IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.Q.BARKATH ALI WEDNESDAY, THE 23RD DECEMBER 2009 / 2ND POUSHA 1931 ITA.No. 92 of 2009() -------------------- IT(S&S)A.NO.48/COCH/2005 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ SRI.SONY THOMAS., MADAKKAL HOUSE, MUTTOM, THODUPUZHA. ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23/12/2009, THE COURT ON 23/12/2009 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & P.Q.BARKATH ALI, JJ. .................................................................... I.T. Appeal No.92 of 2009 .................................................................... Dated this the 23rd day of December, 2009. JUDGMENT Ramachandran Nair, J. Heard Standing Counsel for the appellant and Adv. Sri.P.Balakrishnan appearing for the respondent-assessee. The appeal arises from order of the Tribunal disposing of assessee's appeal against block assessment modified by the Commissioner (Appeals). Even though various additions deleted by the Tribunal are questioned in the appeal, on going through the orders of the Tribunal and the lower authorities, we feel order of the Tribunal calls for modification only in respect of deletion of addition of Rs.10,80,000/- which represents inflated lease rent paid to one Mr.T.C.George. The assessee was running Bar hotel with two counters. During search held on 6.5.1999 the department seized books of accounts from the Bar and the Restaurant. The assessee had accounted payment of lease rent of Rs.18 lakhs to Mr.T.C.George. Admittedly Bar licence was in the name of Mr.T.C.George and assessee was carrying on business by 2 using the said licence on payment of rentals. When department confronted the lessor about the actual amount of rent received by him, he submitted that the actual rent received by him for one counter of the Bar was Rs.2,000/- and for the other Rs.3,000/- as against Rs.6,000/- and Rs.9,000/- respectively accounted by the assessee. It is seen that later assessee also conceded that the rent paid to Mr.T.C.George was only the amount confirmed by him. Contrary to the entries in the seized books of the assessee, assessee took the stand that the balance rental expenses accounted is actually the security expenses which is salary paid to security staff. This argument was not accepted by the C.I.T.(Appeals) and, therefore, assessee filed further appeal to the Tribunal. 2. Standing Counsel submitted that the Tribunal by basing on Head Office accounts of the assessee later produced before it, accepted the assessee's claim that the excess lease rental accounted was actually security expenses. On going through the Tribunal's order, we find that the Tribunal has accepted the daily security expenses in the Bar at Rs.4,000/- which is without any basis. Obviously there was inflation 3 of lease rent paid to Mr.T.C.George because assessee's account showed two third more than the actual rent paid to him. This was later accepted by the assessee and was confirmed by the lessor Mr.T.C.George. The question, therefore, to be considered is whether assessee should be allowed to take a different stand and explain the bogus lease rent accounted as security expenses. We do not find any material for the Tribunal to accept the explanation offered by the assessee based on Head Office accounts later produced, which is at variance with the seized records. Further, assessee has no explanation as to why security expenses was accounted towards lease rentals when there is no difficulty in accounting security expenses as such, particularly when assessee is maintaining expenditure account under various heads such as electricity, sales tax, salary paid to employees etc. It is to be noted that the daily security expenses in a Bar claimed by the assessee at Rs.4,000/- is an exorbitant and unrealistic amount which was accepted by the Tribunal without any basis. We, therefore, allow the appeal on this issue by reversing the order of the Tribunal and sustain the addition of Rs.10,80,000/- for the assessment year 1999-2000. We do 4 not find any ground to interfere with the findings of the Tribunal on all other issues raised. Even though counsel for the assessee contended that the assessee along with others filed return as an AOP from the very same business, such a contention is not seen raised or decided by the Tribunal. Consequently we do not think we should go into that question. Appeal is allowed in part as stated above. C.N.RAMACHANDRAN NAIR Judge P.Q.BARKATH ALI Judge pms