R.Krishnamoorthy, Erode V. ITO, Tiruppur

ITA 1673/CHNY/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8756 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N RENGARAJ
• Assessee Lawyers: S SRIDHAR
• Keywords: Salary income; Earning of tax free income
• Section: 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI .. , . . !' , # $% BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NOS. 1673 & 355/MDS/2014 # & '& / ASSESSMENT YEARS : 2009-10 & 2008-09 SHRI R. KRISHNAMOORTHY, C/O SHRI S. SRIDHAR, ADVOCATE, 112/1, PERIYAR STREET, ERODE 1. PAN : ADWPK 0624 M V. THE INCOME TAX OFFICER, WARD I(1), TIRUPUR. ()*/ APPELLANT) (,-)*/ RESPONDENT) )* . / / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE ,-)* . / / RESPONDENT BY : SHRI N. RENGARAJ, CIT 0 . 1 / DATE OF HEARING : 27.01.2015 2'' . 1 / DATE OF PRONOUNCEMENT : 04.02.2015 / O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE ORDERS PASSED BY LD CIT(APPEALS)II, COIMBATORE AND THEY RELATE TO THE ASSESSMENT YEARS 2008-09 AND 2009-10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(APP EALS) IN CONFIRMING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT IN BOTH THE 2 I.T.A. NOS. 1673 & 355/MDS/2014 YEARS. BOTH THE APPEALS WERE HEARD TOGETHER AND HE NCE THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAK E OF CONVENIENCE. 2. THE FACTS THAT LED TO THE LEVY OF PENALTY U/S 27 1(1)(C) OF THE ACT ARE STATED IN BRIEF. THE ASSESSEE IS DERIVING SALARY INCOME, SHARE INCOME FROM FIRMS AND INCOME FROM OTHER SOURC ES. THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE IN THE TWO YEARS UNDER CONSIDERATION WAS NOT ACCEPTED BY THE ASSESSING OFF ICER AND HENCE HE REDUCED THE SAME. IN THAT PROCESS HE ASSESSED T HE AGRICULTURAL INCOME NOT ACCEPTED BY HIM AS INCOME OF THE ASSESSE E UNDER THE HEAD INCOME FROM OTHER SOURCES. THE DETAILS OF AG RICULTURAL INCOME DECLARED BY THE ASSESSEE AND THAT ACCEPTED BY THE A SSESSING OFFICER ARE GIVEN BELOW:- ASSESSMENT YEAR AGRICULTURAL INCOME DECLARED BY THE ASSESSEE AGRICULTURAL INCOME ACCEPTED BY THE AO INCOME ASSESSED UNDER OTHER SOURCES 2008-09 3,45,46,596 5,00,000 3,40,46,596 2009-10 2,26,72,909 89,71,750 1,37,01,159 THOUGH THE ASSESSEE PREFERRED APPEAL BEFORE LD CIT( APPEALS) CHALLENGING THE ASSESSMENT ORDER PASSED FOR AY 2008 -09, LATER HE 3 I.T.A. NOS. 1673 & 355/MDS/2014 WITHDREW THE SAME. THE ASSESSEE DID NOT FILE APPEA L AGAINST THE ASSESSMENT ORDER PASSED FOR ASSESSMENT YEAR 2009-10 . IN EFFECT, THE ASSESSEE HAS ACCEPTED THE ASSESSMENT ORDER OF B OTH THE YEARS. 3. IN BOTH THE YEARS, THE ASSESSING OFFICER LEV IED PENALTY U/S 271(1)(C) OF THE ACT. IN ASSESSMENT YEAR 2008-09, THE AO LEVIED PENALTY @ 300% OF THE TAX SOUGHT TO BE EVADED, I.E. , AT RS.3.47 CRORES, BY HOLDING THAT THE ASSESSEE IS DEEMED TO H AVE CONCEALED PARTICULARS OF INCOME IN TERMS OF EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT. IN THE APPELLATE PROCEEDINGS, THE LD CIT( A) REDUCED THE QUANTUM OF PENALTY TO 200% OF THE TAX SOUGHT TO BE EVADED. IN ASSESSMENT YEAR 2009-10, THE AO LEVIED PENALTY AT 1 00% OF THE TAX SOUGHT TO BE EVADED, I.E. AT RS.42.28 LAKHS, BY HOL DING THAT THE ASSESSEE HAS CONCEALED INCOME CONSCIOUSLY AND WILLF ULLY. THE LD CIT(A) ALSO CONFIRMED THE SAID PENALTY ORDER. AGGR IEVED, THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. 