2014 (3) TMI 526 - AT - Income Tax

Tribunal upholds penalty for unexplained jewellery, stresses importance of credible explanations

Motilal Jaichandlal Bothra C/o RB. Rathi & Co. Versus ACIT, Circle-11, Ahmedabad

The Tribunal upheld the penalty under section 158BFA(2) imposed by the AO for unexplained jewellery disclosed during assessment proceedings. The ownership ... Levy of Penalty u/s 158BFA(2) of the Act - the appellant has completely disclosed jewellery pertaining to the large family in his wife's locker – Held that:- The decision in CIT vs Becharbhai P. Parmar [2012 (4) TMI 418 - GUJARAT HIGH COURT] followed - The right from the date of search till the date of assessment proceedings, the appellant has stated that the jewellery belongs to his mother in law and wife of the brother in law - No inaccurate particulars were filed by the appellant - the addition was confirmed by the CIT(A) and ITAT by rejecting the explanation of the assesses that the jewellery belong to mother in law and the wife of the brother in law of the assessee, does not automatically mean that penalty u/s. 158BFA(2) is leviable – thus, there is no need to interfere in the findings of the CIT(A) – Decided against Assessee. Issues:1. Levy of penalty under section 158BFA(2) of the Act for unexplained jewellery disclosed during assessment proceedings.Detailed Analysis:Issue 1: Levy of Penalty under Section 158BFA(2) of the ActThe case involved the assessee appealing against the order of the Ld. CIT(A)-XVI Ahmedabad dated 22-06-2010, regarding the imposition of a penalty under section 158BFA(2) of the Act. The search conducted under section 132 of the Act at the residence of the assessee's brother revealed cash, gold jewellery, and silver. The AO completed the assessment under sections 188BD read with 18BC of the Act. The Ld. CIT(A) granted partial relief in respect of unexplained cash and jewellery, treating 175.2 gms of jewellery as unexplained. The ITAT upheld this decision, leading to the imposition of a penalty by the AO on the confirmed addition of jewellery. The contention of the assessee was that the jewellery belonged to his mother-in-law and his brother-in-law's wife, which was consistently maintained from the search to the assessment proceedings. However, the CIT(A) and ITAT rejected this explanation, leading to the imposition of the penalty.Analysis:The CIT(A) and ITAT confirmed the penalty imposed by the AO, emphasizing that the jewellery's ownership was inconsistent throughout the proceedings, casting doubt on the credibility of the assessee's explanation. The ITAT relied on the decision of the jurisdictional High Court in the case of CIT vs. Becharbhai P. Parmar, affirming the penalty under section 158BFA(2) for similar circumstances. The Tribunal distinguished the case laws cited by the assessee's counsel, highlighting that the decisions were not in line with the facts of the present case. The Tribunal concluded that since the addition was based on jewellery found during the search, the penalty was justified, ultimately upholding the order of the Ld. CIT(A) and dismissing the assessee's appeal.In conclusion, the Tribunal upheld the penalty under section 158BFA(2) imposed by the AO, emphasizing the importance of consistent and credible explanations regarding unexplained assets discovered during search operations. The decision was based on the precedents set by the jurisdictional High Court and the specific circumstances of the case, reinforcing the need for transparency and accuracy in disclosing assets to avoid penalties under the relevant provisions of the Act.