Mathai Syriac and Sons v. State of Kerala

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER WEDNESDAY, THE 20TH AUGUST 2008 / 29TH SRAVANA 1930 TRC.No. 19 of 2002 ------------------------ORDER DT.6.9.2001 IN TA.102/2001 of .KERALA AGR .IT & STAT, TRIVANDRUM .................... REVISION PETITIONER/APPELLANT/ASSESSEE ------------------------------- MATHAI SYRIAC AND SONS, INDIAN MADE FOREIGN LIQUID DEALERS, THIRUVALLA. BY ADVS. SRI.N.D.PREMACHANDRAN & SRI.V.B.HARI NARAYANAN RESPONDENT/RESPONDENT/REVENUE: ------------------- STATE OF KERALA, REPRESENTED BY SECRETARY TO TAX, THIRUVANANTHAPURAM. BY SPECIAL .GOVT.PLEADER SRI. VINOD CHANDRAN THIS TAX REVISION CASE HAVING BEEN FINALLY HEARD ON 04/08/2008, THE COURT ON 20/08/2008 PASSED THE FOLLOWING: ## **H.L. DATTU, C.J. & A.K. BASHEER, J.** ## **-------------------------------------** T.R.C. No.19 of 2002 **------------------------------------** Dated this, the 20th day of August, 2008 ## **ORDER** ## **H.L. DATTU, C.J.** The revision petitioner is an assessee under the provisions of the Kerala General Sales Tax Act, 1963 ('Act', for short). 2. The assessment for the year 1996-97 of the assessee was originally completed by the assessing authority under Section 17(3) of the KGST Act, on a total and taxable turnover of Rs.3,41,09,650.00. 3. After completion of the assessment proceedings, inter alia alleging that the subsequent scrutiny of the accounts of the assessee revealed an amount of Rs.10,00,000/- returned in the profits and loss account as Miscellaneous Income for the assessment year 1996-97 and further alleging that such amount revealed in the Profit and Loss Account was not considered for assessment and thereby has escaped assessment, while completing the assessment, has proposed to re-open the completed assessment by invoking Section 19 of the KGST Act. Accordingly, a notice came to be issued under Section 19(2) of the Act. 4. After receipt of the notice, the assessee had filed its reply by letter dated 22.7.1999 and in that offered the following explanation: - “ _We have received the above letter on 19.7.1999._ ## T.R.C.No.19 of 2002 **- 2 -** _It is true that we have shown an amount of Rs.10 lakhs as Miscellaneous income in the profit and loss account for the year 96-97. This is an income declared under VDIS Scheme towards Arrack business up to 95-96. Hence may we request you to exempt the above amount from assessment.”._ 5. The assessing authority after considering the objections filed has passed re-assessment order, confirming the proposal made in the notice issued under Section 19(1) of the Act and in that has made addition of Rs.10 lakhs returned as miscellaneous income included in the profit and loss account as taxable turnover and accordingly, the taxable turnover was fixed at Rs.3,51,09,644/- and additional demand of Rs.80,000/- was made on the assessee by way of sales tax and an amount of Rs.8,000/- towards surcharge. 6. The assessee, being aggrieved by the re-assessment order passed by the assessing authority had preferred first appeal before the first appellate authority, inter alia contending that the miscellaneous income shown in the profit and loss account maintained by the assessee in its regular course of business, cannot be treated as sales turnover in the absence of any evidence. It is also contended that the burden to prove that the said Rs.10 lakhs revealed in the profit and loss accounts is on the T.R.C.No.19 of 2002 **- 3 -** Department and not on the dealer, when the dealer has properly explained that the said miscellaneous income is an amount received from his brother during the assessment year. It is also contended that the reasoning of the assessing authority that the burden is on the dealer to prove that the receipt of the income has no connection with the business is, contrary to the law laid down by the Supreme Court in the case of **Giridharilal Nannelal vs. The Sales Tax Commissioner,** 39 STC 30 and the decision of this Court in **M.O. John vs. State of Kerala** . 7. The first appellate authority has allowed the appeal by his order dated 22.12.2000 and has directed the assessing authority to delete the miscellaneous income of Rs.10 lakhs from the turnover of the dealer and to that extent has modified the re-assessment order passed by the assessing authority. 8. In the second appeal filed by the Revenue before the Sales Tax Appellate Tribunal, the Tribunal has allowed the revenue's appeal and has restored the order of re-assessment passed by the assessing authority. The assessee is before us in this revision petition, being aggrieved by the order passed by the Tribunal in T.A. No.102/2001 dated 6[th] September, 2001. T.R.C.No.19 of 2002 **- 4 -** ## 9. The assessee has framed the following questions of law for our consideration and decision. They are:- _“i. Whether on the facts and circumstances of the case the Tribunal was right in law in holding that miscellaneous income of Rs.10,00,000/revealed in the profit and loss account as taxable under the K.G.S.T. Act without establishing that the amount involved is the result of any transaction liable to sales tax?