By TIOL News Service

AHMEDABAD, MAR 24, 2015: THE issue before the Bench is - Whether participation by assessee in earlier round of litigation either before AO or Tribunal operates as a bar for assessee to challenge jurisdictional authority of AO u/s 158BC. And the verdict favours the assessee.

Facts of the case 

The assessee is a non-banking financial corporation (NBFC). During the A.Y 1996, the AO had carried out block assessment for computing undisclosed income of assessee in accordance with the provisions of section 158BC. The matter was carried in appeal before the Tribunal, wherein, the Tribunal disposed of the appeal by sending back the matter to the AO for fresh block assessment. The matter was again considered by the AO and the block assessment order was passed u/s 158BC. The matters were again carried in appeal before the Tribunal. During pendency of appeal, an additional ground was permitted to be raised by the Tribunal on the point that the order passed u/s 158BC r/w/s 254 was bad in law, invalid or untenable since no warrant authorizing search was issued in the name of the assessee, but on the basis of the warrant issued on the joint name as shown in the Panchnama as that of Arun Choksi, Sanjay Choksi and family and Jolly Tea (India) Ltd. and Jolly group of companies. The Tribunal observing that the additional ground being root of the matter, permitted the same. On special civil application filed by the Revenue, this court confirmed the order of the Tribunal holding that no interference is required with the interim order passed by the Tribunal at this stage. Thereafter, the Tribunal on verification of the Panchnama prepared by the revenue at the time of search, found that the warrant was in case of Arun Choksi, Sanjay Choksi and family and Jolly Tea (India) Ltd. and Jolly group of companies and it was not on the name of the assessee, who was appellant before the Tribunal. The Tribunal found that in absence of the name of the assessees on the warrant authorizing search, the proceedings u/s 158BC could not be initiated. The Tribunal also recorded that there was no dispute about the fact that the names of the assessee was not appearing in the authorization/requisition. Hence, the Tribunal found that the proceedings u/s 158BC against the assessee, was void ab initio.

Having heard the parties, the High Court held that,

++ it is noticed that the additional ground, which was permitted to be raised and admitted, remained unchallenged by the revenue. Special Civil Application filed by Revenue were also directed for rectification of the reasons recorded and that too only first part, but it was not for rectification of any additional ground or the ultimate order for permitting additional ground and the admission of such ground. If a strict view is taken, one may say that the revenue could not agitate such question on the aspects of availability of the additional ground before the Tribunal, which was so permitted vide order dated 17th Aug, 2010. But, as this Court vide order dated 13th June, 2013 did make the abovereferred observations and even if lenient view is taken, at the most, it would mean that opportunity would be available to the revenue to meet with the additional ground, but such opportunity has already been availed by the revenue. The Tribunal has considered the Panchnama prepared by the revenue. It was for the revenue to controvert the said material by any contemporaneous record or otherwise. But, it appears that even as per the revenue, the contents of the Panchnama including that of non-appearance of the name in the authorization/requisition of the assessee, remained undisputed. Therefore, it cannot be said that the Tribunal did not give any opportunity to the revenue to meet with the additional ground;

++ even if, it is considered for the sake of examination that the ground so raised before the Tribunal could also be raised before this Court in the present appeals, then also, it is found that it is well settled legal position that there cannot be any estoppel or waiver against statute or law. It is seen that in the case of P.V. Doshi, wherein the question came up before this Court for consideration as to whether any point or contention, which was expressly not pressed, but if it touches to the root of the matter based on the statutory provisions or the law, can be agitated in the further proceedings before the higher forum or not and this Court in the said decision had observed that: "The legal position about waiver of such a mandatory provision created in the wider public interest to operate as fetter on the jurisdiction of the authority is well settled that there could never be waiver, for the simple reason that in such cases jurisdiction could not be conferred on the authority by mere consent, but only on conditions precedent for the exercise of jurisdiction being fulfilled. If the jurisdiction cannot be conferred by consent, there would be no question of waiver, acquiescence or estoppel or the bar of resjudicate being attracted because the order in such cases would lack inherent jurisdiction unless the conditions precedent are fulfilled";

++ thus, under the circumstances, as on the point of estoppel or waiver, the point is already covered by the decision of this Court, we do not find that a participation by the assessee in the earlier round of litigation either before the AO or before the Tribunal or consequently before the AO can operate as a bar to the assessee to challenge the jurisdictional authority of the AO u/s 158BC. On the aspects of applicability and the condition precedent for making block assessment u/s 158BC, it can be seen from the observations of the Apex Court in case of Manish Maheshwari, wherein, it was held that:

["....Condition precedent for invoking a block assessment is that a search has been conducted u/s 132, or documents or assets have been requisitioned u/s 132A. The said provision would apply in the case of any person in respect of whom search has been carried out u/s 132A or documents or assets have been requisitioned u/s 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of Section 158BC in respect of any other person, the conditions precedents wherefore are:

(i) Satisfaction must be recorded by the AO that any undisclosed income belongs to any person, other than the person with respect to whom search was made u/s 132;

(ii) The books of account or other documents or assets seized or requisitioned had been handed over to the AO having jurisdiction over such other person; and

(iii) The AO has proceeded u/s 158BC against such other person. The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned u/s 132A...."]

++ the observations of the Apex Court go to show that if the condition precedent for block assessment u/s 158BC is not satisfied, such would go to the root of the matter and the jurisdiction, which has not been expressly conferred by the statute, cannot be invested with the AO for the block assessment. On facts, as recorded herein above, admittedly, there was no warrant authorization on the name of the assessee and hence, the Tribunal has found the assessment as ab initio void, which, in the view of this court, calls for no interference, on facts and on law.

(See 2015-TIOL-712-HC-AHM-IT)