Research › Search › Judgment

Karnataka High Court · body

2002 DIGILAW 347 (KAR)

M. M. Bhatia (HUF) v. Commissioner of Income-tax

2002-06-04

P.VISHWANATHA SHETTY

body2002
JUDGMENT P. Vishwanatha Shetty, J.--The petitioners in these petitions are asses-sees under the provisions of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). In these petitions they have called in question the correctness of the communication dated March 24, 1999, a copy of which has been produced as annexure D along with the writ petitions wherein the claim of the petitioners that they are liable to pay tax at 30 per cent, and not at 40 per cent, as determined under the Kar Vivad Samadhan Scheme, 1998 (hereinafter referred to as "the Scheme"), came to be rejected. They also prayed for a direction to the respondent to modify the tax demanded in the certificate issued under Section 90(1) of the Scheme and to restrict the tax liability of the petitioners only at 30 per cent, and to refund the tax collected by the respondent in excess of 30 per cent. 2. A few facts which are not in serious dispute may be stated as hereunder : The residential premises where all the petitioners were residing and also the office premises where the professional activities of petitioners Nos. 1 and 5 in their individual capacity were being carried out were searched by the officers of the Income Tax Department in March, 1995. However, it is the case of the petitioners that warrants were issued for search of the premises only in the name of the first petitioner--Sri M.M. Bhatia and the fifth petitioner--Sri Suresh Bhatia. Consequent upon the search, assessments were made on the family members for the assessment years 1986-87 to 1995-96 by making various additions. The petitioners who were aggrieved by the additions made in the orders of assessment filed appeals before the Commissioner of Income Tax (Appeals). However, though the Commissioner gave some relief to the petitioners, the petitioners not being fully satisfied with the relief granted by the Commissioner filed appeals before the Income Tax Appellate Tribunal, Bangalore Bench, Bangalore ; and while the said appeals were pending, consequent upon the introduction of the Scheme they made a declaration under Section 88 of the Scheme by computing their tax liability at 30 per cent, in terms of the provisions contained in Section 88(a). The respondent on receipt of the declaration filed by the petitioners issued certificates determining the liability of the petitioners to pay tax under the scheme at 40 per cent, as against the claim of the petitioners made in their declaration at 30 per cent. Thereafter, aggrieved by the determination of the tax liability of the petitioners at 40 per cent, by the respondent, each of the petitioners separately filed applications before the respondents seeking for issue of a revised certificate bringing to his notice that since there was no search of the residential premises occupied by the petitioners, it was not permissible for the respondent to determine the tax payable by the petitioners under the Scheme at 40 per cent, and, therefore a revised certificate may be issued calculating the correct tax to enable the petitioners to make the payment within time to avail of the benefit under the Scheme. However, the request made by the petitioners for issue of revised certificate was turned down by the respondent in the impugned communication--annexure D dated March 24, 1999. 3. Sri Parthasarathy, learned counsel appearing for the petitioners, firstly submitted that the determination of the liability of the petitioners to pay tax at 40 per cent, as against 30 per cent, claimed by the petitioners in their declaration is totally erroneous in law and that being the position, the respondent has seriously erred in law in passing the impugned order--annexure D rejecting the claim of the petitioners for issue of modified certificate. According to learned counsel, since there was no search of the premises occupied by the petitioners in compliance with the provisions contained under Section 132 of the Act, the reference made in the orders of assessment with regard to the search made cannot be considered as a search made in terms of Section 132 of the Act and therefore the respondent could not have directed the petitioners to pay tax at 40 per cent. He pointed out that since the warrants for search were issued only in the names of petitioners Nos. 1 and 5, the liability imposed on the petitioners to pay tax at 40 per cent, under the scheme is erroneous in law. He pointed out that since the warrants for search were issued only in the names of petitioners Nos. 1 and 5, the liability imposed on the petitioners to pay tax at 40 per cent, under the scheme is erroneous in law. Sir Parthasarathy, in support of his contention that a search is required to be preceded by a warrant and if that is not done, such a search cannot be considered as one done under Section 132 of the Act, relied upon a decision of this court in the case of Nenmal Shankarlal Parmer Vs. Assistant Commissioner of Income Tax (Investigation), ILR (1991) KAR 4527 made in Writ Petition No. 14894 of 1991 disposed of on November 19, 1991. 