ACIT, Kollam V. Lekshmi Traders, Kollam

ITSSA 17/COCH/2002

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8514 (ITAT-COCHIN)
• Duration Of Justice: 10 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-08-2012
• Assessment Year: misc
• Appeal Filed On: 05-07-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: A S NARAYANANMURTHY
• Keywords: Business expenditure; Block assessment
• Section: 43B; 260A

Judgement Text

1 IT(SS)A NO.14&17 /COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T(SS)A NO. 14/COCH/2002 (BLOCK PERIOD 01-04-1988 TO 23-02-1999) M/S LEKSHMI TRADERS VS DY.CIT, CIR.1 ABKARI CONTRACTORS KOLLAM SASTHAMCOTTA, KOLLAM PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) I.T(SS)A NO. 17/COCH/2002 (BLOCK PERIOD 01-04-1988 TO 23-02-1999) A.C.I.T., CIR.1 VS M/S LEKSHMI TRADERS KOLLAM SASTHAMCOTTA, KOLLAM (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.S. NARAYANANMURTHY REVENUE BY : MS. A.S. BINDHU DATE OF HEARING : 09-08-2012 DATE OF PRONOUNCEMENT : 12-10-2012 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEALS OF THE TAXPAYER AND THE REVENUE A RE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX(A)-III, TRIVANDRUM DA TED 25-03-2002 AND PERTAINS TO BLOCK PERIOD 01-04-1988 TO 23-02-1999. 2. BOTH THESE APPEALS WERE DISPOSED OF BY THIS TRIB UNAL BY AN ORDER DATED 27-02- 2004. HOWEVER, ON APPEAL BY THE REVENUE, THE HIGH COURT VACATED THE ORDER OF THE 2 IT(SS)A NO.14&17 /COCH/2010 TRIBUNAL AND BOTH THE APPEALS WERE REMITTED BACK TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION ON MERIT AFTER HEARING THE PARTIES. ACCOR DINGLY, BOTH THESE APPEALS WERE FIXED FOR HEARING. 3. THE TAXPAYER HAS AGAIN RAISED ADDITIONAL GROUND WITH REGARD TO JURISDICTION OF THE ASSESSING OFFICER FOR MAKING THE BLOCK ASSESSMENT. 4. SHRI A.S. NARAYANAMURTHY, THE LD.REPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT THE TAXPAYER IS A PERSON OTHER THAN PERSON SEARCHED . IT IS A CONDITION PRECEDENT FOR MAKING THE BLOCK ASSESSMENT THAT THE ASSESSING OFFI CER SHALL RECORD A FINDING THAT THE SEARCH MATERIAL BELONG TO THE OTHER PERSON AND HE H AS TO HANDOVER THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS TO THE CONCERNED OFFICE R. IN THIS CASE, ACCORDING TO THE LD.REPRESENTATIVE, THE SATISFACTION AS REQUIRED FOR MAKING A BLOCK ASSESSMENT IN RESPECT OF PERSON OTHER THAN SEARCHED WAS NOT RECORDED. TH EREFORE, THE BLOCK ASSESSMENT FRAMED BY THE ASSESSING OFFICER IS NOT VALID. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN MANISH MAHESHWARI VS DY.C.I.T. (2007) 289 ITR 341 (SC). THE LD.REPRESENTATIVE FURTHER SUBMITTED TH AT WHEN THE TAXPAYER CHALLENGED THE LEGALITY OF THE ASSESSMENT PROCEEDINGS THE SAME WAS UPHELD BY THIS TRIBUNAL; HOWEVER, ON APPEAL BY THE REVENUE, THE HIGH COURT VACATED TH E ORDERS OF THE TRIBUNAL AND REMITTED THE MATTER BACK FOR FRESH DECISION ON MERI T. HOWEVER, THE TAXPAYER AGAIN RAISED AN ADDITIONAL GROUND WITH REGARD TO THE VALI DITY OF THE ASSESSMENT ON THE GROUND THAT THE SATISFACTION AS REQUIRED U/S 158BD WAS NOT RECORDED. 