Wa/1415/2012 Of Dr.k.m.mehaboob v. Deputy 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 C.K.ABDUL REHIM MONDAY, THE 30TH DAY OF JULY 2012/8TH SRAVANA 1934 WA.No. 1415 of 2012 () IN WPC/2954/2011 ---------------------------------------- AGAINST THE ORDER/JUDGMENT IN WPC.2954/2011 DATED 13-06-2012 APPELLANT(S)/PETITIONER:----------------------- DR.K.M.MEHABOOB M/S.MOIDU'S MEDICARE PRIVATE LIMITED INDIRA GANDHI ROAD, CALICUT. BY ADV. MS.ANITHA RAMACHANDRAN MS.INDU SUSAN JACOB RESPONDENT(S)/RESPONDENTS: -------------------------- 1. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2 (1), AAYAKAR BHAVAN, NORTH BLOCK, KOZHIKODE-673001. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2 (1), KOZHIKODE-673001. BY MR.JOSE JOSEPH, SC THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 30-07-2012,ALONG WITH W.A.NOS.1416, 1417, 1418, 1419, 1420 & 1421 OF 2012, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & C.K.ABDUL REHIM, JJ. .................................................................... W.A.No.1415, 1416, 1417, 1418, 1419, 1420 & 1421 of 2012 ....................................................................Dated this the 30[th] day of July, 2012. J U D G M E N T Ramachandran Nair, J. The appellant, a Doctor, who is an assessee before the Deputy Commissioner of Income Tax, Kozhikkode, wasassessed under Section 153C read with Section 153A of theIncome Tax Act, 1961 (hereinafter referred to as the Act forshort) based on evidence gathered in the course of search ofanother assessee at Mangalore. When the searched assessee'sassessment was taken up under Section 153A, based on theinformation and materials gathered during search thatAssessing Officer noticed that the part of the evidencecollected and materials received during search of that assesseebelong to the appellant, and therefore the evidence andmaterials so collected during search of the assessee atMangalore were transferred to the Assessing Officer beforewhom the appellant/assessee is regularly assessed at W.A.No.1415/2012 & connected cases Kozhikkode. Based on materials received from the AssessingOfficer from Mangalore, the appellant/assessee's assessmentswere taken up under Section 153C read with Section 153Aafter issuing notice and the said assessments were completedthrough separate orders for each of the six assessment yearsimmediately preceding the assessment year relevant to theprevious year in which the search was made on the assessee atMangalore as provided under Section 153A(1)(b) of the Act.While the assessments are completed for the assessment yearsfrom 2003-04 to 2008-09 under Section 153C read withSection 153A of the Act, for the assessment year 2009-10separate assessment was made on best judgment basis underSection 144 of the Act because the assessee did not file evenreturn for that assessment year even when assessment wastaken up in December, 2010. Over looking the statutoryremedy of appeal, the assessee contested the assessments inwrit proceedings on technicalities before the learned SingleJudge, who rejected the same against which this Writ Appeal isfiled. W.A.No.1415/2012 & connected cases -3- 2. We have heard learned counsel appearing for the appellant/assessee and learned Standing Counsel for therespondents. 3.Before proceeding to consider the Writ Appeal onthe grounds decided by the learned Single Judge against theappellant, we are constrained to observe that on the merit withregard to the additions sustained in assessments, assesseestill has right of appeal before the appellate authority, namelyCIT (Appeals), because the learned Single Judge has notconsidered the assessments on merit. Therefore, it is for theappellant/assessee to file appeals before the statutoryauthorities raising contentions which are not decided by thelearned Single Judge and by us. W.A.No.1415/2012 & connected cases -3- 2. We have heard learned counsel appearing for the appellant/assessee and learned Standing Counsel for therespondents. 3.Before proceeding to consider the Writ Appeal onthe grounds decided by the learned Single Judge against theappellant, we are constrained to observe that on the merit withregard to the additions sustained in assessments, assesseestill has right of appeal before the appellate authority, namelyCIT (Appeals), because the learned Single Judge has notconsidered the assessments on merit. Therefore, it is for theappellant/assessee to file appeals before the statutoryauthorities raising contentions which are not decided by thelearned Single Judge and by us. 4.The first challenge is against the assessment for theassessment year 2009-10 made under Section 144 read withSections 153C and 153A of the Act. According to theappellant, assessments permissible under Section 153C readwith Section 153A are only for six assessment years in termsof Section 153A(1)(b) of the Act. Admittedly, search was on W.A.No.1415/2012 & connected cases 17/03/2009 and therefore the six assessments permissibleunder the above Sections are for the assessment years 2003-04 to 2008-09. The appellant has contested the validity of allthe assessments. We first proceed to consider the challengeagainst the validity of the best judgment assessmentcompleted for the assessment year 2009-10. The specificgrievance of the appellant is that assessment for theassessment year 2009-10 is for the previous year in whichsearch