4. THE LD A.R SUBMITTED THAT THE ASSESSEE HAD C ULTIVATED 149.08 ACRES IN AY 2008-09 AND 173.62 ACRES IN AY 2009-10. THE ASSESSEE OFFERED AGRICULTURAL INCOME IN BOTH THE YE ARS ON ESTIMATED BASIS BY ADOPTING THE MARKET RATE OF THE PRODUCE RA ISED BY HIM. HOWEVER, THE AO DISBELIEVED THE AGRICULTURAL HOLDIN G IN AY 2008-09 AND ACCORDINGLY ESTIMATED INCOME AT RS.5.00 LAKHS. HOWEVER, IN 4 I.T.A. NOS. 1673 & 355/MDS/2014 AY 2009-10, THE AO HAS ACCEPTED THE AGRICULTURAL IN COME PARTIALLY TO THE TUNE OF RS.89.71 LAKHS. HE SUBMITTED THAT T HE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO DISPROVE THE AGRI CULTURAL INCOME DECLARED BY THE ASSESSEE, BUT HE HAS ALSO RESORTED TO ESTIMATE THE AGRICULTURAL INCOME IN BOTH THE YEARS. HE SUBMITTE D THAT THE AO HAS ACCEPTED THE EXTENT OF LAND HOLDING IN AY 2009-10 B Y CONDUCTING NECESSARY ENQUIRIES THROUGH HIS INSPECTOR OF INCOME TAX. THE LD A.R FURTHER SUBMITTED THAT THE AO HAS ACCEPTED THE EXTENT OF LAND HOLDING IN AY 2007-08 ALSO BY VERIFYING THE RELEVAN T DOCUMENTS, I.E., THE YEAR PRECEDING TO THE ASSESSMENT YEAR 2008-09. ACCORDINGLY HE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN ESTIM ATING THE AGRICULTURAL INCOME AT A VERY LOW AMOUNT IN AY 2008 -09 WITHOUT CONSIDERING THE EXTENT OF LAND HOLDING. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE AGRICULTURAL INCOME D ETERMINED BY THE AO IN BOTH THE YEARS. 5. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS N OT CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED ANY INACCURA TE PARTICULARS OF INCOME. HE SUBMITTED THAT THE ASSESSING OFFICER HA S REDUCED THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE IN BOT H THE YEARS BY SUBSTITUTING HIS OWN ESTIMATES AND IN THAT PROCESS; HE HAS CONVERTED THE EXEMPT INCOME INTO TAXABLE INCOME . HE SUBMITTED 5 I.T.A. NOS. 1673 & 355/MDS/2014 THAT THE CLAIM OF AGRICULTURAL INCOME HAS BEEN REJE CTED IN BOTH THE YEARS ONLY ON PRESUMPTIONS AND THE AO HAS PROCEEDED TO SIMPLY ESTIMATE THE AGRICULTURAL INCOME. HE SUBMITTED THA T THE ASSESSING OFFICER DID NOT DISPROVE THAT THE DETAILS FURNISHED BY THE ASSESSEE I.E., THE EXTENT OF LAND HOLDING, THE TYPES OF CROP S RAISED, THE SELLING RATES, THE AGGREGATE AMOUNT REALISED ETC. BY BRINGI NG ANY CREDIBLE EVIDENCE. ACCORDINGLY HE CONTENDED THAT THE MERE R EDUCTION OF AGRICULTURAL INCOME BY SUBSTITUTING HIS OWN ESTIMAT ES WOULD NOT GIVE RISE TO THE CHARGE OF CONCEALMENT OF INCOME. ACCOR DINGLY HE PRAYED THAT THE PENALTY LEVIED IN BOTH THE YEARS BE DELETE D. 6. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSEE HAS DELIBERATELY DECLARED AGRICULTURAL INCOME AT HIGHER FIGURE IN BOTH THE YEARS, SINCE THE AGRICULTURAL INCOME IS EXEMPT UNDE R THE INCOME TAX ACT. HE SUBMITTED THAT THE VERY FACT THAT THE ASSE SSEE HAS ACCEPTED THE ASSESSING OFFICERS ORDER IN REDUCING THE AGRIC ULTURAL INCOME AND ASSESSING THE DIFFERENCE AS INCOME WOULD SHOW THAT THE ASSESSEE HAD TAKEN A CHANCE TO DECLARE HIGHER AGRICULTURAL I NCOME. HE SUBMITTED THAT THE INTENTION OF THE ASSESSEE HAS CO ME TO LIGHT SINCE THE RETURNS OF INCOME OF BOTH THE YEARS WERE TAKEN UP FOR SCRUTINY AND THE ASSESSEE MIGHT HAVE ESCAPED, IF THE RETURNS HAD BEEN PROCESSED U/S 143(1) OF THE ACT. ACCORDINGLY HE SU BMITTED THAT THE 6 I.T.A. NOS. 1673 & 355/MDS/2014 LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE PENALTY L EVIED U/S 271(1)(C) OF THE ACT IN BOTH THE YEARS. 