TaxTMI 
TaxTMI 
2016 (1) TMI 119
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.... well as confirmation of penalty by contending that vide letter dated 13/05/1994, the amount of Rs. 75 lakh was paid to custom authorities as penalty/redemption fine. 2.2. We have considered the rival submissions and perused the material available on record. Before coming to any conclusion, we are expected to analyze the facts first. It is not a simple case of importing the goods/imposition of penalty. The facts, in brief, are that the assessee declared total income of Rs. 1,47,020/- in his return filed on 28/6/1988, which was accepted u/s 143(1) of the Income Tax Act, 1961 on 10/10/1998. Subsequently, the ld. Assessing Officer received information from Circle-19(1), vide letter dated 13/05/1994 that Shri M.P. Gupta made penalties of Rs. 75 lacs for importing almonds contravening the provision of the import policy, on open market licence. Since the penalties were not allowable deduction, the assessment was reopened with the issuance of notice u/s 148 of the Act on 29/03/1995, which was duly served upon the assessee. The assessee did not file return of income in response to the said notice. Subsequently, notices u/s 143(2) and 142(1) were served upon the assessee to which there w....
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....ose." 2.3. We note from the assessment order that initially the assessee tried to explain, through his submissions, that the penalty amount of Rs. 75 lakh was paid by the M/s Rajnikant Bros. as the import was made by them. The Assessing Officer vide order sheet entries dated 28/11/1996, 27/01/1997, 21/02/1997 and 04/03/1997 and various letters issued to on 02/03/1996, 24/01/1997 and 24/02/1997 was asked to produce the evidence. The assessee denied the payment of penalty, therefore, summons were issued to M/s Rajnikant Bros., who furnished the following details:- (a) Zerox copy of agreement dated 14/10/1985 entered between M/s Rajnikant Brothers and Shri M. P. Gupta (present assessee) for the use of import licence. (b) Copy of account in respect of almonds in the name of Shri M.P. Gupta regarding purchase and sale. 2.4. Pursuant to summons issued to M/s Rajnikant Bros. Shri Indresh K. Shah, accountant, attended the office of the Assessing Officer and his statement was recorded, wherein, in response to question no. 4, with respect to modus operandi of the transactions and use of the import licence, it was tendered by him that Mr. M.P. Gupta imported almonds in....
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....by the assessee. (iv) that the accountant of M/s Rajnikant Bros. categorically tendered that the amounts were paid by Shri M.P. Gupta. (v) that the consignments of almonds was imported by Shri M.P. Gupta, using the import licence issued to M/s Rajnikant Bros. (vi) initially the present assessee tried to explain that the import was made by M/s Rajnikant Bros and did not cooperate the department as is evident from finding contained at page 4 of the assessment order. (vii) it is clear that Shri M.P. Gupta used the licence and all the transactions including the payment of penalty was made by him, as is clarified from the agreement entered between them. However, the Tribunal, vide order dated 31/10/2014 (ITA No.4239/Mum/2011) found that the amount paid by the assessee to the custom authorities was in the nature of redemption fine and not penalty and accordingly it was allowed as business expenditure. The appeal of the assessee was allowed. Following the order of the Tribunal, since, the quantum addition has been deleted, in our view, penalty cannot survive. Our view find supports from the decision of the Tribunal dated 31/10/2015 in the case of Smt....
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....ree with the explanation offered by the assessee. He observed that out of the total jewellery found, the jewellery valuing Rs. 21,58,524/- had remained unexplained. He accordingly added the said amount into the income of the assessee u/s 69A of the Act. Aggrieved by the addition made by the AO, the assessee preferred appeal before the Ld. CIT(A). 5. The assessee submitted before the Ld. CIT(A) that the jewellery found during the search action belonged to the members of the Doshi family, including the assessee, the names of whom are mentioned as under: "i) Mr. Pravin H Doshi (Spouse of Appellant) ii) Mrs. Neela Pravin Doshi (Self-Appellant) iii) Mr. Munish P Doshi (Son of Appellant) iv) Mrs. Alka Munish Doshi (Daughter in law) v) Master Manav Munish Doshi (Grand Son of Appellant) vi) Mr. Rajesh P Doshi (Son of Appellant) vii) Mrs. Priti Rajesh Doshi (Daughter in law) viii) Pravin H Doshi (HUF) ix) Mrs. Ranjan Ben R Doshi. (widow of late Shri Ratilal Doshi) (Aunty of spouse)" The assessee also furnished the following evidences to explain the source of acquisition of the jewellery in que....