5 THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE MATTER WAS REMITTED BACK TO THE FILE OF THE TRIBUNAL FOR A FRESH DECISION, THER EFORE, THE TRIBUNAL HAS ALL THE POWERS TO ADMIT THE ADDITIONAL GROUNDS. ACCORDING TO THE LD. REPRESENTATIVE, THE ADDITIONAL GROUND RAISED BY THE TAXPAYER GOES TO THE ROOT OF THE MATT ER WITH REGARD TO THE JURISDICTION OF THE ASSESSING OFFICER TO MAKE THE BLOCK ASSESSMENT. THEREFORE, IT HAS TO BE CONSIDERED BY THIS TRIBUNAL. THE LD.REPRESENTATIVE HAS ALSO P LACED HIS RELIANCE ON THE UNREPORTED 3 IT(SS)A NO.14&17 /COCH/2010 JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN C.I.T. VS DR T.M. KUIRIACHAN, KURIENS CLINIC, ADIMALI PO, ADIMALI ITA NO.12 OF 2011, JUDGMENT DAT ED 05 TH MARCH, 2012 AND SUBMITTED THAT IN THIS CASE ALSO, THE JURISDICTIONAL HIGH COU RT IN THE FIRST ROUND OF LITIGATION REMANDED THE MATTER BACK TO THE FILE OF THE TRIBUNA L FOR RECONSIDERATION. THE TAXPAYER RAISED A GROUND WITH REGARD TO NON RECORDING OF SAT ISFACTION BY THE ASSESSING OFFICER. THE HIGH COURT AFTER REFERRING TO ITS EARLIER DECIS ION IN C.I.T. VS PANCHAJANYAM MANAGEMENT AGENCIES & SERVICES 239 CTR (KER) 424 FO UND THAT IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF MANISH MAHESHWARI (SUPRA) THE ASSESSMENT WOULD BE INVALID SINCE THE SATISFACTION AS REQUIRED U/S 158B D WAS NOT RECORDED. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, EVEN IN THE REM AND PROCEEDINGS THE TAXPAYER CAN RAISE ADDITIONAL GROUND WITH REGARD TO JURISDICTION ONCE AGAIN. THE LD.REPRESENTATIVE, VERY FAIRLY SUBMITTED THAT HE DID NOT WANT TO ADVAN CE ANY ARGUMENTS WITH REGARD TO MERIT OF THE CASE. 6. WE HAVE HEARD SMT. A.S. BINDHU, THE LD.DR ALSO. THE LD.DR SUBMITTED THAT ON REMAND PROCEEDINGS, THE TRIBUNAL CANNOT GO BEYOND T HE DIRECTION OF THE HIGH COURT. THEREFORE, THE ADDITIONAL GROUND RAISED BY THE TAXP AYER CANNOT BE ADMITTED AT THIS STAGE. THE LD.DR ALSO HAS NOT ADVANCED ANY ARGUMEN T WITH REGARD TO THE MERIT OF THE CASE WHICH WAS RAISED IN THE DEPARTMENTAL APPEAL. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, IN THE FIRST ROUN D OF LITIGATION THE TAXPAYER CHALLENGED THE VALIDITY OF THE BLOCK ASSESSMENT PROCEEDINGS BE FORE THIS TRIBUNAL BY WAY OF ADDITIONAL GROUND OF APPEAL. IN FACT, THE TRIBUNAL ADMITTED THE ADDITIONAL GROUND AND ALLOWED THE APPEAL OF THE TAXPAYER ON THE GROUND TH AT THE BLOCK ASSESSMENT PROCEEDINGS WERE NOT VALIDLY INITIATED. ON APPEAL BY THE REVENUE, THE HIGH COURT FOUND THAT THE BLOCK ASSESSMENT PROCEEDINGS HAVE BEEN VAL IDLY INITIATED. THE HIGH COURT ALSO HELD THAT THE GROUND RAISED BY THE TAXPAYER BEFORE THIS TRIBUNAL IS AN AFTERTHOUGHT BECAUSE IT WAS RAISED FOR THE FIRST TIME. ACCORDIN GLY, THE HIGH COURT VACATED THE ORDERS 4 IT(SS)A NO.14&17 /COCH/2010 OF THIS TRIBUNAL AND RESTORED THE MATTER IN BOTH TH ESE APPEALS BACK TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION ON MERIT. 