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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 12TH DAY OF SEPTEMBER 2013
PRESENT
THE HON'BLE MR.JUSTICE DILIP B.BHOSALE
AND
THE HON'BLE MR.JUSTICE B.MANOHAR
ITA NO.226/2007 BETWEEN
The Commissioner of Income-Tax, Central Circle, C.R.Building, Queens Road, Bangalore.
The Deputy Commissioner of Income-Tax, Central Circle – 1(2), C.R.Building, Queens Road, Bangalore.
….Appellants
(By Sri.G.Kamaladhar, for Sri.K.V.Aravind, Advocate)
AND:
M/s.Sri.Lakshmi Narasimha Distilleries P Ltd., No.190, Sankey Road, Sadashivanagar, Bangalore.
…Respondent
(By Sri.K.R.Prasad for M/s.K.R.Prasad Assts)
This ITA is filed U/s.260-A of I.T.Act, 1961 arising out of order dated 08-09-2006 passed in IT(SS)A.154/Bang/2004 for the Block Assessment Year 01-04-91-24-04-01, praying that this Hon’ble Court may be pleased to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the ITAT, Bangalore in IT(SS)A.154/Bang/2004 dated 08-09-2006 and confirm the order of the Appellate Commissioner confirming the order passed by the Deputy Commissioner of Income Tax, Central Circle – 1 (2), Bangalore, in the interest of justice and equity.
This appeal coming on for Hearing this day, B. MANOHAR J., delivered the following:
J U D G M E N T
The Revenue preferred this appeal under Section 260A of the Income Tax Act, challenging the order dated 8-9-2006 made in IT(SS)A No.154/Bang/2004 passed by the Income Tax Appellate Tribunal, Bangalore (hereinafter referred to as ‘the Appellate Tribunal’ for short) for the block assessment year from 1-4-1991 to 27-4-2001.
The respondent/assessee is a Limited Company engaged in the business of manufacturing of rectified
spirit. Search was conducted in the premises of the assessee on 27-04-2001 under Section 132 of the Income Tax Act (for short ‘the Act’). During the course of search, the evidences with regard to unaccounted sale of rectified spirit and other incriminating documents were seized. On the basis of the said documents, notice under Section 158 BC of the Act was issued to the assessee directing him to file the return of income for the block period from 1-4-1991 to 27-4-2001 in a prescribed form.
In pursuance of the notice, the assessee filed the return of income for the block period on 4-3-2002 declaring the undisclosed income of Rs.49,47,000/-. Subsequently, notices under Section 143(2) and 142(1) were issued on the assessee. In response to the said notices, the authorized representative of the assessee appeared before the Assessment Officer. During the course of assessment proceedings, the authorized
representative was asked to furnish the basis for declaration of the undisclosed income of Rs.49,47,000/- and also set off of Rs.31,95,000/- towards miscellaneous receipts as recorded in the books. The assessee failed to produce any evidence with regard to set off amount claimed by him. Accordingly, the Assessing Authority rejected the claim for set off and issued demand notice as per assessment order dated 30th April 2003. Being aggrieved by the assessment order dated 30-04-2003, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) Bangalore (hereinafter referred to as the Appellate Authority), contending that rejection of the claim of the assessee for set off Rs.31,95,000/- is contrary to law. The Appellate Authority by its order dated 28-09-2004 after considering the matter in detail rejected the appeal insofar as set off/reduction of a sum of Rs.31,95,000/-. Being aggrieved by the order passed by the First Appellate Authority, the assessee preferred an appeal
before the Income Tax Appellate Tribunal, Bangalore. The Appellate Tribunal, relying upon the earlier order passed by it in J.P.NARAYANASWAMY case made in IT (SS) A No.154/B/2004 allowed the appeal in part by its order dated 8-9-2006 and held that the miscellaneous receipts represented the income and such income is to be reduced from undisclosed income determined on unaccounted sale of rectified spirit. The appellant/ revenue being aggrieved by the order passed by the Appellate Tribunal, has preferred this appeal.
