IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.M.JOSEPH THURSDAY, THE 10TH APRIL 2008 / 21ST CHAITHRA 1930 ST.Rev..No. 116 of 2008 ------------------------- TA.286/2006 of S.T.A.T., ADDL.BENCH-II, ERNAKULAM .................... REVISION PETITIONER/APPELLANT/ASSESSEE: ---------------------------------------------------------------------- M/S. HOTEL PRINCE, KALADY, REPRESENTED BY E.J.JOSE, AGED 61 YEARS, S/O. LATE E.M.JOSEPH, MANAGING PARTNER. BY ADV. DR.K.B.MUHAMED KUTTY (SR.) SRI.K.M.FIROZ RESPONDENT/RESPONDENT/REVENUE: --------------------------------------------------------- THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY SR. GOVT. PLEADER SRI. MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 10/04/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L. DATTU, C.J. & K.M. JOSEPH, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - S.T.Rev. No. 116 of 2008 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 10th day of April, 2008. JUDGMENT H.L.DATTU, CJ, The assessee is a dealer registered under the provisions of Kerala General Sales Tax Act (“the KGST Act” for short). He is conducting a business of bar attached hotel. He had filed his annual returns for the assessment year 2003-2004 and in that he had conceded the total turnover and taxable turnover and also had indicated that the gross profit earned by him for the assessment year is only at 18%. 2. The assessing authority has rejected the annual return so filed and also the books of accounts. After such rejection, the assessing authority had issued a proposition notice proposing to add 22% of the gross profit to the taxable turnover declared by the assessee. After receipt of the objection to the proposal so made, the assessing authority has confirmed the proposal made by him while quantifying the tax liability for the assessment year in question. The assessee had carried the matter in appeal before the first appellate authority. The appellate authority has granted whatever reliefs that the petitioner has asked for. 3. The revenue, being aggrieved by the order so passed by the first appellate authority, had carried the matter in second appeal before the Tribunal. The Tribunal, while allowing the revenue's appeal, has observed in its order that the gross profit in IMFL business will be normally between 20% to 30% and the gross profit conceded by the assessee at 18% is too low. Accordingly, the Tribunal had allowed the revenue's appeal and had confirmed the orders passed by the assessing authority for the assessment year in question. S.T.Rev.116/2008. 2 4. The assessee is before us in this revision petition against the orders passed by the Tribunal. He has raised the following questions of law for our consideration and decision. They are as under: “1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in interfering with the order of the 1st appellate authority in regard to gross profit, without any material on record and without any proof that the petitioner has earned more gross profit than what was shown in the books of account. Has not the Tribunal decided the question regarding gross profit erroneously? Is not the decision of the Appellate Tribunal perverse in the eye of law? 2. Whether on the facts and circumstances of the case and in the light of the rulings of the Hon'ble Supreme Court of India and High Courts, is not the findings of the Appellate Tribunal erroneous and unsustainable in law? 3. Whether on the facts and circumstances of the case, the Appellate Tribunal is justified in relying on the gross profit disclosed by the appellant for the year 2005-2006 for the determination of the gross profit for the year 2003-2004. Is not the decision of the Tribunal perverse? 4. Whether on the facts and in the circumstances of the case, is there any justification in interfering with the Order of the 1st appellate authority in regard to the gross profit as the view taken by the 1st appellate authority is supported by reasons?” 5. Dr.K.B.Mohammedkutty, learned Senior counsel appearing for the assessee would submit that the Tribunal was not justified in modifying the orders passed by the first appellate authority. Apart from this, the learned Senior counsel would submit that the assessing authority, while rejecting the returns filed by the assessee when he had claimed a gross profit of only 18%, without there being any material, could not have made addition of 22% of gross profit to the declared turnover. S.T.Rev.116/2008. 3 Therefore, the learned Senior counsel would submit that the orders passed by the Tribunal and the orders passed by the assessing authority require to be set aside and the order passed by the first appellate authority requires to be restored. 6. Sri. Muhammed Rafiq, learned Government Pleader for the revenue, justifies the impugned order. 7. In the instant case, as we have already noticed, the assessee is a dealer in IMFL. He has got a bar attached hotel. In the annual return filed, he had conceded total and taxable turnover and had indicated that the gross profit earned by him is only at 18%. The assessing authority, keeping in view that in IMFL business the normal gross profit will be between 20% to 30%, made an addition of 22% as against 18% declared by the assessee. The orders passed by the assessing authority by way of best judgment assessment, in our view, cannot be characterised as either arbitrary or illegal without there being any basis. In view of the matter, while rejecting the revision petition filed by the assessee, we confirm the orders passed by the assessing authority. The questions of law raised by the assessee is answered against the assessee and in favour of the revenue. Ordered accordingly. H.L. DATTU, CHIEF JUSTICE K.M. JOSEPH, JUDGE sb.