THE COMMISSIONER OF INCOME TAX,COCHIN. vs. KERALA BEVERAGE COMPANY,THODUPUZHA.

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ITA/662/2009HC KeralaKLHC01025423200919 May 2010Bench: HONOURABLE MR.JUSTICE. P.S.GOPINATHAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the questions raised did not constitute substantial questions of law warranting a decision in appeal under Section 260A of the Income Tax Act. The Court found no material on record to justify the Revenue's contention that the expenditure accounted for was not actually incurred by the assessee. In a block assessment, income can only be assessed based on materials gathered and disclosed. The seized records showed the amount as expenditure, and the department failed to establish that the entry was bogus or did not represent real expenditure. Therefore, the Tribunal rightly rejected the department's contention. Consequently, the departmental appeal was dismissed.

What were the facts?

The Commissioner of Income Tax, Cochin (Revenue) filed an appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The appeal concerns Assessment Year not specified. The dispute revolves around an expenditure accounted for by the assessee, M/s Kerala Beverage Company, Thodupuzha, under the code name 'A Expenditure'. The assessee contended that this expenditure represented bribes and other unrecordable expenses actually incurred. The Revenue argued that if the expenditure was not proven, it should be treated as deemed income. The ITAT had deleted the addition made by the Revenue.

What were the issues?

1. Whether the expenditure accounted for by the assessee under the code name 'A Expenditure' is to be treated as deemed income of the assessee, when the assessee claims it represents bribes and other unrecordable expenses, and the Revenue contends it is unproven expenditure, in the context of block assessment. (Question of law turning on the interpretation of provisions related to deemed income and block assessment). Assessee's Contention: The expenditure was actually incurred and represented bribes and other expenses that could not be accounted for in the regular books of account. The Tribunal rightly rejected the department's contention. Revenue's Contention: If the expenditure accounted for by the assessee is not proved, it is assessable as deemed income. The department's case is that the expenditure accounted for is not proved and therefore should be treated as income.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 19TH MAY 2010 / 29TH VAISAKHA 1932 ITA.No. 662 of 2009() --------------------- IT(S&S)A.3/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: -------------------- THE COMMISSIONER OF INCOME TAX, COCHIN, BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT: --------------- M/S KERALA BEVERAGE COMPANY, THODUPUZHA. ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 19/05/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. .................................................................... I.T. Appeal No.662 of 2009 .................................................................... Dated this the 19th day of May, 2010. JUDGMENT Ramachandran Nair, J. Heard Standing Counsel for the appellant and Adv. Sri.P.Balakrishnan appearing for the respondent. After hearing both sides and on going through the orders of the Tribunal and the lower authorities, we find that the questions raised are not substantial questions of law warranting our decision in appeal filed under Section 260A of the Income Tax Act because the addition deleted are expenditure accounted by the assessee under the code name "A Expenditure". While the case of the assessee is that the expenditure accounted is really incurred and is bribe and other expenditure which cannot be accounted, the department's case is that if the expenditure accounted is not proved, it is assessable as deemed income. However, we find from the Tribunal's order that there is no material for the department to show that the expenditure accounted is not really incurred by the assessee to justify it's treatment as income. We do not

2 think in a block assessment any income can be assessed except based on materials gathered and disclosed. In this case the records seized show the amount as expenditure and the department has not established that the entry so made is a bogus entry and the same does not represent real expenditure. So much so, in our view, the Tribunal rightly rejected the department's contention. Consequently we dismiss the departmental appeal.

C.N.RAMACHANDRAN NAIR Judge P.S.GOPINATHAN Judge pms

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