Ita/76/2010 Of Sri.jose Cyriac v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN FRIDAY, THE 22ND OCTOBER 2010 / 30TH ASWINA 1932 ITA.No. 76 of 2010() -------------------- ITA.207/COCH/2005 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: -------------------- SRI. JOSE CYRIAC, ERNAKULAM, KOCHI - 25. BY ADV. SRI.P.BALAKRISHNAN (E) RESPONDENT(S): APPELLANT ------------------------ THE COMMISSIONER OF INCOME TAX, CENTRAL, COCHIN. ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX FOR R THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ALONG WITH ITA NO.1168/2009 & CONN. CASES ON 22/10/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 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 bythe Revenue relate to the assessments of relatives and related concernspursuant to search made under Section 132 and survey made underSection 133A of the Income Tax Act (hereinafter called "the Act"). Wehave heard Senior counsel Sri.P.K.R.Menon appearing for the Revenueand 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 havetheir 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. 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 admittedlybrothers by name Jose Cyriac, Jose Kurian, son of one of the partnersby name P.C. Joy and other family members. Suspecting suppressionand concealment of income by the partners and the business concerns,the Director of Income Tax (Investigation) issued search warrants inForm 45 showing the places to be searched as the group head office of"Carbo Group of Conerns" specifically showing their office addressand stating in the very same warrant the name and residential addressof the partner to be searched. Similarly search warrant was issued inthe case of each and every partner/director of the business concerns.Based on the search warrants, search and survey operations are carriedout and all the assessees were called upon to file returns of undisclosedincome. All the assessees filed returns without any contest about the ITA No.76/2010 & conn. ITA No.76/2010 & conn. validity of the assessments initiated pursuant to search and survey.Assessments completed were challenged in first appeal before theCommissioner of Income Tax (Appeals) wherein also the assessees didnot contest the validity of the assessments on the ground that searchwas not conducted in accordance with the provisions of Section 132 ofthe Act or for any defect in the search warrants issued. The CIT(Appeals) while considering the appeals did not have any opportunityto consider the validity of assessments on the ground of any omissionor mistake or irregularity in the search warrants issued. The onlycontention raised by all the assessees in first appeals was that assesseeswere not given sufficient opportunity by the Assessing Officer to raisetheir objections against the income determined. The Commissioner(Appeals) upheld the claim of the assessees that sufficient opportunitywas not given to raise objection against the proposal for assessmentand so much so, he set aside all the assessments and remanded thecases to the Assessing Officer for fresh adjudication. The departmentchallenged the orders of the Commissioner of Income Tax (Appeals)before the Tribunal. The contention of the Revenue before the ITA No.76/2010 & conn. Tribunal was that the assessees after receipt of notices from theAssessing Officer took ten months' time to file even returns and,therefore, the assessees cannot complain that they were not givensufficient time by the Assessing Officer before making assessments.Even though pursuant to CIT (Appeal)'s orders in the first round ofappeals some of the assessments were revised during the pendency ofdepartmental appeals before the Tribunal, the Tribunal later upheld theclaim of the department that delay in completion of assessments ismore attributable to assessees who took ten months' time to file thereturns and such returns were filed on the verge of expiry of time limitfor completion of assessments, set aside the orders of CIT (Appeals)and the matter was remitted back to the CIT (Appeals) forconsideration of the appeal on merits i.e. on the income determinedbased on materials gathered in search and survey. 3. When the appeals were taken up by the CIT (Appeals) afterremand, the assessees for the first time raised a contention that theassessments were invalid for the reason that search warrant was issuedin the name of "Carbo Group of concerns" who are not assessees and so ITA No.76/2010 & conn. much so, the search conducted under Section 132 is invalid whichaffects the validity of assessments. In fact, the appeals were restored tothe Commissioner of Income Tax (Appeals) by the Tribunal with aspecific direction to consider the assessments on merit. In other words,the validity of assessments on ground of alleged irregularity in thesearch warrant issued under Section 132 was not questioned in the firstround of appeals which reached upto the Tribunal. Even thoughremand order issued by the Tribunal did not authorise the CIT(Appeals) to consider the validity of assessments on the alleged groundof irregularity in the search, the Commissioner still proceeded toconsider the assessees' contention in regard to validity of search. TheCIT (Appeals) accepted the contention of the assessees that the searchcarried out with warrant issued in the name of "Carbo Group ofconcerns" was an invalid search and consequently assessments werecancelled by him. When the Revenue took up the matter in appealsbefore the Tribunal, three appeals were heard and decided by oneBench of the Tribunal and the last appeal was heard by a differentBench which took a view entirely different from the view taken by the ITA No.76/2010 & conn. ITA No.76/2010 & conn. earlier Bench. In other words, both the Benches of the Tribunal issueddivergent orders with regard to validity of assessments. Therefore, wehave to only consider which order of the Tribunal is right. We noticethat the later decision was rendered by the Tribunal in the orderproduced in I.T.A. No.76/2010 which is the appeal filed by the assesseewherein the Tribunal has explained how the other Bench order of theTribunal is not tenable. Therefore, we proceed to consider the saidorder issued by the Tribunal in I.T.A. No.207/Coch/2005 pertaining tothe assessment of one of the partners Sri.Jose Cyriac. 