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....ore called upon the assessee to prepare an item vise chart showing which of the items could be said to be matching and another chart in respect of items which did not match with the description of items made in the valuation report furnished by the assessee. The assessee made charts No. I & II in the above manner in relation to gold items, the contents of which have also been reproduced in the impugned order. 7. The Ld. CIT(A), after tallying and making comparative analysis of the items disclosed by the assessee in the approved valuer's report with that of the report made during search action, observed that most of the items mentioned in chart No.I mathed with the description given in the valuation report of the approved valuer, except items No.24 & 25 being gold ginni and gold coin respectively, which the assessee claimed to have been received as gift. The Ld. CIT(A), therefore directed the AO to delete the addition in respect of the remaining items mentioned in chart No. I, except the above stated two items amounting to Rs. 82,392/- and Rs. 75,823/- respectively. In relation to chart No.II, the Ld. CIT(A) observed that the items mentioned in chart No.II did not exactly m....
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....tention in respect of other items also where the gross gold weight of the items matches with that of the description mentioned in the valuation reports submitted by the assessee and even number of pieces of diamonds in the jewellery also matched. However, there was difference in estimation of carat weight. 10. We find that it is not a case where the items mentioned in the valuation reports submitted by the assessee did not match at all with that of the items of jewellery which were found during the search action. Not only the description of the jewellery sets, bangles, pendant, eartopes etc. matched with the valuation report but also the number of diamonds embedded in the jewellery. So far as the estimation of carat weight is concerned, it is an admitted fact that the weight was not measured by extracting the diamonds out of the jewellery, but was just estimated by the Departmental Valuer. Under such circumstances, the minor difference in carat weight value, especially when the same was not exactly weighed by the Departmental Valuer could not be the sole criteria to hold that the description of jewellery did not match. The Ld. A.R. of the assessee has further invited our a....
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....has observed that merely because the description of some of the ornaments in the Wealth-tax return did not tally with the ornaments found at the time of search, is no ground for rejecting the assessee's claim of remaking of the ornaments even if the assessee has not preserved the bill of remaking charges. In the case of "ACIT vs. Shri Kamalkishan H. Aggarwal" in ITA No.777/M/1998 and ITA No.5127/M/1995 & others decided vide common order dated 21.06.13, the Tribunal under somewhat similar circumstances has observed that normal presumption is that during the course of the search, the entire jewellery found at residence, in Bank lockers, other premises and also on person is duly inventorised. If the weight of the jewellery found at the time of search is more than the weight declared in Wealth Tax returns, the difference has to be taken to be unexplained jewellery unless the assessee is able to establish that fresh jewellery was purchased and sources thereof are explained. it is normal that some of the ornaments are dismantled and remade. it would be unreasonable to take a stand that all the ornaments found at the time of search must accurately compare in description and weight with th....
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....dagiri, defended the imposition of penalty. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the aforesaid order of the Tribunal (ITA No.8797 and 8798/Mum/2010) order dated 27/02/2015 for ready reference:- "These two appeals have been filed by two assessees against the order of CIT(A), for the assessment year 2007-08, in the matter of order passed u/s.143(3) of the I.T.Act. 2. Common grievance in both the appeals relate to disallowance of claim of deduction u/s.54(1) in respect of residential flats acquired by the assessees in consideration of old house sold to the builder. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee Vilma Mary Pereira has sold immovable property situated at "Violet Valley" (with garage) at Junction of 26th and 30th Road at Bandra (W), Mumbai for a total consideration of Rs. 3,05,00,000/- vide agreement dated 28.4.2006 to M/s. Aqua Marine Enterprises. The share of the assessee is 23% in the said property and the other assessee Mr. Peter Pereira was having share of 77% in the said house. F....
