Ita/915/2009 Of The Commissioner Of Income Tax v. Shri.p.kumaran

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN TUESDAY, THE 2ND FEBRUARY 2010 / 13TH MAGHA 1931 ITA.No. 915 of 2009() --------------------- ITA.337/COCH//2005 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT: ----------------------------- THE COMMISSIONER OF INCOME TAX, THRISSUR. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT: --------------- SHRI. P.KUMARAN, PARAKOTIL HOUSE, KOTTAPURAM, MANNARKKAD, PALAKKAD DIST. ADV. SRI.KMV.PANDALAI FOR R1 SMT.S.HEMALATHA FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 02/02/2010, ALONG WITH ITA NO.1124 OF 2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &P.S.GOPINATHAN, JJ. .................................................................... I.T. Appeal Nos.915 & 1124 of 2009 ....................................................................Dated this the 2nd day of February, 2010. JUDGMENT Ramachandran Nair, J. The appeals are filed by the Revenue against the orders of theTribunal cancelling the entire additions made in the respondent-assessee's assessment for 2001-2002. We have heard Standing Counselappearing for the appellant and Adv. Sri.K.M.V.Pandalai appearing forthe respondent and have gone through the orders of the Tribunal andthat of the lower authorities. 2. Assessee was engaged in Abkari business during the previousyear relevant for the assessment year 2001-2002. Even though he wasin regular business for several years, the details of previousassessments are not discussed in any of the orders for this year. In thecourse of a survey conducted in the previous year it is seen thatassessee had offered Rs.25 lakhs for assessment from a Hotel by name Hotel Relax Park and a Bar Hotel by name Ragam Bar. However, evenafter offering Rs.25 lakhs towards income from other sources, the ITA 915&1124/09 assessee has claimed set off against loss from several business concernsincluding two retail outlets of Indian made foreign liquor. TheAssessing Officer, however, after verifying the accounts noticed thatassessee never maintained any credible accounts and the only option tohim is to make to a best judgment assessment under Section 145 of theIncome Tax Act. The loss declared in the two liquor shops wererejected by the Assessing Officer and additions were made for salestax, Employees' Provident Fund etc., which were claimed as deductionwithout actual payment which was hit by Section 43B of the IncomeTax Act. Even though the net result of computation of taxable incomewas Rs.51,30,060/- and the same was only partly modified in firstappeal, the Tribunal cancelled the specific addition of Rs.7 lakhs beingthe unexplained credit found in assessee's own accounts in threeconcerns and directed to accept the book results in respect of the twoliquor shops. The major grievance of the Revenue is against theTribunal's direction to accept loss returned from two liquor shops.However, the Tribunal has partly sustained disallowances of variousclaims of deduction which were hit by Section 43B of the Act. ITA 915&1124/09 ITA 915&1124/09 3. The assessee was engaged in retail sale of liquor at two places,one at Mukkom where the assessee returned a turnover ofRs.2,35,92,162/-. However, the assessee returned a loss ofRs.4,60,217/- from this shop. When the Assessing Officer sought forreasons for the loss, assessee claimed that payment of kist was onereason and the remaining being sale of liquor at below the market priceon account of the year being the last year of promotion for private tradein liquor. However, on examining the purchase register, AssessingOfficer found that there is nothing to indicate that the assessee hadeven reduced purchases towards the end of the financial year, whichobviously means that assessee had sales. So far as assessee's claim ofsale of liquor at below market price is concerned, no evidence wasproduced to substantiate the same. Based on the findings on all theseand in view of the declaration of Rs.25 lakhs towards income from twoother Bar Hotels, though under the head "income from other sources"in the course of survey, the Assessing Officer rejected the claim of loss.However, the Assessing Officer did not estimate any profit. Eventhough facts in respect of the other shop at Thiruvambadi are identical, ITA 915&1124/09 the Assessing Officer did not estimate any income from liquor trade inthose two shops. On the other hand what he found was that assessee'sclaim for massive loss cannot be set off against income disclosed fromtwo Hotels. Additions made were only in respect of tax, GPF etc.,which were claimed as deduction, but without making payment, inviolation of Section 43B of the Act. We are unable to sustain theTribunal's order directing the Assessing Officer to accept the massiveloss returned by the assessee from the two liquor shops becauseTribunal has no material and they have not even gone through theaccounts of the assessee or found it reliable to accept the loss returnedby the assessee. We notice that the assessee's claim of sale of liquor atbelow market price stands demolished by reasoned order issued by theofficer. 4. The next important issue pertains to Rs.38,00,810/- seencredited in the three business concerns of the assessee in his own name.On going through the orders we find that in the toddy section assesseehas credited Rs.15 lakhs, in one liquor shop account assessee hascredited Rs.11,75,680/- and in the case of an International Centre for ITA 915&1124/09 Information Tech. assessee credited Rs.11,25,130/-. When asked toexplain about the source of these credits, assessee though submittedthat he had withdrawn various amounts from several firms of which hewas a partner, the Assessing Officer on verifying the accounts of suchfirms noticed that though there were withdrawals, they were periodicaldeposits made by the assessee in the accounts of the same firm. We donot know on what basis Tribunal can accept assessee's explanationwithout verifying and being satisfied about the time and date ofwithdrawal of particular amounts from various firms and correspondingcredits in the capital accounts of various business concerns of theassessee. In fact, we notice that the Assessing Officer has been verylenient in reckoning the amount of Rs.25 lakhs offered by the assesseetowards income from other sources and the assessee's explanation ofRs.6 lakhs towards agricultural income available with him for settingoff the total amount of Rs.31 lakhs from out of the cash credits ofRs.38 lakhs and limiting the addition to only Rs.7,00,810/-. Eventhough we do not find any justification for the Tribunal accepting theassessee's explanation for loss returned by him based on accounts ITA 915&1124/09 ITA 915&1124/09 which even Tribunal has not found to be reliable, we do not think weshould remand the matter to the Tribunal or to the lower authoritiesbecause in the course of survey, assessee himself offered Rs.25 lakhstowards income from other sources. It is seen from the assessmentorder itself that the income offered is from two hotels namely, HotelRelax Park and Ragam Bar and therefore, assessee could not declarebusiness income from hotels as income from other sources. In any caseafter having declared Rs.25 lakhs voluntarily in the course of surveyunder Section 133A, we do not think assessee can neutralise incomeoffered by declaring loss from other hotels and retail sales counters ofliquor maintained by him. For the sake of finality, we feel the offermade by the assessee for assessment of Rs.25 lakhs should have beenaccepted by the department and the assessment could have beencompleted without undergoing the exercise of a detailed assessmentwhich now stands virtually cancelled by the Tribunal. We, therefore,allow the appeals by vacating the orders of the Tribunal and that of thelower authorities and direct the Assessing Officer to just assess Rs.25lakhs as net income without any deduction whatsoever based on the ITA 915&1124/09 offer made by the assessee in the course of survey under Section 133Aof the Act in the place of the addition sustained by the Tribunal. Theassessment should be completed without any addition whatsoever toRs.25 lakhs offered by the assessee as income from other sourcespursuant to survey conducted in the relevant previous year. C.N.RAMACHANDRAN NAIRJudge pms P.S.GOPINATHANJudge