Ita/25/2012 Of Classy The Antique Disigned Furniture v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU FRIDAY, THE 1ST DAY OF JULY 2016/10TH ASHADHA, 1938 ITA.No. 25 of 2012 () ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 125/COCH/2011 of I.T.A.TRIBUNAL,COCHINBENCH DATED 21.10.2011 APPELLANT(S)/APPELLANT: -------------------------------- CLASSY THE ANTIQUE DISIGNED FURNITURE WOOD COMPLEX TOWER, NEAR AYURVEDA COLLEGE, CHANKUVETTY, KOTTAKKAL. BY ADVS.SRI.ANIL D. NAIR SRI.J.R.PREM NAVAZ SMT.NIVEDITA A.KAMATH RESPONDENT(S)/RESPONDENT: ------------------------------------ THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2, KOZHIKODE-673001. R BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01-07-2016,ALONG WITH ITA. 29/2012, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: APPENDIX IN ITA.25/12 APPELLANTS' EXHIBITS: ANNEXURE A: TRUE COPY OF THE ORDER OF ASSESSMENT FOR THE YAR 2007-08ISSUED TO the APPELLANT.ISSUED TO the APPELLANT. ANNEXURE B: TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) FOR THE YEAR 2007-08 ISSUED TO THE APPELLANT.(APPEALS) FOR THE YEAR 2007-08 ISSUED TO THE APPELLANT. ANNEXURE C: TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATETRIBUNAL, COCHIN BENCH DT.21.10.2011.TRIBUNAL, COCHIN BENCH DT.21.10.2011. /TRUE COPY/ PS TO JUDGE ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. -----------------------------------I.T.A.Nos.25 & 29 of 2012----------------------------------- Dated this the 1[st] day of July, 2016 JUDGMENT Antony Dominic, J. 1. These appeals are filed by the assessee beingaggrieved by the order passed by the Income TaxAppellate Tribunal, Cochin Bench in ITA.Nos.125/11and 126/11, concerning the assessment years 2007-08and 2008-09 respectively.aggrieved by the order passed by the Income TaxAppellate Tribunal, Cochin Bench in ITA.Nos.125/11and 126/11, concerning the assessment years 2007-08and 2008-09 respectively. 2.We heard learned counsel for the assessee and thesenior counsel for the Revenue.senior counsel for the Revenue. 3.The assessee is a partnership firm. It originallydeclared loss for both the years under reference.Search under section 132 of the Income Tax Act wascarried out in the business premises as well as theresidential premises of the partners and books ofaccounts and other documents were seized. Noticesunder section 153A of the Act were issued and inresponse thereto, the assessee filed return on20.1.2009, declaring loss of `16,75,385/- for bothdeclared loss for both the years under reference.Search under section 132 of the Income Tax Act wascarried out in the business premises as well as theresidential premises of the partners and books ofaccounts and other documents were seized. Noticesunder section 153A of the Act were issued and inresponse thereto, the assessee filed return on20.1.2009, declaring loss of `16,75,385/- for both the years. Notices under section 143(2) were issuedand on the basis of the statement of one of thepartners under section 132(4), assessments were made.Aggrieved by the assessment orders, the assesseefiled appeals before the Commissioner of Income Tax(Appeals). The first appellate authority videseparate orders disposed of the appeals remitting thematter to the assessing officer on the limited issueof sale of branded items and directing the assessingofficer to exclude such sales for working outunderstated sales and grant appropriate relief to theassessee. Still aggrieved, the assessee filedappeals before the Tribunal. By the impugned commonorder, the Tribunal directed that the issue relatingto bulk sales be adjudicated by the assessingofficer, with opportunity of hearing to the assessee.On rest of the issues, the Tribunal confirmed theorder passed by the lower authorities. It is inthese circumstances, the assessee has filed theseappeals and two questions of law are framed for theconsideration of this Court. ITA.25/12 & 29/12 4.The first question is whether, in the facts andcircumstances of the case, the Tribunal ought to havedisregarded the statement recorded under section 132(4) of the partner of the firm, more so when theManaging Partner was not confronted with any suchqueries relating to the assessee. The secondquestion framed is whether, in the facts andcircumstances of the case, the Tribunal ought to haveallowed the claim of expenditure by way of interestto the partners on their capital and salary to theworking partners.circumstances of the case, the Tribunal ought to havedisregarded the statement recorded under section 132(4) of the partner of the firm, more so when theManaging Partner was not confronted with any suchqueries relating to the assessee. The secondquestion framed is whether, in the facts andcircumstances of the case, the Tribunal ought to haveallowed the claim of expenditure by way of interestto the partners on their capital and salary to theworking partners. 5.During the hearing of the appeals, the contentionswere reiterated by the learned counsel for theassessee. In so far as the first question relatingto the statement of one of the partners recordedunder section 132(4) is concerned, it was thecontention of the assessee that the person whosestatement was recorded is one Jabir who is a 22 yearold son of the Managing Partner. According to thecounsel, he was only a student and was not involvedin the business and that therefore, his statement,which was not a corroborated one, should not have ITA.25/12 & 29/12 been acted upon. However, we find from the orderpassed by the Tribunal that the statement recordedunder section 132(4) was attested by two witnesses.The statement was also not retracted in any manner.The assessing officer first appellate authority andthe Tribunal were satisfied that Sri.Jabir wasactively involved and was fully conversant with thebusiness activities of the firm. In fact, thestatement of a salesman of another firm, of which hisfather himself is the Managing Partner, was to theeffect that it was Sri.Jabir who was running thebusiness and even deciding the price of the woodenfurnitures that were sold. All these factualfindings contained in the order of the Tribunal wouldtherefore indicate that Sri.Jabir was a person whowas actively involved in the business and wascompetent to depose about the business activities ofthe firm. It may be true that the Managing Partnerwas not confronted with the contents of the statementmade by Sri.Jabir. But having regard to the law laiddown by the Apex Court in Narayan Bhagwat RaoGosavibalajiwale v. Gopal Vinayak Gosavi & Others relied on by the Tribunal, which lays down that the statement recorded under section132(4) of the Income Tax Act is the best evidence,absence of confrontation does not necessarily requireeschewing or discarding such a statement. Therefore,we do not find any substance in the first questionframed by the assessee. 6.In so far as the second question is concerned, theclaim is that the Tribunal should have allowed theclaim of the assessee for expenditure by way ofinterest to the partners on their capital and salaryto the working partners. First of all, it is theconceded case of the assessee that they have notraised any such claim either before the assessingofficer or before the first appellate authority. Theorder of the Tribunal also give an impression thatsuch a claim was raised only when the matter wasargued. Secondly, this claim could not have beenconsidered by the Tribunal in the absence of anysupporting document, including the partnership deed.The fact that issues relating to sale of brandeditems and bulk sales are remanded for freshadjudication by the assessing officer does not mean ITA.25/12 & 29/12 that the Tribunal should have, as contended by thecounsel for the assessee, remitted this claim of theassessee also to the assessing officer. On facts, weare not satisfied that the Tribunal has committed anyillegality. 7.We do not therefore find any illegality in the orderspassed by the Tribunal. Answering the questions oflaw in favour of the Revenue, the order of theTribunal is confirmed.passed by the Tribunal. Answering the questions oflaw in favour of the Revenue, the order of theTribunal is confirmed. Appeals fail and are accordingly dismissed. Sd/- ANTONY DOMINIC, Judge. Sd/- DAMA SESHADRI NAIDU, Judge. kkb.