was made and therefore for that year Section 153A orSection 153C has no application. However, the contention ofthe learned Standing Counsel for the Income Tax Department,which found acceptance with the learned Single Judge, is thatthough in the assessment order for the year 2009-10 all theconnected Sections of the Act including Sections 153C and153A are mentioned, it is in fact a best judgment assessmentunder Section 144 for failure of the assessee to file return forthe said assessment year. Admittedly, assessment for the year2009-10 has been made on 29/12/2010 along with theassessments taken up under Section 153C read with Section W.A.No.1415/2012 & connected cases 153A for the six preceding assessment years. All the sixassessments under these provisions are completed byseparate orders along with separate best judgmentassessment completed for the assessment year 2009-10.There is no dispute that all the assessments including thecontested best judgment assessment for the year 2009-10were completed by the regular Assessing Officer who hasjurisdiction on the assessee. The assessee has no explanationas to why no return was filed for the assessment year 2009-10. The assessee had also not made any payment of advancetax during the previous year relevant for the said assessment.When no return is filed for the assessment year, the AssessingOfficer is bound to make best judgment assessment underSection 144 of the Act, which is exactly what is done in thiscase. However, since the materials gathered during search ofanother assessee was the basis for completion of assessmentsof the appellant for the six preceding assessment years underSection 153C read with Section 153A, regular assessment for2009-10 was completed immediately thereafter. The W.A.No.1415/2012 & connected cases W.A.No.1415/2012 & connected cases Assessing Officer by mistake has quoted all those Sectionsnamely Sections 153C and 153A of the Act in the bestjudgment assessment also wherein it is also stated that thesaid assessment is made under Section 144 of the Act. We donot think the validity of a best judgment assessmentcompleted under Section 144 is any way affected merelybecause Sections 153C and 153A, based on which precedingyear's assessments were completed, are also quoted therein.When assessee contests the validity of assessments completedwith reference to different provisions of the Act, it is theobligation of the department to clarify the real provision underwhich the each contested assessment is really made, which inthis case is explained to be under Section 144 of the Act.When the best judgment assessment made under Section 144is otherwise valid for the year 2009-2010, there is no scopefor challenging it's validity on the ground that some otherSections pertaining assessment made contemporaneously forpreceding years are also quoted therein. We therefore do notfind any merit in the challenge against the assessment for the W.A.No.1415/2012 & connected cases -7- year 2009-10 on the ground that the Assessing Officer hasalso quoted Sections 153C and 153A of the Act in the saidorder because we have found that the assessment is one madeexclusively under Section 144 of the Act after issuing notice tothe assessee. However, it was open to the assessee to contestthe best judgment assessment on merit in appeal before CIT(Appeals), which he can still do.5.The remaining question to be considered isappellant's challenge against the assessments completed forthe six assessment years from 2003-04 to 2008-09 underSection 153C read with Section 153A(1) on the ground that theAssessing Officer who conducted search on the assessee atMangalore under Section 132 has not recorded the satisfactionas required under Section 153C before transferring the files tothe Assessing Officer of the appellant to make assessments onthe appellant under Section 153C read with Section 153A ofthe Act. While learned counsel for the appellant has relied onthe decision of the Supreme Court in Manish Maheshwariv.Asst. Commissioner of Income Tax and Another, reported in W.A.No.1415/2012 & connected cases 289 ITR 341, learned Standing Counsel for the Revenue hasrelied on the Division Bench decision of this Court inCommissioner of Income Tax v. Panchajanyam ManagementAgencies and Services, reported in 333 ITR 281 (Ker). We donot think there is any need to go to both these decisionsbecause even though Section 153C is analogous to theprevious provisions of Section 153BD, there is completedeviation in the new provision in as much as while Section158BD provided for transfer of file only when the AssessingOfficer who conducted the search or who called for books ofaccounts was satisfied that the undisclosed income foundtherefrom belongs to any person other than the searchedassessee who has to be assessed under Section 158BD readwith Section 158BC, under Section 153C of the Act fortransferring the material or evidence collected in search to theAssessing Officer of an assessee other than the searchedassessee, what is required to be satisfied is that the money,bullion, jewellery or other valuable article or thing or books ofaccount or documents seized in the course of search of an W.A.No.1415/2012 & connected cases -9- W.A.No.1415/2012 & connected cases -9- assessee belong to or relate to a person other than thesearched assessee. In other words, unlike under