Karnataka High Court
The Commissioner Of Income Tax vs M/S H Dasappa & Sons. on 23 October, 2010
Bench: Manjula Chellur, B.V.Nagarathna
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W 'I'§--EE1 I-1¥(}H CGURT 09' KARNATfisKA, BANGALORE
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E)A'I'EIZ) THES THEJ3 my 0? OCTOBER, 20:0' « ;_. A'
PR ESEZNT
THE HON-31,8 MRS. JUSTICE MANJ}.,: Lzf-.
ANS
THE H()N'Bi.E MRS. JU3rKi"13:..,:B; V. NAz3A§+:;;=?H:x{A
INCOME 1'A>§'aPPgAL_R§;3§i~2Qo4
BETWEEN:
1.
'V " Bzixtgaiiére"
Tbs Commissmxgea". of I§_i:zcomt;~ tax ' -- ._ .«
C. R. Building V . "
Queens mad" V « --. »
Bajzgalerev 7 V
The Assistant C;0m331i:;$ii2Iité£ sf
ins:x)me~Ta:>{, Liaentrai 'f3§1'::_1é:--iV
C. Btliiditxg ' '
(g_ués;ms'E2Qad
.,. APPE LLANT8
= Advocate)
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M[ 3. §*I." Dgcisappa 8!» Sons.
vNG.I'~'£2'_1, [Ti Cross
"WiE.s;31i;Ga1den
. Biangaierew 27
RESPONDENT
T " (33; 311%. A. Shankar, Sri. M. Lava, Advocates) irfii This I.T.A is flea 11/ S. 2260A of the Income Tax Act, 196} arising out of order datrzd 31.752033 passed in WA No.66S/ Ba3:1g/ 199'? for the assessment yegaijr V' praying that this Hozfble Court may be eleasegi ' -. "
1) folmuiate the substaniiéieiiieeetions-iof above; ' ' "
2? ..3Vf:3;tVe:d 7
ii) Aliow the appeal and the ergiers 'psi-3S'ed ' by the Income Taxjfisppeliate 'I'1~ibu11a1,V..:13{anga1ore 2 V L' in {TA Ne.665/ Bang/13397 da2¢dv31',=7.2Qo3 and confirm the order passed by ._i:he Assistant Commissioner of I .e.<_21i'ue 'Tax, Ci1eie--¥, Bangalore, efe';-._ 3 ~ V. This Appea} being heaifd .. -reserved for prenouncement ;;3f_J1id.gj;::":e:1¥t this»-ttiay, {Mianj Lula Cheilur, J., delivered '£he3"Q3lowi3}g:- _ . . ' .
The _:qjL1estic>ns of law are raised in this appealg * A % '_ 1 egffiihefher tEVieV.T[V':1eibu&1r:al was eeneei in holding that V""the*5S:t0€i}£'_0f reciified spirit ef 33,980 litres worth V = "E?esI'1§,;€1fi,{.}V0Qf =» missing in the premises :31" the «' 'assestfiee directeéi by the S{ff:1I'Qh party which "~Was__'E;neI:i1ded in {he works of accounfs cammt be treated as the income 01" the assessee? Q§"i&3het}1er the Txibmlai wax correct in reiyiug on 1 Certain extraneous materiai 119?; relevant to facts of the present case and proceeded to farm an ogcsinjon based on conjectures and sumxises that there was 110 sales outside the books of aeceaunts by accepting the unreasonable ofliired by the assesstm without I*ec<)_;£t§.iug"' '7' .' finding as to Whether the nfissing spixit {mates} as incame of ff.i1e""&sscss;et:
consequently recordeci a _ 1 The revenue is bcfam the ofiiafi of the Inmme Tax Appciiate 13§:i¢1:i" 'C' in {TA No.665/9'? dated A'
2. The caxrying 03:1 its ¥3usi§a5é4$s:"::.""i§£i'"V. concemeti with the asse$s.iIj§Ve'1':*.V:V,.:YQ§*£';?.a~I:':::(i'gji" return of the income for the a$"$_¢és<:mefi:1:V fin 31.12. 1993 declaring a loss of of the assesses came to be p};jt:1;:?:aa:sE;$ed_A ufl€ié;1"«.$g:§";£i0H 143{})(a) of the income Tax Act, ' ;1i)5,1,--vV[herc§;iiatier referred to as 'the Actfi. ' a search was conductsd in the §usi11c%$s f,:reB.'zises of the 5315365366 and missing Iectified V "spi_;it bf 33,980 liters was detected. it was valued at VRS;Ai6,0G,0%/~ (rugmcs sixteen Lakhs) was missing. The " exp}a1::1a'£§;ofi Gfiered by the Exccufive Dimctor was found to be without slfiastance aa the claim of mctificé spirit bctixzg " Zthe assessee.
