IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY FRIDAY, THE 28TH JANUARY 2011 / 8TH MAGHA 1932 ST.Rev..No. 8 of 2011() ----------------------- AGAINST THE ORDER IN TA.286/2009 DATED 25/03/2010 of S.T.A.TRIBUNAL, ADDL.BENCH,PALAKKAD .................... REVISION PETITIONER/ASSESSEE: ------------------------------------------------- M/S.ITEL INDUSTRIES LTD., (FORMERLY TATA TELCOM LTD., KANJIKODE, PALAKKAD) NEW NO.II, ANNA AVENUE, BHAKTAVATSALAM NAGAR, ADAYAR, CHENNAI-600 020, REPRESENTED BY ITS AUTHORISED SIGNATORY. BY ADV. DR.K.B.MUHAMED KUTTY, SENIOR ADVOCATE SRI.K.M.FIROZ RESPONDENT(S): REVENUE: ----------------------- THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. MR.MOHAMMED RAFEEQ, GOVERNMENT PLEADER THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 28/01/2011, ALONG WITH STRV NO.9 OF 2011 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ. ---------------------------------- S.T.Rev. Nos.8 & 9 of 2011 --------------------------------- Dated, this the 28th day of January, 2011 J U D G M E N T Ramachandran Nair, J. These Revision cases are filed against the orders of the Tribunal modifying the KGST and CST assessments on the petitioner Company for 1999-2000. 2. We have heard learned Senior counsel Dr.K.B.Mohammedkutty appearing for the revision petitioner and learned Government Pleader appearing for the respondents. 3. The petitioner is a Tata Group Company, which was taken over by a Company by name M/s.Itel Industries Ltd., which is carrying on business in manufacture and sale of telephone equipments and instruments. The transfer of management was with effect from 01/06/2001 and the assessment pertains to the year 1999-2000. On going through the impugned orders, we find that returns filed were rejected and turnover estimated, for the reason that books of accounts produced were not full and complete. It is S.T.Rev.Nos.8 & 9 of 2011 -2- seen that the first appellate authority gave an opportunity to the assessee to produce books of accounts before the Assessing Officer for him to file a report. However, the Company could not produce all the books of accounts and therefore, the Assessing Officer suggested only estimation of turnover. The appellate authority made additions at 5%, which was modified by the Tribunal with lump sum additions both under sales and purchase turnover. It is against this order of the Tribunal, these revision cases are filed. 4. Learned Senior counsel for the petitioner pointed out the nature of additions, which according to him, is arbitrary and without any basis. Learned Government Pleader on the other hand, referred to the findings in the orders wherein it is clearly stated that the petitioner could not produce the books of accounts before the Assessing Officer to verify the same and make assessment based on book figures. Even though accounts are not full and complete, we do not think there is any justification for making wild additions. This is a case where the Company went into bad days and was in fact a BIFR company for some time. It remained closed for sometime and the fact that the Management had to sell the business clearly shows that there was only decline in business. Therefore, assessments have to be made on a rationale basis, even if some of S.T.Rev.Nos.8 & 9 of 2011 -3- books are missing in the course of transmission of management or during closure of business. Learned Senior counsel for the petitioner specifically pointed out that without establishing local purchases, addition is made for assessment under Section 5A treating 80% of the sales turnover as local purchases. We find force in the contention because none of the authorities have bothered to find out the turnover for which C-Forms are issued, which would have indicated the percentage of sourcing of raw materials from outside Kerala. If raw materials are not locally purchased, then there is no justification for making any assessment under Section 5A. Similarly since most of the sales are interstate, the Bank accounts should have disclosed the turnover because sales are normally not made against cash. In any case, learned counsel for the petitioner has pointed out that the Tribunal has partly remanded the matter involving production of accounts once again before the Assessing Officer. According to him, the petitioner will be able to produce the accounts, which will disclose purchase and sales turnover. We feel along with the books of accounts, the petitioner should produce Bank pass books also before the Assessing Officer for him to make assessment based on books of accounts, and if required to make rationale estimation of turnover based on S.T.Rev.Nos.8 & 9 of 2011 -4- materials. So far as Section 5A assessment is concerned, we direct the Officer to examine the pattern of sourcing of raw materials and the percentage of turnover for which purchases are made within and outside Kerala, or whether any sourcing is done through imports, and then to make assessment under Section 5A on the actual purchases or based on reasonable estimation. These revision cases are, accordingly, allowed by vacating the orders of the Tribunal and that of the lower authorities and by remanding the matter to the Assessing Officer. There will be a direction to the petitioner to produce the entire books of accounts and details before the Assessing Officer after getting a date fixed by him to enable the Assessing Officer to complete the assessment within three months from the date of receipt of a copy of this judgment. However, if books produced are not full and complete, assessment should be made on estimation basis based on materials and after issuing pre-assessment notice containing proposals. These Revision Cases are allowed as above. (C.N.RAMACHANDRAN NAIR, JUDGE) (BHABANI PRASAD RAY, JUDGE) jg