Full Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE1T DAY OF JANUARY201411TH POUSHA, 1935 ST.Rev..No. 46 of 2013 () -------------------------- AGAINST THE ORDER
/JUDGMENT
IN TA632011 of S.T.A.T.ADDL.BENCH,TVM. DATED2103-2013 PETITIONER(S)/REVISION PETITIONER/RESPONDENT: --------------------------------------------- STATE OF KERALA REPRESENTED BY THE DEPUTY COMMISSIONER OF LAW COMMERCIAL TAXES, ERNAKULAM BY ADV. GOVERNMENT PLEADER RESPONDENT(S)/RESPONDENT/APPELLANT/ASSESSEE: -------------------------------------------- ANTONY ABRAHAM, MANGING PARTNER-CHEERS BAR &STEP-IN-RESTAURANT ANTONY'S TOWER PATHANAPURAM PIN689695 BY ADV. SRI.S.ANIL KUMAR (TRIVANDRUM) BY ADV. SRI.K.S.HARIHARAN NAIR THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON0101-2014, ALONG WITH STRV. 51/2013, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: APPENDIX ST.Rev..No. 46 of 2013 PETITIONER'S EXHIBITS: ANNEXURE A: COPY OF ASSESSMENT ORDER
DATED3413.2011 PASSED BY THE ASSISTANT COMMISSIONER (ASSESSMENT) SPECIAL CIRCLE, KOTTARAKKARA. ANNEXURE-B: COPY OF FIRST APPELLATE ORDER
DATED66.2011 PASSED BY THE DEPUTY COMMISSIONER (APPEALS)II, COMMERCIAL TAXES, KOLLAM. ANNEXURE-C: COPY OF ORDER
DATED213.2013 PASSED BY THE TRIBUNAL IN T.A.NO.63 OF2011 /TRUE COPY/ PS TO JUDGE MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J.
---------------------------------------------- S.T.Rev.No. 46 and 51 of 2013 ---------------------------------------------- Dated this the 1st January, 2014 JUDGMENT
Manjula Chellur, C.J.
Admitted facts placed before us are as under: Respondent assessee is a registered dealer under the Kerala General Sales Tax Act running a Bar Hotel at Pathanapuram; an inspection came to be conducted in the business place of the assessee on 29.3.2006 by Intelligence Officer; certain irregularities, such as stock variation, non maintaining of proper books of accounts etc. were pointed out. Subsequently, on verification of books of accounts maintained by the assessee penalty was imposed.
2. According to the revision petitioner, the gross profit disclosed by the assessee for the year 2005-2006 is only 34.25%, but the gross profit arrived at after considering 11 sales bills recovered during inspection by the Intelligence Officer works out at 75%, therefore, there is vast variance between the gross profit disclosed by the assessee and the gross profit arrived at by the STR.46 & 51/13 2 department on the basis of the report of the Intelligence Officer. The assessment made based on the Intelligence Officer's report so far as gross profit was at 75% which came to be challenged before the first appellate authority, which was reduced to 65% and the same came to be challenged before Tribunal by the assessee.
3. Tribunal, after referring to two different tables, i.e., calculating gross profit taking into account purchase cost of the goods and also gross profit taking into consideration sales price made by the assessee, ultimately concluded that it comes to 43.17% by using the formula taking into consideration recovered sale bills numbering 11 during the inspection. However, 43.17% was reduced to 35% on the ground that it would meet principle of fairness and equity. Aggrieved by the same, the revenue is before us so far as S.T.Rev.46 of 2013 is concerned.
4. So far as S.T.Rev.No.51 of 2013, it relates to the penalty imposed based on 35% of gross profit as directed by the Tribunal. According to the revision petitioner, gross profit has to be assessed at 75% taking into account the purchase cost of the goods and then the penalty has to be correspondingly based on STR.46 & 51/13 3 the gross profit arrived at 75%. According to learned Government Pleader, there is no justification in reducing 43.17% gross profit to 35% arrived at by the Tribunal by adopting the formula referred to in the order.
5. We have gone through the detailed order of the Tribunal. At paragraph 7 of the order the table refers to formula taking into consideration purchase cost which is with reference to 11 bills recovered during the inspection. The gross profit was arrived at 75%. At paragraph 8 of the order the Tribunal says, normally in trade parlance, the percentage of gross profit is arrived at using the formula, i.e., G.P x 100 . The method adopted by the sales Intelligence Officer was the percentage of gross profit taking into account purchase cost and Tribunal opines that it is an improper method of calculation. According to the Tribunal, the 11 recovered sale bills clearly indicate at what price the goods were sold by the assessee. According to them, the formula in vogue in trade parlance was to take into consideration sales and not purchase cost. Therefore, at paragraph 9 of the order, the Tribunal arrived at 43.17% as gross profit taking into consideration the sales as the basis and not the purchase cost. So far as the records of the STR.46 & 51/13 4 assessee, they have arrived at the gross profit as 25.50% as referred to at paragraph 10 of the order and not 34.50% as contended by the learned Government Pleader.
6. Ultimately, the Tribunal though arrived at 43.17% as gross profit by using table B at paragraph 9, reduced the gross profit to 35%. According to learned Government Pleader, there is no justification in reducing the gross profit to 35%. However, he has not placed before us any material to substantiate such contention. On the other hand, the Tribunal refers to extract of "advanced accounting" produced by the assessee before the Tribunal which indicates that the gross profit has to be arrived at based on sales turnover. Actual sales turnover was not taken into account to arrive at 43.17% of gross profit, therefore, the Tribunal was justified in opining fairness and equity requires that it has to be reduced to 35% as against 43.17% (based on 11 sales bills).
7. In the light of such opinion arrived at by the Tribunal based on the material and also discussion after referring to different methods of calculation to arrive at gross profit, we are of the opinion, there is no illegality or irregularity. Even otherwise, it is well settled that if two methods could be adopted to arrive at a STR.46 & 51/13 5 conclusion to determine the gross profit earned by the assessee, the method which is beneficial to the assessee could always be extended to the assessee.
8. In that view of the matter, we are of the opinion, there is justification in reducing 43.17% of gross profit to 35% by the Tribunal and relatively the penalty has to be imposed based on this percentage of gross profit of 35%. Accordingly, both revisions are disposed of declining to interfere with the orders of the Tribunal. MANJULA CHELLUR, CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE vgs2.1.14