IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA.No. 1305 of 2009(C)
1. THE COMMISSIONER OF INCOME TAX,
... Petitioner
Vs
1. M/S.HOTEL SAMRAT, EDAKKARA,
... Respondent
For Petitioner :SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)
For Respondent :SRI.S.ARUN RAJ
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN
Dated :25/11/2009
O R D E R
C.N.RAMACHANDRAN NAIR &
V.K.MOHANAN, JJ.
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I.T. Appeal Nos.1305, 1066 & 1321 of 2009
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Dated this the 25th day of November, 2009.
JUDGMENT
Ramachandran Nair, J.
Question raised in the connected appeals filed by the Revenue is
whether the Tribunal was justified in allowing the Miscellaneous
Petition to recall the earlier order and dismiss the appeals filed by the
Revenue. Respondent-assessee was engaged in the business of
running a Bar Hotel as a partnership firm. During survey conducted,
various records were recovered including the price list maintained by
the Bar Hotel for retail sale of liquor. Statements were recorded from
the Managing Partner, the Hotel Manager and also a supplier. The
Assessing Officer found from the recovered materials and the
statements that the gross profit conceded was incorrect and the gross
profit received by the assessee was 60% for the year 1997-98, 70% for
the year 1998-99 and 75% for the year 1999-2000. Assessments were
accordingly completed on an estimation basis under Section 144 of the
Income Tax Act. On appeal, the C.I.T. (Appeal) relying on the
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judgment of this court in PAUL MATHEWS AND SONS VS.
COMMISSIONER OF INCOME-TAX reported in (2003) 263 ITR 101
held that the statements recorded under Section 133A(3)(iii) of the
Income Tax Act have no evidentiary value and therefore, he cancelled
the estimation made by the Assessing Officer and refixed the gross
profit at 35%. In the appeals filed by the department, the assessee did
not appear during hearing. The Tribunal, however, heard the appellant-
department, perused the records and partly allowed the appeals by
refixing gross profit at 40% for the first year, 45% for the next year and
at 50% for the last year. The assessee thereafter filed an application to
set aside the exparte order and for rehearing, which was allowed by the
Tribunal. However, after rehearing the party the Tribunal also
following the judgment of this court abovereferred recalled their earlier
order and dismissed the department appeals against which these
appeals are filed.
2. We have heard Standing Counsel appearing for the appellant
and Adv. Sri.V.S.Jayakumar appearing along with Adv. Sri.S.Arun Raj
for the respondent-assessee. During hearing, we felt that the decision
of this court in PAUL MATHEWS’ case abovereferred does not lay
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down the correct position of law because in our view, statement
recorded under Section 133A(3)(iii), though cannot be treated as
independent evidence like evidence recorded under Section 132(4), has
corroboratory value in assessment and statement recorded under the
said provision can be even relied on by the assessee. In other words,
the decision of this court that the statement recorded under the above
provision does not have evidentiary value, in our view, does not lay
down the correct law. However, since counsel for the respondent-
assessee does not rely on the above decision, we proceed to consider
these cases on merits without referring the matter for consideration to
Full Bench because by the operation of the latter part of the Section,
such statement has relevance for assessment and other proceeding
under the Act.
3. This is a case where during survey the department recovered
certain account books, price list etc. Statements were also recorded
from the Managing Partner, from the Manager of the Hotel and also a
supplier, all of whom have confirmed to the department’s stand that
accounts written are not full and complete and do not reflect the actual
receipts on sales. Therefore, best judgment assessment under Section
4
144 was the only course open to the Assessing Officer. In fact, in
principle, even the first appellate authority who modified the
assessment has not directed acceptance of books of accounts. All what
he has done is to fix the gross profit at a uniform rate of 35% for all the
years. In doing so he has relied on the fact that in subsequent
assessments even in assessee’s own case gross profit assessed is only
upto 34% and in comparable cases gross profit adopted is not as high
as the percentage estimated for the three years in the assessee’s case.
We notice from the Tribunal’s first order that even though it was passed
without hearing the assessee, the Tribunal has elaborately considered
the documents produced and the statements recorded. However, the
Tribunal was in fact considerate in refixing the gross profit from 40%
to 50% for the three years. After going through the impugned order of
the Tribunal issued after filing of the Miscellaneous Petition, we feel
the Tribunal has based on the judgment of this court not only rejected
the statements as having no evidenciary value, but has not even
considered the contents of the documents seized by the department, the
most important of which is the price list. When the contents of the
documents seized are proved through corroboratory evidence of the
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Managing Partner, the Manager and the sales boy, we see no reason to
reject it. However, at this distance of time remand again to the lower
authority will cause hardship to the assessee and also to the department.
For the sake of finality, we feel the gross profit estimated by the
Tribunal in the first round at 40% for the year 1997-98 can be applied
for all the years. Accordingly we allow the appeals in part by vacating
orders of the Tribunal and C.I.T.(Appeals) and by directing the
department to accept gross profit at 40% for all the years as fixed by
the Tribunal in the first round of appeals. The Assessing Officer will
revise the assessments accordingly.
C.N.RAMACHANDRAN NAIR
Judge
V.K.MOHANAN
Judge
pms