IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST Rev No. 145 of 2004()
1. M/S.KALLIYATH WIRE DISTRIBUTORS,
... Petitioner
Vs
1. STATE OF KERALA
... Respondent
For Petitioner :SRI.K.SRIKUMAR
For Respondent :GOVERNMENT PLEADER
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice K.M.JOSEPH
Dated :24/10/2007
O R D E R
H.L.DATTU, C.J. & K.M.JOSEPH, J.
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S.T.Rev.No.145 of 2004
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Dated this the 24th day of October, 2007.
O R D E R
H.L.Dattu, C.J.
The assessment year in question is 1989-90. The assessee is a
dealer registered under the provisions of the Kerala General Sales Tax Act.
Its main activity is sale and supply of iron and steel. The assessee had filed
its annual return before the assessing authority for the assessment year 1989-
90. The assessing authority has rejected the return so filed by the assessee
and has proceeded to complete the best judgment assessment and while
doing so has taken into consideration the suppression detected by the
Intelligence Wing of the department, the check post declarations and the
findings of the Income Tax Department and thereafter has made an addition of
25 percent to the total turnover conceded by the dealer.
(2). Aggrieved by the said quantification of tax liability of the
assessing authority, the assessee had filed appeal before the first appellate
authority in S.T.A.No.156 of 1998. The appellate authority has modified the
additions made by the assessing authority. While doing so has observed in his
order dated 02-04-1998 as under:
“Considering the fact that the assessment was
completed on the basis of the findings of the
Income Tax Department the entire suppression
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25% is unwarranted and that addition is hereby
deleted.”
(3). The first appellate authority has further directed the
assessing authority to modify the assessment of the assessee for the
assessment year 1989-90 by adding the actual suppression detected by the
Income Tax Department to the total turnover declared by the assessee.
(4). The assessee, being aggrieved by the said order passed by
the first appellate authority, had carried the matter in appeal before the
Tribunal in T.A.No.177 of 1998. The Tribunal has rejected the appeal by its
order dated 24th September, 2003 and while doing so, at para 5 of the order
has observed as under:
“The next issue to be decided in this appeal is
whether the addition sustained by the Ist
appellate authority is reasonable and just. The
appellant’s counsel vehemently argued that the
turnover suppression arrived by the I.T.
Authorities are incorrect and an appeal is pending
before the Commissioner of Income Tax. He also
pointed out that the closing stock of iron scrap
worth Rs.16,60,777/- assessed during the year
1989-90 is incorrect and unwarranted. On
perusal of the assessment order it is found that
the assessing authority has not assessed the
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closing stock as alleged by the appellant. The
raid conducted by the I.T. Authorities revealed
that certain purchases were not accounted in the
stock register. If the purchases were properly
accounted total stock as on 31-3-90 would have
been Rs.22,53,305/- whereas the value of
closing stock shown as per the account was
Rs.5,92,528/- only. Thus there was a difference
of Rs.16,60,777/-. It is therefore clear that the
appellant-dealer had disposed scraps worth
Rs.16,60,777/- without accounting the same in
the books of accounts. It is relevant to note that
the search was conducted by the I.T. Department
on 29-11-90 i.e., after the close of the financial
year. The assessing authority is therefore correct
in treating the difference of Rs.16,60,777/- as
unaccounted sales. Even though the counsel for
the appellant has stated that an appeal was filed
against the order of the I.T. Officer before the
Commissioner no orders have been produced.
Since the assessment in question relates to 89-
90, we do not find any reason to keep this appeal
further pending. The Ist appellate authority has
sustained the actual suppression detected alone
and the addition of 25% made by the assessing
authority towards probable omissions and
suppression was deleted. In view of the above
facts we do not find any reason to order any
further relief in this case. The objections are
accordingly over-ruled and the appeal stands
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dismissed.”
(5). Aggrieved by the findings and conclusions reached by the
Tribunal, the assessee is before us in this revision petition.
(6). The assessee has framed the following questions of law for
our consideration and decision:
“(i). Is not the Tribunal in error in confirming the
best judgment addition on the findings of the
Income Tax Department to fix the turnover when
those findings were cancelled by the Ist appellate
authority and set aside by the Income Tax
Tribunal?
(ii). Is not the Tribunal in error in confirming the
best judgment addition without any independent
finding of suppression or omission by the Sales
Tax Department, while the findings of the Income
Tax Department relied by the sales tax authorities
were cancelled and set aside by the Income Tax
Appellate Authorities?
(iii) Is not the Tribunal being the highest fact
finding authority erred in not considering the entry
of scrap purchases in the books of accounts?
(7). Sri. K.Srikumar, learned counsel appearing for the petitioner
brings to our notice that the assessee being aggrieved by the suppression
detected by the Income Tax Department had carried the matter in appeal
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favourable order in the hands of the first appellate authority, it had carried the
matter before the Tribunal by filing the second appeal. It appears that the
Tribunal had remanded the matter to the assessing authority (Income Tax
Department) to re-do the matter in accordance with law. It is also informed to
us that after such remand, the Income Tax Officer has reduced the actual
suppression detected by the department from Rs.16,60,777/- to
Rs.12,20,653/-. Therefore, contends that the actual suppression that requires
to be added to the total turnover of the dealer for the purpose of quantification
of the tax liability under the provisions of the Kerala General Sales tax Act
could only be Rs.12,20,653/-. At this stage, it is appropriate to observe that the
Sales Tax Department has not questioned the correctness or otherwise of the
orders passed by the Deputy Commissioner (Appeals) in S.T.A.No.156 of
1998 and the orders passed by the Tribunal in T.A.No.177 of 1998 dated 24th
September, 2003, wherein the first appellate authority and the Tribunal has
proceeded to observe that the assessing authority while completing the best
judgment assessment in the assessee’s case had entirely relied on the
suppression detected by the Income Tax Department.
(8). In view of the subsequent order passed by the Income Tax
Officer, on remand by the Tribunal, the actual suppression detected by the
Income Tax Department is only Rs.12,20,653/-. Therefore that amount alone
can be added to the turnover conceded by the dealer, while computing the tax
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liability under the provisions of the Kerala General Sales Tax Act.
(9). In view of the above, we dispose of this revision petition
with a direction to the assessing authority to make an addition of only a sum of
Rs.12,20,653/- instead of Rs.16,60,777/- to the total turnover conceded by
the dealer for the assessment year 1989-90 and issue a fresh demand notice.
Ordered accordingly.
(H.L.DATTU)
CHIEF JUSTICE
(K.M.JOSEPH)
JUDGE
MS