Ita/13/2001 Of The Commiossioner Of Income Tax, Cochin v. M/S.benhur Trades & Investments Pvt.ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR MONDAY, THE 14TH JANUARY 2008 / 24TH POUSHA 1929 ITA.No. 13 of 2001() -------------------- ITA.279/COCH/1996 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ----------------- THE COMMISSIONER OF INCOME TAX,COCHIN. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: ------------- M/S.BENHUR TRADES & INVESTMENTS PVT. LTD., MAS BUILDING, COCHIN-18. BY ADV. SRI.T.M.SREEDHARAN SRI.T.S.ARUNKUMAR SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 14/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &T.R.RAMACHANDRAN NAIR, JJ. .................................................................... ....................................................................Dated this the 14th day of January, 2008. JUDGMENT C.N.Ramachandran Nair, J. Even though four questions are raised, actually only two issues are involved which pertain to addition of estimated unpaid dividends fromchitty business and estimation of foreman's commission on the date ofauction. We have heard counsel appearing for the appellant and counselappearing for the respondent-assessee. 2. It is clear from the orders of the Tribunal and that of the firstappellate authority and the assessment order that the assessee which wasengaged in different lines of business including chitty, did not produceentire books of accounts. If assessee does not produce books of accounts tosubstantiate the return and profit and loss account filed, assessment shouldhave been completed under Section 144 as provided under Section 145(3) ofthe Income Tax Act and not under Section 143(3). However, the AssessingOfficer has accepted the profit and loss account and made certain additionsbased on a guess work. However, he has made addition towardsundistributed dividend by reference to Section 41(1) of the Income Tax Act. The first appellate authority as well as the Tribunal did not approve theaddition under Section 41(1) and therefore, they deleted the same. Weagree with the orders of the Tribunal and the appellate authority becauseSection 41(1) has no application in this case. It was for the assessee to haveproved with evidence before the Assessing Officer that dividend though notdistributed along with subscriptions, was in fact distributed to thesubscribers at the end of the chit as claimed by counsel in this court, if thatis the factual position. The terms of chitty contained in the variola are alsonot referred by the Assessing Officer, which would have disclosed whethersubscribers who default payment of subscription are entitled to dividend atthe end of the kury as is claimed in this court. Veethapalisa is normallydistributed among subscribers who remit the kury amount in time and oncesubscribers forfeit the benefit, it goes to the foreman. So far as foreman'scommission is concerned, it is not known what is the date on whichpetitioner credited it. It may be credited on the date of auction or on thedate of payment to the successful bidder i.e., the date on which prize amountis paid. Strangely the officer has not considered any of these and petitioneradmittedly did not produce books of accounts. We are not in a position touphold the Tribunal's order confirming the first appellate order which isbased on certain assumption of facts. We, therefore, set aside the orders of the Tribunal and that of the first appellate authority and remand the matterto the Assessing Officer for reconsideration. The petitioner is directed toproduce books of accounts. The assessing authority will call for theaccounts and make fresh assessment. The assessing authority will give anopportunity to the assessee to produce accounts and other details to makefresh assessment. There will be a direction to the Assessing Officer tomodify the assessment within three months from date of receipt of copy ofthis judgment. If books are not available at this distance of time and theassessee is in business, the Assessing Officer can find out the practicefollowed by the assessee in the following years accepted in assessments andif in the later period assessee's claim was accetped, then there is no scopefor addition for this year also. The appeal is disposed of as above. C.N.RAMACHANDRAN NAIRJudge pms T.R.RAMACHANDRAN NAIRJudge