Tc/57/2004 Of Commissioner Of Income Tax v. M/S.pioneer Bredding Farms

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 26.2.2007 CORAM THE HON'BLE MR.JUSTICE P.D.DINAKARANAND THE HON'BLE MRS.JUSTICE CHITRA VENKATARAMAN Commissioner of Income TaxCoimbatore-III...Appellant M/s.Pioneer Breeding FarmsPongalur, Coimbatore District...Respondent Appeal under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Madras 'A' Bench dated24.7.2003 made in ITA No.1337/Mds/1996 for the assessment year 1992-93against the order of the Commissioner of Income Tax (Appeals), Coimbatoredated 22/4/96 in ITA No.645-C,863-C,646-C & 864-C/95-96 against the orderof the Commissioner of Income-Tax (Appeals) Coimbatore dt.18.5.95 inAppeal No.124-C/94-95 & 50-C/95-96 against the order of the Income -TaxOfficer, Ward II (1)Tiruppur dt. 29.3.95 in PAN/GIR No.P.436/III (1)/TUP& dt. 10.1.96 in P.436/II (1)/Tup & dt. 17.11.95 in P-436/II (1) Tup/92-93. The above tax case appeal is directed against the order of theIncome-tax Appellate Tribunal dated 24.7.2003 made in ITANo.1337/Mds/1996 for the assessment year 1992-93, and is admitted on thefollowing question of law: https://hcservices.ecourts.gov.in/hcservices/ "Whether on the facts and in the circumstances of the case, theTribunal was right in holding that the assessee was not liablefor penalty under Section 271(1)(c) for concealment of income byway of understatement of the value of closing stock of hatchingeggs to the tune of Rs.11,70,047/-?" 2. The Revenue is the appellant. The assessee filed his return ofincome for the assessment year 1992-93 admitting a total income ofRs.1,92,300/-. The assessment under Section 143(3) was completed on29.3.1995 determining the total income at Rs.16,83,986/-. During thecourse of the assessment proceedings, it was found that the assessee wasselling eggs that were found not fit for hatching at a nominal rate of25 paise per egg. A survey at the assessee's premises also confirmed thesaid fact. It was found that the assessee had adopted a flat rate forthe entire closing stock of hatching eggs at the rate of Rs.2.66 peregg. The Assessing Officer found that there was wide difference betweenthe value admitted and the actual value and brought the differenceamount, viz., Rs.11,70,047/-, to assessment. In view of the suppressionin the sale of eggs and the difference in the value of the closingstock, the Assessing Officer initiated penalty proceedings under Section271(1)(c) of the Act, and being not satisfied with the explanationoffered by the assessee, penalty of a sum of Rs.3,17,318/- was levied. 3. The assessee preferred an appeal before the Commissioner ofIncome Tax (Appeals), contending that the valuation at the rate ofRs.2.66 per hatching egg was adopted as per the specific directions fromthe Chief Manager, Indian Bank, Variety Hall Road, Coimbatore, who hadsanctioned a working capital loan to the assessee. The Commissioner ofIncome Tax (Appeals) confirmed the addition made by the AssessingOfficer, however he opined that for the purposes of penalty proceedings,it could not be held that the assessee had suppressed or concealed anyparticulars. Accordingly, the Assessing Officer was directed to excludethe addition of Rs.11,70,047/- from the computation of penalty andconfine to only the amount of Rs.25,000/- being the suppression of salefor levying penalty under section 271(1)(c) of the Act. 4. On appeal by the Revenue, the Tribunal confirmed the order ofthe Commissioner of Income Tax (Appeals). Hence, the present appealraising the substantial question of law referred to above. 5. The learned Senior Standing Counsel appearing for the Revenuesubmitted that there was wide difference between the value admitted andthe actual value and therefore, the Assessing Officer is right in addingthe difference between the two figures to the total income of theassessee. 4. On appeal by the Revenue, the Tribunal confirmed the order ofthe Commissioner of Income Tax (Appeals). Hence, the present appealraising the substantial question of law referred to above. 5. The learned Senior Standing Counsel appearing for the Revenuesubmitted that there was wide difference between the value admitted andthe actual value and therefore, the Assessing Officer is right in addingthe difference between the two figures to the total income of theassessee. 6. The learned counsel appearing for the assessee reiterating thesubmissions made before the Commissioner of Income Tax (Appeals) andTribunal, justified the orders passed by the said authorities. 7. Any addition on account of difference in stock can be made onlyon adequate materials, but not arbitrarily. Admittedly, there was adifference between the value of the closing stock declared to the bankand to the Income Tax authorities. The fact that the assessee valued theeggs at the rate of Rs.2.66 per egg merely based on the direction issuedby the Indian Bank, Loans and Advances Department, Coimbatore dated25.5.1992 is not disputed. In view of the same, there is no basis totreat the difference in value as the assessee's under-valuation of stockor undisclosed income. Under such circumstances, there is no incertitude in coming to theconclusion that there is no error or legal infirmity in the order of theTribunal so as to warrant interference. Hence, we answer the questionof law in favour of the assessee and against the Revenue and the appealis dismissed. No costs. Sd/Asst.Registrar /true copy/ Sub Asst.Registrar sasiTo:1.The Assistant Registrar,Income Tax Appellate TribunalMadras Bench "A", Rajaji Bhavan,II Floor, Besant Nagar, Chennai.2.The Commissioner of Income Tax, Coimbatore.3.The Commissioner of IncomeTax (Appeals), Coimbatore.4.The Income Tax Officer, Ward II (1) Tiruppur.+1cc to Mr.M.Muralikumar, Advocate Sr 12004KSJ (CO)km.12.3. T.C.(A).No.57 OF 2004 https://hcservices.ecourts.gov.in/hcservices/