in matters of Public employed (Art.
16). (iv) Abolition of untouchability - (Art. 17).
(i) Protection of certain rights regarding freedom of speech etc.
(Art. 19).
(iv) Protection against arrest and detention in certain case (Art.
22).
(i) Prohibition of Traffic in human beings & forced Labour (Art.
23).
(i) Freedom of Conscience and free profession, Practice and Propogation of religion (Art. 25).
(iii) Freedom as to payment of taxes for promotion of any particular religion (Art. 27).
(iv) Freedom as to attendance at religion instructions or regions worship in certain educational Institution (Art. 28).
(ii) Right of minorities to establish and administer educational Institution (Art. 30).
"32. (1) The right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred by this Part is guaranteed.
(2) The Supreme Court shall have power to issue directions or orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari whichever may be appropriate, for the enforcement of any of the rights conferred by this Part.
(3) Without prejudice to the powers conferred on the Supreme Court by clauses (1) and (2), Parliament may by law empower any other court to exercise within the local limits of its jurisdiction all or any of the powers exercised by the Supreme Court under clause (2).
(4) The right guaranteed by this article shall not be suspended except as otherwise provided for by this Constitution." "226. (1) Notwithstanding anything in article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, (for the enforcement of any of the rights conferred by part III and for any other purpose.(2) ** ** **(3) ** ** **" From the combined in-depth study of the Articles 32 and 226 on the one hard and the Fundamental Rights on the other hand, what is gathered is that : 1. The subject's right to approach the Hon'ble Supreme Court for the enforcement of any of or all of the Fundamental Rights conferred by Part-III of the Constitution is guaranteed - meaning thereby that there is no bar for any person to approach the Hon'ble Supreme Court if it is of the opinion that its Fundamental Rights is being abrogated or not enforced or is suspended.
2. In addition to aforesaid guaranteed right the subject has been given further right (may be additional one) to approach the H.C. for the enforcement of any of or all of the Fundamental Rights conferred by Part-III of the Constitution, but, (i) The right to approach the High Court is not guaranteed, rather it is the High Court which has been given power to issue to any person or authority, including, in appropriate cases, any Government within the territories in relation to which it exercises the jurisdiction, orders or writs including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them for the enforcement of the rights conferred by Part-III and for any other purposes.
(ii) Article 226 shall/is not in derogation of the powers conferred on the Supreme Court by clause (2) of article 32.
(iii) Article 226 is not meant to short circuit or circumvent the statutory procedure available under the relevant law. It is only where Statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as, for instance (1) where the very vires of the statute is in question or (2) where Private or Public wrongs are so inextricably mixed up and the prevention of Public Injury and the vindication of public justice require it that recourse may be had to article 226 of the Constitution, but, then the Court must have good & sufficient reason to bypass the alternative remedy provided by statute.
10. After going through the Article 226 of the Constitution, I am of the opinion that the jurisdiction of the High Court under article 226 can be got invoked by the subject not as a matter of right or in a routine manner. This jurisdiction can be requested for only under special circumstances (supra). What to say of as a matter of right or in a routine manner, the position is absolutely otherwise, because the courts have time and again discouraged the approach by way of article 226 when there is alternate remedy available under the relevant statute. The aforesaid view is derived from the scheme of Articles 32 and 226 and finds support from the following decisions of the Apex Court : (1) In the case of Asstt. Collector v. Dunlop India Ltd. AIR 1985 SC 330, the Hon'ble Supreme Court, after observing that since a vast majority of the petitions under article 226 of the Constitution are filed solely for the purpose of obtaining interim order and thereafter prolonging the proceedings by one device or the other, held that the practice certainly needs to be strongly discouraged.Titaghur Paper Mills Co. Ltd. v. State of Orissa [1983] 142 ITR 663, the Hon'ble Supreme Court, while confirming the decision of the High Court dismissing the writ petition in limine, held that pages 668 and 669 as under : "We are constrained to dismiss these petitions on the short ground that the petitioners have an equally efficacious alternative remedy by way of an appeal to the prescribed authority under sub-section (1) of section 23 of the Act, then a second appeal to the Tribunal under sub-section (3)(a) thereof, and thereafter in the event the petitioners get no relief, to have the case stated to the High Court under section 23 of the Act. In Raleigh Investment Co. Ltd. v. Governor-General in Council [1947] LR 74 IA 50 : 15 ITR 332 (PC), Lord Uthwatt, J., in delivering the judgment of the Board, observed that in the provenance of tax where the Act provided for a complete machinery, which enabled an assessee to effectively raise in the courts the question of the validity of an assessment denied an alternative jurisdiction to the High Court to interfere. It is true that the decision of the Privy Council in Raleigh Investment Co.'s case was in relation to a suit brought for a declaration that an assessment made by the ITO was a nullity, and it was held by the Privy Council that an assessment made under the machinery provided by the Act, even if based on a provision subsequently held to be ultra vires, was not a nullity like an order of a court lacking jurisdiction and that section 67 of the Indian Income-tax Act, 1922, operated as a bar to the maintainability of such a suit. In dealing with the question whether section 67 operated as a bar to a suit to set aside or modify an assessment made under a provision of the Act which is ultra vires, the Privy Council observed : 'In construing the section it is pertinent, in their Lordships' opinion, to ascertain whether the Act contains machinery which enables an assessee effectively to raise in the courts the question whether a particular provision of Income-tax Act bearing on the assessment made is or is not ultra vires. The presence of such machinery, though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to inquire into the same subject matter.'K. S. Venkataraman & Co. v. State of Madras [1966] 2 SCR 229; [1966] 60 ITR 112 : 17 STC 418 (SC), in a five-judges Bench by a majority of 3 : 2 has dissented with the view expressed by the Privy Council in Raleigh Investment Co's case [1947] 15 ITR 332, and held that an assessment made on the basis of a provision which is ultra vires is not an assessment made under the Act. It was observed that the entire reasoning of the Judicial Committee was based upon the assumption that the question of ultra vires can be canvassed and finally decided through the machinery provided under the Income-tax Act. The majority observed that the hierarchy of authorities set up under the Act being creatures of statute were not concerned as to whether the provisions of the Act were intra vires or not. If an assessee raises such a question, according to the decision of the majority in Venkataraman's case [1966] 60 ITR 112; 17 STC 418 (SC), the Appellate Tribunal can only reject it on the ground that it has no jurisdiction to entertain such objection or render any decision on it. As no such question can be raised, or can even arise, out of the order of the Appellate Tribunal, the High Court cannot possibly give any decision on the question of ultra vires because its jurisdiction under section 66 is a special advisory jurisdiction and its scope is strictly limited. It can only decide questions of law that arise out of the order of the Appellate Tribunal and that are referred to it. Further, an appeal to this court under section 66A(2) does not enlarge the scope of the jurisdiction of this court as this court can only do what the High Court can under section 66. It would, therefore, appear that the majority decision in Venkataraman's case rests on the principal that : (i) An ultra vires provision cannot be regarded as a part of the Act at all, and an assessment under such a provision is not "made under the Act" but is wholly without jurisdiction and is not directed by section 67 of the Act. And (ii) The question whether a provision is ultra vires or not cannot be decided by any of the authorities created by the Act and, therefore, cannot be the subject-matter of a reference to the High Court or a subsequent appeal to this Court.
