SHIVAMMA Vs. KRISHNA GRAMEEN BANK THROUGH ITS CHAIRMAN

JUDGEMENT

(1.) THIS appeal is by the assessee challenging the order passed by the Tribunal on various grounds, including the findings recorded by the appellate Tribunal that the appellate Tribunal has no jurisdiction to examine the legality of the action of the authorizing officer anterior to the assessment officer, commencing the assessment proceedings.

(2.) ON 05.12.1995, search operations were carried out in the assessee"s premises. ON the conclusion of the search operations on 05.12.1995, the authorized officer clamped prohibitory order under Section 132 in respect of certain jewelleries, books of accounts etc., found at the time of search. Later on, on 24.01.1996. the authorized officer prepared one more panchanama in which the prohibitory order passed under Section 132(3) on 05.12.1995 was lifted. The books of accounts, jewelleries, etc., which were earlier kept under the prohibitory order were released. There was no seizure effected on 24.01.1996 when the search proceedings were stated to be concluded in the panchanama. It states, the prohibitory order was passed on 05.12.1995 itself. Thereafter, an order of block assessment under Section 158(B)(C) of the Income Tax Act 1961 (for short, hereinafter referred to as, "the Act") was passed by the assessment officer on 28.01.1997. Aggrieved by the said order is assessment, the assessee preferred an appeal before the Tribunal in accordance with the provisions of the law, as was prevailing at the relevant point of time. The assessee contended before the Tribunal among other grounds that the block assessment was barred by limitation under Section 158(B)(E)(i) of the Act. When the matter was pending before the appellate Tribunal, the Revenue filed an application for referring the matter to a Special Bench, in view of the conflicting decisions rendered by various Tribunals in respect of the issues involved in the appeal. Accordingly, the Tribunal framed the following three questions for consideration by the Special Bench. The three points that were referred for consideration by the Special Bench are as under:

(3.) PER contra, the learned Senior Counsel appearing for the Revenue submitted that, search proceedings were conducted by an authorized officer and after the conclusion of such proceedings on the basis of the material collected during such search and on the basis of the returns filed in pursuance of the notice issued, the assessing officer passes a block assessment order. In an appeal filed challenging the assessment order, the legality of the validity of search proceedings cannot be gone into. Under the statute, no appeal is provided against search proceedings. If at all, the assessee wants to challenge search proceedings, his remedy is by way of writ petition under Article 226 of the Constitution of India. If he fails to avail the said remedy, then in an appeal filed against the assessment order, he is estopped from challenging the legality and validity of the search proceedings. Secondly, it was contended that assuming that there is any illegality in search proceedings, that would not vitiate the assessment order, as it is well settled that any documents or materials collected in such illegal search could be made use of in the assessment proceedings to pass an order. Such a material is not inadmissible. Therefore, the illegality of the search would not render the order of assessment void. If order of assessment could be supported by other material, the validity of the said order has to be gone into with respect of such materials. Therefore, he contended, the appellate Tribunal was justified in holding that in an appeal under Section 253(1), it has no jurisdiction to go into the validity of the initiation and continuation of search proceedings under Section 132(1) of the Act. Further, he contended that the law contemplates issue of more than one authorization in which event for the purpose of limitation, it is the last of such authorization which has to be taken into consideration. Further, he contended that, in pursuance of an authorization, the authorized officer visits the place of the assessee and if he is unable to complete the search, he has the discretion to pass prohibitory order, discretion to pass a restraint order and thereafter fix the date for further search and on a date convenient to him, he can visit the place again in pursuance of the authorization, which was given to him earlier and examine the books or other materials which are the subject matter of restraint order/prohibitory order, and if necessary, seize them at that point of time. It is only then, the panchanama which is drawn in the end where he has recorded that the search is completed would be basis for the starting point of limitation as contemplated under law. Therefore, the subsequent visits for inspection is a continuation of the search proceedings and after such inspection and visits, there is no necessity to have a fresh authorization. The authorization issued comes to an end only when a panchanama is written recording that the search is finally concluded or completed and therefore, he submits that the finding recorded by the Tribunal are legal and valid and do not call for any interference.