Income Tax Appellate Tribunal - Chennai
C.A.V.Cotton Mills (P) Ltd., Tiruppur vs Department Of Income Tax on 26 May, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
Bench 'B' Chennai
Before Shri N. BARATHVAJA SANKAR, VP and Shri GEORGE MATHAN, JM
.....
I.T.A. No.52/Chny/2010 A.Y :2003-04
DCIT, M/s.Sangeeth Textiles P. Ltd.
Company Circle, No.551,Ganeshapuram,
121,60 feet Road, Vs. SS Kulam (via) Annur,
Adams Building Combatore 641 107.
Tiruppur.
(PAN No.AACCS 7188 Q)
(Appellant) (Respondent)
I.T.A. No.1431/Chny/2007 A.Y :2003-04
ACIT, M/s.Sri Vasudeva Textiles Ltd.
Circle-I, No.551,Ganeshapuram,
5, College Road, Vs. SS Kulam (via) Annur,
Tiruppur-2. Combatore 641 107.
(PAN No.AACCS 9189 B)
(Appellant) (Respondent)
Page 2 of 8
I.T.A. No. 52/Chns/2010
I.T.A. No. 1431/1432/Chns/07
I.T.A. No.1432/Chny/2007 A.Y :2003-04
ACIT, M/s.CAV Cotton Mills (P) Ltd.
Circle-I, No.551,Ganeshapuram,
5, College Road, Vs. SS Kulam (via) Annur,
Tiruppur-2. Combatore 641 107.
(PAN No.AAACC 8779 K)
(Appellant) (Respondent)
Assessee by : Shri T.Banusekar
Department by : Shri P.B. Sekaran
ORDER
Per GEORGE MATHAN, JM
These three appeals filed by the Revenue are against the order of CIT(A) -II, Coimbatore in appeal No.308C/06-07 dt.23.03.07, CIT(A) -II, Coimbatore in appeal No.310C/06-07 dt.23.03.07, CIT(A) -II, Coimbatore in appeal No.309C/06-07 dt.23.03.07 and CIT(A) -II, Coimbatore in appeal No.308C/06-07 dt.23.03.07 for the assessment year 2003-04. Shri P.B. Sekaran represented on behalf of the Revenue and Shri T. Banusekar on behalf of the assessee.
2. At the outset it was submitted by the Ld. AR that in respect of ITA No.52/Chny/10, the appeal of Revenue was barred by limitation by more than two years. However, it was the submission that he had no objection to condonation of delay. As Ld. AR has submitted that assessee has no objection to the condonation of delay, the delay in filing the appeal by the Revenue stands condoned and the appeal is being disposed off on merits along with ITA Page 3 of 8 I.T.A. No. 52/Chns/2010 I.T.A. No. 1431/1432/Chns/07 Nos.1431 & 1432/Chns/07. As All the three appeals contained identical issues being the cancellation of penalty u/s.271(1)(c) of the Act by the Ld. CIT(A). Therefore, all these three appeals are being disposed off by this common order.
3. It was submitted by the Ld. DR that assessees had disclosed agricultural income on account of the sale of trees of spontaneous growth. It was the submission that the assessees had disclosed agricultural income in the case of Sangeeth Textiles P. Ltd. to the extent of Rs.10,25,543/-, in the case of CAV Cotton Mills Pvt Ltd. to the extent of Rs.6,95,000/- and in the case of Sri Vasudeva Textiles Ltd. to the extent of Rs.13,00,910/-. It was the submission that in the course of assessment, the Assessing Officer had not accepted the claim of the assessee of the agriculture income in the absence of satisfactory and supporting evidence and treated the same as income from unexplained source by invoking the provisions of Sec.68 of the Act. It was the submission that the assessees had not appealed against the assessment order. It was the submission that the Assessing Officer had levied penalty against which the assessee had filed an appeal to the Ld. CIT(A), who had deleted the penalty levied holding that the assessees were assessed under the provisions of MAT and by treating the agricultural income as disclosed by the assessee as "income from other sources", the possibility of the evasion of tax by applying the provisions of MAT varied between Rs.54,000/- and Rs.1,02,000/-, which was against probability especially when the assessees were paying taxes by applying provisions of MAT of Rs.15 lakhs or more. It was the submission that the assessee's could not prove the claim of agricultural income and Ld. CIT(A) had erred in deleting the penalty. It was the submission that the order of the CIT(A) was liable to be reversed and the order of the Assessing Officer restored.
