Sri.sajith Kumar v. Respondents: Appellant In Ita

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 THURSDAY, THE 13TH MARCH 2008 / 23RD PHALGUNA 1929 ITA.No. 16 of 2004() -------------------- ITA.158/CO158/CO/1999 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT IN ITA: --------------------------------------------- T.M. FRANCIS, PROPRIETOR, T. FRANCIS & COMPANY, KAZHUTHUMUTTU, KOCHIN-5, REPRESENTED BY POWER OF ASTTORNEY, MRS.TESSY FRANCIS, AGED 52 YEARS, C.C.16/452, KAZHUTHUMUTTU, KOCHI-5. BY ADV. SRI.K.R.SUDHAKARAN PILLAI SRI.SAJITH KUMAR V. RESPONDENTS: APPELLANT IN ITA: ------------------------------ THE COMMISSIONER OF INCOME TAX, ERNAKULAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 13/03/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ON 13/03/2008, THE COURT ON THE SAME DAY DELIVERED THE C.N.RAMACHANDRAN NAIR &T.R.RAMACHANDRAN NAIR, JJ. .................................................................... I.T. Appeal No.16 of 2004....................................................................Dated this the 13th day of March, 2008. JUDGMENT C.N.Ramachandran Nair, J. Heard Sri.K.R.Sudhakaran Pillai, counsel appearing for the appellant and Standing Counsel appearing for the respondent-assessee. Theappellant-assessee is a contractor who was engaged in construction of iceplants. During the accounting year relevant for the assessment year 1992-93, the Assessing Officer made an addition of Rs.15,42,425/- towards billamount and a further sum of Rs.4 lakhs raised on M/s.Cochin Frozen FoodExport Pvt. Ltd., omitted to be included by the assessee in the return filed.Similarly a further sum of Rs.4 lakhs was added towards bill raised onM/s.Horisona Food Exports. While the Assessing Officer justifiedaddition by holding that assessee was following mercantile system ofaccounting and the entire amounts billed are includable in the income, theassessee took the stand that it was following cash system of accounting andtherefore, only received amounts form part of income. In fact the firstappeal filed by the assessee was allowed by the appellate authority holdingthat assessee was following cash system of accounting. The Tribunal, however, accepted the department's contention and reversed the firstappellate authority's order holding that assessee is maintaining mercantilesystem of accounting and therefore, bills raised are accountable. So far asthe addition of Rs.15,42,425/- is concerned, the case of the assessee is thateven though the amounts were billed during the accounting year, there wasdispute between the assessee and the contractee which led to settlementwherein assessee received only Rs.9,35,000/- which was accounted by theassessee. Standing Counsel on the other hand submitted that the originalcontract amount was Rs.38 lakhs and amount added represents bills raisedsubsequent to the settlement. We are surprised to note that the assesseehas not come forward with the full facts even when the appeal was filedbefore this court in 2004. If the assessee has a case that the bill amountswere later accounted after receipt and tax paid, the assessee could havestated that amount got assessed in later years. On the other hand if billswere not received, assessee would have written off and claimed benefit insubsequent year. Neither of these facts are available on record. However,we feel an opportunity can be granted to the assessee to prove before theofficer the subsequent developments and if it is found that same amount isassessed in the next year, the officer will grant relief in this year to avoidduplication of assessment of same amount. The assessee also has not produced any evidence from the contractee to prove the terms of settlementand payments to prove his case before any of the authorities. In any case inthe interest of justice, we grant an opportunity to the assessee to produceany such evidence also before the Assessing Officer who, if required, cancross-check with the assessment records of the contractee and can grantrelief to avoid double assessment of the same amount, if any made. 2. So far as the addition of Rs.4 lakhs is concerned, we are not able toaccept the argument of the department that this is assesseable on mercantilebasis because entire contract amount of Rs.12 lakhs were stated to be billedby the assessee under two invoices dated 12.11.1990 and 29.11.1990 whichfalls within the accounting year relevant for the assessment year 1991-92.However, Standing Counsel submitted that assessee is accounting oncontract-completion basis and contract with Horison Food Exports appearsto have been completed only during the accounting year relevant for theassessment year 1992-93. Since we are remanding the case for verificationin respect of the contract with the other party, we direct the officer to verifywhether the full contract amount billed for the work executed for HorisonFood Exports got assessed in the earlier year 1991-92. Here again, wedirect the officer to verify the assessment records of the earlier year and ifrequired, of the subsequent year also and make correction to avoid duplication. We make it clear that the Assessing Officer need to re-investigate the matter only if the assessee produces proof of assessment ofthe same amount for any earlier or subsequent year. The appeal is disposedof directing the Assessing Officer to make modification to the extentrequired in terms of the above direction. The Tribunal's order will standmodified to the above extent. C.N.RAMACHANDRAN NAIRJudge pms T.R.RAMACHANDRAN NAIRJudge