8. NOW THE QUESTION ARISES FOR CONSIDERATION IS WHE N THE VALIDITY OF THE BLOCK ASSESSMENT PROCEEDINGS HAS BEEN UPHELD BY THE HIGH COURT ON THE GROUND RAISED BY THE TAXPAYER FOR THE FIRST TIME BEFORE THIS TRIBUNAL, C AN THE TAXPAYER RAISE ANOTHER GROUND WITH REGARD TO THE VALIDITY OF THE PROCEEDINGS BEFO RE THIS TRIBUNAL IN THE REMAND PROCEEDINGS ESPECIALLY WHEN THE HIGH COURT DIRECTED THE TRIBUNAL TO DECIDE THE APPEAL ON MERIT? NO DOUBT, THE JURISDICTIONAL HIGH COURT IN DR T.M. KURIACHAN (SUPRA) ENTERTAINED A SIMILAR GROUND IN THE SECOND ROUND OF LITIGATION. HOWEVER, IT IS NOT KNOWN FROM THE JUDGMENT OF THE HIGH COURT WHETHER THE LEG ALITY OF THE BLOCK ASSESSMENT PROCEEDINGS WAS CHALLENGED IN THE FIRST ROUND OF LI TIGATION. A BARE READING OF THE JUDGMENT SHOWS THAT IN THE FIRST ROUND OF LITIGATIO N THE MATTER WAS REMANDED BACK TO THE FILE OF THE TRIBUNAL FOR RECONSIDERATION. SO, PRIMA FACIE IT APPEARS THAT IT WAS AN OPEN REMAND TO DECIDE THE CASE AFRESH AFTER RECONSI DERING THE MATERIAL AVAILABLE ON RECORD. IN THE CASE BEFORE US, THE LEGALITY OF THE PROCEEDINGS HAS BEEN UPHELD BY THE HIGH COURT AND THE MATTER WAS RESTORED BACK TO THE FILE OF THE TRIBUNAL FOR A FRESH DECISION ON MERIT. IN SUCH A SITUATION, CAN THE TR IBUNAL ENTERTAIN ANOTHER GROUND WITH REGARD TO THE VALIDITY OF THE PROCEEDINGS? THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE HIGH COURT UPHELD THE VALIDITY OF THE PROC EEDINGS WITH REGARD TO THE BLOCK ASSESSMENT PROCEEDINGS, THE SAME CANNOT BE RE-AGITA TED AGAIN BY RAISING ANOTHER GROUND WITH REGARD TO THE VALIDITY OF THE SAME PROC EEDINGS. THIS TRIBUNAL BEING UNDER THE SUPERVISORY CONTROL OF THE HIGH COURT UNDER ART ICLE 227 OF THE CONSTITUTION OF INDIA IS BOUND TO CARRY OUT THE DIRECTIONS OF THE HIGH COURT IN LETTER AND SPIRIT. WHEN THE HIGH COURT SPECIFICALLY DIRECTED THE TRIBUNAL TO DECIDE THE APPEAL AFRESH ON MERIT, THIS TRIBUNAL CANNOT GO BEYOND THE DIRECTION OF THE HIGH COURT BY ENTERTAINING ANOTHER GROUND WITH REGARD TO THE VALIDITY OF BLOCK ASSESSM ENT PROCEEDINGS. THIS VIEW OF OURS IS FORTIFIED BY THE JUDGMENT OF THE APEX COURT IN BHOP AL SUGAR INDUSTRIES LTD VS ITO (1960) 40 ITR 618 (SC). 5 IT(SS)A NO.14&17 /COCH/2010 9. IN THE CASE BEFORE THE APEX COURT IN BHOPAL SUGA R INDUSTRIES LTD (SUPRA) THE TRIBUNAL DIRECTED THE ASSESSING AUTHORITY TO ASCERT AIN THE AVERAGE TRANSPORT CHARGES PER MAUND FROM THE CENTRES TO THE FACTORY AND ADD TO IT THE RATE OF RS.1-4-6 PER MAUND OF SUGARCANE AND ON THAT BASIS WORK OUT THE VALUE OF S UGARCANE GOWN BY THE TAXPAYER COMPANY IN ITS OWN FARM. HOWEVER, THE ASSESSING AU THORITY HAS NOT CARRIED OUT THE DIRECTION OF THE TRIBUNAL. THE ASSESSING AUTHORITY FAILED TO CARRY OUT THE DIRECTION OF THE TRIBUNAL. THE MATTER WAS BROUGHT BEFORE THE JUDICI AL COMMISSIONER, WHO THEN EXERCISED THE POWERS OF HIGH COURT FOR THAT AREA ON APPEAL. THE JUDICIAL COMMISSIONER FOUND THAT THE ASSESSING AUTHORITY FAILED TO CARRY OUT HIS DUTY AS DIRECTED BY THE TRIBUNAL. HOWEVER, THE JUDICIAL COMMISSIONER FOUND THAT THERE WAS NO MANIFEST INJUSTICE AS A RESULT OF THE ORDER OF THE ASSESSING AUTHORITY. THE MATTER TRAVELLED BEFORE THE APEX COURT. THE APEX COURT FOUND THAT THE ASSE SSING AUTHORITY FLATLY REFUSED TO CARRY OUT THE DIRECTION