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TMI Blog2016 (1) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the aforesaid order dated 31/07/2015, on quantum addition, for ready reference:- "ITA No.3513/M/2012 2. The assessee in this appeal has challenged the action of the Ld. CIT(A) in confirming the additions made by the Assessing Officer (hereinafter referred to as the AO) as unexplained investments in relation to jewellery found during the course of search action. 3. The facts in brief are that a search action u/s 132 of the I.T. Act was carried out in the case of Acme Group Companies and related persons. The assessee was also covered in the said search action. The assessee is a partner in various firms engaged in business of builder and developer. During the course of the search operation, total jewellery valued at Rs. 17330641/- was found from the premises of the assessee, out of which jewellery valued at Rs. 36,93,026/- was seized. During the course of the assessment proceedings, the AO asked the assessee to show cause why jewellery to the extent which has not been reflected in the return of income should not be treated as unexplained and added to the income of the assessee. 4. The assessee explained the source of the jewellery and made his submissions vide letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marriage, birthday anniversary etc. It was also explained that some of the jewellery was remade out of the old jewellery. The assessee further submitted that the total weight of jewellery found matched with the jewellery accounted by the Doshi family. The assessee further submitted that in case of some jewellery, the description did not match either due to absence of full description of the jewellery made by the Departmental Valuer during search action or due to the remaking of the jewellery from the old jewellery items. It was submitted that even in respect of Diamond Jewellery, the overall carat weight of diamonds approximately matched with that was already accounted by assessee's family members. It was therefore submitted that the additions under section 69A were not warranted in this case. 6. The Ld. CIT(A), after considering the submissions of the assessee observed that it was correct that the overall weight of the gold jewellery declared by the assessee and his family in the books of accounts was in excess of gold jewellery found during the course of search action, however, the department had to match each and every item found with the items declared in the valuation repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. Inviting our attention to the page 12 of the impugned order in relation to item No.29 of locker No.571, the description has been mentioned as 'Tanmanya Pendant with chain'. The number of pieces of diamond in the said pendant has been mentioned as 59. The assessee has stated that it matched with item at serial no. 9 of the valuer's report wherein the description has been mentioned as 'Double String Black Beads Mangalsutra with Pendant' wherein the total number of diamonds is also mentioned as 59. However, the carat weight mentioned by the Departmental Valuer is 0.88, whereas, in the assessee's valuation report, it has been mentioned as 118. However, the gold gross weight mentioned by the Departmental Valuer is 21.850 whereas in the valuation report produced by the assessee it has been mentioned as 20.3. Similarly, in respect of item No.19 i.e. 'Bangles with Rodium' the gold gross weight also matched and the pieces of diamonds mentioned also matched. However, the estsimation of carat value by the government valuer is at 1.68 whereas as mentioned in the valuation report of the assessee is at 2.75. Similarly, in respect of item No.21 'Eartopes' gold gross weight also matches an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conversion or remaking of the jewellery, possession of which was otherwise accepted, it could not be said that holding of gold jewellery to that extent was unexplained, especially when evidence was available that the assessee had already been assessed at much more jewellery in earlier assessment year. Further, in the case of "Mrs. Vinita S. Jhunjhunwala vs. ACIT" in ITA No.8837/M/2010 for A.Y. 2008-09 decided on 20.01.2014, the co-ordinate Mumbai bench of the Tribunal has concluded that when quantity of jewellery disclosed by the assessee is same as the quantity of jewellery found during the course of search, no addition is warranted merely because the description is not matching. It is a vital fact that ladies get jewellery converted as per latest design and for which even the concerned man in the family is being not informed. In these circumstances merely because of conversion of such jewellery, cannot be made basis for making addition, when the jewellery disclosed by the assessee either in his own hand or in the hands of their family members prior to the date of search is equal to or more than the jewellery found during the course of search. In the case of "Rakesh J. Parikh v. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts is more than that of the jewellery found during the course of search action. In view of the above stated facts and in the light of the proposition of law laid down vide judicial pronouncements on this issue as discussed above, it cannot be said in this case that the jewellery found during the search action was unexplained. The additions thus in this case are not warranted and the same are ordered to be deleted." 