Ita/833/2009 Of Commissioner Of Income Tax v. Kureethadom Wines Piravom

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 2ND DECEMBER 2009 / 11TH AGRAHAYANA 1931 ITA.No. 833 of 2009() --------------------- ITA.109/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT: ----------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- M/S KUREETHADAM WINES, PIRAVAM, DIANA TOURIST HOME, KOOTHATTUKULAM. ADV. SRI.T.M.SREEDHARAN FOR R1 SMT.C.K.SHERIN FOR R1 SRI.V.P.NARAYANAN FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ALONG WITH ITA NO.497/2009 ON 02/12/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &V.K.MOHANAN, JJ. ....................................................................I.T. Appeal Nos.833 & 497 of 2009 .................................................................... Dated this the 2nd day of December, 2009. JUDGMENT Ramachandran Nair, J. Question raised in the connected appeals filed by the Revenue iswhether the Tribunal was justified in deleting the assessment of Rs.15lakhs under Section 69 of the Income Tax Act at the hands of oneassessee in the regular assessment and at the hands of the other assesseeas a protective assessment. We have heard Standing Counsel appearingfor the appellant and Adv. Sri.T.M.Sreedharan appearing for therespondent-assessee. 2. In the course of search conducted in the premises of apartnership firm and it's partners, the department recovered copy of theagreement between one Sri.Krishnadas and one Sri.K.A.Isaac who laterdied and whose legal heir is the respondent in I.T.A. No.497/2009,whereunder the late assessee paid Rs.15 lakhs to Mr.Krishnadas fortransferring the right to carry on arrack business during 1995-96 in thePiravom Range. Auction was conducted by the Government for retail sale of arrack in the Piravom Range and Mr.Krishnadas was thesuccessful bidder. However, under agreement dated 10.3.1995 withlate assessee, the right to carry on arrack business in Piravom Rangewas transferred to the late assessee on a consideration of Rs.15 lakhsbesides payment of kist and other charges by the transferee.Admittedly the respondent in I.T.A. No.833/2009 which is apartnership firm, the Managing Partner of which was the late assessee,carried on business in arrack in Piravom Range pursuant to theagreement the late partner had with Sri.Krishnadas, claimed deductionof kist payments and returned net income for assessment. However,the late assessee and the firm denied having paid the consideration ofRs.15 lakhs to Mr.Krishnadas which was treated as unexplainedinvestment by the department for assessment under Section 69 of theAct. The first appellate authority as well as the Tribunal came to theconclusion that the evidence is not convincing to make assessment of unexplained investment in the hands of the late assessee and thepartnership firm. Standing counsel referred to the documents andcontended that copy of the agreement seized from Sri.Krishnadasproved that out of Rs.15 lakhs, Rs.8 lakhs was already paid on the dateof execution of the agreement and balance was agreed to be paid on20.3.1995 i.e. before commencement of business in the financial year.It is the admitted case of the respondents that the firm of which the lateassessee entered into agreement with Sri.Krishnadas, carried on thebusiness which was originally licensed to Sri.Krishnadas. However,the firm or the partner has not explained or produced any agreement bywhich the right obtained by Sri.Krishnadas got transferred to them forcarrying on business which admittedly they did other than under theseized document. Therefore, in our view, the deceased partner and thefirm of which he was the Managing Partner could not have denied theexecution of the agreement, the contents of which is the basis for the assessment. We do not know what more proof the Tribunal wants forsustaining the assessment on the unexplained investment. It is also tobe noted that Sri.Krishnadas in fact conceded Rs.15 lakhs paid by thelate assessee to him under the agreement and therefore, there is amplecorroboration of the evidence obtained by the department in the form ofagreement executed by late assessee. The order of the Tribunalconfirming the first appellate authority's order is therefore liable to bevacated and we do so. 3. The next question to be considered is at the hands of whichassessee the unexplained investment has to be assessed under Section69 of the Act. Since respondent-firm in I.T.A. 833/2009 admittedlycarried on business in arrack pursuant to the agreement in the PiravomRange by remitting kist amounts and returned the income, there can beno doubt that the payment made for purchase of the right to carry onbusiness by the late partner is on behalf of the firm. So much so, it is an investment of the firm's money assessable at the hands of the firm.We, therefore, reverse the orders of the Tribunal and that of the firstappellate authority and direct the officer to treat the assessment in thehands of the firm as a regular assessment. Consequently theassessment at the hands of the late assessee will stand vacated. I.T.A.No.833/2009 is, therefore, allowed and I.T.A. No.497/2009 isdismissed. C.N.RAMACHANDRAN NAIRJudge pms V.K.MOHANANJudge