No such question arises in a case like the present where the impugned orders of assessment are not challenged on the ground that they are based on a provision which is ultra vires. We are dealing with a case in which the entrustment of power to assess is not in dispute, and the authority within the limits of his power is a Tribunal of exclusive jurisdiction. The challenge is only to the regularity of the proceedings before the learned STO as also his authority to treat the gross turnover returned by the petitioners to be the taxable turnover. Investment of authority to tax involves authority to tax transactions which in exercise of his authority the taxing officer regards as taxable, and not merely authority to tax only those transactions which are, on a true view of the facts and the law, taxable." The Hon'ble Court, after distinguishing another decision of the Apex Court itself in the case of State of U.P. v. Mohammad Nooh [1958] SCR 595, 609, at page 671 observed as under : "If an inferior court or Tribunal of first instance acts wholly without jurisdiction or patently in excess of jurisdiction or manifestly conducts the proceedings before it in a manner which is contrary to the rules of natural justice and all accepted rules of procedure and which offends the superior court's sense of fair play the superior court may, we think, quite properly exercise its power to issue the prerogative writ of certiorari to correct the error of the court or Tribunal of first instance, even if an appeal to another inferior court or Tribunal was available and recourse was not had to it or if recourse was had to it, it confirmed what ex-facie was a nullity for reasons aforementioned." We find no justification for extending the principles laid down in Mohammad Nooh's case, to a case like the present where there is an assessment made by the learned STO under the Act. In Raleigh Investment Co.'s case [1947] 15 ITR 332, the Privy Council rightly observed that the phrase "made under the Act" described the provenance of the assessment; it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test.
The decision in Mohammad Nooh's case, is clearly distinguishable as in that case there was total lack of jurisdiction. There is no suggestion that the learned STO had no jurisdiction to make an assessment. Nor can it be contended that he acted in breach of rules of natural justice. There is no denying the fact that the petitioner was served with a notice of the proceeding under rule 12(5) of the Rules and sub-section (4) of section 12 of the Act. The impugned orders clearly show that the petitioners were afforded sufficient opportunity to place their case. Merely because the learned STO refused to grant any further adjournment and decided to proceed to best judgment, it cannot be said that he acted in violation of the rules of natural justice. The question whether another adjournment should have been granted or not was within the discretion of the learned STO and is a matter which can properly be raised only in an appeal under sub-section (1) of section 23 of the Act. All that this court laid down in Mohammad Nooh's case [1958] SCR 595, is that the rule which requires the exhaustion of alternative remedies is a rule of convenience and discretion rather than a rule of law; in other words, it does not bar the jurisdiction of the court." 10.1 The aforesaid decisions leave no room about the proposition that if the relevant statute provides for equally efficacious alternative remedy by way of appeal to the prescribed Authority, the extraordinary jurisdiction of the High Court under article 226 of the Constitution cannot be invoked.
11. What I am able to understand from the above discussions is that one can approach the High Court or the Supreme Court, as the case may be, requesting for invoking of the extraordinary jurisdiction under article 226 or article 32 of the Constitution, as the case may be, if it is found that : (i) violation of fundamental right is by way of legislative action, i.e., by the statute itself or by way of an Ordinance.
(ii) if the subject's fundamental right or any other right is abrogated by the executive, i.e., by the authorities, acting under a lawful legislation/statute, by misinterpreting the provisions or due to any other reason, then the extraordinary jurisdiction under article 226 of the Constitution can be requested for only if (a) there is no other remedy available under the relevant statute or (b) if the procedure/other remedial procedure is followed, the subject would suffer an irreparable loss to life or properties or reputation or anything else.
12. Non-guaranteeing the subject's right to approach the High Court under article 226 supports the view that subject's right to approach the High Court requesting for the invoking of the special jurisdiction is neither guaranteed nor is absolute - which makes it, further clear that wherever the subject has efficacious alternative remedy under the relevant statutes for getting the objective redress, it should first exhaust that remedy.
12.1 If this is the law, then to say that a subject, instead of going the Tribunal, should go to the High Court by way of a petition under article 226 is to confer a right on the subject which otherwise is not conferred on it - even by the Constitution itself.
Even otherwise, such an approach leads to interpretation that article 226 debars the subject from availing the other efficacious alternative remedies available under the relevant statutes which, in my opinion, is not the law.
13. In view of the above discussion, I am of the opinion that article 226 does not debar the subject from taking recourse to efficacious remedies available under the statutes; rather it is necessary to first exhaust the other efficacious remedy available except in special circumstances which, so far as the present case is concerned, do not exist.
