THE COMMISSIONER OF INCOME TAX vs. KALLADA WINES, TRICHUR

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN FRIDAY, THE 6TH NOVEMBER 2009 / 15TH KARTHIKA 1931 ITA.No. 204 of 2009() --------------------- IT(S&S)A.1/COCH/2002 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX TRICHUR BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ M/S.KALLADA WINES, S.T.NAGAR, TRICHUR ADV. SRI.P.BALAKRISHNAN (E)

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06/11/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

C.N. RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. ---------------------------------------- ITA. No. 204 OF 2009 & C.M.Appl.No.430 of 2009 ---------------------------------------- Dated, the 6th November , 2009 JUDGMENT Ramachandran Nair, J. Since the reason for delay in filing the appeal is on account of the pendency of the miscellaneous petition before the Tribunal for rectification of the order, we condone the delay and admit the appeal. 2. The appeal is filed against the order of the Tribunal deleting Rs.24,72,170/-, which is a suppressed income assessed, based on inspection in the assessee's premises held on 12.12.96. 3. We have heard the Standing Counsel appearing for the appellant and Sri P.Balakrishnan, counsel appearing for the respondent. 4. A search was conducted in the assessee's premises. The assessee was engaged in purchase and sale of liquour. Strangely, two sets of accounts were

ITA No.204/09 -:2:- maintained by the assessee, one for brandy sales and other for other liquor sales. Even under these two heads, the assessee had two sets of accounts in as much as for brandy sales, turnover from April to 31-7-1996, found in the computer account was higher by Rs.20,74,344/- over the written bills maintained by the assessee. The subsequent unaccounted sales were also found out and the total unaccounted income was Rs.24,72,170/-. In the block assessment, this amount was treated as suppressed income. Besides this, the assessee was found to be engaged in sale of liquor under name 'other liquor sales', the accounts of which were found in the computer was also seized. The Assessing Officer treated this as spurious liquor sales, but granted deduction of cost of purchase and treated the net amount as suppressed income. In appeal, the Tribunal sustained both additions. However, when the matter was taken up in appeal in referece to High Court, the High Court directed the Assessing Officer to grant deduction of kist payments. The Commissioner also directed revision of the

ITA No.204/09 -:3:- assessment under section 263 of the IT Act on other matters. The Assessing Officer therefore, issued revised order based on judgment of the High Court and the order of the Commissioner against which assessee again filed appeal. The Tribunal however, deleted the addition made based on section 263 order of the Commissioner and even though the addition on account of suppression of the income from brandy sale was earlier sustained by the Tribunal in the first round of appeal, in the second round of appeal they cancelled the addition against which this appeal is filed. After hearing both sides and after going through the Tribunal's order, we are of the view that the Tribunal's order is not tenable because, admittedly, the assessee maintained two sets of accounts in respect of brandy sales which is nothing but sale of liquor purchased from authorised sources. When the assessee accounts the full sale consideration in the computer statement, only around 70% of the same is accounted in the bills maintained in writing. The difference is nothing but excess price realised over the

ITA No.204/09 -:4:- accounted sale price. In the first round, the Tribunal sustained the addition and in the second round of appeal, after remand, the Tribunal cannot take a different stand. Further, on merits, we find no justification in the finding of the Tribunal that the assessee has accounted sales in full, when the Department collected two sets of accounts maintained by the assessee. We therefore, allow the appeal by reversing the finding of the Tribunal and restoring the addition of Rs.24,72,170/- also. No other issue arises in the appeal. The appeal is allowed by reversing the order of the Tribunal and by restoring the assessment made with the addition originally made. C.N.RAMACHANDRAN NAIR JUDGE

V.K.MOHANAN, JUDGE kvm/-

ITA No.204/09 -:5:- V.K.MOHANAN, J. O.P.No. JUDGMENT

ITA No.204/09 -:6:- Dated:..