_ _ii. Whether on the facts and circumstances of the case, the Tribunal was justified in reversing the order the Appellate Assistant Commissioner?_ _iii. Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the burden is on the assessee, in a case under Section 19 to prove that the receipt of income have no connection with the business transaction assessable under the K.G.S.T.Act?”_ 10. We have heard learned counsel for the assessee and the learned Government Advocate. During the hearing, the learned counsels for the petitioners has relied on the observations made by the Apex Court in the case of Giridharilal Nannelal vs. The Sales Tax Commissioner, 39 STC 30 Sri.Vinod Chandran, learned counsel for the Revenue relies on the T.R.C.No.19 of 2002 **- 5 -** decision of this Court in the case of Haleema Zubaia vs. State of Kerala, 2007 (1) KLT 234. 11. The primary question raised for our consideration is, whether the burden of proof is on the dealer that the miscellaneous income received and reflected by him in the profit and loss account is not his sales turnover and therefore, not exigible to tax under the KGST Act or is the burden on the Revenue to prove that the miscellaneous income represents the sales tax turnover and therefore exigible to tax under the Act? 12. In our view, the aforesaid question really does not arise for our consideration and consequent decision in the facts and circumstances of the present case, especially in view of the explanation offered by the assessee to the re-assessment notice issued by the assessing authority. Admittedly, the nature of business carried on by the assessee is in Indian Made Foreign Liquor (IMFL). The income of Rs.10 lakhs is an income declared in the profit and loss account as miscellaneous income, but this income even according to the assessee is an income of arrack business up to 1995-96. Since this turnover was not assessed for the purpose of the Act, the assessing authority was wholly justified in invoking the provisions of the Act for the purpose of re-assessment of escaped turnover. The first T.R.C.No.19 of 2002 **- 6 -** appellate authority merely relying on the decision of the Apex Court in the case of **Giridharilal Nannelal,** 39 STC 30, has allowed the assessee's appeal, without even noticing the explanation offered by the assessee by way of reply to the notice issued under Section 19(1) of the Act by the assessing authority. At this stage, it is worthwhile to recall the observations of the Allahabad High Court in the case of **Gujarat Co-operative Milk Marketing Federation Limited vs. Assistant Commissioner (Assessment) Trade Tax,** following the decision of the Apex Court in the case of **Sun Engineering Works (P) Ltd** . 198 ITR 297. In the said decision, the court has observed, “that a decision of the court takes its colour from the questions involved in the case in which it is rendered. It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court divorced from its context as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment”. 13. The Apex Court in the case of **Union of India vs. Jesus Sales Corporation** (1996) 4 SCC 69, has sated, “that, judgment of courts are not be construed as statutes. Judicial utterances are made in the settings of the facts of a particular case. There is always peril in treating words of a T.R.C.No.19 of 2002 **- 7 -** judgment as though they are words in a legislative enactment”. 14. In our view, even the Appellate Tribunal in the appeal filed by the revenue has misdirected itself in following certain observations made by the Calcutta High Court in the case of **Pran Prasad and others vs. Commercial Tax Officer** , 72 STC 172, A **ndhra Prabha Private Limited vs. The State of Andhra Pradesh,** 73 STC 260 and **The Manager, Govt. of India Forms Stores vs. Assistant Commissioner,** 67 STC 93. In fact, in our view, those decisions have no relevance whatsoever to the facts and circumstances of the present case. 15. This is a simple case of re-assessment proceedings to bring to tax the escaped turnover,. which has come to the notice of the assessing authority after completion of the assessment proceedings. To comply with the principles of natural justice, a notice is issued and the reply is received from the assessee. The assessee in his reply specifically admits that the income of Rs.10 lakhs shown in its profit and loss account is the income of arrack business. Therefore, the further question of proving the nature of income, whether it is on the revenue or on the assessee, does not arise in the facts and circumstances of the case. In the present set of facts, the basis for re-opening of the assessment of the petitioner under Section 19 T.R.C.No.19 of 2002 **- 8 -** of the Act is perfectly justified. Therefore, while affirming the orders passed by the assessing authority and further orders passed by the Appellate Tribunal, the revision case requires to be rejected and we do so. In the facts and circumstances of the case, parties are directed to bear their own costs. Ordered accordingly. Sd/- **H.L.DATTU, CHIEF JUSTICE.** Sd/- **A.K. BASHEER, JUDGE** **DK.**