Ita/92/2009 Of The Commissioner Of Income Tax,Cochin v. Sony Thomas,Nadakkal House,Muttom

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.Q.BARKATH ALI WEDNESDAY, THE 23RD DECEMBER 2009 / 2ND POUSHA 1931 ITA.No. 92 of 2009() -------------------- IT(S&S)A.NO.48/COCH/2005 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ SRI.SONY THOMAS., MADAKKAL HOUSE, MUTTOM, THODUPUZHA. ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23/12/2009, THE COURT ON 23/12/2009 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &P.Q.BARKATH ALI, JJ. .................................................................... .................................................................... Dated this the 23rd day of December, 2009. JUDGMENT Ramachandran Nair, J. Heard Standing Counsel for the appellant and Adv.Sri.P.Balakrishnan appearing for the respondent-assessee. The appealarises from order of the Tribunal disposing of assessee's appeal againstblock assessment modified by the Commissioner (Appeals). Eventhough various additions deleted by the Tribunal are questioned in theappeal, on going through the orders of the Tribunal and the lowerauthorities, we feel order of the Tribunal calls for modification only inrespect of deletion of addition of Rs.10,80,000/- which representsinflated lease rent paid to one Mr.T.C.George. The assessee wasrunning Bar hotel with two counters. During search held on 6.5.1999the department seized books of accounts from the Bar and theRestaurant. The assessee had accounted payment of lease rent ofRs.18 lakhs to Mr.T.C.George. Admittedly Bar licence was in thename of Mr.T.C.George and assessee was carrying on business by using the said licence on payment of rentals. When departmentconfronted the lessor about the actual amount of rent received by him,he submitted that the actual rent received by him for one counter of theBar was Rs.2,000/- and for the other Rs.3,000/- as against Rs.6,000/-and Rs.9,000/- respectively accounted by the assessee. It is seen thatlater assessee also conceded that the rent paid to Mr.T.C.George wasonly the amount confirmed by him. Contrary to the entries in theseized books of the assessee, assessee took the stand that the balancerental expenses accounted is actually the security expenses which issalary paid to security staff. This argument was not accepted by theC.I.T.(Appeals) and, therefore, assessee filed further appeal to theTribunal. 2. Standing Counsel submitted that the Tribunal by basing onHead Office accounts of the assessee later produced before it, acceptedthe assessee's claim that the excess lease rental accounted was actuallysecurity expenses. On going through the Tribunal's order, we find thatthe Tribunal has accepted the daily security expenses in the Bar atRs.4,000/- which is without any basis. Obviously there was inflation 2. Standing Counsel submitted that the Tribunal by basing onHead Office accounts of the assessee later produced before it, acceptedthe assessee's claim that the excess lease rental accounted was actuallysecurity expenses. On going through the Tribunal's order, we find thatthe Tribunal has accepted the daily security expenses in the Bar atRs.4,000/- which is without any basis. Obviously there was inflation of lease rent paid to Mr.T.C.George because assessee's account showedtwo third more than the actual rent paid to him. This was later acceptedby the assessee and was confirmed by the lessor Mr.T.C.George. Thequestion, therefore, to be considered is whether assessee should beallowed to take a different stand and explain the bogus lease rentaccounted as security expenses. We do not find any material for theTribunal to accept the explanation offered by the assessee based onHead Office accounts later produced, which is at variance with theseized records. Further, assessee has no explanation as to why securityexpenses was accounted towards lease rentals when there is nodifficulty in accounting security expenses as such, particularly whenassessee is maintaining expenditure account under various heads suchas electricity, sales tax, salary paid to employees etc. It is to be notedthat the daily security expenses in a Bar claimed by the assessee atRs.4,000/- is an exorbitant and unrealistic amount which was acceptedby the Tribunal without any basis. We, therefore, allow the appeal onthis issue by reversing the order of the Tribunal and sustain theaddition of Rs.10,80,000/- for the assessment year 1999-2000. We do not find any ground to interfere with the findings of the Tribunal on all other issues raised. Even though counsel for the assessee contendedthat the assessee along with others filed return as an AOP from the verysame business, such a contention is not seen raised or decided by theTribunal. Consequently we do not think we should go into thatquestion. Appeal is allowed in part as stated above. C.N.RAMACHANDRAN NAIRJudge pms P.Q.BARKATH ALIJudge