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAVE ALREADY NOTICED THAT THE ASSESSEE HAD DECLARED AGRI CULTURAL INCOME OF RS.3.45 CRORES AND RS.2.26 CRORES RESPECTIVELY F OR AY 2008-09 AND 2009-10. HOWEVER, THE AO HAS ACCEPTED THE SAME AT RS.5.00 LAKHS AND RS.89.71 LAKHS RESPECTIVELY IN AY 2008-09 AND 2009-10. IN AY 2008-09, THE AO HAS DISBELIEVED THE EXTENT OF AGRICULTURAL HOLDINGS AND ACCORDINGLY ESTIMATED THE AGRICULTURAL INCOME AT A TOKEN FIGURE OF RS.5.00 LAKHS. HOWEVER, WE NOTICE THAT THE ASSESSEE HAD DISPUTED THE AGRICULTURAL INCOME ESTIM ATED FOR AY 2007-08 AND THE MATTER HAS TRAVELLED UP TO THE TRIB UNAL AND THE ITAT HAS RESTORED THE MATTER BACK TO THE FILE OF TH E AO. IN THE SET ASIDE PROCEEDINGS, THE AO HAS EXAMINED THE RELEVANT DOCUMENTS AND HAS ACCEPTED THE EXTENT OF AGRICULTURAL HOLDING S. WE ALSO NOTICE THAT THE ASSESSING OFFICER HAS ALSO ACCEPTED THE EXTENT OF LAND HOLDING IN AY 2009-10 ALSO, EVEN THOUGH HE HAD OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE PARTIALLY THE EXTE NT OF LEASE HOLD LAND WITH NECESSARY EVIDENCES. DESPITE THIS OBSERV ATION, THE ASSESSING OFFICER HAS PROCEEDED TO ESTIMATE THE AGR ICULTURAL INCOME ON THE AGGREGATE LAND HOLDING CLAIMED BY THE ASSESS EE. THUS, IT IS 7 I.T.A. NOS. 1673 & 355/MDS/2014 SEEN THAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTE D THE EXTENT OF LAND HOLDING BOTH IN THE IMMEDIATELY PRECEDING YEAR (AY 2007-08) AND IN THE IMMEDIATELY SUCCEEDING YEAR (AY 2009-10) . HENCE, THE VERY BASIS ON WHICH THE AGRICULTURAL INCOME WAS RED UCED IN AY 2008-09 IS PROVED TO BE WRONG BY THE ABOVE SAID FAC TS. THUS, IT IS SEEN THAT THE AGRICULTURAL INCOME HAS BEEN ESTIMATE D AT A LOWER FIGURE IN AY 2008-09 ON THE BASIS OF MERE PRESUMPTI ON ABOUT THE EXTENT OF LAND HOLDING, WHICH IS PROVED TO BE WRONG . THE ASSESSING OFFICER HAS ALSO FAILED TO FURNISH THE BASIS IN ADO PTING A ROUND SUM AMOUNT OF RS.5.00 LAKHS. THUS, THE AGRICULTURAL IN COME DETERMINED BY THE ASSESSING OFFICER TURNS OUT TO BE A MERE EST IMATE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE ASS ESSEE CANNOT BE FOUND FAULT WITH, WITH THE CHARGE OF CONCEALMENT OF PARTICULARS OF INCOME. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) IN AY 2008-09 AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT FOR THAT YEAR. 8. IN AY 2009-10, WE NOTICE THAT THE ASSESSEE H AD ORIGINALLY DECLARED AGRICULTURAL INCOME AT RS.2.26 CRORES. HO WEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER ASKED THE ASSESSEE TO RE-ESTIMATE THE SAME, SINCE THE AO FELT THAT THE ORIGINAL ESTIMATE WAS ON THE HIGHER SIDE. ACCORDINGLY, THE ASSESSEE SCALED 8 I.T.A. NOS. 1673 & 355/MDS/2014 DOWN THE AGRICULTURAL INCOME TO RS.1.31 