14. Having held as above, the next question for my consideration is with respect to the jurisdiction of the Assessing Officer and of the Income-tax Appellate Tribunal : 15.1 So far as the powers and jurisdiction of the Assessing Officer to go into the question of existence of any circumstances or satisfaction of any conditions enumerated in clause (a) or (b) or (c) of sub-section (1) of section 132 are concerned, I am of the opinion that empowerment of the Assessing Officer to make an assessment of block period is an executive act in exercise of powers vested by virtue of provisions of section 120 of the Act and the Assessing Officer has no reason or right to challenge such empowerment but the moment the Assessing Officer proceeds to exercise his power to make assessment of a block period, his action partakes the character of a quasi-judicial act by a quasi-judicial authority and as far as the proceedings for making an assessment of a block period are concerned, the moment the Assessing Officer decides to proceed by way of issuing a notice under section 158BC of the Act, the quasi-judicial proceedings are put in motion and it is at this stage of the matter that the Assessing Officer is supposed to apply his quasi-judicial mind and should not proceed with closed mind. The moment the Assessing Officer is supposed to apply his quasi-judicial mind, he can and is duty bound to go into the question of existence of a search action under section 132 of the Act having taken place in accordance with law which in turn extends his jurisdiction to go into the question of existence of any of the circumstances for satisfaction of any of the conditions stipulated in clause (a) or (b) or (c) of sub-section (1) of section 132 irrespective of the fact as to whether he is called upon by the assessee to do so or not. His failure to do so may not only cause unlawful loss to the subject but can result in loss to the revenue also because if the Assessing Officer is said to have no powers to satisfy himself about the factum of search in accordance with law, then he is bound to proceed with closed mind and closed eyes, i.e., without going into the factum of search itself - what to say of in accordance with law or in violation of law; which, as may be clear from the following example, may result in loss to the revenue : Example : Let us take an example of a search action in the case of one 'A' having been carried out as a result of search warrant having been issued in favour of 'A' alone, but during the course of search it is found that there are other concerns/persons, namely, 'B', 'C' and 'D' having independent business at the same premises. The search party completes the search in all those cases and completes the search by seizing the documents, books and other assets, as the case may be, by preparing Panchnamas either in the name of 'A' alone or in the names of 'A', 'B', 'C' and 'D' separately. The authorised Officer informs the Assessing Officer, having jurisdiction over the cases about the factum of search. The Assessing Officer, without going into the factum of search - what to say in accordance with law or against law, makes assessments of 'A', 'B', 'C' and 'D' under section 158BC. 'B', 'C' and 'D' challenge their assessments under section 158BC before the appellate authority on the ground that there being no search warrant in their names, assessments under section 158BC were bad in law. The appellate authority has no option but to verify the factum of search, i.e., the existence of search warrant in the names of 'B', 'C' and 'D' and on satisfaction that there was no authorisation in their names has to declare the assessment of block periods in case of 'B', 'C' and 'D' as void ab-initio.
15.2 If the Assessing Officer could be said to have not only the powers but duty bound to verify the factum of search, then he could have detected this mistake in the communication sent to him by the authorised officer and since the records of 'B', 'C' and 'D' were found during the search of 'A', the Assessing Officer could have, if the circumstances, as enumerated in section 158BD, were satisfied, proceeded in case of 'B' and 'C' for making block assessment and revenue's loss could have been saved.
16. In view of the above discussions, I am of the opinion that the Assessing Officer not only, if called upon by the assessee, but of his own also is duty bound to satisfy himself about the factum of a search in accordance with law which, in turn, amounts to Assessing Officer's having jurisdiction/power to call for the satisfaction note of the authority authorising the search.
16.1 Here, the fact that the Assessing Officer is subordinate to the authority authorising search is not material because the Assessing Officer is performing his quasi-judicial functions where as the act of authorisation is neither judicial nor quasi-judicial; rather is an executive function Seth Bros. case (supra). That being the case, the subordination in the hierarchy of the Income-tax authorities is of no relevance.
17.1 Article 323 of the Constitution of India provides for the establishment of the Tribunals, by the appropriate legislative by way of appropriate law for adjudication or trial by the Tribunals in dispute, complaints or offences with respect to all or any of the matters specified in clause (2) of article 323B. "323B. (1) The appropriate Legislature may, by law, provide for the adjudication or trial by Tribunals of any disputes, complaints, or offences with respect to any of the matters specified in clause (2) with respect to which such Legislature has power to make laws.
(2) The matters referred to in clause (1) are the following, namely :- (d) land reforms by way of acquisition by the State of any estate, as defined in article 31A or of any rights therein or the extinguishment of modification of any such rights or by way of ceiling on agricultural land or in any other way; (f) elections of either House of Parliament or the House of the Legislature of a State, but excluding the matters to in article 329 and article 329A; (g) production, procurement, supply and distribution of food-stuffs including edible oilseeds and oils and such other goods as the President may, by public notification, declare to be essential goods for the purpose of the article and control of prices of such goods; (h) offences against laws with respect to any of the matters specified in sub-clauses (a) to (g) and fees in respect of any of those matters; (i) any matter incidental to any of the matters specified in sub-clauses (a) to (h).
(b) specify the jurisdiction, powers (including the power to punish for contempt) and authority which may be exercised by each of the said Tribunals; (c) provide for the procedure (including provisions as to limitation and rules of evidence) to be followed by the said Tribunals; (d) exclude the jurisdiction of all courts except the jurisdiction of the Supreme Court under article 136 with respect to all or any of the matters falling within the jurisdiction of the said Tribunals; (e) provide for the transfer to each such Tribunal of any cases pending before any court or any other authority immediately before the establishment of such Tribunal as would have been within the jurisdiction of such Tribunal, if the causes of action on which such suits or proceedings are based had arisen after such establishment; (f) contain such supplemental, incidental and consequential provisions (including provisions as to fees) as the appropriate Legislature may deem necessary for the effective functioning of, and for the speedy disposal of causes by, and the enforcement of the order of, such Tribunals.
(4) The provisions of this article shall have effect notwithstanding anything in any other provision of this Constitution or in any other law for the time being in force.
Explanation - In this article "appropriate Legislature in relation to any matter means Parliament or, as the case may be, a State Legislature competent to make laws with respect to such matter in accordance with the provisions of Part XI." 18. If we read clause (1) alongwith sub-clause (a) and sub-clause (2) of article 323B, it is clear that the Tribunal so established can be empowered to adjudicate even the matters incidental to the matters relating to levy, assessment, collection and enforcement of any tax and since the levy, assessment and collection of tax under Chapter XIV-B of the Act is in consequence upon action under section 132 of the Act, the matter relating to the validity of search action under section 132 of the Act and consequently the existence of circumstances or satisfaction of the conditions specified in clause (a) or (b) or (c) of sub-section (1) of section 132, which are prerequisite mandatory requirements, comes at least within the ambit of the term "matters incidental" referred to in sub-clause (i) of clause (2) of Article 323B and, therefore, I am of the opinion that the Income-tax Appellate Tribunal which, though of course is not a court, being the creature of Legislative legislation - authority for which is derived from the Constitution; derives judicial functions in the performance of the same can adjudicate upon all the matters under the purview of Income-tax Act which, of course, includes levy, assessment, collection and enforcement of Income-tax Law and also the matters incidental to them.
19. That being the case, I am unable to subscribe to the revenue's plea that Income-tax Appellate Tribunal, inspite of its being the highest fact-finding authority, under the Income-tax Law, has no jurisdiction or powers to verify the existence of facts (with regard to the search having taken place in accordance with law) specified under clause (a) or (b) or (c) of sub-section (1) of section 132 - existence of which is the prerequisite condition for authorising a search in accordance with law and once this view of mine is upheld, the Income-tax Appellate Tribunal's power automatically gets extended to scrutinise the record of the authority empowered to authorise search because it is only that record which will reveal the existence/satisfaction of any of the circumstances/conditions listed underclause (a) or (b) or (c) of sub-section (1) of section 132 of the Act and also the existence of reasons to believe by such authority for bringing the case of a person within the ambit of provisions of section 132 and consequently within the ambit of provisions of Chapter XIV-B of the Act.
