IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 2ND DECEMBER 2009 / 11TH AGRAHAYANA 1931 ITA.No. 833 of 2009() --------------------- ITA.109/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT: ----------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- M/S KUREETHADAM WINES, PIRAVAM, DIANA TOURIST HOME, KOOTHATTUKULAM. ADV. SRI.T.M.SREEDHARAN FOR R1 SMT.C.K.SHERIN FOR R1 SRI.V.P.NARAYANAN FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ALONG WITH ITA NO.497/2009 ON 02/12/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... I.T. Appeal Nos.833 & 497 of 2009 .................................................................... Dated this the 2nd day of December, 2009. JUDGMENT Ramachandran Nair, J. Question raised in the connected appeals filed by the Revenue is whether the Tribunal was justified in deleting the assessment of Rs.15 lakhs under Section 69 of the Income Tax Act at the hands of one assessee in the regular assessment and at the hands of the other assessee as a protective assessment. We have heard Standing Counsel appearing for the appellant and Adv. Sri.T.M.Sreedharan appearing for the respondent-assessee. 2. In the course of search conducted in the premises of a partnership firm and it's partners, the department recovered copy of the agreement between one Sri.Krishnadas and one Sri.K.A.Isaac who later died and whose legal heir is the respondent in I.T.A. No.497/2009, whereunder the late assessee paid Rs.15 lakhs to Mr.Krishnadas for transferring the right to carry on arrack business during 1995-96 in the Piravom Range. Auction was conducted by the Government for retail 2 sale of arrack in the Piravom Range and Mr.Krishnadas was the successful bidder. However, under agreement dated 10.3.1995 with late assessee, the right to carry on arrack business in Piravom Range was transferred to the late assessee on a consideration of Rs.15 lakhs besides payment of kist and other charges by the transferee. Admittedly the respondent in I.T.A. No.833/2009 which is a partnership firm, the Managing Partner of which was the late assessee, carried on business in arrack in Piravom Range pursuant to the agreement the late partner had with Sri.Krishnadas, claimed deduction of kist payments and returned net income for assessment. However, the late assessee and the firm denied having paid the consideration of Rs.15 lakhs to Mr.Krishnadas which was treated as unexplained investment by the department for assessment under Section 69 of the Act. The first appellate authority as well as the Tribunal came to the conclusion that the evidence is not convincing to make assessment of 3 unexplained investment in the hands of the late assessee and the partnership firm. Standing counsel referred to the documents and contended that copy of the agreement seized from Sri.Krishnadas proved that out of Rs.15 lakhs, Rs.8 lakhs was already paid on the date of execution of the agreement and balance was agreed to be paid on 20.3.1995 i.e. before commencement of business in the financial year. It is the admitted case of the respondents that the firm of which the late assessee entered into agreement with Sri.Krishnadas, carried on the business which was originally licensed to Sri.Krishnadas. However, the firm or the partner has not explained or produced any agreement by which the right obtained by Sri.Krishnadas got transferred to them for carrying on business which admittedly they did other than under the seized document. Therefore, in our view, the deceased partner and the firm of which he was the Managing Partner could not have denied the execution of the agreement, the contents of which is the basis for the 4 assessment. We do not know what more proof the Tribunal wants for sustaining the assessment on the unexplained investment. It is also to be noted that Sri.Krishnadas in fact conceded Rs.15 lakhs paid by the late assessee to him under the agreement and therefore, there is ample corroboration of the evidence obtained by the department in the form of agreement executed by late assessee. The order of the Tribunal confirming the first appellate authority's order is therefore liable to be vacated and we do so. 3. The next question to be considered is at the hands of which assessee the unexplained investment has to be assessed under Section 69 of the Act. Since respondent-firm in I.T.A. 833/2009 admittedly carried on business in arrack pursuant to the agreement in the Piravom Range by remitting kist amounts and returned the income, there can be no doubt that the payment made for purchase of the right to carry on business by the late partner is on behalf of the firm. So much so, it is 5 an investment of the firm's money assessable at the hands of the firm. We, therefore, reverse the orders of the Tribunal and that of the first appellate authority and direct the officer to treat the assessment in the hands of the firm as a regular assessment. Consequently the assessment at the hands of the late assessee will stand vacated. I.T.A. No.833/2009 is, therefore, allowed and I.T.A. No.497/2009 is dismissed. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge pms