Ita/147/2002 Of The Commissioner Of Income Tax,Tvm v. M/S.aiswrya Trading Company,Kuttanada

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 17TH MARCH 2008 / 27TH PHALGUNA 1929 ITA.No. 147 of 2002() --------------------- AGAINST ORDER IN ITA.149/COCH/2001 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/ RESPONDENT --------------------------- THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: APPELLANT ---------------------- M/S.AISWRYA TRADING COMPANY, KUTTANAD, ALLEPPEY. BY ADV. SRI.S.ANANTHAKRISHNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 17/03/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & T.R.RAMACHANDRAN NAIR, JJ. ------------------------- I.T.A. No. 147 of 2002 --------------------------------- Dated, this the 17[th] day of March, 2008 J U D G M E N T C.N.Ramachandran Nair, J. Heard learned senior counsel appearing for the appellant andlearned counsel appearing for the respondent assessee. 2.The order under challenge is for the assessment year1994-95. The assessee was engaged in abkari business. Duringthe previous year relevant for the assessment year, the assesseehad licence to carry on arrack business in 33 arrack shops andtoddy business in 6 toddy shops. The assessee's account were notcreditworthy and were rejected. In fact, original assessment itselfwas set aside and remanded by the Tribunal. Order underchallenge arises from assessment completed after one round ofremand. In fact, in first appeal, the first appellate authority thoughwithout issuing specific notice enhanced income. On second appealby the assessee the Tribunal though accepted rejection of books ofaccounts estimated income based on quantity of arrack sold by theassessee. The Tribunal has relied on earlier order in the case of theassessee and similar cases of some other abkari licencees. 3.The contention of the revenue is that the Tribunal ITA No.147/2002 -2- committed a major error in accepting the accounts pertaining to thequantity of arrack sold by the assessee. We are in completeagreement with this argument because after rejecting books ofaccounts for want of creditworthiness, the Tribunal has nojustification to accept the accounts with regard to the quantity ofarrack sold. In fact, on going though the orders we do not find thatany of the authorities have considered the relevant materials forestimation of income after rejection of books of accounts. Anassessee, who has paid compounding fee on various occassions forunaccounted sale of arrack cannot in the first place canvas foracceptance of books of accounts. Moreover, this is a case wherethe assessee has conceded sale of arrack through toddy shops.Obviously, the assessee cannot legally account the said transactionas it is in violation of licence condition warranting even cancellationof licence besides prosectuion. In fact, it is common knowledgethat the major liability for the assessee in abkari business is the kistpaid for obtaining the licence. None of the authorities haveconsidered the kist, sales tax, abkari welfare fund dues etc. paidwhich are liabilities incurred by the assessee to carry on thebusiness. There was no difficulty to estimate the turn over andprofit by taking into account the cost involved and by providing ITA No.147/2002 ITA No.147/2002 reasonable margin. We are of the view that after rejecting books ofaccounts of the assessee, which in this case is inevitable, theTribunal should have estimated profit by taking into account costinvolved, volume and turnover of business estimated etc. TheTribunal's order is illegal and untenable because after upholdingrejection of accounts it accepted quantity of arrack from theaccounts for the estimation of profit. The assessment for each yearis separate and therefore, there was no justification for the Tribunalto estimate income based on the pattern of assessment for anotheryear. We, therefore, set aside the order of the Tribunal and remandthe case back to the Tribunal for deciding the matter afresh afterhearing the parties. We make it clear that the Tribunal being thefinal fact finding authority should estimate the income on rationalebasis and since the assessment relates to 1994-95 unnecessaryremand should be avoided to achieve finality in the matter. The I.T.Appeal is disposed of as above. (C.N.RAMACHANDRAN NAIR, JUDGE) (T.R.RAMACHANDRAN NAIR, JUDGE)