20. In view of the above discussions and the fact that Income-tax Appellate Tribunal has been established by the Parliament in exercise of its powers derived from Article 323B of the Constitution of India, the Income-tax Appellate Tribunal can adjudicate upon the matters relating to the validity of search which, in turn, empowers it to go into the establishment of existence for the satisfaction of any of the facts/conditions specified under clause (a) or (b) or (c) of sub-section (1) of section 132 of the Income-tax Act.
21. In view of the above discussion and for the reasons stated in paras 19 to 27 of the order of the ld. Judicial Member constituting the Division Bench, I am of the opinion that in the event of assessee challenging the validity of search undersection 132 on the ground of non-existence of any of the circumstances/conditions enumerated in clause (a) or (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 this case, the Assessing Officer as well as the Income-tax Appellate Tribunal, not only have the powers but are duty bound, in exercise of their quasi-judicial jurisdiction to adjudicate upon the matter and consequently can call for the records of concerned authorities leading to the issue of authorisation of search and can satisfy itself with regard to the authorisation having been issued in accordance with law. My aforesaid view is supported by the decision of Income-tax Appellate Tribunal, Bangalore, in case of Microland Ltd.'s case (supra) and of Hon'ble jurisdictional High Court of Allahabad in the case of P. N. Mishra - Writ Petition No. 406 of 1997, decided on 19th May, 1999, which, I consider necessary to discuss in ensuing paragraphs.
In the case of Microland Ltd. (supra), the assessee has challenged the validity of the search on the ground that there was no search warrant in its name. When the revenue was called upon to produce the search warrant, the revenue, instead of producing the original record/search warrant, produced a photostat copy of the same which was in the following terms : "Whereas information has been laid before me and on the consideration thereof I have reason to believe that : If a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 or under sub-section (1) of section 131 of the Income-tax Act, 1961 or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922 or sub-section (1) of section 142 of the Income-tax Act, 1961 is issued to Mr. Pradeep Kar (name of the person) to produce or cause to be produced, books of account or other documents which will be useful for or relevant to proceedings under the Indian Income-tax Act, 1922, or under the Income-tax Act, 1961, he would not produce or cause to be produced, such books of account or other documents as required by such summons or notice.
Shri Pradeep Kar, Chairman & Managing Director of Microland Ltd. and Microland Ltd. or/is in possession of any money, bullion, jewellery or other valuable article or thing or such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purpose of the Indian Income-tax Act, 1922 or the Income-tax Act, 1961 ..." 22.1 Since the photocopy was showing the name of the assessee also, the assessee alleged that its name has been interpolated at a later point of time. Since the Tribunal was in doubt regarding the existence of assessee's name in the original search warrant, the Tribunal directed the Departmental Representative to produce "all the papers connected with the search including the reasons recorded before authorising the search and also the appraisal report prepared by the Department Officer consequent upon the search." Revenue did not produce the requisite records on the ground of privilege.
22.2 It was in these circumstances that the Tribunal negatived the plea of privilege and in view of revenue's failure to produce the records accepted the assessee's plea that his name was not in the original search warrant. The Tribunal also referred to the decision of Karnataka High Court at Southern Herbals Ltd. v. Director of Income-tax (Investigation) [1994] 207 ITR 55 and Nenmal Shankarlal Parmer v.Asstt. CIT [1992] 195 ITR 582/62 Taxman 529 and of Punjab & Haryana High Court, at H. L. Sibal v. CIT [1976] 103 ITR 606. The relevant part of the Tribunal's order, as contained in para 22 of the order reads as under : "22. Now, we take up the different grounds as contended by the assessee. First of all we will be taking up the preliminary and technical grounds against the validity of the assessment order as such.
It is the contention of the assessee that the impugned assessment under Chapter XIV-B of the Income-tax Act is invalid in as much as there was no valid search in the assessee's case. The representative of the assessee, Sri K. R. Pradeep appearing before us has shown it to us that in all the correspondences, notice issued asking for the return and also in the assessment order, the Assessing Officer has all along considered the assessments as having been done under section 158BC and that nowhere any mention of the provisions of section 158BC relating to an assessment under Chapter XIV-B arising out of search in the case of another assessee has been mentioned.
Sri Pradeep strongly contends that the search warrant was not in the name of the assessee viz., M/s. Microland Ltd. He has also shown that the panchanama issued by the Deptt. on different occasions were all in the name of Sri Pradeep Kar, CMD, M/s. Microland Ltd., although the place to be searched was mentioned as M/s. Microland Ltd. In the lists/inventory of account books, etc., found/seized also, the name of the person is found to be shown as Sri Pradeep Kar, CMD, M/s. Microland Ltd. On the examination of the relevant papers (copies of the panchanamas etc.) we find the contention of the assessee to be Correct. Therefore, we wanted Dr. Krishna, the Departmental counsel, to produce before us the relevant search warrant. After initial hesitations, Dr. Krishna produced before us a photocopy of the said search warrant (original search warrant was never produced before us). The photocopy of the search warrant (which is very hazy) is found to read as below : "Whereas information has been laid before me and on the consideration thereof I have reason to believe that : If a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 or under sub-section (1) of section 131 of the Income-tax Act, 1961 or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922 or sub-section (1) of the section 142 of the Income-tax Act, 1961 is issued to Mr. Pradeep Kar (name of the person) to produce or cause to be produced, books of account or other documents which will be useful for or relevant to proceedings under the Indian Income-tax Act, 1922, or under the Income-tax Act, 1961, he would not produce or cause to be produced, such books of account or other documents as required by such summons or notice.
Shri Pradeep Kar, Chairman & Managing Director of Microland Ltd. and Microland Ltd. or/is in possession of any money, bullion, jewellery or other valuable article or thing or such money, bullion, jewellery, or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purpose of the Indian Income-tax Act, 1922 or the Income-tax Act, 1961 ...