converted to IMFE. ami sold could not be verified xa?if31§jz.1 _fa;1y proof to substantiate the same.
4. The assessing oflicer, coneiucieci :2:-'u"z~mg. cguzjse' of regular assessment, that the above has seen soid by tl:1e:a.ssessee_ <§21tsic'.€e'ti1e'_V bog}-icsé of accounts. Hence entire Rs. as the income of the assessee [':«. an appeal came to be filegi befoygfefiexe of Income Tax (Appeals)--I, authority" accepted the 'eflicer. Therefore, the 011 6.5.1997. Aggrieved by t11Ve'.s.s1.ne'_ be pneferred to the Income Tax _ AppeLIL3te' Bench. The Tribune} the reeiifieiispirit could not have been said outside Ftflt? _ Vboélisee as the assessee was "under the constant 'su§§e1visie~.1}.5'ef the excise auihoxzities. Thezefeie, the auflgofifies were not justifieci in holding that no materiai was AA fijimd finfing the search that the stock had been removed by In other woxds, the Tribunal accepted the explanation ofieieé by the assesses: and aflowed.._{11e' of the assessee on 31.?.i2003.
5. From the orders of the,'Jtf£reeau.thQrifies, jWe5no'fie that there is no dispute so far as beiiig--.,eonduc--:t,ed,b:o'n,V 6.832 at the premises fLhe Vhassessee '}"eeI1ya." Observation of the V siéorliage of rectified spirit to the was confirmed from the sfaie'ments e'i' :V'i-fixenoy, Elistillery Manager $31136 Master, recorded duI'i1;,g.the""eoui:*s;e: 10.8.1992 the Executive Dizeetor -of ..b'3r-'-name D. Ravindranath gave statereeI1t:_" Jehe deficiency of rectified spirit ce1,§1i1otA.be but could. be only 21,000 1ts., since a ,£}§1tioii,A&ofA'fhe rectified spirit would have been converted into 'V the same sold in difierent forms. The de«fen<§__e {lie assessee is that excise officials could 1101: find AA any s'e,._ortage of any xeetified spirit, therefore, presumption is ' there was no such shortage in fact, as othelwise the Héexcise officials would have definitely taken action a.gai1:1st the assesses.
6. The assessing authcsrity obse1ved3V_:«.."ti1éii----.i::'2_£§' . explanations offered by the assmssee II1U,Ci1'v*--1;§lt€;I;"'.i«E, V l£ittE3I'S datttd 23.12.1994 and 2?.19§3.5«A.iv4§Sr¢{ conjunctian with the statements of fin: istafi" 0f"$;'Vm:4_ass§:sS€a_ recorded on 6.8.1992 311:1 by the Execntiva Dirtictsr da;{é:',"{.?§.' '. v'V.?]"h€ aséésfigng officer was justificé in saying the, Executive:
Dimcmr haé; t0: _u fixaflei' and afiiel"
necessary £§0n._§15;}:té;£io13 Ag"1v.r:;1 the 'explanation. Th€3}I€f0I'€, he was r1'g_h_iA v_Sa.jg_rjfi12g i?. ;5'va$ 21 srsliiserving statement and éid 1191*, reflécfi i"}).§: aflahs. Ht: rightly opimitd that fhef€'m'3S 'C};akn 'to .ihe éffe<:t. that converted IMFL sold had '~ ., i;:ei;r3;'afi:Co1i'n.:ted thfiit was no pmof of the same. The excise daubt were ent:ru.sted with the duty 01' over sfishiilg t1;x(:'2'i{_.?'{ivitie:; of the assfissee bu: it is not possible to Cfiflclfifiifii. thai each anci every irreguiarity cemmittsd by the aA,§;;séssee was taken mate of by the excise ofiicials. The éigppfillate authoiity -- tbs GET (A) aiso was jusfified in hoidifig mtilat it was gossibie that the assesses has devised Ways and means ':0 get over the irregularities COn1Ifii§t§€i' concealing them from excise authorities.