Page 4 of 8I.T.A. No. 52/Chns/2010 I.T.A. No. 1431/1432/Chns/07
4. In reply Ld. AR submitted that in respect of Sangeeth Textiles Ltd. the land holding was 210 acres, and the agricultural income disclosed was Rs.10,25,543/- and the tax under MAT provision was only Rs.80,761/-In respect of agricultural income disclosed whereas the penalty levied was by applying a regular provision. In respect of CAV Cotton Mills P Ltd., it was the submission that the land holding was 205.63 acres, and agricultural income disclosed was Rs.6,95,000/- and the tax under MAT provision was only Rs.54,732/-. In respect of Sri Vasudeva Textiles Ltd, it was the submission that the land holding was 175.205 acres, and agricultural income disclosed was Rs.13,00,910/- and the tax under MAT provision was only Rs.1,02,446/-. It was the submission that assessee is not in the business of doing agriculture operations. These trees, which were cut and sold, were purely spontaneous growth trees, which could have been used only for fuel and country wood. It was the submission that the income of the assessee in respect of agricultural income from the spontaneous grown trees had not been accepted by the Assessing Officer and the addition was agreed by the assessee as the tax effect was nominal. It was the submission that the claim of assessee has not been found to be false. It was the submission that for the purpose of levying penalty u/s.271(1)(c) , assessee should have failed to offer explanation and the explanations offered by the assessee is found to be false by the Assessing Officer or assessee offers an explanation, which he is unable to substantiate, then the penalty u/s.271(1)(c) of the Act could be levied. It was the submission that right from the beginning the assessee has been claiming that it is not doing business of agriculture and that it is not having any evidence to prove the agricultural income. It was the submission that the assessee had right from the beginning stated that the agricultural income disclosed by the assessee was from the sale of the spontaneously grown trees and such sale had been made to Page 5 of 8 I.T.A. No. 52/Chns/2010 I.T.A. No. 1431/1432/Chns/07 the local people living nearby itself. It was the submission that if the Assessing Officer had doubted the assessee's claim, nothing stopped the Assessing Officer from having the same verified with the persons living nearby to the agricultural lands held by the assessee. It was the submission that the explanation, which has been given by the assessee, has also found acceptable in so far as in para 4.1. of the order of the CIT(A), the Ld. CIT(A) has accepted that the claim of the assessee is probable. It was the submission that this finding of the Ld. CIT(A) has not been challenged by the Revenue. It was the submission that Revenue has only challenged the finding of the Ld. CIT(A) holding that the Adangal extract did not show the details of the spontaneously grown trees. It was the submission that Ld. CIT(A) has deleted the penalty on three accounts being (i) explanation of the assessee is probable and the assessee has given an explanation, (ii) the tax impact was very low for the assessee to attempt an evasion which supported the bona fide of the assessee and (iii) the Assessing Officer has not been able to establish that the explanation given by the assessee is false. It was the submission that Revenue has only challenged the deletion of the penalty on the ground that Adangal extract did not contain the spontaneously grown trees. It was the submission that the other finding of the Ld. CIT(A) have not been challenged, the order of the CIT(A) was liable to sustained. It was the submission that Adangal extract did not provide in column 18(a) for this spontaneously grown trees and column 18(a) as was being harped upon by the Revenue was the column which showed the nature of the agricultural operations and the agricultural crop, which was grown on the land. It was the submission that the assessee did not do any agricultural operation and the tress were spontaneous growth and the same could not have been recorded in column 18(a) of the Adangal extract. It was the submission that even assuming that there could be an entry in the column 18(a) of the Adangal extract, the proof thereto or the area covered thereof would have to be Page 6 of 8 I.T.A. No. 52/Chns/2010 I.T.A. No. 1431/1432/Chns/07 brought out and it would have to be shown that the assessee was doing the agricultural operations per say which in fact the assessee had not done and has admitted to have even not done. It was the submission that the Adangal extract could not be the foundation for proving the agricultural income, especially when the assessee itself has been claiming that trees are spontaneous growth. He Vehemently supported the order of the CIT(A).