The present appeal was admitted for considering the following substantial question of law: Whether the Tribunal was correct in holding that miscellaneous receipts of Rs.31,95,000/- discovered in the course of search cannot be treated as the undisclosed income of the assessee during the block period as the same should be presumed as unaccounted sale of rectified spirit even though these unaccounted sales had been correctly reflected in the books discovered in the course of search?
Sri.G.Kamaladhar, learned counsel appearing for the appellants-Revenue contended that the order passed by the Appellate Tribunal is contrary to law. The search of premises of the assessee was conducted on 27-04-2001 and seized some materials which disclose that 240 loads of rectified spirits were dispatched by the assessee, each load having carrying capacity of 12,000 liters of rectified spirit. Out of the same, 84 loads were accounted and 154 loads were not accounted by the assessee. The profit margin on the sale of rectified spirit was admitted at Rs.3/- per liter. Adopting the same, value of 156 loads of rectified spirit comes to Rs.56,16,000/-.
The assessee themselves have admitted that, apart from manufacturing the rectified spirit they are not doing any business. Hence, the question of reduction of Rs.31,95,000/- from the undisclosed amount does not arise. No material has been produced before the Assessing Authority or the Appellate Authority with regard to parallel business.
However, the Tribunal without considering all these aspects of the matter relying upon the earlier order dated 26-05-2005 passed by the Appellate Tribunal in IT(SS)A No.152/B/2004 made in J.P.NARAYANASWAMY case, allowed the appeal in part, which is contrary to law. Further the Revenue has preferred an appeal against the order dated 26-05-2005 in IT (SS) A No.152/B/2004 made in J.P.NARAYANASWAMY case in ITA No.3136/2005. The Division Bench of this Court in a judgment reported in (2012) 340 ITR 193 (J.P.NARAYANASWAMY v/s DEPUTY COMMISSIONER OF INCOME TAX) allowed the appeal filed by the appellant and set aside the order passed by the Appellate Authority. Hence, the order passed by the Appellate Tribunal cannot be sustainable and sought for allowing the appeal.
On the other hand, Sri.K.R.Prasad, learned counsel appearing for the respondent-assessee argued
in support of the order passed by the Appellate Tribunal and contended that the authorities below without considering the contentions raised by the assessee refused to deduct a sum of Rs.31,95,000/- towards miscellaneous receipts out of the undisclosed income of Rs.49,47,000/-. The Appellate Tribunal after considering the matter in detail allowed the appeal allowed the set off of Rs.31,95,000/- which does not call for interference. Hence, sought for dismissal of the appeal.
We have carefully considered the arguments addressed by the learned counsel for the parties.
The records clearly disclose that the assessee had filed return of income on 4-3-2002 declaring the undisclosed income of Rs.49,47,000/-. However, they claimed reduction of Rs.31,95,000/- as miscellaneous receipts. During the course of assessment proceedings, the assessee had admitted that except the business of
rectified spirit, they are not doing any other business. No document has been produced with regard to miscellaneous receipts. The Assessing Authority after considering the matter in detail passed fresh assessment order and the same was confirmed by the Appellate Authority. The Appellate Tribunal without any material before it, has set aside the order solely on the basis of the earlier order made by it in IT(SS)A No.152/B/2004 and the said order was set aside by the court on an appeal filed by the revenue in ITA.No.3136/2005 dated 11-08-2011. The assessee has failed to produce any materials or evidence to support the claim with regard to miscellaneous receipts and also failed to maintain the true and correct account. Hence, the order passed by the Appellate Tribunal cannot be sustained.
Accordingly, the appeal is allowed, the set off allowed by the Tribunal in favour of the assessee is set
aside and the substantial question of law framed in this appeal is held in favour of the appellants-revenue.
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JUDGE
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JUDGE
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