IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA.No. 76 of 2010()
1. SRI. JOSE CYRIAC,
... Petitioner
Vs
1. THE COMMISSIONER OF INCOME TAX,
... Respondent
For Petitioner :SRI.P.BALAKRISHNAN (E)
For Respondent :SRI.JOSE JOSEPH, SC, FOR INCOME TAX
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice K.SURENDRA MOHAN
Dated :22/10/2010
O R D E R
C.R.
C.N.RAMACHANDRAN NAIR &
K.SURENDRA MOHAN, JJ.
....................................................................
I.T. Appeal Nos.76 of 2010, 1168, 684 & 777 of 2009
....................................................................
Dated this the 22nd day of October, 2010.
JUDGMENT
Ramachandran Nair, J.
Connected appeals, one filed by the assessee and three filed by
the Revenue relate to the assessments of relatives and related concerns
pursuant to search made under Section 132 and survey made under
Section 133A of the Income Tax Act (hereinafter called “the Act”). We
have heard Senior counsel Sri.P.K.R.Menon appearing for the Revenue
and Adv. Sri.P.Balakrishnan appearing for the assessees.
2. The facts leading to the controversy are the following. The
following business concerns generally known as Carbo Group have
their office in Carbo House, Old Railway Station Road, Cochin-18:
1. Carbographics Pvt. Ltd.
2. Carbo Colour Ltd.
3. Carbo Aquamarine Exports Pvt. Ltd.
4. Bethal Chemical Industries P. Ltd.
ITA No.76/2010 & conn. 2
5. Kurian’s Ink and Chemicals Ltd.
6. Jagannath Aqua Culture Tuticorin P. Ltd.
7. M/s.K.C.Thomas & Co.
8. M/s.Carbo Chemical Industries
9. M/s.Jose Kurian & Sons
The partners of the firms and directors of the Companies are admittedly
brothers by name Jose Cyriac, Jose Kurian, son of one of the partners
by name P.C. Joy and other family members. Suspecting suppression
and concealment of income by the partners and the business concerns,
the Director of Income Tax (Investigation) issued search warrants in
Form 45 showing the places to be searched as the group head office of
“Carbo Group of Conerns” specifically showing their office address
and stating in the very same warrant the name and residential address
of the partner to be searched. Similarly search warrant was issued in
the case of each and every partner/director of the business concerns.
Based on the search warrants, search and survey operations are carried
out and all the assessees were called upon to file returns of undisclosed
income. All the assessees filed returns without any contest about the
ITA No.76/2010 & conn. 3
validity of the assessments initiated pursuant to search and survey.
Assessments completed were challenged in first appeal before the
Commissioner of Income Tax (Appeals) wherein also the assessees did
not contest the validity of the assessments on the ground that search
was not conducted in accordance with the provisions of Section 132 of
the Act or for any defect in the search warrants issued. The CIT
(Appeals) while considering the appeals did not have any opportunity
to consider the validity of assessments on the ground of any omission
or mistake or irregularity in the search warrants issued. The only
contention raised by all the assessees in first appeals was that assessees
were not given sufficient opportunity by the Assessing Officer to raise
their objections against the income determined. The Commissioner
(Appeals) upheld the claim of the assessees that sufficient opportunity
was not given to raise objection against the proposal for assessment
and so much so, he set aside all the assessments and remanded the
cases to the Assessing Officer for fresh adjudication. The department
challenged the orders of the Commissioner of Income Tax (Appeals)
before the Tribunal. The contention of the Revenue before the
ITA No.76/2010 & conn. 4
Tribunal was that the assessees after receipt of notices from the
Assessing Officer took ten months’ time to file even returns and,
therefore, the assessees cannot complain that they were not given
sufficient time by the Assessing Officer before making assessments.