5. We have heard the rival submissions. Perusal of the assessment order clearly shows that the assessee has disclosed agricultural income in its profit and loss account and the assessee has also furnished the details of the land holding along with the copies of chitta adangal, adangal extract obtained from Village Administrative Officer (VAO). In the course of assessment proceedings, the assessee has categorically admitted that the trees were of spontaneous growth in the windmill land and the same were cut and sold to various persons. In the course of assessment, the Assessing Officer has not accepted the contention of the assessee and has treated the agricultural income as non agricultural income. In course of penalty proceedings, assessee has categorically given a explanation wherein the assessees have stated that the local people living in an around the lands took permission from the assessee to cut the trees and sold them as fuel wood. Assessee has also in the explanation categorically admitted that column 18(a) of the Adnagal extract furnished by the local authorities would contain the percentage of cultivation of the land alone and as trees were spontaneous growth, local authorities have not mentioned anything in column 18(a). The Assessing Officer has in the penalty order made computation of the possible number of truck loads, which would have to be used without appreciating that this total of 5036 tones of fuel wood or country wood, which has been computed by him in respect of three assessees are relating to various villages and places. Ld. Assessing Officer has Page 7 of 8 I.T.A. No. 52/Chns/2010 I.T.A. No. 1431/1432/Chns/07 also failed to appreciate that the lands are in various villages and it is local village people, who are cutting and selling the trees for fire wood and it is not the assessee. The assessee has right from the beginning maintained that it has no association with the cutting and selling of the trees and it is used to collect the money from the villagers and credit the same to its books as and when same is received. In such a situation obviously the assessee could not be found to hold any substantial evidence to prove the sale of the spontaneous grown trees. It is also well know that in Tamilnadu, in the village areas on uncultivated lands spontaneous grown thorn trees are substantial, which are mostly used for fire wood. Further, it was the submission that if the Assessing Officer did doubt the genuineness of the bona fide of the claim of the assessee, nothing stopped the Assessing Officer from having the same verified by sending his inspector to the land areas claimed by the assessee for verification with villagers living nearby. As per provision of Sec.271(1)(c) , what is required is that the assessee should have given an explanation and such explanation should be a plausible explanation and such explanation is not found by the Assessing Officer to be false. Here, it should be understood that the rejection of an explanation does not make an explanation of the assessee to be false. The explanation of the assessee should be found by the Assessing Officer to be false. Assessee has given the basic details and plausible explanation. Assessing Officer other than rejecting the explanation given by the assessee and drawing calculations has not done anything further to show that the explanation was false. In the circumstances, we are of the view that the explanations of the assessees having not been found to be false and the assessees having furnished plausible explanation, the finding of the Ld. CIT(A) on the issue for cancelling the penalty is on right footing and does not call for any interference. In the circumstances, the appeals of the Revenue stands dismissed.
Page 8 of 8I.T.A. No. 52/Chns/2010 I.T.A. No. 1431/1432/Chns/07
6. In the result the appeals of the Revenue are dismissed.
Order pronounced on 26.05.2010.
(N. BARATHVAJA SANKAR) (GEORGE MATHAN)
VICE PRESIDENT JUDICIAL MEMBER
Chennai,
Dated the 26th May, 2010.
KSS
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file