Sri M. Balakrishna Hegde V. The Deputy Commissioner of Income Tax, Investigation Circle, C.R. Building, Mangalore

ITA/226/2009

AI Insights

The appeal by Sri M. Balakrishna Hegde challenged the block assessment order based on a search conducted under Section 132 of the Income-Tax Act, 1961. The primary contention was the invalidity of the search, which the Tribunal had previously upheld following the judgment of the Full Special Bench. The High Court, referencing the case of C. Ramaiah Reddy v. Appellate Commissioner of Income-Tax, emphasized that the Tribunal has the authority to examine the legality of the search and its implications on the block assessment. The Court found that if the search was indeed illegal, the block assessment would be void, necessitating a re-examination of both the search's validity and the assessment's merits.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 794082 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-01-2015
• Assessment Year: misc
• Other Referred Cases: C. Ramaiah Reddy v. Appellate Commissioner of Income-Tax (IMV)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: A SHANKAR; M LAVA
• Keywords: Appellate Authority; Block assessment; Legal requirements; Search validity
• Section: 132; 132(1)(A); 132(1)(c); 132(1)(b); 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF JANUARY, 2015 PRESENT THE HON' BLE MR. JUSTICE N. KUMAR AND THE HON' BLE MR. JUSTICE B. VEERAPPA INCOME TAX APPEAL No. 226/2009 BETWEEN: SRI M. BALAKRISHNA HEGDE, GOKUL, SHIVABHAGH MAIN ROAD, KADRI, MANGALORE-575 002 ... APPELLANT (BY SRI A. SHANKAR & SRI M. LAVA, ADVOCATES) AND: THE DEPUTY COMMISSIONER OF INCOME TAX, INVESTGATION CIRCLE, C.R. BUILDING, MANGALORE. ... RESPONDENT (BY SRI K.V. ARAVIND, ADVOCATE) … THIS ITA IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 02.01.2009 PASSED IN IT(SS)A NO. 138/BNG/2003, FOR THE BLOCK ASSESSMENT YEAR 01.04.1989 TO 28.06.1999, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED 2 THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE I.T.A.T. BANGALORE BENCH, BANGALORE, IN IT(SS)A NO.138/BNG/2009, DATED 02.01.2009, IN THE INTEREST OF JUSTICE AND EQUITY. THIS INCOME TAX APPEAL COMING ON FOR HEARING THIS DAY, N. KUMAR, J., DELIVERED THE FOLLOWING: JUDGMENT The assessee has preferred this appeal against the order passed by the Tribunal partially upholding the order of block assessment passed by the original authority. 2. Before the Tribunal, the assessee has challenged the validity of the search. It is his specific case that his search is invalid. The entire order passed on the basis of search is also void and liable to be set aside. The said contention has been negatived by the Tribunal following the judgment of the Full Special Bench of the same. 3 3. The search question arose for consideration before this Court in the case of C. RAMAIAH REDDY v. APPELLATE COMMISSIONER OF INCOME-TAX (IMV) reported in (2011) 339 ITR 210 (Karn), wherein it was held that the Tribunals’ power in dealing with appeals are of the widest amplitude and have in same cases been held similar to and identical with the powers of an appellate Court under the Code of Civil Procedure, 1908. The block assessment is based on search. If the assessee contends that the search initiated under Section 132 of the Income-Tax Act, is not in accordance with law and that it would not satisfy the legal requirements as contemplated under Section 132(1)(a), (b), (c), the contention has to be considered and adjudicated upon by the Tribunal in an appeal against the assessment order. Since this action of the Assessing Officer is inextricably linked with the initiation of the assessment proceedings the action can 4 be assailed before the appellate authority. If the initiation of block assessment proceedings is vitiated in the eyes of law, there is no search and the entire proceedings based on such search has no leg to stand on. Therefore, in an appeal filed challenging the block assessment order it is open to the assessee to contend that the foundation for block assessment was an illegal search. The Tribunal has power to look into all aspects of search and a valid search is a sine qua non for initiating block assessment. In that view of the matter the impugned order passed by the Tribunal cannot be sustained. 4. Accordingly, it is hereby set aside not only on that ground, even on the merits. Now the matter is remitted back to the Tribunal for fresh consideration in accordance with law. Both the validity of the search and if it is found to be valid, to go into the merits afresh 5 and pass appropriate orders to the extent impugned in this appeal. Sd/- JUDGE Sd/- JUDGE Sbs* "