OF THE SUPERIOR TRIBUNAL WH ICH WAS ISSUED IN EXERCISE OF ITS APPELLATE POWERS. SUCH REFUSAL IS IN FACT DENIAL O F JUSTICE. THE APEX COURT FURTHER FOUND THAT THE REFUSAL BY THE SUBORDINATE AUTHORITY / TRI BUNAL TO CARRY OUT THE DIRECTION GIVEN BY THE SUPERIOR TRIBUNAL IN EXERCISE OF THE APPELLA TE POWERS WILL BE CHOICE IN THE ADMINISTRATION OF JUSTICE. IN FACT, THE APEX COURT HAS OBSERVED AS FOLLOWS AT PAGES 622 & 623 OF THE ITR: IT IS WORTHY OF NOTE HERE THAT WHILE THE TRIBUNAL HAD DIRECTED THE RESPONDENT TO ASCERTAIN THE AVERAGE TRANSPORT CHARG ES FROM THE CENTRES TO THE FACTORY, THE RESPONDENT REFERRED TO THE COST OF TRANSPORTATION FROM THE FARMS TO THE FACTORY. CLEARLY ENOUGH, THE RESP ONDENT MISREAD THE DIRECTION OF THE TRIBUNAL AND FAILED TO CARRY IT OU T. HE PROCEEDED ON A BASIS WHICH WAS IN CONTRAVENTION OF THE DIRECTION O F THE TRIBUNAL. IN THESE CIRCUMSTANCES, THE APPELLANT COMPANY MOVE D THE JUDICIAL COMMISSIONER, BHOPAL, THEN EXERCISING THE POWERS OF A HIGH COURT FOR THAT AREA, FOR THE ISSUE OF A WRIT TO COMPEL THE RE SPONDENT TO CARRY OUT THE DIRECTIONS GIVEN BY THE TRIBUNAL. THE LEARNED JUDICIAL COMMISSIONER FOUND IN EXPRESS TERMS THAT THE RESPONDENT HAD ACTE D ARBITRARILY AND IN CLEAR VIOLATION OF THE DIRECTIONS GIVEN BY THE TRIB UNAL; IN OTHER WORDS, HE 6 IT(SS)A NO.14&17 /COCH/2010 FOUND THAT THE RESPONDENT HAD DISREGARDED THE ORDER OF THE TRIBUNAL, FAILED TO CARRY OUT HIS DUTY ACCORDING TO LAW AND H AD ACTED ILLEGALLY. HAVING FOUND THIS, THE LEARNED JUDICIAL COMMISSIONE R WENT ON TO EXAMINE THE CORRECTNESS OR OTHERWISE OF THE ORDER OF THE TR IBUNAL AND FOUND THAT THE TRIBUNAL WENT WRONG IN NOT TREATING THE CENTRES AS MARKETS WITHIN THE MEANING OF RULE 23 OF THE INCOME-TAX RULES. HE THEN CAME TO THE CONCLUSION THAT IN VIEW OF THE ERROR COMMITTED BY T HE TRIBUNAL, THERE WAS NO MANIFEST INJUSTICE AS A RESULT OF THE ORDER OF T HE RESPONDENT; ACCORDINGLY, HE DISMISSED THE APPLICATION FOR THE I SSUE OF A WRIT MADE BY THE APPELLANT COMPANY. WE THINK THAT THE LEARNED JUDICIAL COMMISSIONER WA S CLEARLY IN ERROR IN HOLDING THAT NO MANIFEST INJUSTICE RESULTE D FROM THE ORDER OF THE RESPONDENT CONVEYED IN HIS LETTER DATED MARCH 24, 1 955. BY THAT ORDER THE RESPONDENT VIRTUALLY REFUSED TO CARRY OUT THE D IRECTIONS WHICH A SUPERIOR TRIBUNAL HAS GIVEN TO HIM IN EXERCISE OF I TS APPELLATE POWERS IN RESPECT OF AN ORDER OF ASSESSMENT MADE BY HIM. SUC H REFUSAL IS IN EFFECT A DENIAL OF JUSTICE, AND IS FURTHER MORE DESTRUCTIV E OF ONE OF THE BASIC PRINCIPLES IN THE ADMINISTRATION OF JUSTICE BASED A S IT IS IN THIS COUNTRY ON A HIERARCHY OF COURTS. IF A SUBORDINATE TRIBUNAL I N THE EXERCISE OF ITS APPELLATE POWERS, THE RESULT WILL BE CHAOS IN THE A DMINISTRATION OF JUSTICE AND WE HAVE INDEED FOUND IT VERY DIFFICULT TO APPRE CIATE THE PROCESS OF REASONING BY WHICH THE LEARNED JUDICIAL COMMISSIONE R WHILE ROUNDLY CONDEMNING THE RESPONDENT FOR REFUSING TO CARRY OUT THE DIRECTIONS OF THE SUPERIOR TRIBUNAL, YET HELD THAT NO MANIFEST INJUST ICE RESULTED FROM SUCH REFUSAL. 