The validity of a search conducted under section 132 of the Income-tax Act and its impact on the block assessment under Chapter XIV-B.

1. Aggrieved by the order dated September 17, 2002, passed by the Tribunal, Jodhpur Bench, Jodhpur, in IT(SS)A No. 7/JP/1997, the Revenue has preferred this appeal.

2. While the defects were overruled by this court on August 6, 2003, and admitting the appeal, the following substantial questions of law were framed :

"1. Whether for having recourse to assessment for the block period under Chapter XIV-B, a valid search under section 132 is a condition precedent and mere fact of search is not enough to give jurisdiction to the Assessing Officer to have recourse to the provisions under Chapter XIV-B ?

2. If so, whether, in the facts and circumstances of the present case, the Tribunal was right to hold that the search conducted in the present case was invalid ?"

3. The facts giving rise to the present appeal are that the assessee, Chitra Devi, filed an appeal before the Tribunal challenging the validity of the assessment order being violative of the principles of natural justice. The assessee contended that the assessment order is bad in law for the reason that the same was passed on the belief of the assessing authority without disclosing any material as is required under section 132 of the Income-tax Act. According to the assessee, there was no material with the Director to form the belief as is required under the provisions of section 132(1) and in the absence of any material to this effect the assessment order passed is not maintainable and, therefore, the assessment order deserves to be set aside.

4. The Tribunal in appeal decided the said issue, after referring to the various judgments on the issue, as to whether the Tribunal is having jurisdiction to examine the validity of the authorisation based on reasons duly recorded in writing for search when the same is challenged before the court/Tribunal. According to the Tribunal, the Revenue was given various opportunities to produce the material to show that authorisation was based on the existence of reasons about there being one or more of the circumstances enumerated in section 132(1)(a) to (c), as is required under section 132(1) of the Income-tax Act. It was stated that on October 12, 2001, the appeal was adjourned to December 21, 2001, for the purpose of production of record showing authorisation being based on the existence of reasons about there being one or more of the circumstances enumerated in section 132(1)(a) to (c). Then the matter was further adjourned to February 12, 2002, however, when the material was not produced the matter was further adjourned to March 19, 2002, and, finally, when the Revenue could not produce the record showing authorisation being based on existence of reasons about there being one or more of the circumstances enumerated in section 132(1)(a) to (c), the arguments were heard on March 19, 2002, and March 27, 2002. Even during the course of arguments also, record containing existence of material which may have given reasons to believe the competent authority about existence of any one or more of the circumstances postulated under section 132(1)(a), (b) and (c) could not be produced, rather the representative appearing for the Revenue showed his helplessness to produce the record before the Tribunal. Thus, the Tribunal after granting ample opportunity to the Revenue for production of the record decided the issue holding that in the absence of authorisation being based on reasons required under section 132(1) of the Income-tax Act search was not valid, which otherwise was taken as a basis for the purpose of passing the order by the assessing authority. Even the factum of authorisation based on reasons has not come on record. In those circumstances, the Tribunal passed the order to the effect that search was not valid in the absence of authorisation based on reasons, as required by section 132(1), and consequentially, the block assessment was held to be illegal.

5. It has been argued by counsel appearing for the Revenue that the Tribunal cannot