1/15 R IN HIGH COURT OF KARNATAKA, BENGALURU DATED THIS 7TH DAY OF NOVEMBER 2017 BEFORE HON'BLE Dr.JUSTICE VINEET KOTHARI W.P.Nos.24646 24651 OF 2015(T-IT) BETWEEN: Prathibha Jewellery House Rep. by its Partner Sri S N Sharath Kumar Aged about 68 years No.1/1, Raja Ram Mohan Roy Road Richmond Circle Bangalore 560 025. Petitioner (By:Mr.A Shankar, Advocate) AND: 1. Commissioner of Income Tax (Appeals) Office of Commissioner of Income-Tax (Appeals)- 11, Central Revenue Building Queens Road, Bangalore 560 001. 2. Commissioner of Income-Tax Central Circle, C.R.Building, Queens Road Bangalore 560 001. 3. Deputy Commissioner of Income-Tax Central Circle-1(4), Central Revenue Building Queens Road, Bangalore 560 001. Respondents Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 2/15 (By:Mr.K.V.Aravind, Advocate) These Writ Petitions are filed under Articles 226 and 227 of Constitution of India praying to quash order passed by 1st respondent dated 11.2.2015 in upholding order of assessment passed for Assessment Years 2005-06 to 2010-11 vide Annexure and quash order of Authorities below as very initiation of proceedings under Section 153-A is without jurisdiction as mandatory conditions has been not complied and etc. These W.Ps. coming on for Preliminary Hearing B Group this day, Court made following:- ORDER Mr.A Shankar, Advocate for Petitioner-Assessee Mr.K.V.Aravind, Advocate for Respondent-Revenue assessee petitioner has filed these petitions in this Court directly against order Annexure-A passed by Commissioner of Income Tax (Appeals) [CIT(A)] on 11.2.2015, passed in pursuance of remand order passed by higher Appellate Authority Income Tax Appellate Tribunal (ITAT), C Bench, Bangalore on 21.11.2014 for Assessment Years 2005-2006 to 2011-2012. Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 3/15 2. ITAT while deciding earlier appeals filed by assessee-petitioner, M/s.Prathibha Jewellery House had given following directions while remanding case back to CIT (A). same is quoted below for ready reference:- 2. Having regard to rival contentions and material on record, we find that assessee has raised additional ground of appeal particularly against existence of conditions for issuance of warrant of search and validity of assumption of jurisdiction u/s 153A read with section 143(3) of Act. In remand report to said additional grounds raised by assessee, AO has clearly not only rebutted contentions of assessee but also has remained silent as to whether conditions for issuance of warrant of search existed at all. In such circumstances, CIT(A) ought to have at least satisfied herself about existence of conditions before concluding that that jurisdiction has been validly exercised by AO in view of judgment of jurisdictional High Court in case of Ramaiah Reddy (cited supra) on which assessee has placed reliance Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 4/15 upon. All subordinate courts and authorities are bound by decision of jurisdictional High Court and has to follow same in its letter and spirit. In view of same, we deem it fit and proper and remand appeals for all assessment years back to file of CIT(A) for proper adjudication of additional ground of appeal relating to validity of jurisdiction u/s 153A as well as existence of conditions for issuance of warrant u/s 132A of Act. other grounds of appeal raised by assessee with regard to merits of disallowance of addition made by AO and as confirmed by CIT(A), are not adjudicated at this stage and assessee shall be at liberty to agitate same in case CIT(A) decides ground of jurisdiction against assessee. 3. Learned CIT(A) upon such remand, passed impugned order on 11.2.2015 with following observations dismissing appeal of assessee- petitioner and holding that it could not go into question of validity of Search action against petitioner under Section 132 of Income Tax Act, Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 5/15 1961 ( Act ). relevant portions of order are quoted hereinbelow for ready reference:- 8. In any case, as regards justification or validity of search action u/s 132 with reference to decision of Hon ble High Court of Karnataka in case of C Ramaiah Reddy 339 ITR 210, same is examined in light of specific order of Hon ble ITAT. On going through said decision, it is apparent that issue before Hon ble Court was whether Tribunal is competent to look into issue regarding validity of search? With regard to said issue, Hon ble High Court has answered said issue in favour of appellant holding that Tribunal was competent to look into issue of validity of search. 