4. Counsel appearing for both sides have referred to copy of thewarrant issued in Form 45 produced in all the cases. We notice fromthe warrant issued in the case of assessee in I.T.A. No.76/2010 that theauthorisation was to search the office of "M/s.Carbo Group ofConcerns, 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 theother warrants produced in court, we notice that in all the warrantsissued under Section 132 of the Act the place authorised to be searched ITA No.76/2010 & conn. is the Group Head Office of the business concerns under the control ofall the assessees and the residence of the partners named in the warrant.The first question to be considered is in the second round when theappeals were restored to the CIT (Appeals) by the Tribunal, whetherthe Commissioner (Appeals) was entitled to consider the question ofvalidity of assessments based on the irregularity in the warrant allegedby the assessees. We find force in the contention of the counsel for theRevenue and the findings of the Tribunal in their order challenged inI.T.A. No.76/2010 that the CIT (Appeals) while considering theappeals after remand by the Tribunal should consider the appeals basedon the directions contained in the Tribunal's order. It is to be noted thatthe assessees never contested the validity of the assessments on theground of alleged irregularity in the warrant issued in the first round ofappeal before the CIT (Appeals). In the second stage when theRevenue filed appeals before the Tribunal against the orders of the CIT(Appeals) remanding the cases, though assessees filed cross objectionchallenging the validity of the assessments, the Tribunal did notconsider the same because the same did not arise from orders of the ITA No.76/2010 & conn. CIT (Appeals) challenged before the Tribunal. In other words, theTribunal while remanding the cases did not allow the assesees to raisean issue on the validity of assessments on ground of alleged defects inthe warrant issued which was not the subject matter of first appealsfiled before the CIT (Appeals). Admittedly the remand orders issuedby the Tribunal had become final and in the remand order Tribunalneither considered the validity of assessments nor included the samewithin the scope of remand for the CIT (Appeals) to consider the samewhen the matter reach him a second round after remand by theTribunal. We, therefore, uphold the findings of the Tribunal in theorder challenged in I.T.A. No.76/2010 that the CIT (Appeals) had nojurisdiction to consider the validity of the assessments and he wasauthorised to consider only the assessment on merits i.e. about theincome determined in assessment. 5. Even though we have upheld the order of the Tribunal on thelack of jurisdiction of the CIT (Appeals) to consider validity ofassessments after remand by the Tribunal, both sides argued merits onthe validity of the assessments as well. After verifying the entries in ITA No.76/2010 & conn. 5. Even though we have upheld the order of the Tribunal on thelack of jurisdiction of the CIT (Appeals) to consider validity ofassessments after remand by the Tribunal, both sides argued merits onthe validity of the assessments as well. After verifying the entries in ITA No.76/2010 & conn. the copies of search warrants produced, we have already noticed that inall the warrants the name of the assessees and the residential address ofthe assessees are given as place to be searched besides the Head Officeof the Carbo group of concerns which was also authorised to besearched under the same warrant. In our view, there is nothing wrongin authorising search of a group of concerns by a warrant issued underSection 132 of the Act. We have already stated in the beginning of thejudgment the names of the firms and the companies whose Head Officeaddress is shown in every warrant for search. Very many businessconcerns which are assessed after search have in their name, the name"Carbo" and "Carbo" appears to be the common name forming part ofthe name of various business concerns of the related assessees.Assessees do not dispute that the address of the Head Office of thebusiness concerns shown is not correct. Admittedly all the assesseeshave their Head Office in the same building, the address of which isfully given in the warrant. Besides the name of the group shown asCarbo Group of concerns in the warrant, every warrant contains theaddress of residential house of the assessee to be searched. In fact, it is ITA No.76/2010 & conn. admitted that based on the search warrant issued the Head Office of thebusiness concerns and the residences of the partners/directors weresearched and documents and records were recovered. Assessees havenot chosen to challenge the validity of assessments on the allegation ofdefect or irregularity in the warrant issued either before the AssessingOfficer or in first round of appeals and they have chosen to raise such acontention after remand before the CIT (Appeals) for the first time.We are in complete agreement with the finding of the Tribunal in theirorder challenged in I.T.A. No.76/2010 that the CIT (Appeals) has nojurisdiction to entertain such a contention. Further, on merits also, wefind no substance in the allegation of the assessees that the warrant isdefective. In our view, the warrants issued are free from the defectalleged by the assessees. What is required to be stated in the warrant isprecise details about the assessees and the persons to be searched whichare contained in the warrants issued in these cases because the GroupHead Office of all the business concerns and the residence of thepersons in charge of business namely, partners and directors of thebusiness concerns, were authorised to be searched. We, therefore, find ITA No.76/2010 & conn. 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 theTribunal. Since the Tribunal has decided the merits on the additions inthe order challenged in I.T.A. No.76/2010, the said appeal filed by theassessee is dismissed. So far as the other appeals are concerned, sinceneither the CIT (Appeals) nor the Tribunal has considered theassessees' challenge against the determination of income and additionsmade, the matter will stand remanded to the CIT(Appeals) for decisionon merits i.e. pertaining to the income assessed based on the orders ofremand issued by the Tribunal in the first round of appeals. C.N.RAMACHANDRAN NAIRJudge K.SURENDRA MOHANJudge