Section158BD for transferring a file under Section 153C, there is noneed to examine whether the books of accounts or otherevidence or materials seized in the course of search of anassessee represents or proves undisclosed income of anotherassessee. On the other hand, for transferring the file to theAssessing Officer of such other assessee, all what is requiredto be considered is whether the materials or books of accountsor evidence recovered relates to another assessee, which mayor may not lead to an assessment in the case of the otherassessee after transfer of the file to his Assessing Officer.This is only an internal arrangement to be made between twoDepartmental Officers and in this regard the only fact thatneeds to be verified is whether the assessee whose books ofaccounts or materials are recovered in the course of search ofany other assessee, is a regular assessee before anotherOfficer, and if so, to transfer the file to such other Officer forhis consideration and for passing orders, whether assessment W.A.No.1415/2012 & connected cases or penalty or such other order permissible under the Act bythat Officer. Admittedly, in this case, the Assessing Officer,who conducted the search and who obtained materials andevidence about the income of the Appellant rightly transferredthe files to the Assessing Officer of the appellant atKozhikode, who has jurisdiction to assess him, and it is onlyon receipt of such files and materials from the AssessingOfficer from Mangalore, the appellant's assessments weretaken up and completed under Section 153C read with Section153A of the Act. We, therefore, do not find any merit in thecontention of the appellant's counsel that satisfaction was notrecorded by the Assessing Officer at Mangalore beforetransferring the materials and seized records to the appellant'sAssessing Officer. In our view, if appellant's argument isaccepted he could be placed in a worse position, because if hisobjections were considered and overruled while transferringthe file by the Assessing Officer at Mangalore holding thatgoods seized or materials recovered really belong to himjustifying assessment, the appellant will forfeit his right to W.A.No.1415/2012 & connected cases raise same objection before his Assessing Officer who has toconsider the relevance of the documents, accounts or othermaterials received from the Assessing Officer at Mangalore.The scope of Section 153C is such that assessment has to bestrictly made only by the Assessing Officer before whom theassessee is regularly assessed because it is that Officer who isfamiliar with the transactions, income and regular assessmentof the assessee for the preceding years' and based on thesame to consider the relevance of materials or documentsreceived from another Assessing Officer after hearing theassessee to consider such materials or evidence forassessment. So much so, we do not think any enquiry orhearing or adjudication is contemplated by the AssessingOfficer, who conducted the search of an assessee in whichevidence or materials belonging to another assessee isobtained for transferring the file to the Assessing Officerbefore whom such other assessee is to be assessed. Eventhough transfer as contemplated under Section 153C has to bemade by the Officer who conducted the search and who W.A.No.1415/2012 & connected cases -12- W.A.No.1415/2012 & connected cases -12- recovered books of accounts, materials or articles in thecourse of search of an assessee other than searched assessee,still it is open to such assessee to establish before hisAssessing Officer that the opinion of the Assessing Officertransferring the materials or evidence or books of accounts orgoods seized is wrong and that those do not belong to him.In other words, the transfer of recovered books of accounts,evidence or materials is only a procedural formality to becomplied with by the Assessing Officer who searched anassessee and recovered materials pertaining to anotherassessee, and the Assessing Officer who takes up assessmentunder Section 153C against the latter will have full jurisdictionto appreciate evidentiary value of the books of accounts ormaterials or goods received from the other officer and proceedto make assessment in his own way. We therefore do not findany merit in the contention of the appellant's counsel thatsatisfaction is required to be recorded by the AssessingOfficer, who conducted the search before transferringmaterials or articles or things found belonging to another W.A.No.1415/2012 & connected cases -13- assessee. 6.Appeals as devoid of any merit. In view of the findings above, we dismiss these Writ Since the assessments were subject matter of contest in Writ Petitions and in Writ Appeals, we feel the appellant can begiven one month time from now to file appeals. If appeals arefiled within one month from now, the appellate authority willtreat the appeals as filed in time and proceed to dispose of thesame on merit except on grounds raised before us anddecided by us. Similarly, if the appellant moves for interimorders either before the Assessing Officer or before theappellate authority, payments made under interim orders ofthis Court should be reckoned while considering suchapplication. These Writ Appeals are dismissed but by granting the limited relief as above. (C.N.RAMACHANDRAN NAIR, JUDGE) (C.K.ABDUL REHIM, JUDGE)