9. It is on record that said decision is pending in appeal before Hon ble Supreme Court, and also that Hon ble Chattisgarh High Court in case of Trilok Singh Dhillon vs. CIT (2011)41(I)ITCL 2010 (Chattisgarh-HC), on similar issue has decided in favour of Revenue, and that on appeal against Revenue favourable decision of Chattisgarh High Court, Supreme Court has dismissed Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 6/15 appeal of appellant. In effect, decision favouring Revenue has been upheld. 10. powers and jurisdiction of CIT(A) and orders which are appealable before CIT(A) as per Income Tax Act, 1961 do no empower me to look into issue of reasons for search ordered by Director or Director General of Income Tax. Moreover, as officer of Income Tax Department, I cannot sit in judgment over action authorized by authority superior to me [in case of Director General or Chief Commissioner] or authority equivalent to me [in case of Director or Commissioner] authorizing search action. Even in case of Sri C Ramaiah Reddy, (supra) as cited by appellant, this issue has been sent back for decision to Hon ble Tribunal and not to any lower authority. Thus ground raised on justification of search action is not maintainable before me. 11. With above findings, I hold that proceedings u/s 153A have been validly initiated in case of appellant pursuant to search action authorized and executed through valid warrants to search appellant. issue setaside before me vide order of Hon ble Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 7/15 ITAT vide their order dated 21.11.2014 in ITA Nos.579 to 585/Bang/2014 for A.Ys 2005-06 to 2011-12 is decided accordingly. 4. assessee-petitioner preferred these writ petitions without filing appeal before ITAT against said order passed by learned CIT(A) on 11.2.2015 and present writ petitions were filed before this Court on 15.6.2015. 5. Mr. A.Shankar, learned counsel for assessee-petitioner submitted before Court that learned CIT(A) was bound to consider question of validity of Search against assessee-petitioner under Section 132 of Act, in view of decision of this Court in case of C.Ramaiah Reddy v. Assistant Commissioner of Income Tax [339 ITR 210)(Kar)] and learned CIT (A) instead of doing that, could not have refused to do so following decision of Chattisgarh Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 8/15 High Court in case of Trilok Singh Dhillon v. CIT (2011)41(I)ITCL 2010 (Chattisgarh-HC). 6. Mr.Shankar has relied upon decisions of Hon ble Supreme Court in case of Bhopal Industries Ltd. v. Income-Tax Officer, Bhopal [1960 (40) ITR (618)] and in case of Director General of Income Tax (Investigation) & ORS. v. Spacewood Furnnishers (P) Ltd. & Ors. [(2015) 119 DTR 201 (SC)] and also order passed by Hon ble Supreme Court on 17.11.2016 in S.L.P.(C) Nos.15734- 15735/2016, to support his contention that even Appellate Authorities, including CIT (A) first Appellate Authority was bound to look into question of validity of Search under Section 132 of Act. 7. However, Mr.Shankar has also brought to notice of Court recent Amendment effected by Finance Act, 2017 with retrospective effect from Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 9/15 1-4-1962 inserted to Explanation in Section 132(1) of Act, which reads as under:- Explanation.- For removal of doubts, it is hereby declared that reason to believe, as recorded by income-tax authority under this sub-section, shall not be disclosed to any person or any authority or Appellate Tribunal. 8. He further submits that writ petition challenging validity of said Amendment by way of insertion of said Explanation is already pending in this Court vide Writ Petition No.45250/2017 (C.Ramaiah Reddy v. Union of India). He therefore submitted that matter should be remanded back to CIT(A) to reconsider question of validity of search under Section 132 of Act in view of specific directions of ITAT, which CIT(A) has failed to comply in present case. Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 10/15 9. On other hand, learned counsel for Revenue, Mr.K.V.Aravind supported impugned order and urged that not only in view of amendment of law with retrospective effect CIT(A) could not go into said question of validity of Search under Section 132 of Act, but also because, since Civil Appeal No.2734/2013 (The Assistant Commissioner of Income Tax v. C.Ramaiah Reddy) against decision of this Court in C.Ramaiah Reddy s case is still pending before Hon ble Supreme Court and judgment is still awaited. He therefore submitted that learned CIT(A) was justified in following decision of Chattisgarh High Court in Trilok Singh Dhillon s case (supra), against which S.L.P. filed by Revenue was dismissed by Hon ble Supreme Court and therefore, CIT (A) could not be mandated to specifically go into this question. 10. Having heard learned counsels for parties, this Court is satisfied that present writ Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 11/15 petitions deserve to be dismissed for following reasons:- (i) That decision of this Court in case of C.Ramaiah Reddy, which allowed Appellate Authority to go into question of validity of Search is subject-matter of pending appeal before Hon ble Supreme Court and therefore, not only Authorities of Department, but even this Court should await decision of Hon ble Supreme Court on said issue and cannot direct Appellate Authorities like (CTC Appeal) below by way of writ of mandamus to go into question of validity of search under Section 132 of Act and it would be incongruous and not in deference to pendency of aforesaid Civil Appeal No.2734/2013 before Hon ble Supreme Court. Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 12/15 (ii) That even law has been amended by insertion of aforesaid Explanation by Parliament in Section 132 of Act by Finance Act, 2017 with retrospective effect from 1.4.1962. That Explanation also prohibits Appellate Authorities to go into reasons recorded by concerned Income Tax Authority for directing Search against assessee or tax payer. (iii) That this Amendment came after both, ITAT passed order in present case on 21.11.2014 as also learned CIT(A) passed impugned order on 11.2.2015. Nonetheless, retrospective effect of said Amendment, will have its effect on present case as well so long that said Amendment holds field. Therefore, Appellate Authorities of Department Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 13/15 cannot be expected to go into said question. It is only for Constitutional Courts to examine vires and validity of such Amendment and for that, separate writ petition is already said to be pending. However, no such challenge to Amendment has been made in present case. 11. In these circumstances, impugned order Annexure-A dated 11.2.2015 passed by learned CIT(A) cannot be faulted and it stands to reason for learned CIT(A) to have followed Chattisgarh High Court s decision and refused to do so. 12. assessee-petitioner obviously had alternative, adequate and efficacious remedy against said order passed by learned CIT(A) before Income Tax Tribunal again under Section 253 of Act. There appears to be no justification for cutting Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 14/15 short that regular remedy at this stage and to entertain these writ petitions on merits. 13. decisions relied upon by learned counsel for petitioner can also not enure to benefit of assessee-petitioner awaiting final decision from Hon ble Supreme Court in Civil Appeal No.2734/2013 against decision of Division Bench of this Court in C.Ramaiah Reddy s case (supra) and also question of validity of Explanation is yet to be examined by Constitutional Courts. Without that, lower Appellate Authorities of Income Tax Department cannot be expected to look into these questions of validity of search under Section 132 of Act at their own level independently. 14. Therefore this Court does not find any good ground to allow petitioner to bypass said alternative remedy and directly assail order of learned CIT(A) before this Court. writ petitions Date of Order 07-11-2017 W.P.Nos.24646-24651/2015 Prathiba Jewellery House Vs. Commissioner of Income-Tax (Appeals) & Ors., 15/15 being devoid of merit are accordingly dismissed. No costs. 15. If assessee-petitioner files Appeal before Income Tax Tribunal within period of 30 days from today, same may be entertained without raising objection of limitation subject to assessee-petitioner complying with other conditions as per provisions of Act in this regard. Sd/- JUDGE VGR Prathibha Jewellery House v. Commissioner of Income-tax (Appeals), Bangalore/ Commissioner of Income-tax Central Circle, Bangalore/ Deputy Commissioner of Income-tax Central Circle-1(4), Bangalore