10. IN VIEW OF THE ABOVE OBSERVATIONS OF THE APEX C OURT, THIS TRIBUNAL IS BOUND TO CARRY OUT THE DIRECTIONS OF THE HIGH COURT WHICH WA S ISSUED IN EXERCISE OF ITS APPELLATE JURISDICTION U/S 260A OF THE ACT. FOR THE PURPOSE OF CONVENIENCE, WE REPRODUCE THE DIRECTIONS OF THE HIGH COURT BELOW: THEREFORE, THESE APPEALS ARE ALLOWED VACATING THE ORDERS OF THE TRIBUNAL AND BY RESTORING BOTH THE APPEALS FILED BY THE ASSESSEE AND THE DEPARTMENT TO THE TRIBUNAL FOR FRESH DECISION ON ME RITS, AFTER HEARING THE PARTIES. FROM THE ABOVE, IT IS OBVIOUS THAT THE DIRECTION OF THE HIGH COURT TO THIS TRIBUNAL IS TO DECIDE THE CASE AFRESH ON MERIT AFTER HEARING THE P ARTY. THEREFORE, THIS TRIBUNAL, AT THIS 7 IT(SS)A NO.14&17 /COCH/2010 STAGE, CANNOT GO BEYOND THE MERIT OF THE CASE. THE VALIDITY OF THE BLOCK ASSESSMENT PROCEEDINGS HAS ALREADY BEEN DECIDED BY THE HIGH CO URT AND THIS TRIBUNAL CANNOT DISTURB THE FINDINGS OF THE HIGH COURT BY ENTERTAIN ING ANOTHER GROUND WHICH IS RAISED BY THE TAXPAYER AS ADDITIONAL GROUND BEFORE THIS TRIBU NAL. IN VIEW OF THE ABOVE, WE ARE UNABLE TO ADMIT THE ADDITIONAL GROUND RAISED BY THE TAXPAYER WITH REGARD TO RECORDING OF THE SATISFACTION FOR INITIATING BLOCK ASSESSMENT PR OCEEDINGS. THEREFORE, THIS TRIBUNAL IS BOUND TO DISPOSE OF THE APPEAL ON MERIT. 11. AS WE HAVE ALREADY DISCUSSED, BOTH THE REPRESEN TATIVES FOR THE TAXPAYER AND THE DEPARTMENT HAVE NOT ADVANCED ANY ARGUMENT ON MERIT. IN FACT, BOTH THE PARTIES SUBMITTED BEFORE THIS TRIBUNAL THAT THEY DID NOT WA NT TO ADVANCE ANY ARGUMENT ON MERIT. HOWEVER, IN VIEW OF THE DIRECTION OF THE H IGH COURT TO DISPOSE OF THE APPEALS ON MERIT, THIS TRIBUNAL HAS A RESPONSIBILITY TO DISPOS E OF THE APPEALS ON MERIT ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. THEREFORE, WE ARE NOW PROCEEDINGS TO DISPOSE OF THE APPEALS ON MERIT ON THE BASIS OF THE MATERIAL A VAILABLE ON RECORD. 12. LET US FIRST TAKE THE TAXPAYERS APPEAL IN IT(S S)A NO.14/COCH/2002. 13. THE FIRST GROUND OF APPEAL IS WITH REGARD TO BA TA EXPENSES. IT APPEARS FROM THE ORDERS OF LOWER AUTHORITIES AND THE MATERIALS AVAIL ABLE ON RECORD THAT THE TAXPAYER CLAIMED EXPENSES OF RS. 4,17,060. HOWEVER, THE COM MISSIONER OF INCOME-TAX(A) RESTRICTED THE SAME TO RS.3,77,611. IN THE GROUND OF APPEAL THE TAXPAYER CLAIMS THAT THE BATA WAS PAID TO PARTNERS AND IT WAS DEBITED IN THE IR ACCOUNT AS SHOWN IN THE TRIAL BALANCE. IT IS ALSO CLAIMED THAT THE PARTNERS WERE WORKING THROUGH OUT THE YEAR FOR THE CONCERN. THE COMMISSIONER OF INCOME-TAX(A) FOUND T HAT THERE IS NO EVIDENCE TO SHOW THAT THE PARTNERSHIP DEED PROVIDES FOR PAYMENTS OF SALARY AND BATA TO PARTNERS. IN THE ABSENCE OF ANY MATERIAL, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY RESTRICTE D THE EXPENSES TO RS.3,77,611. THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 8 IT(SS)A NO.14&17 /COCH/2010 14. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF RS.1 LAKH. THE CONTENTION OF THE TAXPAYER BEFORE THE LOWER AUTHORI TY APPEARS TO BE THAT IT IS A DONATION; THEREFORE, THE SAME IS ALLOWABLE U/S 37(1 ) OF THE ACT. FROM THE MATERIAL AVAILABLE, IT IS NOT KNOWN WHAT KIND OF DONATION IS PAID BY THE TAXPAYER. IN THE ABSENCE OF ANY MATERIAL, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LOWER AUTHORITY HAS RIGHTLY DISALLOWED THE CLAIM OF THE TAXPAYER. THE ORDER OF THE COMMISSIONER OF INCOME- TAX(A) IS UPHELD ON THIS ISSUE. 15. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF RS.82,354 U/S 43B OF THE ACT. THE TAXPAYER HAS CLAIMED RS. 49,27,311 TOWARDS PROVIDENT FUND PAYMENT. HOWEVER, THE ASSESSING OFFICER HAS ALLOWED RS.49,37 ,780 THEREBY ALLOWING AN EXCESS AMOUNT OF RS. 10,469. HOWEVER, ON VERIFICATION OF THE TAXPAYERS ACCOUNT THE LOWER AUTHORITIES FOUND THAT THE INTEREST OF RS.48,145 WA S ALSO ALLOWED BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME-TAX(A) FURTHER FOUND THAT THE INTEREST FOR THE PERIOD 01-04-1998 TO 30-06-1998 WAS RS. 22,389 WHIC H FALLS BEYOND THE ACCOUNTING PERIOD. WITH REGARD TO THE DISALLOWANCE OF INTERES T OF RS. 82,354 THE COMMISSIONER OF INCOME-TAX(A) CONFIRMED THE DISALLOWANCE SINCE THE SAME IS NOT ALLOWABLE U/S 43B(A) OF THE ACT. IT IS NOBODYS CASE THAT THE AMOUNT OF RS. 82,354 WAS ACTUALLY PAID. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 16. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF RS.19,65,160. THE REVENUE HAS ALSO FILED APPEAL WITH REGARD TO RELIEF GIVEN BY THE COMMISSIONER OF INCOME- TAX(A) AS PER GROUND 13 OF ITS APPEAL. 17. FROM THE SEIZED TRIAL BALANCE, IT APPEARS THAT THE CLOSING STOCK WAS SHOWN AT RS. 6,93,840 AND THE STOCK DEBITED IS RS.19,14,120. TH E COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE CLOSING STOCK OF RS. 6,96,840 SHOULD BE INCLUDED IN THE PURCHASES. WHEN 9 IT(SS)A NO.14&17 /COCH/2010 THERE IS A CLOSING STOCK AS FOUND IN THE SEIZED MAT ERIAL, THE SAME HAS TO BE INCLUDED IN THE PURCHASES TO FIND OUT THE STOCK POSITION. THER EFORE, THE COMMISSIONER OF INCOME- TAX(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE TAXPAYE R. THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACC ORDINGLY, THE ISSUE RAISED BY THE TAXPAYER ON THIS ISSUE IS DISMISSED. 18. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF R.27,06,000 TOWARDS PAYMENT OF TREE PATTOM. THE TAXPAYER CLAIM ED DEDUCTION OF RS. 27,06,000 TOWARDS TREE PATTOM EXPENSES. THE CLAIM OF THE TAX PAYER APPEARS TO BE THAT IT IS RS.50 PER MONTH FOR 4,510 TREES FOR 12 MONTHS. THE COMMI SSIONER OF INCOME-TAX(A) FOUND THAT THERE IS NO EVIDENCE FOR PAYMENT OF ANY PATTOM EXPENSES. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE PAYMENTS HAVE BEEN MADE, THE COMMISSIONER OF INCOME- TAX(A) CONFIRMED THE DISALLOWANCE. NO FURTHER MATE RIAL IS PRODUCED BEFORE THIS TRIBUNAL. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 19. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EST IMATION OF INCOME FOR THE ASSESSMENT YEAR 1999-2000 AT RS.77,63,583. FOR THE ASSESSMENT YEAR 1999-2000 THE SEIZED MATERIAL SHOWED THE TURNOVER OF RS.16,00,73, 888 AND THE NET PROFIT AT RS. 9,30,30,771. THE COMMISSIONER OF INCOME-TAX(A) FOU ND THAT THE BOOKS OF ACCOUNT WAS NOT MAINTAINED PROPERLY AND HE ESTIMATED THE PROFIT AT 4.85% ON THE TURNOVER OF RS. 16,00,73,888 AND PROFIT IS DETERMINED AT RS.77,63,5 83. AFTER CAREFULLY GOING THROUGH THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE SEIZE D MATERIAL SHOWS THE TURNOVER AT RS.16,00,73,888 AND THE PROFIT AT RS. 9,30,30,771. THE COMMISSIONER OF INCOME-TAX(A) APPARENTLY HAD NO REASON TO ESTIMATE THE PROFIT AT 4.85%. THE VERY FACT THAT THE COMMISSIONER OF INCOME-TAX(A) ACCEPTED THE TURNOVER FOUND IN THE SEIZED MATERIAL SHOWS THAT HE BELIEVED THE SEIZED MATERIAL. THEREF ORE, THE PROFIT WORKED OUT ON THE BASIS OF SEIZED MATERIAL CANNOT BE REJECTED. IN VI EW OF THE ABOVE, WE ARE UNABLE TO 10 IT(SS)A NO.14&17 /COCH/2010 UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME-TAX( A). ACCORDINGLY, THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 20. NOW COMING TO THE DEPARTMENTAL APPEAL, THE FIRS T GROUND OF APPEAL IS WITH REGARD TO THE DETERMINATION OF UNDISCLOSED INCOME B Y THE COMMISSIONER OF INCOME- TAX(A) AT RS.1,42,95,340 AS AGAINST RS.13,03,36,970 FIXED BY THE ASSESSING OFFICER. FROM THE ORDER OF THE ASSESSING OFFICER IT APPEARS THAT A TRIAL BALANCE WAS FOUND DURING THE COURSE OF SEARCH. THE REVENUE AUTHORITIES FOUND TH AT THE ENTRIES FOUND IN THE SEIZED MATERIAL TALLIES WITH THE BANK ACCOUNT MAINTAINED B Y THE TAXPAYER. THE TRIAL BALANCE IS ONE OF THE IMPORTANT MATERIALS FOUND DURING THE COU RSE OF SEARCH OPERATION. WHEN THE TRIAL BALANCE DISCLOSED THE UNDISCLOSED AT RS.13,03 ,36,970 THERE IS NO REASON FOR THE COMMISSIONER OF INCOME-TAX(A) TO RESTRICT THE SAME AT RS.1,42,95,340. IN THE ABSENCE OF ANY PROPER EXPLANATION, THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT THE TRIAL BALANCE AS FOUND DURING THE COURSE OF SEARCH OPERATION HAS TO BE TAKEN AS A VALID PIECE OF EVIDENCE TO PROVE THE UNDISCLOSED INCOME EARNED BY THE TAXPAYER. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE COMM ISSIONER OF INCOME-TAX(A) IS NOT JUSTIFIED IN RESTRICTING THE UNDISCLOSED INCOME AT RS.1,42,95,340 AS AGAINST THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFI CER AT RS.13,03,36,970. ACCORDINGLY THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS S ET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 21. THE NEXT GROUND OF APPEAL IS WITH REGARD TO SUP PRESSION OF BUSINESS PROFIT AMONGST THE PARTNERS TO THE EXTENT OF RS.4.5 CRORES . FROM THE MATERIALS AVAILABLE ON RECORD AND THE ORDERS OF LOWER AUTHORITIES WE FIND THAT THE TAXPAYER COULD NOT PRODUCE ANY MATERIAL WITH REGARD TO THE PROFIT DIVIDED AMON GST THE PARTNERS UPTO 27-12-1998. IT IS NOT KNOWN HOW THE COMMISSIONER OF INCOME-TAX(A) ALLOWED THE CLAIM IN THE ABSENCE OF ANY MATERIAL PRODUCED BY THE TAXPAYER WITH REGAR D TO THE DISTRIBUTION OF PROFIT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN THE A BSENCE OF ANY EXPLANATION FROM THE TAXPAYER WITH REGARD TO SUPPRESSED BUSINESS PROFIT, THERE IS NO REASON FOR DELETION OF 11 IT(SS)A NO.14&17 /COCH/2010 ADDITION TO THE EXTENT OF RS.4.5 CRORES. THEREFORE , THE ORDER OF LOWER AUTHORITY IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED . 22. THE NEXT GROUND OF APPEAL IS WITH REGARD TO CON SUMPTION OF TODDY TO THE EXTENT OF RS.19,14,120. WHILE CONSIDERING THE TAXPAYERS APPEAL THIS TRIBUNAL EXAMINED THE ISSUE AND CONFIRMED THE ORDER OF THE COMMISSIONER O F INCOME-TAX(A). THEREFORE, FOR THE REASONS STATED THEREIN, THE ORDER OF THE COMMISSION ER OF INCOME-TAX(A) IS CONFIRMED ON THIS ISSUE. 23. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DON ATION TO THE EXTENT OF RS.8,06,451. FROM THE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF LOWER AUTHORITIES IT APPEARS THAT THIS DONATION OF RS. 8,06,451 APPEA RS TO HAVE BEEN PAID TO POLITICAL PARTIES, TEMPLES, ETC. THIS PAYMENT DOES NOT HAVE ANY RELATIONSHIP WITH THE BUSINESS OF THE TAXPAYER. SINCE THERE IS NO NEXUS BETWEEN THE PAYMENT OF DONATION AND THE BUSINESS OF THE TAXPAYER, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT SUCH DONATION CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. ACCORDI NGLY, THE ORDER OF COMMISSIONER OF INCOME-TAX(A) IS SET ASIDE AND THAT OF THE ASSESSIN G OFFICER IS RESTORED. 24. THE NEXT GROUND OF APPEAL IS WITH REGARD TO PAY MENT MADE TO EXCISE AND POLICE OFFICIALS. THE PAYMENTS MADE TO EXCISE AND POLICE OFFICIALS ARE AGAINST PUBLIC POLICY AND IT CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. THE EXCISE AND POLICE OFFICIALS BEING THE GOVERNMENT EMPLOYEES ARE UNDER THE OBLIGATION TO PE RFORM THEIR STATUTORY FUNCTION. THEREFORE, ANY PAYMENT MADE BY THE TAXPAYER TO THOS E OFFICIALS IS AGAINST THE PUBLIC POLICY AND CANNOT BE ALLOWED AS A DEDUCTION. ACCOR DINGLY, THE ORDER OF LOWER AUTHORITY IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS R ESTORED. 25. THE NEXT GROUND OF APPEAL IS WITH REGARD TO VEH ICLE MAINTENANCE AND HIRE CHARGES. FROM THE ORDER OF THE LOWER AUTHORITIES I T APPEARS THAT THE TAXPAYER HAS NOT CHALLENGED THE TRIAL BALANCE WHICH WAS FOUND DURING THE COURSE OF SEARCH OPERATION. 12 IT(SS)A NO.14&17 /COCH/2010 SOME OF THE ENTRIES FOUND IN THE SEARCH MATERIAL TA LLIES WITH THE BANK ACCOUNT. THEREFORE, THERE IS NO QUESTION OF ANY EXPENDITURE TO BE ALLOWED AS VEHICLE MAINTENANCE / HIRE CHARGES. THE COMMISSIONER OF IN COME-TAX(A) IS NOT CORRECT IN ALLOWING THE CLAIM OF THE TAXPAYER. ACCORDINGLY, T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS SET ASIDE AND THAT OF THE ASSESSIN G OFFICER IS RESTORED. 26. THE NEXT GROUND OF APPEAL IS WITH REGARD TO PRO FIT ESTIMATED FOR THE ASSESSMENT YEAR 1999-2000 @4.85%. THIS ISSUE WAS ELABORATELY CONSIDERED IN THE TAXPAYERS APPEAL AND THE TRIBUNAL HAS FOUND THAT THE COMMISSIONER OF INCOME-TAX(A) COMMITTED AN ERROR, THEREFORE, THE ORDER OF THE ASSESSING OFFICER WAS R ESTORED. BY FOLLOWING THE REASONS STATED THEREIN THE ORDER OF THE COMMISSIONER OF INC OME-TAX(A) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 27. IN THE RESULT, THE APPEALS OF THE TAXPAYER AND THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH OCTOBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 12 TH OCTOBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH