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M/s. Sree Nithyakalyani Textiles Ltd v. The Deputy Commissioner of Income-Tax - T.C.(A) No.951 of 2005 [2005] RD-TN 785 (10 November 2005)


Dated: 10/11/2005


The Hon'ble Mr.Justice P.D.DINAKARAN


The Hon'ble Mr.Justice T.V.MASILAMANI

T.C.(A) No.951 of 2005

and T.C. (A) No. 952 of 2005

M/s. Sree Nithyakalyani Textiles Ltd.

Tiruvadanai 630 407

Ramanathapuram. ... Appellant in both the appeals -Vs-

The Deputy Commissioner of Income-Tax,

Special Range I,

Madurai. ... Respondent in both the appeals The above T.C.(Appeals) are preferred under Section 260A of the Income-Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench dated 22.3.2005 made in ITA Nos.1120 of 1997 & 1 108 of 2000 respectively.

For Appellant : Mr.S. Sridhar

For Respondent : ---

:J U D G M E N T

(Judgment of the Court was made by P.D.DINAKARAN, J.) The above tax case appeals are directed against the common order of the Income-tax Appellate Tribunal in ITA.NOs.1120 of 1997 and 1108 of 2000 dated 22.3.2005 respectively. The assessee company, against which penalty was imposed, is the appellant in both the appeals. The assessment years involved is 1994-1995.

2. The facts in brief are as follows :- The assessee Company is carrying on the business of manufacturing cotton yarn. Assessee filed its return of income showing its total income as Rs.45,99,530/- on 28.11.1994, which was accepted in toto by the Department. After scrutiny, the Deputy Commissioner of Income Tax, Special Range I, Madurai, the respondent herein, made an addition of Rs.25,55,192/- as the cotton lying was undervalued at Rs.29.38, instead of Rs.39.76 per kilo. Aggrieved by the said addition, the assessee filed appeal before the Commissioner of Income Tax (Appeals), who by order dated 13.3.1997 confirmed the order passed by the respondent herein. Challenging the said order, the assessee filed second appeal before the Income Tax Appellate Tribunal, which upheld the contention of the Department and confirmed the additions made. The assessee filed T.C.(Appeal)No.951 of 2005 against that portion of the order challenging the addition of amount of Rs.25,55,192/- raising the following substantial questions of law,

1. Whether the Tribunal is correct in concluding that the addition of Rs.25,55,192/- being the difference in valuation of closing stock as at 31.3.94, applying different method of valuation by the respondent/Assessing Officer in contrast to the facts existed in the earlier years was justified, based on assumption of certain facts ?

2. Whether the Tribunal is correct in confirming the said addition consequent to the revaluation of closing stock of cotton upon ignoring the consistent method of valuation of the said stock of cotton based on "cost or market price whichever is lower", adopted by the appellant over the period of years and accepted in assessments framed in those years ?"

3. The revenue on completion of the assessment proceedings, issued show cause notice dated 27.12.1996 for initiation of proceedings and to levy penalty. Though a detailed reply was sent by the assessee on 30.1.1997, the respondent by order dated 25.9.1997 imposed penalty of Rs.14,69,230/- on the assessee. In the first appeal filed by the assessee, the authority came to the conclusion that since addition was sustained, the penalty imposed on account of understatement of stock should be confirmed. The second appeal preferred before the Appellate Tribunal being dismissed by order dated 22.3.2005, the assessee has come forward with T.C. (Appeal) No.952 of 2005 raising the following substantial questions of law, "1. Whether the Tribunal is correct in confirming the levy of penalty under Section 271(1)(c) of the Act for the assessment year 1994-95 on the facts and in the circumstances of the case ?

2. Whether the Tribunal is correct in concluding that the explanation to section 271(1)(c) of the Act was correctly invoked to levy the said penalty in spite of total disclosure of facts relating to the valuation of closing stock of cotton ?"

4. In T.C.951 of 2005, the question under consideration is with regard to the addition of Rs.25,55,192/- being the difference in valuation of closing stock. The learned counsel appearing for the assessee/ appellant has contended that the Tribunal wrongly assuming that the entire stock of cotton is of SG variety, valued the stock at Rs.39.76 per Kg and passed the impugned order and that the Tribunal failed to take into consideration the fact that the entire stock of cotton is of RG variety valued at Rs.29.37 per Kg. The learned counsel further contends that the method adopted by the assessee for valuing the closing stock of cotton was a recognised method and it should have been followed.

5. Admittedly, J-34 variety of cotton has two types i.e, SG and RG varieties, the former being superior than the latter. The Tribunal after perusal of the records, especially the stock registers and purchase bills produced by the assessee, came to the factual conclusion that the cotton variety in dispute is of SG variety valued at Rs.39.76 per Kg. The Tribunal has also found that it is the duty of the assessee to furnish the correct market value of the SG variety of cotton, but instead, the assessee applied the last purchase price of RG variety of cotton for valuing SG variety of cotton. This method of valuation, according the Tribunal, is incorrect. In view of this lapse on the part of the assessee, the Tribunal held that the authorities below are justified in valuing the SG variety of cotton on the basis of cost at Rs.39.76 per Kg and accordingly confirmed the additions made on this account. The above findings of the Tribunal are purely on the basis of facts. The appellant/assessee has not made out any case to interfere with such findings of fact. In such view of the matter, we are not inclined to interfere with the order passed by the Tribunal in respect of addition of Rs.25,55,192/-.

6. The questions raised in T.C.952 of 2005 are with regard to levy of penalty under Section 271(1)(c) of the Income Tax Act. The learned counsel for the appellant contends that without considering the necessary facts, the assessing officer has levied a penalty of Rs.14,69,2 30/- holding that the company has concealed the income and furnished inaccurate particulars of income regarding valuation of closing stock. Counsel has further submitted that the penalty imposed is against the provisions of the Income Tax Act.

7. The Tribunal after going through the entire records found that the assessee has furnished inaccurate particulars and the explanation offered by them was found to be false and that instead of valuing both varieties of cotton independently as per the rate applicable to each of them, the assessee has adopted uniform rate, which resulted in under valuation of SG variety of cotton to the tune of Rs.25,55,192/-. The Tribunal also found that the explanation offered by the assessee was not found to be bona fide and thus concealed the income to evade tax and this attracts the provisions of Section 271(1)(c) of the Act.

8. The above findings of the Tribunal are well founded and cogent. We do not find any infirmity or illegality in the order of the Tribunal. At this juncture, it is needless to point out that while exercising the appellate jurisdiction, normally the Court should not interfere with the concurrent findings rendered on facts.

9. Consequently, the substantial questions of law raised in the above appeals are answered in the affirmative against the assessee. The appeals are dismissed. No costs.

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The Deputy Commissioner of Income Tax,

Special Range I,



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