CRORES. SI NCE THE AO STILL CONSIDERED THE ABOVE SAID AMOUNT TO BE ON THE HIGHE R SIDE, THE ASSESSEE FURNISHED ANOTHER ESTIMATE SHOWING AGRICUL TURAL INCOME ON 173.62 ACRES AT RS.98.26 LAKHS. IT IS NOTICED T HAT THE ASSESSING OFFICER HAS ACCEPTED THE SAME IN PRINCIPLE. HOWEVE R, SINCE THE AREA OF CULTIVATION WAS SHOWN AT 17.9 ACRES OUT OF 35 AC RES OF LAND IN A PARTICULAR SECTOR, THE AO PROPORTIONATELY REDUCED T HE AGRICULTURAL INCOME TO RS.89.71 LAKHS. ACCORDINGLY HE HAS ASSES SED THE DIFFERENCE AMOUNT AS INCOME OF THE ASSESSEE UNDER T HE HEAD INCOME FROM OTHER SOURCES. 9. THE DISCUSSIONS MADE IN THE PRECEDING PARAGRA PH WOULD SHOW THAT THE ASSESSING OFFICER HAS SIMPLY FORCED T HE ASSESSEE TO SCALE DOWN THE AGRICULTURAL INCOME BY MAKING LOWER ESTIMATES. THE AO HAS EXAMINED THE EXTENT OF LAND HOLDING AND WAS ALSO SATISFIED WITH THE SAME. HOWEVER, IN ONE OF THE AGRICULTURAL RECORD, THE AREA OF CULTIVATION WAS SHOWN AT A LOWER LEVEL AND HENCE THE ASSESSING OFFICER HAS CONSIDERED THE SAME TO BE A CASE OF FUR NISHING OF INACCURATE PARTICULARS OF INCOME. HOWEVER, THE ASS ESSING OFFICER HAS ULTIMATELY LEVIED THE PENALTY ON THE GROUND THA T THE ASSESSEE HAS CONCEALED THE INCOME. THUS, IT IS SEEN THAT TH ERE IS CONTRADICTION IN THE STAND OF THE ASSESSING OFFICER ALSO. IN ANY CASE, 9 I.T.A. NOS. 1673 & 355/MDS/2014 IT IS SEEN THAT THE ASSESSING OFFICER HAS SUBSTITUT ED THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE WITH ANOTHER ESTIMA TE ONLY. IN OUR VIEW, SUCH KIND OF SUBSTITUTION OF INCOME ON ESTIMA TED BASIS CANNOT BE CONSIDERED TO BE A CASE OF CONCEALMENT OF PARTIC ULARS OF INCOME AND HENCE THE SAME WOULD NOT GIVE RISE TO ANY PENAL TY U/S 271(1)(C) OF THE ACT. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) IN AY 2009-10 ALSO AND DIRECT THE AO TO DELETE THE PENALT Y LEVIED U/S 271(1)(C) OF THE ACT IN ASSESSMENT YEAR 2009-10. 10. DURING THE COURSE OF HEARING, IT WAS NOTICE D THAT THE ASSESSING OFFICER HAS MADE IDENTICAL DISALLOWANCES IN ASSESSMENT YEAR 2007-08 AND 2010-11. HENCE, BOTH THE PARTIES WERE ASKED TO FURNISH DETAILS ABOUT THE PENALTY PROCEEDINGS, IF A NY, INITIATED IN THOSE YEARS. THE ASSESSEE HAS FURNISHED A CERTIFIC ATE FROM HIS CHARTERED ACCOUNTANT, WHEREIN IT WAS STATED THAT TH E PENALTY PROCEEDINGS WERE INITIATED IN BOTH THE ABOVE SAID Y EARS, BUT THE SAME WAS DROPPED BY THE ASSESSING OFFICER. THE REV ENUE HAS ALSO FILED A LETTER CONFIRMING THE FACT WITH REGARD TO A Y 2007-08. THUS, IT IS SEEN THAT THE ASSESSING OFFICER HIMSELF HAS DROP PED THE PENALTY PROCEEDINGS ON IDENTICAL DISALLOWANCES MADE IN AY 2 007-08 AND 2010-11, WHICH FACT ALSO SUPPORTS THE CASE OF THE A SSESSEE. 10 I.T.A. NOS. 1673 & 355/MDS/2014 11. IN THE RESULT, BOTH THE APPEALS FILED BY TH E ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THE 4 TH DAY OF FEBRUARY, 2015 AT CHENNAI. SD/- SD/- ( . . !' ) ( .. ) (S.S. GODARA) (B.R. BASKARAN) # /JUDICIAL MEMBER /ACCOUNTANT MEMBER /CHENNAI, ? /DATED, THE 4 TH FEBRUARY, 2015. KRI. @ . ,#1AB CB'1 /COPY TO: 1. )* /APPELLANT 2. ,-)* /RESPONDENT 3. 0 D1 () /CIT(A)-II, COIMBATORE 4. 0 D1 /CIT-III, COIMBATORE 5. BE! ,#1# /DR 6. ! & F /GF.