M/S.KOTTAKKAL WOOD COMPLEX, vs. THE DEPUTY COMMISSIONER OF INCOME TAX

ITA/27/2013HC KeralaKLHC01025912201304 July 2016Author: HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU,HONOURABLE MR.JUSTICE ANTONY DOMINIC11 pages
AI SummaryRemanded

What were the facts?

The assessee, M/s.Kottakkal Wood Complex, is a partnership firm engaged in the furniture business. A survey under Section 133A of the Income Tax Act was conducted on 12.09.2007, following a search under Section 132 in a related concern. This led to assessments under Section 153C for assessment years 2002-2003 and 2007-2008, and under Section 143 for assessment year 2008-2009. The assessee's appeals before the Commissioner (Appeals) were partly allowed, but further appeals to the Income Tax Appellate Tribunal (ITAT) were dismissed. The assessee filed these appeals before the High Court against the ITAT's order.

What did the High Court hold?

The High Court acknowledged that an assessment based solely on a Section 133A statement without corroboration is unsustainable, citing Paul Mathews and Sons. However, in this case, the assessment was not solely based on the Section 133A statement. The Revenue also relied on penalty proceedings under Section 67 of the KVAT Act and a letter from the salesman re-affirming his statement. The Court found merit in the Revenue's argument that the assessee had not proven the statement's contents to be incorrect. Therefore, the assessments were not held to be illegal on this ground. However, the Court noted that the quantification of suppressed sales was based on excess stock detected under the KVAT Act. The penalty proceedings under Section 67 of the KVAT Act were compounded for a lesser amount of `2,10,595/- as total suppression, compared to the initial detection of excess stock of `14,38,785/-. Since the Income Tax assessment relied on the KVAT detection, the reduction in excess stock in the KVAT proceedings should impact the Income Tax assessment. The Court confirmed the impugned orders but remitted the proceedings to the Assessing Officer to pass revised orders considering the reduced excess stock as determined in the KVAT order dated 08.08.2007.

What were the issues?

1. Whether the assessments made solely on the basis of a statement recorded under Section 133A of the Income Tax Act, without corroborative evidence, are illegal? Assessee's contention: The assessments are illegal as they are based entirely on the statement of a salesman recorded under Section 133A, which lacks evidentiary value in the absence of corroboration. Reliance was placed on judgments in Paul Mathews and Sons v. CIT, CIT v. S. Khader Khan Son (Madras High Court and Supreme Court). Revenue's contention: The statement under Section 133A has evidentiary value, and the assessment is not solely based on it. The Revenue pointed to the assessment order's reliance on penalty proceedings under Section 67 of the KVAT Act for suppression of stock and a confirmatory letter dated 18.09.2007 from the salesman. Reliance was placed on Dr. Dinesh Jain v. ITO (Bombay High Court) which distinguished the S. Khader Khan Son judgment. 2. Whether the quantification of suppressed sales, based on excess stock detected under the KVAT Act, should be revised in light of a subsequent reduction in the excess stock amount in KVAT proceedings?

Which sections of the Income-tax Act were involved?

Section 133A,Section 132,Section 153C,Section 143,Section 67,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU MONDAY, THE 4TH DAY OF JULY 2016/13TH ASHADHA, 1938 ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 127/COCH/2011 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 07.09.2012 APPELLANT/RESPONDENT: ---------------------------- M/S.KOTTAKKAL WOOD COMPLEX, MAIN ROAD, KOTTAKKAL, PAN: AACFK 6874A

BY ADV. SRI.ANIL D. NAIR RESPONDENT(S)/APPELLANT: --------------------------------- THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, KOZHIKODE - 673 001. R1 BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R1 BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04-07-2016, ALONG WITH ITA. 28, 29, 35, 36, 42 & 53 of 2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

: 2 : APPENDIX PETITIONER'S ANNEXURES: ANNEXURE A :OF THE ORDER OF ASSESSMENT. ANNEXURE B :OF THE ORDER OF THE COMMISSIONER OF INCOME TAX. ANNEXURE C :OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL. ANNEXURE D

The order continues below.

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