The search warrant is found to be signed by the Additional Director of Income-tax (Inv.) Unit. It thus appears that at one place of the search warrant, the names of both Sri Pradeep Kar, Chairman & Managing Director of M/s. Microland and also Microland Ltd., were mentioned. The learned counsel for the assessee has verbally stated that the name of the assessee-company was interplated at a later point of time. From a thorough examination of the photocopy of the search warrant, we also feel that there is some scope for suspecting the existence of the name of Microland Ltd., in the search warrant originally. In order to resolve the issue about this suspicion, we wanted to inspect the original search records which led to conducting this search in the premises of the assessee. We felt that an examination of the reasons required to be recorded by the officer authorising the search would be able to throw light as to whether that authority originally had proper reasons for conducting the search in the case of Mr. Pradeep Kar alone or even in the case of the assessee, i.e., Microland Ltd. We therefore verbally directed Dr. Krishna to produce all the papers connected with the search including the reasons recorded before authorising the search and also the appraisal report prepared by the Departmental Officers consequent on the search. The departmental representatives including Dr. Krishna, however did not produce any papers in that regard including the reasons recorded for authorising the search on the ground of privilege and also divulgence of secret matter of the Department. We are unable to accept the departmental contention in this regard. In this connection, we would like to rely on a judgment of the Allahabad High Court in the case of Union of India v. Sheo Shankar Sitaram (1974) 95 ITR 523 as pointed out by the learned counsel for the assessee. It was held by the High Court in that case that the claim of privilege by Department in the matter of production of assessment records containing the correspondence between the ITO and his higher official under section 124 of the Evidence Act on the ground of official secrecy is not tenable.
A reference may also be made in this connection on a judgment of the Punjab & Haryana High Court in the case of H. L. Sibal v. ITO (1976) 103 ITR 606. It was held in the said case that when claim for privilege is made under section 138 of the Income-tax Act, the matter has to be decided with respect of the public affairs of the state, and that the competent authority which claims privilege must apply its mind to each individual document and also indicate reasons for which the claim for privilege is made. It was further more decided in the said case that when an official record is tampered with by its custodian for the purpose of putting forth false defence, no claim for privilege in respect of such a record can be allowed. In the instant case, we feel that the insertion of the name of the assessee in the relevant search warrant might have been made at a latter date. For the purpose of removal of our suspicion in that regard only, we wanted to inspect and verify the official records supposed to be maintained in this connection. The claim of privilege on the part of the Department is certainly unwarranted in view of the above decisions.
In this connection, we may make mention of certain remarks made by the Karnataka High Court in the case of Southern Herbals Ltd. v. Director of Income-tax (1994) 207 ITR 55, which has actually been sought to be relied upon by the learned departmental counsel with regard to certain other issue. The Karnataka High Court clearly stated in the said case that the warrant of authorisation for search has to be in the prescribed form and that it cannot be issued in general terms without specifying the person in respect of whom it is issued. The learned counsel for the assessee has also relied in this connection on another judgment of the Karnataka High Court in the case of Nenmal Shankarlal Parmer v. Asst. CIT (1992) 195 ITR 582 at page 586. In that case, the search warrant was in the name of the firm but the residential premises of the partners were searched without any warrant in their names. The Karnataka High Court held that the mere mention of the residential premises did not enable the department to effect seizure of assets etc. belonging to the partners from such premises.
Dr. Krishna initially tried to argue that Microland was actually the party to be searched although the warrant was in the name of its Managing Director Mr. Pradeep Kar. He argues that a company does not have any direct method of operation and that it is to be operated through its employees and authorised persons only. He referred to the provisions of section 282(2)(b) of the Income-tax Act, 1961 in accordance with which a notice in the case of a company may be served on the principal officer thereof. As regards the question of disclosure of information to the assessee at the stage of conducting the search is concerned, Dr. Krishna has tried to rely on the discussions made by the Karnataka High Court in the case of Southern Herbals Ltd. (supra) at page 62 of the reported judgment to the effect that disclosure of the materials or the information to the persons against whom action under section 132(1a) is taken is not mandatory, because the very disclosure would affect or hamper the investigations.
In this connection, Sri Pradeep appearing on behalf of the assessee company, has brought our notice to the further discussions made by the Karnataka High Court in that very case at page 63 of the reported judgment, as below : 'The stage for disclosure of the materials is reached only when the Revenue resolves to proceed to make an appropriate order imposing tax liability or penalty, etc. and at that stage, all relevant materials from which the liability of the taxpayer is sought to be inferred shall have to be disclosed.' Sri Pradeep strongly argues that even at the stage of framing the assessments also, the departmental authorities did not disclose the actual reasons for conducting the search.
Whatever may be the case relating to disclosure of the informations about search to the assessee even at the assessment stage, at this stage of appeal before us, at least, the departmental authorities should have placed all the relevant records. The Tribunal would have surely taken care to see that such confidential matters are not divulged to the assessee or anybody else. However, non-production of the relevant records would certainly go against the departmental case. We are constrained to take an adverse view of the matter on account of non-compliance of our requirements, by the departmental authorities. We therefore come to the opinion that the name of M/s.
Microland Ltd., was not there in the original search warrant and was inserted at a later stage and a photocopy thereof only was produced before us when we wanted for the same. There are indeed a large number of decisions in support of the proposition that the Court cannot put its own judgment as to the reasonability of the reasons required to be recorded by the authority for issuing the search warrant. However, the Court can certainly look into and get itself satisfied as to whether such reasons were at all recorded or not.
The onus will lie on the department to prove the existence of such recording. In the instant case, on account of failure of the Department to discharge such onus, we once more reiterate our opinion about the lack of the proper and valid search in the case of the assessee. So far as the provision of section 282(2)(b) is concerned, that particular section merely prescribes on whom the notice may be served. However, it is cardinal principle of law that the notice itself should show the name of the company. In the instant case, all the papers on record are merely in the names of Sri Pradeep Kar. Although he has been stated to be the Chairman & Managing Director of M/s. Microland Ltd., that is only an epithet used to describe him and it cannot be said that the departmental authorities have meant Microland itself in place of Sri Pradeep Kar, in all the papers and documents used by it like panchnamas etc.
Ultimately, therefore, we feel that as there was no valid search in the case of the assessee, the assessment made under section 158BC is invalid and void in law. There is again no indication anywhere that the assessment has been made under section 158BD." 22.3 In cage before the Hon'ble High Court of Allahabad, the assessee challenged the validity of search action by way of writ petition on various grounds, including the one as contained in paras 22 to 29 and 34 to 39 of the writ petition which run as under : "22. That the said search operation were carried out without there being in existence, even a prima facie material leave aside the 'information' which could lead to the 'reasons to believe' that the case of the petitioner fell in the category of : (a) any person to whom a summons under section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922) or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of accounts or other document as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceedings under the Indian Income-tax Act, 1922 (11 of 1922) or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property (which has not been, or would not be disclosed) for the purposes of the Indian Income-tax Act, 1922 (11 of 1922) or this Act (hereinafter in this section referred to as the undisclosed income or property). As envisaged in section 132(1) of the Income-tax Act, 1961.
That none of the conditions, mentioned in section 132(1) of the Act, which alone could have given justification for issuing 'authorisation' to enter into the premises of the petitioner and to carry out the search operation (an extreme 'measure' which leads serious interference with the 'life' and 'liberty' of a citizen) existed.