2.2. In view of the above, it can be said that the basis on which penalty was levied, remains no more in existence, therefore, the penalty cannot survive. Our view find supports from the decision of the Tribunal dated 30/09/2015 (ITA No.2253/Mum/2014) in the case of Ms. Vilma M. Pereira for ready reference:- "The Revenue is aggrieved by the impugned order dated 10/01/2014 of the ld. First Appellate Authority, Mumbai, deleting penalty of Rs. 18,75,314/-, imposed u/s 271(1)(c), even though the quantum addition has been upheld by the ld. Commissioner of Income Tax (Appeals). 2. During hearing of this appeal, the ld. counsel for the assessee, at the outset, pointed out that the quantum addition on the basis of which penalty was imposed has been deleted by the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TCG for the year on sale of property. 2. Please furnish purchase proof at" NHA bonds against which deduction uls.54EC has been claimed. Please furnish copies of relevant bank extracts with narration of each entry to support your claim. 3. Proof of payment of professional fees and allowability of the same as deduction from the LTCG shown. 4. Basis of division of share of the property sold during the year. Please furnish evidences to support your claim. 5. Please explain why the valuation made by you of the property sold as on 1.4.1981 should not be rejected? 4. In response, the A.R. of the appellant vide letter dated 23.10.2009 submitted as under :- "The new flat and car parking is receivable in lieu of old residential place and old car parking place. Hence there is no additional amenities received from seller hence there should not be addition on account of market value of the said flat and amenities added to total consideration for sale of property during the year. Valuation done by Odilio Fernandes on 31.7.2006 as on 1.4.1981 at Rs. 35 lacs. Your honour may refer to departmental valuer for further verification. In case your honour is not satisfied without val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption u/s.54 in respect of capital gains arising on-sale of property used for residence is only available towards investment [by way of purchase or construction in a new house property within the time limit prescribed under the Act. In the case under consideration, the assessee is treating the flats and parking lots received by her as additional consideration as investment made u/s.54. These flats (alongwith car parking spaces) received by the assessee as part of 'consideration' cannot simultaneously be treated as investment. In order to avail the exemption u/s.54, the assessee should have made the investment in a new residence either by way of purchase or construction of the same. In the instant case, as per AO, the assessee has not fulfilled this condition which is the requirement of the Act. In view of the above, the A.O. held that the assessee is not eligible for exemption u/s.54 of the l.T.Act and accordingly denied the same to the assessee. 7. By the impugned order, the CIT(A) confirmed the disallowance against which the assessees are in further appeals before us. 8. We have considered rival contentions, carefully gone through the orders of the authorities bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. T.N. Aravinda Reddy. In this case, the definition of the term 'purchase' has been given as under: "....... We find no reason to divorce the ordinary meaning of the word purchase as buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration from the legal meaning of that word in section 54(1). If you sell your house and make a profit pay Caesar what is due to him. But if you buy or build another subject to the conditions of section 54(1), you are exempt. The purpose is plain the symmetry is simple, the language is plain. " Thus the Hon. Supreme Court has defined the term 'purchase' as buying for a price / equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration. The word 'purchase' in section 54 has to be given its common and wider meaning. It should include buying or adjustment towards old debt or for other monetary consideration. 6. In the present' case before your honour, the assessee has purchased/constructed the new residential property and paid the consideration equivalent of price by payment in kind. Therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concept introduced by the AO into the section. Sec. 54/54F requires the assessee to acquire a "residential house" and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems that the IT authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements. Most of the houses are constructed according to the needs and requirements and even compulsions. For instance, a person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, therefore, in our humble opinion, the ld. Commissioner of Income tax (Appeals) is justified in deleting the penalty. 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 levying the penalty. Ordinarily, penalty cannot stand in itself if the addition made in the assessment itself is set aside or cancelled by the superior authority/Court. The penalty cannot stand by itself because false result may be produced by the falsity of one or more of the constituent items in the return. The word 'inaccurate particulars' would cover falsity in the final figure and also the constituent elements or items. They simply would mean inaccurate in some specific or definite respect whether in the constituent or subordinate items of income or the end result. Concealment or furnishing inaccurate particulars implies some deliberate act on the part of the assessee in withholding the true facts fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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