4. However, Sri Sheshachala, learned counsel for the respondent, strongly countering the submissions of learned counsel appearing for the petitioners made two submissions. Firstly, he submitted that since it cannot be disputed that the order of assessment is based on a search of the premises wherein the petitioners were residing, there is no error made in the impugned orders of assessment rejecting the claim of the petitioners to modify the certificate issued determining the liability of the petitioners to pay tax at 40 per cent. Secondly, he submitted that in the light of the decision of the Supreme Court in the case of Income-tax Officer, Special Investigation Circle-B, Meerut Vs. Seth Brothers and Others etc., AIR 1970 SC 292 , the decision of this court in the case of Nenmal Shankarlal Parmer Vs. Assistant Commissioner of Income Tax (Investigation), ILR (1991) KAR 4527 , is no longer a good law. He referred me to the observation made in the said judgment at page 847 which reads as hereunder ; "We are unable to hold that because the Income Tax Officers made a search for and seized the books of account and documents in relation to business carried on in the names of other firms and companies, the search and seizure were illegal." 5. Having elaborately heard learned counsel appearing for the parties, I am of the view that the petitioners are not entitled for the relief sought for by them in these petitions. It is not in dispute that the order of assessment is based on the materials collected at the time of search of the premises occupied by the petitioners. Having elaborately heard learned counsel appearing for the parties, I am of the view that the petitioners are not entitled for the relief sought for by them in these petitions. It is not in dispute that the order of assessment is based on the materials collected at the time of search of the premises occupied by the petitioners. It is also not in dispute that all the petitioners were residing in the premises where the search had taken place. Even according to the petitioners the search warrants were issued in the names of petitioners Nos. 1 and 5. Under these circumstances, merely because the search was not preceded by a warrant issued to the petitioners, in my view, it is not permissible for the petitioners to contend that the order of assessment is not based on a search of the premises under Section 132 of the Act. Section 88(a)(v)(B) of the Act does not make service of a search warrant a condition precedent to fasten the liability of an assessee to pay tax at 40 per cent. The only requirement of the said provision is that the assessment should have been made on the basis of the search and seizure proceedings under Section 132 or Section 132A of the Act. Any infirmity in the procedure followed at the time of search will not enure to the benefit of an assessee to avoid his liability to pay tax at 40 per cent, in terms of Section 88(a)(v)(B) of the Scheme. As noticed by me earlier, the only requirement of Section 88(a)(v)(B) of the scheme is that the assessment should have been made on the basis of the search and seizure proceedings conducted either under Section 132 or Section 132A of the Act. It is not in dispute that the order of assessment refers to the materials collected at the time of the search of the premises occupied by the petitioners. When that is the position, it is not possible for me to accept the contention of learned counsel appearing for the petitioners that since the warrant of search was not issued to all the petitioners prior to the search of the premises and materials collected at the time of search was not one made and collected under Section 132 of the Act. So long as the order of assessment is based on the basis of the materials collected in the course of the search, the petitioners are liable to pay the tax only at 40 per cent, and not at 30 per cent. Whether the search done earlier was legal or not, whether it should have been preceded by a warrant issued to the petitioners or not is not a matter to be gone into while extending the benefit of the scheme to the petitioners. If the search was not legal, or for any reason that the materials collected at the time of the search could not have been relied upon by the appellate authority, it was open to the petitioners to get the order of assessment modified by the appellate authority. It is also admitted by learned counsel for the petitioners that the petitioners had unsuccessfully challenged the order of assessment before the first appellate authority and when the matter was pending before the Tribunal, the petitioners wanted to take the benefit of the scheme. Therefore, so long as the order of assessment remained undisturbed and the petitioners sought to take the benefit of the scheme, it is not permissible for the petitioners to contend that the search made was not preceded by a warrant issued to the petitioners. In the light of the above conclusion reached by me, I find it unnecessary to go into the question as to whether the decision of this court in the case of Nenmal Shankarlal Parmer Vs. Assistant Commissioner of Income Tax (Investigation), ILR (1991) KAR 4527 , is no longer a good law in the light of the judgment of the Supreme Court in the case of Income-tax Officer, Special Investigation Circle-B, Meerut Vs. Seth Brothers and Others etc., AIR 1970 SC 292 , relied upon by learned counsel for the respondent. 6. In the light of the discussion above, these petitions are liable to be rejected. Accordingly, they are rejected.