The Commissioner Of Income-Tax, Karnal v. M/S Paras Rice Mills, Kurukshetra

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.93 of 2004 & Cross Objection No.68-CII of 2004Date of decision: 16.9.2008 The Commissioner of Income-tax, Karnal -----Appellant. Vs. M/s Paras Rice Mills, Kurukshetra. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON'BLE MR JUSTICE AJAY TEWARI Present:Mr. Vivek Sethi, Advocatefor the appellant. Mr. Pankaj Jain, Advocate for the respondent/cross-objector. ----- ORDER: The revenue has preferred this appeal under Section260-A of the Income Tax Act, 1961 (for short, “the Act”) againstthe order of the Income Tax Appellate Tribunal (Chandigarh ‘B’Bench) dated 7.10.2003 passed in IT(SS) No.1118/Chandi/96 forthe assessment years 1986-87 to 1996-97. On 26.9.1995, search and seizure action under Section 132(1) of the Act was carried out at the businesspremises of the assessee and assessment under Section 158 BCwas completed. The assessee preferred an appeal and alsoraised additional grounds against validity of search. The Tribunalheld that search and seizure was illegal as no material was produced before the Tribunal to show that the requirements ofSection 132(1) of the Act were complied with. Though initially, number of questions of law weresought to be raised, but in view of order dated 28.7.2008 of thisCourt, the matter is required to be considered with respect toquestions (a) and (b), which are as under:- “(a)Whether on the facts and in the circumstancesof the case, the Income-tax Appellate Tribunalwas right in law in deciding to go into the validityof the action taken under section 132(1) of theIncome-tax Act, 1961.of the case, the Income-tax Appellate Tribunalwas right in law in deciding to go into the validityof the action taken under section 132(1) of theIncome-tax Act, 1961. (b) Whether the Tribunal was right in law to permitthe assessee to enlarge the scope, ambit andcomplexion of the appeal in the garb of raisingadditional grounds, specifically when suchgrounds do not fall within the scope of section253 of the Income-tax Act, since this issue hadnot been raised before the Assessing Authoritythe same could not be taken before theAppellate Authority, and that too, when nospecific appeal is provided in the Act.”the assessee to enlarge the scope, ambit andcomplexion of the appeal in the garb of raisingadditional grounds, specifically when suchgrounds do not fall within the scope of section253 of the Income-tax Act, since this issue hadnot been raised before the Assessing Authoritythe same could not be taken before theAppellate Authority, and that too, when nospecific appeal is provided in the Act.” Learned counsel for the revenue does not dispute thatagainst raising of additional grounds, an appeal, being ITANo.129 of 2002 was preferred before this Court, which wasdismissed on 16.6.2003. In view of this development question No.(b) does notsurvive. As regards question No.(a), learned counsel for therevenue relies upon judgments of Delhi High Court in VirinderBhatia v. CIT(2001) 79 ITD 340 and judgment of MadhyaPradesh High Court in Gaya Prasad Pathakv. AssistantCommissioner of Income-tax and others(2007) 290 ITR 128. Learned counsel for the assessee relies upon contrajudgment of Rajasthan High Court in CITv. Smt. Chitra DeviSoni (2008) 1 DTR 98 and also a judgment of this High Court inC.I.T., Chandigarh v. Raj Kumar Gupta (I.T.A. No.50 of 2002)passed on 21.8.2003. We have given due consideration to the issueinvolved. We are in agreement with the view taken by the Delhi High Court inVirinder Bhatia (supra) and Madhya Pradesh HighCourt inGaya Prasad Pathak (supra). For the same reason, werespectfully disagree with the view taken by the Rajasthan HighCourt inSmt. Chitra Devi (supra). Judgment of this Court inRajKumar Gupta (supra) does not deal with the issue of scope ofassessing authority to go into question of validity of search. Learned counsel for the assessee relies upon contrajudgment of Rajasthan High Court in CITv. Smt. Chitra DeviSoni (2008) 1 DTR 98 and also a judgment of this High Court inC.I.T., Chandigarh v. Raj Kumar Gupta (I.T.A. No.50 of 2002)passed on 21.8.2003. We have given due consideration to the issueinvolved. We are in agreement with the view taken by the Delhi High Court inVirinder Bhatia (supra) and Madhya Pradesh HighCourt inGaya Prasad Pathak (supra). For the same reason, werespectfully disagree with the view taken by the Rajasthan HighCourt inSmt. Chitra Devi (supra). Judgment of this Court inRajKumar Gupta (supra) does not deal with the issue of scope ofassessing authority to go into question of validity of search. In the judgment of Delhi High Court in M.B. Lal v.Commissioner of Income Tax(2005) 279 ITR 298, it wasobserved:- “It was, in the light of the above, no longer opento the petitioner to reagitate the question of validity ofthe authorization and legality of the searchproceedings either before the Commissioner of Income-tax or before the Tribunal for that matter. Thequestion of validity or otherwise of the searchproceedings stood concluded by the judgment of thisCourt dated May 6, 2002, in the writ petitionmentioned above...” In Gaya Prasad Pathak(supra), it was observed:- “...In our considered opinion, the jurisdiction exercisedby the statutory authority while hearing the appealcannot enter into the justifiability of an action undersection 132A of the Act. To elaborate: whether theorder passed by the Commissioner is withoutjurisdiction or not cannot be the subject-matter ofassessment as the same does not arise in the courseof assessment. Therefore, neither the AssessingOfficer nor the appellate authority can dwell upon thesaid facet. We may note with profit, it would not be ajurisdictional fact within the parameters of assessmentproceeding or an appeal arising therefrom. It can onlypartake of the nature and character of adjudicatoryfact to the limited extent whether such search andseizure had taken place and what has been foundduring the search and seizure. The validity of searchand seizure in and, therefore, the same cannot bedwelled upon or delved into in an appeal. Thesubmission of Mr. Nema that the Tribunal having beenconstituted under article 323 of the Constitution candelve into, we are disposed to think, is anunacceptable proposition of law especially in the teethof the provision contained under section 253 of theAct.” We are of the view that the Tribunal when hearing anappeal against the order of assessment, could not go into thequestion of validity or otherwise of any administrative decision forconducting search and seizure. The same may be subject matterof challenge in independent proceedings where question ofvalidity or otherwise of administrative order could be gone into.The appellate authority was concerned with the correctness orotherwise of the assessment. For the above reasons, we answer the question (a) infavour of the revenue and against the assessee. The assessee has also filed cross-objections. As regards the judgment of this Court inRaj KumarGupta(supra), there was no discussion on the issue of power ofappellate authority to go into the question of validity of search. In support of cross-objections, learned counsel for theassessee submitted that search and seizure operations havingfound to be invalid, the Tribunal should have given full effect tothe said finding. In view of our above finding, this contentiondoes survive. Accordingly, appeal of the revenue is allowed inabove terms and cross objection of the assessee is dismissed. ( ADARSH KUMAR GOEL )JUDGE September 16, 2008ashwani ( AJAY TEWARI ) JUDGE