Sree Krishna Trading Co. vs Assistant Commissioner of Income Tax

G. Sivarajan, J.—The matter arises under the Income Tax Act, 1961 (for short "the Act").

The appellant is a partnership firm carrying on abkari business. It is an assessee on the files of the Assistant Commissioner of Income Tax, Circle 1, Alappuzha. The assessment year concerned is 1991-92, relevant previous year ended March 31, 1991. The appellant filed a return declaring a loss of Rs. 1,13,313 pursuant to a notice u/s 148 of the Act. The assessing authority processed the return u/s 143(1)(a) of the Act and the net loss was determined at Rs. 93,000. The excess tax paid was either adjusted/ refunded. Subsequently, the assessing authority took up the matter for scrutiny and an assessment was completed u/s 143(3) of the Act by order dated January 13, 1995 (annexure A) determining the total income at Rs. 41,18,770. The appellant took up the matter in appeal before the Commissioner of Income Tax (Appeals), who by his order dated November 6, 1995 (annexure B) allowed the appeal in part. In respect of the loss from toddy business the Commissioner of Income Tax (Appeals) directed that the loss incurred in the toddy section had to be allowed and the provisions of the Benami Transactions (Prohibition) Act, 1988, cannot be invoked to disallow the said loss. Certain other reliefs were also granted. The Commissioner (Appeals) also allowed the claim of the appellant for registration of the firm. The Department filed appeal I. T. A. No. 160/Coch. of 1996 against the order of the Commissioner (Appeals) before the Tribunal. The Tribunal sustained the disallowance of the loss in toddy business to the extent of Rs. 6,00,000 as against the order of the Commissioner of Income Tax (Appeals) cancelling the entire disallowance. The appellant, being aggrieved by the said order, has filed this appeal.

This court ordered notice in the appeal on the following question of law :

"That, on the facts and circumstances of the case, is the Income Tax Appellate Tribunal right in confirming the disallowance of loss from the toddy business to the extent of Rs. 6 lakhs ?"

We have heard Sri V. Ramachandran, learned senior counsel for the appellant, and Sri P.K.R. Menon, learned senior Central Government standing counsel for the respondent. We have also perused the orders of the assessing authority as well as the two appellate authorities. The first appellate authority has considered the question in paragraph 3 of the appellate order. He had noted that the assessing authority has disallowed the entire loss in the toddy section since the permit was only in the name of one of the partners and therefore the Benami Transactions (Prohibition) Act, 1988, applies. The appellate authority also noted that the firm was granted registration as per the appellate order and therefore, notwithstanding the provisions of the Benami Transactions (Prohibition) Act, the loss incurred in the toddy section has to be allowed. The Income Tax Appellate Tribunal in I. T.A. No. 159/Coch. of 1996 set aside the order of the Commissioner of Income Tax (Appeals) directing registration of the firm and held that the appellant is not entitled to the registration of the firm. The Tribunal thereafter noted that the assessing authority has discussed elaborately why the loss of Rs. 12,90,997 from the toddy business from 15 shops could not be accepted. The Assessing Officer has referred to the survey conducted u/s 133A at various shops on December 22, 1992, and the statements obtained from the employees. In the said statements, the employees had admitted that the assessee-firm has been maintaining printed daily statements. The assessee had cross examined the said employees and obtained conflicting statements. The Assessing Officer has taken the view that the assessee had obtained conflicting statements from his employees by coercion and therefore the original statements which had been given voluntarily by the employees cannot be ignored. The Tribunal, noting the aforesaid circumstances, had observed that the Commissioner (Appeals) had not considered the above factors while deleting the disallowance. The Tribunal has taken the view that the burden is on the assessee to prove with valid evidence that there was loss of more than Rs. 12 lakhs incurred in the running of 15 shops. The Tribunal also noted that the assessee had filed a statement before the Tribunal showing the details of the loss in toddy business for the assessment years 1989-90 to 1991-92 and pointed out that during the previous year relevant to the assessment year 1989-90 the assessee was running 17 toddy shops in Karunagappally range and that though there was loss of Rs. 18,10,385 claimed in the toddy business there was only a disallowance of Rs. 5 lakhs and the Tribunal has allowed a loss of Rs. 13,00,385 in 17 toddy shops, Similarly, for the assessment year 1990-91, the assessee claimed a loss of Rs. 16,30,213 in 30 toddy shops, that the Commissioner of Income Tax (Appeals) sustained the disallowance of Rs. 4.5 lakhs which was confirmed by the Tribunal. The authorised representative of the appellant on the basis of these materials contended that the loss of Rs. 12,70,920 claimed by the assessee for the assessment year 1991-92 is neither excessive nor unreasonable and so there was no case for making any disallowance. The Tribunal based on the assessment for the year 1990-91, noted that the loss per shop sustained was Rs. 39,300, but for the current year the assessee''s claim works out to a loss of Rs. 86,000 per toddy shop. With reference to the order of the Tribunal for the assessment year 1990-91, the Tribunal observed that the position is the same for the assessment year 1991-92 and on that basis the Tribunal allowed a loss of Rs. 6,70,920 and disallowed the loss to the extent of Rs. 6 lakhs. The Tribunal had accordingly set aside the order of the first appellate authority and sustained the disallowance to the extent of Rs. 6 lakhs.

From the discussion made by the Tribunal noted hereinabove, it is clear that the assessee was not maintaining proper accounts in respect of its business, particularly the toddy business, and that the assessee has not produced any supporting material or evidence with respect to the loss in toddy business claimed by it. The first appellate authority, however, did not go into the said question and had decided the matter mainly on the basis that the firm was granted registration. The Tribunal after noting the aforesaid circumstances had independently considered the claim made by the assessee with reference to the assessment proceedings for the earlier assessment years particularly the assessment for the year 1990-91 and the order passed by the Tribunal for the said year. The Tribunal had noted that for the assessment year 1990-91 as against the loss of Rs. 11,80,000 allowed by the Tribunal in respect of 30 toddy shops, for the current year the loss claimed is Rs. 12,70,920 in respect of 15 shops. The Tribunal considered the results of the assessment for the year 1990-91 and compared the same with the results of the current year 1991-92 and determined the loss in toddy business at Rs. 6,82,349 and disallowed the loss to the tune of Rs. 6 lakhs. It is not seen that the Department has filed any appeal against the order of the Tribunal. We are of the view that the Tribunal had disallowed the claim of loss to the extent of Rs. 6 lakhs on a due consideration of all the relevant materials placed before it. We do not find any illegality in the order of the Tribunal. The findings entered by the Tribunal are findings of fact. We do not find any substantial question of law much less any question of law arising from the said findings.

There is no merit in this appeal. It is accordingly dismissed.