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....submission of the assessee was considered by the A.O. According to the A.O. the new flat and car parking are nothing but additional consideration. If the said new flat is receivable for old flat and old car parking place, how the assessee has claimed indexation on the value of the said properties as on 1.4.1981 against the consideration. If the new flat was to be given in lieu of the old area occupied by the assessee in the old structure, then the value of the said old structure should have been reduced from the value of the entire property as on 1.4.1981 while computing the LTCG on such sale. However, the assessee has taken the FMV of the entire property as on 1.4.1981 into consideration while computing the LTCG on the sale of such property. 5. The A.R. of the assessee vide his submission dated 12.11.2009 stated that if market value of the new flat is added to income of the assessee, then the investment in new residential property should be allowed u/s.54 at market value. The AO. analysed the contention of the assessee. According to the A.O., exemption u/s.54 is available only when the assessee has purchased a new flat one year before or two years after the date of transf....
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.... from the record that during the course of appellate proceedings the assessee has submitted as under :- "1. During the year the assessee with her co owner i.e. her brother Mr.Peter Savio Pereira sold the ancestral residential property for consideration of Rs. 3,05,00,00/- and 3 flats admeesurinq 3150 sq. ft. with one open and two stilt parking in kind. 2. In the assessment order. the A.O. has valued the consideration received in kind for Rs. 3,32,70,540/- and additions were made in the assessment order under the head long term capital gains without considering the said amount as reinvestment is neither purchased nor constructed by the assessee. 3. As regards benefit of section 54, this section makes it clear that capital gain arising from the transfer of a house property is exempt from tax provided the following conditions are satisfied :- (a) The house property is a residential house whose income is taxable under the head 'Income from house property' as transferred by an individual or an HUF. (b) The house property (may be self occupied or let out) is a long term capital asset. (c) The assessee has purchased a residenti....
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....on equivalent of price by payment in kind. Therefore the assessee has purchased the residential property and is entitled for exemption u/s.54 of the I T.Act 1961." 9. It is clear from the above that residential house was given to the assessee in consideration of the sale of old house. The sale consideration was partly received in cash and partly in the form of new flats to be constructed on the plot of old house sold by assessee. The new flats agreed to be given to assessee amounts to investment by assessee in residential house. Therefore, the AO was not justified in adding back the additional consideration given in the form of allotment of three flats by declining claim of deduction u/s.54 of the I.T.Act. 10. In the present case before us, the assessee has purchased/constructed the new residential property and paid the consideration equivalent of price by payment in kind. Therefore, the assessee is entitled for exemption u/s.54 of I.T.Act, 1961 in respect of these flats. 11. An issue was also raised by the AO with regard to sharing of 3 flats between the co-owners of the property and the exemption u/s.54 allowable in case of investment in one residential....
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....oor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. The physical structuring of the new residential house, whether it is lateral or vertical, should not come in the way of considering the building as a residential house. The fact that the 'residential house consists of several independent units cannot be permitted to act as an impediment to the allowance of the deduction under s.54/54F. It isneither expressly nor by necessa....
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....ing inaccurate particulars implies some deliberate act on the part of the assessee in withholding the true facts from the authorities. Since, the basis of levying penalty remains no more in existence, after deletion of quantum addition, therefore, from this angle, the stand of the ld. Commissioner of Income tax (Appeals) is justified. Finally, the appeal of the Revenue is having no merit, therefore, dismissed." 2.3. There is no dispute that quantum addition has been deleted by the Tribunal, therefore, in our humble opinion, the ld. Commissioner of Income tax (Appeals) is not justified in confirming the penalty. Admittedly, the impugned order is dated 07/10/2013, whereas, the order of quantum addition of the Tribunal is dated 31/07/2015, meaning thereby, the order of the Tribunal was even not even existence. Our view further finds support from the decision and the ratio laid down in CIT vs S.P Viz Construction company 176 ITR 47 (Patna) and K.C. Builders vs ACIT 265 ITR 562 (Supreme Court). We are of the view where the penalty for concealment or furnishing inaccurate particulars was levied and after deleting the quantum addition, there remains no basis at all for l....