23. That it is settled law that any action which results into such an interference has to be just and fair and cannot be allowed to be taken by any authority, except by following a valid process of law.
24. That it is specifically stated here that the petitioner was never issued any summons for the purpose mentioned in clause (a) of sub-section (1) of section 132 of the Act (as reproduced in para 22 above) nor there existed any basis for the apprehension mentioned in clause (b) of the said section." 34. That the authorisation was issued by the respondent No. 2/5 without there being in existence any material which go to satisfy the conditions mentioned in sub-clauses (a), (b) and (c) of sub-section (1) of section 132 of the Income-tax Act, 1961, which had been extracted in paras 11 and 18 above amounts to interference with the 'life' and 'liberty' of the petitioner and violates Article 21 of the Constitution of India. It is settled law that any action which affects the 'life' and 'liberty' of a citizen which is Guaranteed to him under Article 21 of the Constitution of India, has to be just, fair and reasonable and any act done in violation of this principal is liable to be quashed as void ab initio.
35. That the authorisation issued by the respondent No. 2/5 without there being in existence any material which could go to satisfy the conditions mentioned in sub-clauses (a), (b) and (c) of sub-section (1) of Section 132 of the I.T. Act which have been extracted above amounts to misuse of the authority vested in him. Such a 'misuse' coupled with the distorted version of the "recovery or valuables" in the course of search operations, as given to the media by the respondent No. 2 and/or the authorities subordinate to him, which his (respondent No. 2's) full consent and concurrence, has seriously jeopardised the long career of the petitioner of nearly 33 years in the State Civil Services, and has also put him to undue harassment and humiliation in public life inasmuch as on the basis of such a distorted rather mischievous version of 'recovery', one Shri Surya Bhan Singh filed a complaint (against the petitioner) before the Hon'ble Lok Ayukt, Uttar Pradesh, who has even taken cognizance of such complaint. The State Government of U.P. has transferred the petitioner on the basis of such action of Respondent No. 2 and attached him without any specific charge. A copy of the order of the State Govt. is filed with this petition as Annexure No. 17.
36. That the unjust and unfair exercise of the authority by the respondent No. 2 coupled with the distorted version of "recovery of valuables" in the course of above referred search operations, as given to the media by the respondent No. 2 and the authorities subordinate to him, with his (respondent No. 2) full consent and concurrence has created a serious jeopardy to the petitioners, inasmuch as his long career of nearly 33 years in the State Civil Services has been put at stake and has caused him undue harassment and humiliation in public life.
37. That this Hon'ble Court in the case of Nand Lal Tahaliyani v. CIT reported in 170 ITR 592 has held that 'information' within the meaning of Section 132(1) should be as accurate as possible having reference to the precise assets of a person and not of general nature. In case such an information is not precise, the Director of Inspection should have put this foot down on that and should not have endorsed the action suggested by the Assistant Director. The Hon'ble Supreme Court did not interfere with the said decision, though for different reasons, in the petition filed by the CIT, Allahabad, before it as may be seen from the decision reported in 172 ITR p. 627.
38. That following the decision of this Hon'ble Court in the case of Nand Lal Tahaliyani (supra), the Hon'ble Delhi High Court has held that in the case of L. R. Gupta v. Union of India reported in 194 ITR p. 32 at page 45 as under : "The expression 'information' must be something more than a mere rumour or a gossip or a bunch. There must be some material which can be regarded as information which must exist on the file on the basis of which the authorising officer can have reason to believe that action under section 132 is called for any of the reasons mentioned in clauses for any of the reasons mentioned in clauses (a), (b) or (c). When the action of issuance of an authorisation under section 132 is challenged in a court, it will be open to the petitioner to contend that, on the facts of the information disclosed, no reasonable person could have come to the conclusion that action under section 132 was called for. The opinion which has to be formed is subjective and, therefore, the jurisdiction of the court to interfere is very limited. A court will not act as an appellate authority and examine meticulously the information in order to decide for itself as to whether action under section 132 is called for. But the Court would be acting within its jurisdiction in seeing whether the act of issuance of an authorisation under section 132 is arbitrary or mala fide or whether the satisfaction which is recorded is such which shows lack of application of mind of the appropriate authority. The reason to believe must be tangible in law and if the information or the reason has no nexus with the belief or there is no material or tangible information for the format on of the belief, then in such a case, action taken under section 132 would be regarded as bad in law.
39. That apart from inherent illegality in issuing the authorisation for carrying out the search operations in the case of the petitioner, the manner in which such search operations have been executed is also wholly illegal. The authorised officers who entered the premises of the appellant did not carry any proper authorisation at that time and even after repeated requests/representations made by the petitioner, copy of the so called warrant of authorisation was not given and rather the petitioner was made to sign some blank forms in the presence of large police contingent. A photo copy of excessive show of police force may be seen in Annexure 25." "1. Because the respondent No. 2 had no material of any kind whatsoever which could lead to the formation of 'reason to believe' that the petition fell in the category of any of the provisions of section 132(1) of the Act under which alone the warrant of authorisation for carrying out search at the premises of the petitioner could be issued.
2. Because the petitioner was never served with any notice under section 131(1) of the Income-tax Act, 1961 or under section 142(1) requiring him to produce or cause to be produced any books of account or other documents and there was, therefore, no omission or failure at the part of the petitioner to produce such books of account or other documents, so as to invite authorisation of search warrant against him under section 132(1)(a) of the Act.
3. Because there existed no basis or justification for the apprehension that the petitioner would not comply with the summons or notice that might be issued under section 131(1) or 142(1) respectively and consequently the condition laid down under section 132(1)(b) has not been satisfied.
4. Because there existed no 'material' that the petitioner was in possession of any unaccounted money, bullion, jewellery or other valuation articles as envisaged in section 132(1)(c) and in the absence of any precise information in this regard, the respondent No. 2 acted in a wholly arbitrary illegal manner in issuing warrant of authorisation for search in his case.
5. Because authorisation of warrant for carrying out search operation and execution of such warrant amounts to serious interference with the 'life' and 'liberty' of the petitioner as has been guaranteed under Article 21 of the Constitution of India and in the absence of the existence the requisite conditions, as is the case here, the entire process commencing from authorisation of search operation by the respondent No. 2, till execution thereof is liable to be declared as void ab initio and consequently all proceedings initiated/action taken against the petitioner deserve to be quashed.
6. Because the right to 'life' and 'liberty' is a constitutional right granted to every citizen of the country under Article 21 of the Constitution of India and any undue and unwarranted interference with such right, as has happened in the case of petitioner, amounts to violation of fundamental right under Article 21 of the Constitution; and the entire proceedings connected therewith deserve to be quashed.
