Hotel Luciya Drive Inn & Dale and Carrington Investment Pvt. Ltd. v. State of Kerala (S.T.Rev. Nos. 13/2020, 14/2020 & 16/2020)

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** ## **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR.JUSTICE T.R.RAVI** **TUESDAY, THE 20TH DAY OF OCTOBER 2020 / 28TH ASWINA, 1942** ## **S.T.Rev.No.13 OF 2020** **AGAINST THE ORDER IN T.A.NO.64/2018 DATED 17-06-2020 OF KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE.** **[ASSESSMENT YEAR 2012-13]** ## **REVISION PETITIONER/ APPELLANT/APPELLANT/ASSESSEE:** **M/S.HOTEL LUCIYA DRIVE INN, CHALAKUDY, THRISSUR, REPRESENTED BY P.K.PRATHAPAN, MANAGING PARTNER.** **BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** ## **RESPONDENT/ RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN.** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 20-10-2020, ALONG WITH S.T.Rev.NO.14/2020, S.T.Rev.NO.16/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **S.T.Rev.13/2020 & connected cases** **- 2 -** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR.JUSTICE T.R.RAVI** **TUESDAY, THE 20TH DAY OF OCTOBER 2020 / 28TH ASWINA, 1942** **S.T.Rev.No.14 OF 2020** **AGAINST THE ORDER IN T.A.NO.63/2018 DATED 17-06-2020 OF KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE.** **[ASSESSMENT YEAR 2012-13]** ## **REVISION PETITIONER/ APPELLANT/APPELLANT/ASSESSEE:** **M/S.DALE AND CARRINGTON INVESTMENT PVT. LTD., CHALAKUDY, THRISSUR, REPRESENTED BY P.K.PRATHAPAN, MANAGING PARTNER.** **BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** ## **RESPONDENT/ RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN.** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 20-10-2020, ALONG WITH S.T.Rev.NO.13/2020, S.T.Rev.NO.16/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **S.T.Rev.13/2020 & connected cases** **- 3 -** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR.JUSTICE T.R.RAVI** **TUESDAY, THE 20TH DAY OF OCTOBER 2020 / 28TH ASWINA, 1942** ## **S.T.Rev.No.16 OF 2020** **AGAINST THE ORDER IN T.A.NO.65/2018 DATED 30.09.2019 OF KERALA VALUE ADDED TAX/AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE.** **[ASSESSMENT YEAR 2013-14]** ## **REVISION PETITIONER/ APPELLANT/APPELLANT/ASSESSEE:** **M/S.HOTEL LUCIYA DRIVE INN RESTAURANT, CHALAKUDY, THRISSUR, REPRESENTED BY P.K.PRATHAPAN, MANAGING PARTNER.** **BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** ## **RESPONDENT/ RESPONDENT/RESPONDENT/REVENUE:** **STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** **BY SENIOR GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN.** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 20-10-2020, ALONG WITH S.T.Rev.NO.13/2020, S.T.Rev.NO.14/2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **S.T.Rev.13/2020 & - 4 - connected cases** **K. Vinod Chandran & T.R.Ravi, JJ.** **-------------------------------------S.T.Rev.Nos.13/2020, 14/2020 & 16/2020 -------------------------------------Dated, this the 20[th] day of October, 2020** ## **ORDER** **Vinod Chandran, J.** **The three revisions raise a common question of law, which we re-frame as under:** **Whether the Assessing Officer was justified in adopting a gross profit higher than that conceded in the returns and books and accounts on the mere ground of compounding having been made of the offence detected by the Intelligence Wing?** **2. The question as to whether there can be a blind adoption of the penalty proceedings has been answered by a Division Bench of this Court in** _**Velimparambil Hardwares v. State of Kerala [1993 (2) KLT 394**_ **]. It was held that penalty proceedings cannot be conclusive when assessment is taken, and the materials relied on by the Intelligence Wing would have to be considered independently by the Assessing Officer.** **3. With the above principle in mind, we would look at the facts of the present case. S.T.Rev.Nos.13 and 16 of 2020 are with respect to the very same dealer, who is the** **- 5 -** **S.T.Rev.13/2020 & connected cases** **revision petitioner. The assessment years respectively are 2012-13 and 2013-14; in the first of which assessment years, the gross profit was adopted at the rate of 60% as against the conceded 46.5%. In the later year, gross profit was taken at 70% as against the conceded 53.66%. In the earlier year there was also a stock difference of Rs.3,006/- detected at the time of inspection. S.T.Rev.No.14 of 2020 is with respect to another dealer, who is the revision petitioner. The gross profit adopted was at the rate of 88% as against the conceded gross profit of 78.29%. A variation of stock, to the tune of Rs.24,774/-, was also detected at the time of inspection. Additions were made estimating the gross profit and equal amount of the suppression found.