7'. 011 6.8.1992 when the"eeri-ire}; at the V premises by the LT. ofiicials in t1ie__p£'esenee' employees of the company iaibso :3é.aha2ar"witfieesee, me- employees without an},<..:esiet:«3iiee'--ofxpreteetvvhaxse aecepteei the shortage of stock ii ef If at all the empioyees 1«;;;3r;--\}§ tihat;:fl1ei taken by the officials e.:e_;,is_V have signed the pmtest. As a matter of fact,:i:':1'1e'-- "i:eta:»'iaecou11'£ by the IT' officials with the hei15'ef the assessee only. Any deficits orideimeets meihod of the stock taken into account by .A 'tizie eiiie'}:«fie--..eught to have been objected to by the employees ~_ particularly, when two efiieials were present, ii:am€:ijf A.J.I~{. Shenoy and Mr. SK. Bhewmik, who knew A. ,€i§30lit" "the entire business. The fact that the employees 015' ii the assessee did not raise aily objection would enly lead to V presumption that there was no t3I'1'(}I' in the method of determination of stock determined by the officials. Much later on 10.8.1992, though the Executive Ravindranath gave an explanation, the said V' not at ail convincing as he hag? gi_:ve:'a'._ defensive i explanation. Even to give the queiiitiiy cf rectified must have gone through the reievant iet3.1cii'~-;1§VIie"}3iiocess' with the assistance of }:1is Heiice,. i.1,/icanziot be said that he was was not able to give p1*oper4e:X1:;_1ana.ti€5i:i 2 8" in of the stock by the of responsible and was confintned by the letter of the Execuijve only go to Show that after duei(ie.1ibe1:ai_i<)_i1isViithe' explanation was given. flierefore, the jéznzgihoiitvi; Ci'? (3.) was justified in concludiilg that me zéfivijliilaflaffiflfi given by the assessee subsequently C8I1I10t 3C('3.(j}C\1_)ii3':dA'E1S the txuth. it is a just and proper conclusion and '' €.1i£1s the shortage of rectified spirit as on the date of _ xse.éiteh was eonectiy determined.
9, On the other hand, the erder of the Tribunal weuld indicate that it was based only on the explanation given by the assesses: nearly six months later. In the ab_se_;1ce"of 3179; material inéiicatixxg that at the relevant pOiI1t,"~.a_:i:" L"
officials had an occasion to certify'fIie"stne1;s in eoixise eff their regular vigil over the Vpremiseé'-_of the --.eassesSese;'-.Vthe_ conclusion of the ._ is-._ csi1 imagination and S1.v1I'1];lViS€:STVA.-~~~~ the ..:*:ubsta.ntia1 questions of law of the revenue holding that: Tr-fbiifiéiji «j:'~;§fified in piacing reliance <§?21:':;:;ateri.fié}," was not at all .e9pe£usion in favour of the asseesgeei' L V » eppeai is allowed by setting aside t"J;e; dr<§e1' o1"'m§g'épp§nate Tribunal confirming the order of {1g&:)A;«._.3Vh0 haé Confirmed the order of the assessing Judge Sd/-
Iudge sak.