7. Because the entire search operations are based on 'misinformation' i.e., on 'rumours' and 'gossips' as is evident from the highly distorted and unrealistic version given to the media by the Respondent No. 2 referred to in para 29 of this writ petition and the authorities subordinate to him, with his (respondent No. 2's) full concurrence and consent and the proceedings initiated thereunder are violative of principle of natural justice and are, therefore, liable to be struck down by this Hon'ble Court.' "It is, therefore, most respectfully prayed that this Hon'ble Court may graciously be pleased - (a) To issue a writ of certiorari order or direction in the nature of certiorari quashing the notice dated 6-3-1997 (Annexure-18); (b) To issue a writ of certiorari quashing the proceedings under section 132(1) of the Act, against the petitioner; (c) to issue writ of mandamus directing the respondents to release all the documents, assets etc. as relating to the petitioner; (d) to grant such other relief as is deemed fit under laws and equity; and 22.6 In this writ petition, the petitioner had made the following authorities as the respondents : 1. Central Board of Direct Taxes, Ministry of Finance, North Block, New Delhi.
2. Director General of Income-tax, Aayakar Bhawan, Lucknow, Uttar Pradesh.
22.7 The respondent No. 4 was the Assessing Officer also and had initiated proceedings for, assessment of block period by issuing a notice under section 158BC of the Act (see para 41).
22.8 The Hon'ble High Court disposed of the writ petition by passing the following order : "The petitioners shall be entitled to raise all objections which have been raised in this writ petition and the respondents shall decide the case on merit in accordance with law. The matter is disposed of.
23. From the order of Hon'ble jurisdictional High Court, which is even otherwise binding on the Tribunal, situated within the state of U.P., I am fortified that the Hon'ble High Court seems to have allowed the petitioner/assessee to raise all the objections, which, inter alia, includes the objections regarding the satisfaction of the conditions or existence of the circumstances specified in clause (a) or (b) or (c) of sub-section (1) of section 132 (Para 22.3) before the respondents, including the Assessing Officer and has directed the respondents, including the Assessing Officer to decide the case on merits and in accordance with law, only with one thing in mind that the objections - including the one similar to the issue underdispute before me as Third Member, can be decided by the revenue authorities, including the Assessing Officer and if that is the case, then the Appellate Tribunal can certainly decide the issue.
24. So far as the decisions relied on by the ld. Sr. Departmental Representative are concerned, I, after careful consideration of the same, am of the opinion that all these decisions relate to the violation of the rights by enactment itself, i.e., by legislative action and not by the executive authority working for the enforcement of the legislation.
25. There is no dispute about the proposition that the Tribunal being the creature of the statute is not a court and has no power to go into the vires of a legislative action - which is the domain of the courts, and to this extent the ld. Sr. Departmental Representative's submissions and the decisions relied are on in consonance with the law laid down by the courts but so far as the question of violation of subject's lights by executive authorities acting under a statute is concerned, the Legislature having made remedial provisions under the relevant statutes itself, it is the appellate authority under the statute which has the power to look into each and every action of executive authority - even if there is violation of subject's right granted under the Constitution because if it is found that the subject's right has been violated, the appellate authority will nullify the action of the authority and not the enactment.
26. As far as the revenue's reliance on the decision in case of Lit Light & Co. v. CIT [1982] 136 ITR 513 (All.) is concerned, I have gone through the decision relied on and also through the decision in the case of ITO v. Firm Madan Mohan Damma Mal [1968] 70 ITR 293 (All.) - observations at page-301, which has been relied upon, carefully and with due regards to the Hon'ble High Court, I am unable to subscribe to the interpretation of these decisions as canvassed by the revenue. What the revenue is canvassing is that the act of issuing of a search warrant by the CIT not being a judicial or quasi judicial act is not subject to scrutiny by the court. In my opinion, it is not the correct interpretation of these decisions because of the following : 26.1 In the case in Firm Madan Mohan Damma Mal (supra) the assessee had raised three questions, namely, (1) whether the creation of the special circle was illegal and consequently all the proceedings before the Income-tax Officer, Special Circle, are without jurisdiction, (2) whether the raid organised by the Income-tax Department was against law and, therefore, any material that may have been seized at the time of the raid cannot be utilised against the assessees, and (3) whether the raid and subsequent proceedings taken by the Income-tax Department against these assessees were actuated by malice and a mala fide motive "to teach them a lesson" and were, therefore, invalid and a nullity.
The court dealt with the questions at pages 300 to 304 in the following terms : "The next question for consideration at this stage is the validity of the search and the utility of the documents which were recovered at such search. The contention on behalf of the assessee is that the search was mala fide and was contrary to the provisions of law. The question of mala fide will be considered separately but here I will deal with the illegality alleged to have been committed in this connection. In the first place it is contended that under section 132 of the Income-tax Act, 1961, as amended in 1965, no search warrant could be issued unless the Commissioner (who issued the search warrant) had information in his possession in consequence of which he had reason to believe that the assessee would not produce the books of account which might be useful or relevant in assessing the tax. It is argued that the existence of such information is a matter of fact which can be adjudicated upon by a court of law although the formation of opinion may be subjective. In this connection, main reliance was placed on the case of Nakkuda Ali v. M. F. De. S. Jayartne. In that case their Lordships of the Privy Council were considering the provisions of Regulation No. 62 which contained the relevant words : 'Where the Controller has reasonable grounds to believe that any dealer is unfit to be allowed to continue as dealer.' These words were interpreted to mean that "There must infact exist such reasonable grounds known to the Controller before he can validity exercise the power of cancellation." But their Lordships further proceeded to note that the Controller was not required to perform any judicial or quasi-judicial functions and unless that was the position the matter would not become justiciable. Their Lordships observed : 'It is a long step in the argument to say that because a man is enjoined that he must not take action unless he has reasonable ground for believing something, he can only arrive at that believe by a course of conduct analogous to judicial process. And yet, unless that proposition is valid, there is really no ground for holding that the Controller is acting judicially or quasi-judicially when he acts under this Regulation. If he is not under a duty so to act, then it would not be according to law that his position should be amenable to review and if necessary to avoidance by the procedure of certiorari." In the present case the issue of a search warrant by the Commissioner was certainly not a judicial or a quasi-judicial act and even if the Commissioner was enjoined to issue a warrant only, when, in fact, there was information if his possession in consequence of which he could form the necessary belief, the matter would not thereby become subject to scrutiny by the court. On facts, the Commissioner has in his affidavit (paragraph 6) stated that he had acted on the basis of information and material placed before him to the effect that the firm had been carrying on a large scale business in the manufacture and sale of liquid gold, the profit from which were not being incorporated in the account books of the petitioner-company and the company had thus evaded tax to a very substantial extent. He also stated that this information indicated that the petitioner-company had been maintaining duplicate sets of accounts different from those which were being produced before the income-tax department which the company was not likely to produce.
