COMMISSIONER OF INCOME TAX, KOTTAYAM vs. M/S.KARINOS WEAVE PRIVATE LIMITED

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN MONDAY, THE 26TH DAY OF MARCH 2012/6TH CHAITHRA 1934 ITA.No. 139 of 2011 ( ) ----------------------- (AGAINST ORDER IN ITA.39/COCH/2009 DATED 18/01/2011 of I.T.A.TRIBUNAL,COCHIN BENCH) APPELLANT(S)/RESPONDENT/REVENUE: --------------------------------- COMMISSIONER OF INCOME TAX, KOTTAYAM KOTTAYAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT/ASSESSEE: ------------------------ M/S.KARINOS WEAVE PRIVATE LIMITED P.B.NO.4642, SOUTH VADAI CANAL ROAD, ALAPPUZHA-688001. BY ADV. SMT.ANITA RAMACHANDRAN ADV.SRI.K.ANAND THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 26-03- 2012, ALONG WITH ITA. 146/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA NO.139/2011 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A : COPY OF ASSESSMENT ORDER UNDER SECTION 143(3) RWS 147 DATED 30/12/2008. ANNEXURE-B : COPY OF CIT(A)'S ORDER IN APPEAL NO.ITA NO.11/ALPA/CIT (A)-IV/07-08 DATED 20/11/2008. ANNEXURE-C : COPY OF CIT(A)'S ORDER IN APPEAL NO.ITA NO.13/APY/CIT (A)-IV/07-08 DATED 15/01/2007 OF M/S.WILLIAM GOODACRE & SONS INDIA PVT. LTD. ANNEXURE-D : COPY OF ITAT'S ORDER IN APPEAL NO.ITA NO.319 & CO 20/COCH/2007 DATED 21/11/2008. ANNEXURE-E : COPY OF ITAT'S ORDER IN APPEAL NO.ITA NO.39 & 95/COCH/2009 DATED 18/01/2011. //TRUE COPY// PA TO JUDGE. jg

C.N.RAMACHANDRAN NAIR & K.VINOD CHANDRAN, JJ. .................................................................... I.T.A. Nos.139 & 146 of 2011 .................................................................... Dated this the 26th day of March, 2012. J U D G M E N T Ramachandran Nair, J. The connected appeals are filed by the Revenue raising a major objection in the assessee pressing a ground before the Tribunal contrary to the undertaking given in this Court while disposing of the assessment appeal, namely ITA No.99/2011, against the holding company. The common dispute arose in the assessment of the holding company, namely M/s.William Goodacre and Sons (India) Ltd. and its subsidiary company namely, M/s.Karinos Weave Pvt. Ltd. with regard to assessment of closing stock of the subsidiary company amounting to Rs.82.47 lakhs, which was not shown as opening stock of that company. However, the holding company declared an opening stock of the same amount in the account of the said Company. In other words, closing stock of the subsidiary company is shown as opening stock of the holding company, which is a

ITA Nos.139 & 146/2011 -2- strange principle of accounting by both the companies. We felt that the value of the stock should be considered for assessment only at the hands of one company. When the appeal of the holding company was heard, learned Senior counsel appearing for the assessee after taking instructions from the subsidiary company submitted that in the Income Tax Appeal that was pending against the assessment of closing stock of the subsidiary company, they will not press that ground thereby accepting the closing stock of that company to be treated as opening stock for assessment. We accordingly disposed of I.T.A. No.99/2009 filed against the holding Company, namely M/s.William Goodacre and Sons (India) Ltd. as follows:- “Counsel appearing for the assessee submitted that ground pertaining to the opening stock addition of the subsidiary company will not be contested by the assessee in that case. We therefore, dismiss the appeal on specific condition that the assessee will not press the addition pertaining to the opening stock in the hands of the subsidiary company namely, M/s.Karinos Weave Private Ltd.”

ITA Nos.139 & 146/2011 -3- However, the subsidiary company was given freedom to dispute the determination of gross profit pertaining to the stock transfer reflected in the opening stock stated above. In spite of the above judgment delivered based on undertaking given by the assessee in this Court the assessee did not inform the Tribunal about the above judgment and the matter was argued on merit, which led to impugned orders issued by the Tribunal. The consequence of this conduct of the assessee is that the Department was disabled from contesting the Tribunal's order at the hands of the holding company and the Department's appeal was dismissed. In the normal course, we should have imposed heavy cost on the assessee for this attitude, which we deprecate. However, the Department is equally indifferent in the matter because they also did not bring our judgment to the notice of the Tribunal. We therefore, do not think the assessee alone should be penalised for this conduct. We therefore allow the appeals by setting aside the orders of the Tribunal and restore

ITA Nos.139 & 146/2011 -4- the matter to the Assessing Officer for re-consideration while revising the orders of assessment issued pursuant to the judgment in ITA No.99/2009 in the case of M/s.William Goodacre and Sons (India) Ltd. Since the very basis of the Tribunal's decision on determination of gross profit also goes as a result of our judgment, it is for the Assessing Officer to reconsider the matter afresh and if the appellant has grievance, the appellant is free to challenge the same in another round of appeal. These Income Tax Appeals are allowed as above. (C.N.RAMACHANDRAN NAIR, JUDGE) (K.VINOD CHANDRAN, JUDGE) jg