** **4. The learned Counsel for the petitioner Sri.Harisankar V. Menon relied on** _**Kalika Hotel and Bar, Amballur (M/s.) v. State of Kerala [2012 (3) KHC 85 (DB**_ **) and** _**M/s.Sams Property Developers & Hotels (P) Ltd. v. State of Kerala [S.T.Rev.No.25 of 2019 & connected cases decided on 25.06.2019**_ **]. It is his argument that there could have been no enhancement of gross profit merely on the basis of what was found by the Intelligence Officer, by examining** **S.T.Rev.13/2020 & - 6 - connected cases** **the gross profit of certain brands sold in the Bar. It is also contended that the Assessing Officer has not at all applied his mind and has merely adopted the findings of the Intelligence Officer.** **5. Sri.V.K.Shamsudheen, learned Senior Government Pleader, on the basis of the records, would defend the order passed by the Tribunal. It is pointed out that there is huge stock difference detected and only an equal addition was made. There was hence, suppressed sales and in that circumstance too an estimation was made to the gross profit.** **6. We see from the records of one of the assessees that the purchase price and sale price of 13 brands were taken by the Intelligence Officer, the average of which was taken at 88% (S.T.Rev.No.14 of 2020). These were the invoices of a particular year. Before the Assessing Officer, the entire books of accounts were produced. The Assessing Officer ought to have looked at the total number of brands sold by the assessee and the ones which are in higher demand. This would have indicated whether the 13 brands, the gross profit of which was adopted by the Intelligence officer, were the most moving brands in the** ## **S.T.Rev.13/2020 & - 7 - connected cases** **Bar of the dealer. The Assessing Officer ought to have applied his mind and not adopted the findings in the penalty proceedings as conclusive. We also notice that, as has been held in** _**Kalika Hotel and Bar, Amballur (M/s.)**_ **and** _**M/s.Sams Property Developers & Hotels**_ , **the gross profit conceded in all the assessment years is more than the gross profit expected by the Government, for the business in specific areas, as revealed from the provision for compounding, which enables an option to pay tax at a certain percentage of the purchase turnover. The compounding provision clearly shows the gross profit normally expected, which is lower than that conceded.** **7. As to the stock variation having resulted only an equal addition; the Assessing Officer could have made a further addition for the variations undetected, which were probable. Having not done that, the State cannot argue that the enhancement of gross profit is also taking into account the stock variation; which reasoning, in any event, is not available in the order of the Assessing Officer.** **8. For the above reasons, we find that the question of law has to be answered in favour of the assessee and against the Department. The gross profit would** **S.T.Rev.13/2020 & - 8 - connected cases** **be as conceded in the returns and the books of accounts. We do not find any reason to interfere with the addition made for stock variation, the same being on facts, which is also not challenged.** **The Sales Tax Revisions are allowed, leaving the** **parties to suffer their respective costs.** **Sd/K.VINOD CHANDRAN JUDGE Sd/T.R.RAVI JUDGE** **Vku/-** **S.T.Rev.13/2020 & - 9 - connected cases** ## **APPENDIX OF S.T.Rev.NO.13/2020** **PETITIONER'S/S ANNEXURES:** **ANNEXURE A COPY OF ORDER ISSUED BY THE ASST. COMMISSIONER (ASSESSMENT), COMMERCIAL TAXES SPECIAL CIRCLE, THRISSUR DATED 30.01.2016.** **ANNEXURE B COPY OF APPELLATE ORDER ISSUED BY THE DEPUTY COMMISSIONER (APPEALS), ERNAKULAM DATED 23.02.2017.** **ANNEXURE C** **COPY OF ORDER IN TA NO.64/2018 ISSUED BY THE KERALA VALUE ADDED TAX/AGRL. INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDL. BENCH, KOZHIKODE DATED 17.06.2020.** **S.T.Rev.13/2020 & - 10 - connected cases** ## **APPENDIX OF S.T.Rev.NO.14/2020** **PETITIONER'S/S ANNEXURES:** **ANNEXURE-A. COPY OF ORDER ISSUED BY THE ASST.COMMISSIONER (ASSESSMENT), COMMERCIAL TAXES SPECIAL CIRCLE, THRISSUR DATED 30.11.2015.** **ANNEXURE-B COPY OF APPELLATE ORDER ISSUED BY THE DEPUTY COMMISSIONER (APPEALS), THRISSUR DATED 22.01.2017. ANNEXURE-C COPY OF ORDER IN T.A NO.63/2018 ISSUED BY THE KERALA VALUE ADDED TAX/AGRL. INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDL.BENCH, KOZHIKODE DATED 17.06.2020.** **S.T.Rev.13/2020 & - 11 - connected cases** ## **APPENDIX OF S.T.Rev.NO.16/2020** **PETITIONER'S/S ANNEXURES:** **ANNEXURE A COPY OF ORDER ISSUED BY THE ASST. COMMISSIONER (ASSESSMENT), COMMERCIAL TAXES SPECIAL CIRCLE, THRISSUR DATED 09.11.2016** **ANNEXURE B COPY OF APPELLATE ORDER ISSUED BY THE DEPUTY COMMISSIONER (APPEALS), THRISSUR DATED 30.01.2017.** **ANNEXURE C COPY OF ORDER IN TA NO.65/2018 ISSUED BY THE KERALA VALUE ADDED TAX/AGRL. INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDL. BENCH, KOZHIKODE DATED 30.09.2019.** **[TRUE COPY]**