Shri F. D. Helms, the Inspecting Assistant Commissioner, has also stated in his affidavit as follows : "The fact is that some secret information was passed on to me which prima facie gave an indication that the petitioner-company had been carrying on a large scale business in the manufacture and sale of liquid gold and the sale of such liquid gold was being effected through the allied business of Madan Mohan Damma Mal who were the sole selling agents of the petitioner firm which was not accounted for in the company's books of account ... that the petitioner was maintaining duplicate sets of accounts which were different from the books which were being produced before the Income-tax Department. I referred the matter to the Commissioner of Income-tax U.P. (2), who asked for some further clarification from me. I sent detailed report to the Commissioner through a special messenger and was later on called by the Commissioner for personal discussion together with the records of the case. After the Commissioner was satisfied about the authority of the information he issued the necessary authorisation letter under section 132 of the Income-tax Act, 1961.
The department has also produced one statement of Kalicharan which was recorded in this connection on the 30th January, 1965. Among other things, be had stated that he was serving with M/s. Madan Mohan Damma Mal, that he was realising the amounts for the sale of liquid gold and that he was also keeping accounts thereof. He also stated that these realisations were not entered in the regular books of account and that he was maintaining another set of accounts.
There is other information also contained in his statement but it is unnecessary to refer to the same. In my opinion, on these affidavits of responsible officers, coupled with this evidence which has been disclosed, there is no reason to doubt that the Commissioner had information which led him to issue the necessary warrant.
The next contention raised was that the statement of Kalicharan was not sufficient to issue a search warrant for all the places mentioned in the warrant and that the search itself was conducted at least at two places which was not authorised by the warrant namely, at the premises of Madan Mohan Damma Mal Trust society and the Kumar Pharmaceutical Works. The justification for the issue of the warrant for the search of so many places is, as put forward by the department, that all these units were allied concerns of the firm Madan Mohan Damma Mal and that duplicate sets of accounts which they were out to find out, could be placed at any of these premises and the search of all the places simultaneously was, therefore, not only justified but necessary. There is no denial of the fact that the places where the search was conducted were within the control of the partners of the firm Madan Mohan Daman Mal and their direct relations. It is, therefore, difficult to say that there was no justification for conducting the search simultaneously at all places. Another contention against the search was that there was an indiscriminate search where all the safes were broken open, floors were dug up at several places, even wells were sometimes dug up and everything possible irrespective of their relevance for the purpose was seized. In this connection, the learned single judge has given three instances of the documents taken into possession by the department at this search which he considered, were wholly irrelevant for the purpose. These documents were shown to us by the learned Advocate-General who was appearing on behalf of the department and he explained that these three items were relevant for the purpose in hand. I am satisfied that these documents cannot be said to be wholly irrelevant. No other instance was brought to our notice by the learned counsel appearing for the assessees which was wholly irrelevant for the purpose. The documents taken away at the time of the search were entered in the lists, although some of the items did not indicate the nature of the document but from that alone it is not possible to hold that the documents were wholly irrelevant." 27. From the perusal of the order extracted above, it is revealed that validity of search was objected to on the basis of the following contentions : (2) Statement of a person named Kalicharan was not sufficient to issue search warrant for all the places mentioned in the warrant.
(3) Under section 132 of the Act, it was incumbent upon the CIT to specify the particular documents which had to be searched and in the warrant issued in the present case no such documents were specified.
28. The Hon'ble court, in the context of objection No. (1) above, observed as under : "In the present case, the issue of a search warrant by Commissioner was certainly not a judicial or a quasi-judicial act and even if the Commissioner was enjoyed to issue warrant only, when, in fact, there was information in possession in consequence upon which he could form the necessary belief, the matter would not thereby become subject to scrutiny by the courts." In the case before the Hon'ble High Court, the Hon'ble Court held the action of the Commissioner of issuing the warrant as not subject to scrutiny because of the existence of information in possession of the CIT in consequence upon which the Commissioner had formed the belief to issue a warrant. In other words, the action of issuing of warrant was held not to be subject to scrutiny only when it was found that there was information in possession of the Commissioner in consequence upon which he had formed the belief and it is so because the provisions relating to issue of a search warrant, as contained in section 132(1) of the Act, have two limbs - (i) First limb relates to the existence of circumstances or satisfaction of the conditions specified in clause (a) or (b) or (c) of sub-section (1), and (ii) The second limb relates to the CIT's having reason to believe in consequence of existence or satisfaction of such circumstances or conditions maturing in actually issuing of a search warrant.
29. So far as the question of existence of the circumstances or the satisfaction of the conditions specified in clause (a) or (b) or (c) is concerned, there being no involvement of the CIT, there is no question of any action or involvement by him and consequently this action is subject to scrutiny of not only the courts but other appellate authorities also. It is only the second limb which relates to the forming of belief or having reasons to believe and consequently actual issue of warrant (which definitely is not judicial or quasi-judicial act), which is not the subject matter of scrutiny by the courts.
30. Since the Hon'ble High Court decided the all three questions raised before it, after due scrutiny of the material, one is led to understand that it was so because all the three questions were in relation to the first limb of provisions of section 132(1) and not the second limb.
31. In view of above discussion, I, with respect to the Hon'ble High Court, and in view of the latest decision of the Hon'ble Allahabad High Court itself in the case of P. N. Mishra (supra), am of the opinion that the issue involved in the questions referred to me for my opinion being related to the first limb of the provisions of section 132(1), the decision relied upon by the revenue is distinguishable and, therefore, is of no help to the revenue.
32. To conclude, my answer to both the questions referred for my opinion, in view of the foregoing discussions, reasons stated by the ld. Judicial Member in paras 19 to 27 of his order, the decision of the Income-tax Appellate Tribunal, Bangalore (supra) and the decision of the Hon'ble High Court of Allahabad in the case of P. N. Mishra (supra), is 'yes', i.e., in favour of the assessee and against the revenue and I am of the opinion that the A.O. as well as the Tribunal, when called upon by the assessee to examine the satisfaction of conditions or existence of circumstances specified in clause (a) or (b) or (c) of sub-section (1) of section 132 of the Act have powers and are duty bound to decide the issue by calling for the records of the authority authorising search including "Satisfaction Note".
33. The assessee's ground is allowed. The matter will now be placed before the Division Bench to decide the assessee's appeal on this point in accordance with the majority view and law.