Even though pursuant to CIT (Appeal)’s orders in the first round of
appeals some of the assessments were revised during the pendency of
departmental appeals before the Tribunal, the Tribunal later upheld the
claim of the department that delay in completion of assessments is
more attributable to assessees who took ten months’ time to file the
returns and such returns were filed on the verge of expiry of time limit
for completion of assessments, set aside the orders of CIT (Appeals)
and the matter was remitted back to the CIT (Appeals) for
consideration of the appeal on merits i.e. on the income determined
based on materials gathered in search and survey.
3. When the appeals were taken up by the CIT (Appeals) after
remand, the assessees for the first time raised a contention that the
assessments were invalid for the reason that search warrant was issued
in the name of “Carbo Group of concerns” who are not assessees and so
ITA No.76/2010 & conn. 5
much so, the search conducted under Section 132 is invalid which
affects the validity of assessments. In fact, the appeals were restored to
the Commissioner of Income Tax (Appeals) by the Tribunal with a
specific direction to consider the assessments on merit. In other words,
the validity of assessments on ground of alleged irregularity in the
search warrant issued under Section 132 was not questioned in the first
round of appeals which reached upto the Tribunal. Even though
remand order issued by the Tribunal did not authorise the CIT
(Appeals) to consider the validity of assessments on the alleged ground
of irregularity in the search, the Commissioner still proceeded to
consider the assessees’ contention in regard to validity of search. The
CIT (Appeals) accepted the contention of the assessees that the search
carried out with warrant issued in the name of “Carbo Group of
concerns” was an invalid search and consequently assessments were
cancelled by him. When the Revenue took up the matter in appeals
before the Tribunal, three appeals were heard and decided by one
Bench of the Tribunal and the last appeal was heard by a different
Bench which took a view entirely different from the view taken by the
ITA No.76/2010 & conn. 6
earlier Bench. In other words, both the Benches of the Tribunal issued
divergent orders with regard to validity of assessments. Therefore, we
have to only consider which order of the Tribunal is right. We notice
that the later decision was rendered by the Tribunal in the order
produced in I.T.A. No.76/2010 which is the appeal filed by the assessee
wherein the Tribunal has explained how the other Bench order of the
Tribunal is not tenable. Therefore, we proceed to consider the said
order issued by the Tribunal in I.T.A. No.207/Coch/2005 pertaining to
the assessment of one of the partners Sri.Jose Cyriac.
4. Counsel appearing for both sides have referred to copy of the
warrant issued in Form 45 produced in all the cases. We notice from
the warrant issued in the case of assessee in I.T.A. No.76/2010 that the
authorisation was to search the office of “M/s.Carbo Group of
Concerns, Carbo House, 40/168, Old Railway Station Road, Cochin-
18” and also the residence of the appellant-assessee Jose Cyriac,
Panamkuzhakal House, SRM Road, Cochin-18. On going through the
other warrants produced in court, we notice that in all the warrants
issued under Section 132 of the Act the place authorised to be searched
ITA No.76/2010 & conn. 7
is the Group Head Office of the business concerns under the control of
all the assessees and the residence of the partners named in the warrant.
The first question to be considered is in the second round when the
appeals were restored to the CIT (Appeals) by the Tribunal, whether
the Commissioner (Appeals) was entitled to consider the question of
validity of assessments based on the irregularity in the warrant alleged
by the assessees. We find force in the contention of the counsel for the
Revenue and the findings of the Tribunal in their order challenged in
I.T.A. No.76/2010 that the CIT (Appeals) while considering the
appeals after remand by the Tribunal should consider the appeals based
on the directions contained in the Tribunal’s order. It is to be noted that
the assessees never contested the validity of the assessments on the
ground of alleged irregularity in the warrant issued in the first round of
appeal before the CIT (Appeals). In the second stage when the
Revenue filed appeals before the Tribunal against the orders of the CIT
(Appeals) remanding the cases, though assessees filed cross objection
challenging the validity of the assessments, the Tribunal did not
consider the same because the same did not arise from orders of the
ITA No.76/2010 & conn. 8
CIT (Appeals) challenged before the Tribunal. In other words, the
Tribunal while remanding the cases did not allow the assesees to raise
an issue on the validity of assessments on ground of alleged defects in
the warrant issued which was not the subject matter of first appeals
filed before the CIT (Appeals). Admittedly the remand orders issued
by the Tribunal had become final and in the remand order Tribunal
neither considered the validity of assessments nor included the same
within the scope of remand for the CIT (Appeals) to consider the same
when the matter reach him a second round after remand by the
Tribunal. We, therefore, uphold the findings of the Tribunal in the
order challenged in I.T.A. No.76/2010 that the CIT (Appeals) had no
jurisdiction to consider the validity of the assessments and he was
authorised to consider only the assessment on merits i.e. about the
income determined in assessment.
