THE COMMISSIONER OF INCOME TAX, TVM vs. M/S.GANGA COMPLEX PUTHOOR, KOLLAM

The learned Senior Counsel for Government of India (Taxes) submits that the residence of the Managing Director of the assessee was searched and survey proceedings were conducted in the assessee's own business premises. Statements were recovered on search from both the premises and the statements recovered from the business premises were found to have disclosed excess sale consideration than the statements found in the business premises. The Managing Director of the assessee, during search proceedings, deposed under Section 132(4) of the Act that the actual sales is as - 3 - seen from the statements recovered from his house. In such circumstances, there was definitely a suppression found on search and it was that suppression which was treated as undisclosed income by the Department. It is contended that but for the search there would not have been a disclosure of the actual sales turnover. The Assessing Officer then approached the Sales Tax Department and found two revised returns having been filed under the Sales Tax enactment for both the assessment years relevant to the assessment years which are the subject matter here; 1999-2000 and 2000-2001. The sales tax assessment for years 1998-99 and 1999-2000, was requisitioned and the difference as admitted by the assessee before the Sales Tax authorities was taken as the undisclosed income. The learned Senior Counsel relies on an unreported decision of this Court in The Commissioner of Income Tax v. M/s.Archana Trading Co. [I.T.A.No.226 of 2013 dated 10.07.2018] and a decision reported in CIT v. Binoy Mathai [(2009) 311 ITR 226 (Ker.)].

We will first look at the decisions as placed by the Revenue, which, we are of the opinion, are not applicable to the facts of this case. In M/s.Archana Trading Co. (supra), the issue was as to sales suppression being found not supported by any unaccounted purchase. The goods - 4 - purchased were Indian Made Foreign Liquor [for brevity "IMFL"] and the State had conferred monopoly to distribute IMFL to the Kerala State Beverages Corporation. Hence, it was contended that there could be no sales suppression found by the Department without corresponding purchase suppression. However, we held that there was no purchase suppression, since the purchase was made in wholesale and the sale carried out in retail without any stipulation for the sale price; which was at the discretion of the Bar Hotel. This does not have any application to the facts of the present case.

Binoy Mathai (supra) was placed on record to show that, the mere fact that the period for filing the return was not over would not absolve the assessee from a block assessment if the transactions disclosed on search were not entered in the books of accounts. To find the applicability of the said decision, we have to look at the facts in the above case.

Admittedly the assessee started the Bar Hotel in September, 1998. The search was conducted on 29.07.1999. Hence, the block period under Section 158BC were between September, 1998 to 31.03.1999 and 01.04.1999 to 29.07.1999, the assessment years being 1999-2000 and 2000-2001. The notice under Section 158BC read with Section 158BD was issued - 5 - on 19.11.199. At that point, the time for filing of return even in the first block period had not expired, being 31.12.1999. As rightly noticed by the Tribunal, though an intelligent assumption has been made that the returns would not have disclosed an excess sale consideration but for the search; it remains in the realm of an assumption. There were no books of accounts recovered from the assessee's business premises which showed a lesser sale consideration. Statements of sales were recovered on search both from the assessee's business premises as also the residence of the Managing Director. The statements recovered from the residence of the Managing Director showed a larger consideration. It cannot be assumed that the returns filed would have shown only the figures in the statements recovered from the business premises.

We do not think Binoy Mathai (supra) is applicable, since therein the time for filing return for the assessment year 1995-96 had been extended by the Central Board of Direct Taxes, in which context the declaration was made. There was also no books of accounts recovered from the assessee's premises as has been specifically noticed by the Tribunal. It is also recorded by the Tribunal that the returns for both the assessment years, being 1999-2000 and - 6 - 2000-2001, was filed by the assessee showing the higher sale consideration as has been found from the documents recovered from the residence of the Managing Director. Hence, if at all, the search materials could have led to a consideration for a re-assessment if there was no correct disclosure and in no circumstance a block assessment. We are, hence, not inclined to interfere with the order of the Tribunal and we answer the question of law in favour of the assessee and against the Revenue.