IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST.Rev..No. 8 of 2011()
1. M/S.ITEL INDUSTRIES LTD.,
... Petitioner
Vs
1. THE STATE OF KERALA, REPRESENTED BY
... Respondent
For Petitioner :DR.K.B.MUHAMED KUTTY (SR.)
For Respondent : No Appearance
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice B.P.RAY
Dated :28/01/2011
O R D E R
C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ.
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S.T.Rev. Nos.8 & 9 of 2011
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Dated, this the 28th day of January, 2011
J U D G M E N T
Ramachandran Nair, J.
These Revision cases are filed against the orders of the
Tribunal modifying the KGST and CST assessments on the petitioner
Company for 1999-2000.
2. We have heard learned Senior counsel
Dr.K.B.Mohammedkutty appearing for the revision petitioner and
learned Government Pleader appearing for the respondents.
3. The petitioner is a Tata Group Company, which was
taken over by a Company by name M/s.Itel Industries Ltd., which is
carrying on business in manufacture and sale of telephone
equipments and instruments. The transfer of management was with
effect from 01/06/2001 and the assessment pertains to the year
1999-2000. On going through the impugned orders, we find that
returns filed were rejected and turnover estimated, for the reason
that books of accounts produced were not full and complete. It is
S.T.Rev.Nos.8 & 9 of 2011
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seen that the first appellate authority gave an opportunity to the
assessee to produce books of accounts before the Assessing Officer
for him to file a report. However, the Company could not produce
all the books of accounts and therefore, the Assessing Officer
suggested only estimation of turnover. The appellate authority
made additions at 5%, which was modified by the Tribunal with
lump sum additions both under sales and purchase turnover. It is
against this order of the Tribunal, these revision cases are filed.
4. Learned Senior counsel for the petitioner pointed out the
nature of additions, which according to him, is arbitrary and without
any basis. Learned Government Pleader on the other hand, referred
to the findings in the orders wherein it is clearly stated that the
petitioner could not produce the books of accounts before the
Assessing Officer to verify the same and make assessment based on
book figures. Even though accounts are not full and complete, we
do not think there is any justification for making wild additions.
This is a case where the Company went into bad days and was in
fact a BIFR company for some time. It remained closed for
sometime and the fact that the Management had to sell the business
clearly shows that there was only decline in business. Therefore,
assessments have to be made on a rationale basis, even if some of
S.T.Rev.Nos.8 & 9 of 2011
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books are missing in the course of transmission of management or
during closure of business. Learned Senior counsel for the
petitioner specifically pointed out that without establishing local
purchases, addition is made for assessment under Section 5A
treating 80% of the sales turnover as local purchases. We find force
in the contention because none of the authorities have bothered to
find out the turnover for which C-Forms are issued, which would
have indicated the percentage of sourcing of raw materials from
outside Kerala. If raw materials are not locally purchased, then
there is no justification for making any assessment under Section
5A. Similarly since most of the sales are interstate, the Bank
accounts should have disclosed the turnover because sales are
normally not made against cash. In any case, learned counsel for
the petitioner has pointed out that the Tribunal has partly remanded
the matter involving production of accounts once again before the
Assessing Officer. According to him, the petitioner will be able to
produce the accounts, which will disclose purchase and sales
turnover. We feel along with the books of accounts, the petitioner
should produce Bank pass books also before the Assessing Officer
for him to make assessment based on books of accounts, and if
required to make rationale estimation of turnover based on
S.T.Rev.Nos.8 & 9 of 2011
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materials. So far as Section 5A assessment is concerned, we direct
the Officer to examine the pattern of sourcing of raw materials and
the percentage of turnover for which purchases are made within and
outside Kerala, or whether any sourcing is done through imports,
and then to make assessment under Section 5A on the actual
purchases or based on reasonable estimation.
These revision cases are, accordingly, allowed by vacating the
orders of the Tribunal and that of the lower authorities and by
remanding the matter to the Assessing Officer. There will be a
direction to the petitioner to produce the entire books of accounts
and details before the Assessing Officer after getting a date fixed by
him to enable the Assessing Officer to complete the assessment
within three months from the date of receipt of a copy of this
judgment. However, if books produced are not full and complete,
assessment should be made on estimation basis based on materials
and after issuing pre-assessment notice containing proposals.
These Revision Cases are allowed as above.
(C.N.RAMACHANDRAN NAIR, JUDGE)
(BHABANI PRASAD RAY, JUDGE)
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