5. Even though we have upheld the order of the Tribunal on the
lack of jurisdiction of the CIT (Appeals) to consider validity of
assessments after remand by the Tribunal, both sides argued merits on
the validity of the assessments as well. After verifying the entries in
ITA No.76/2010 & conn. 9
the copies of search warrants produced, we have already noticed that in
all the warrants the name of the assessees and the residential address of
the assessees are given as place to be searched besides the Head Office
of the Carbo group of concerns which was also authorised to be
searched under the same warrant. In our view, there is nothing wrong
in authorising search of a group of concerns by a warrant issued under
Section 132 of the Act. We have already stated in the beginning of the
judgment the names of the firms and the companies whose Head Office
address is shown in every warrant for search. Very many business
concerns which are assessed after search have in their name, the name
“Carbo” and “Carbo” appears to be the common name forming part of
the name of various business concerns of the related assessees.
Assessees do not dispute that the address of the Head Office of the
business concerns shown is not correct. Admittedly all the assessees
have their Head Office in the same building, the address of which is
fully given in the warrant. Besides the name of the group shown as
Carbo Group of concerns in the warrant, every warrant contains the
address of residential house of the assessee to be searched. In fact, it is
ITA No.76/2010 & conn. 10
admitted that based on the search warrant issued the Head Office of the
business concerns and the residences of the partners/directors were
searched and documents and records were recovered. Assessees have
not chosen to challenge the validity of assessments on the allegation of
defect or irregularity in the warrant issued either before the Assessing
Officer or in first round of appeals and they have chosen to raise such a
contention after remand before the CIT (Appeals) for the first time.
We are in complete agreement with the finding of the Tribunal in their
order challenged in I.T.A. No.76/2010 that the CIT (Appeals) has no
jurisdiction to entertain such a contention. Further, on merits also, we
find no substance in the allegation of the assessees that the warrant is
defective. In our view, the warrants issued are free from the defect
alleged by the assessees. What is required to be stated in the warrant is
precise details about the assessees and the persons to be searched which
are contained in the warrants issued in these cases because the Group
Head Office of all the business concerns and the residence of the
persons in charge of business namely, partners and directors of the
business concerns, were authorised to be searched. We, therefore, find
ITA No.76/2010 & conn. 11
no merit in the assessees’ challenge against the validity of assessments.
For the reasons stated above, we allow the Revenue’s appeals namely,
I.T.A. Nos.684, 777 and 1168 of 2009 by vacating the orders of the
Tribunal. Since the Tribunal has decided the merits on the additions in
the order challenged in I.T.A. No.76/2010, the said appeal filed by the
assessee is dismissed. So far as the other appeals are concerned, since
neither the CIT (Appeals) nor the Tribunal has considered the
assessees’ challenge against the determination of income and additions
made, the matter will stand remanded to the CIT(Appeals) for decision
on merits i.e. pertaining to the income assessed based on the orders of
remand issued by the Tribunal in the first round of appeals.
C.N.RAMACHANDRAN NAIR
Judge
K.SURENDRA MOHAN
Judge
pms