2012 (7) TMI 546 - HC - Income Tax

Whether the Tribunal was justified in holding that the assessments were invalid for the reason that search warrant issued in Form 45 was invalid - search is carried out strictly by following the procedure contained under Rule 112 and by issuing warrant by giving the names of each and every assessee separately - when notice after search was issued, each and every assessee without any objection filed return and contested the assessment on merit - In the first appeal stage also they had no contention that block assessments were invalid for want of separate warrants in the case of each and every assessee. However, at the second appeal stage the assessees raised the contention that warrants were defective - Since the Tribunal has followed their order in allowing assessee s claim which stands now reversed - orders of the Tribunal set aside and appeals restored back to the Tribunal for decision on merits.

Summary

Issues:
Validity of assessments based on search conducted under Section 132 of the Income Tax Act - Whether search warrant issued in Form 45 was invalid.

Analysis:
The judgment of the High Court of Kerala pertains to two sets of appeals involving two assessees, M/s. Bimbis South Star and M/s. Khyber Foods, assessed based on a search conducted under Section 132 of the Income Tax Act. The main issue raised was the validity of the assessments due to the alleged invalidity of the search warrant issued in Form 45. The Senior Counsels for both the Revenue and the respondent presented their arguments before the court.

The Senior Counsel for the Revenue contended that the assessments' validity was never challenged by the assessee until the Tribunal stage when additional grounds were raised, claiming that warrants issued in the name of group concerns were invalid. The assessees heavily relied on a Tribunal order regarding a group of related assessees known as the CARBO Group, whose assessments were canceled due to similar reasons. However, the Revenue's Senior Counsel referred to a Division Bench decision that reversed the Tribunal's order, thereby supporting the Revenue's position.

Upon examination, it was found that the search was conducted simultaneously at three premises on a single day based on warrants issued under Section 132. The premises searched included various establishments such as Bimbis Fast Food, Bimbis Ice Cream, Khyber Hayath, and Lala Fast Food, all located in the same building. The warrants mentioned the establishments under the name "Bimbis Group of Concerns," with individual names of the assessees specified separately. The search records indicated common ownership and management of these establishments, despite operating under different group names for tax benefits.

The court highlighted that the search procedure was followed correctly, with separate warrants issued for assessees in the same building while separate warrants were issued for assessees in different locations. Each assessee filed returns and contested the assessment without objection until the second appeal stage when the contention about defective warrants was raised. The Tribunal's decision to uphold the assessees' claim was deemed erroneous, especially since a similar case was previously decided by the court in favor of the Revenue.

Therefore, the High Court allowed the appeals by setting aside the Tribunal's orders and remanding the case back to the Tribunal for a decision on merits, emphasizing the importance of following proper procedures and warrant requirements in such assessments under the Income Tax Act.