2016 (11) TMI 1724 - AT - Income Tax

Validity of order passed u/s.143(3) r.w.s.153B(1)(b) - there was a search at the premises of the assessee, wherein incriminating documents and jewellery were found - addition was made by the AO on account as alleged to be received by assessee on account of payment from Natvar Parikh Co. in addition to consideration mentioned in settlement deed for transfer of shares of NPCL - AR raised an additional ground to the effect that amount of capital gain so offered by the assessee was received out of family settlement, therefore, not liable to tax - CIT- A deleted the addition - HELD THAT - These jewellery were acquired by the assessee out of drawings. Considering the withdrawals made by the assessee during the year amounting to Rs.43,14,569.30 towards personal expenses and the income declared by the assessee amounting to Rs.2,81,83,911/-, we do not find any merit for the addition of Rs.74,565/- so made by AO. As assessee has not filed any revised return with regard to the capital gains originally offered in the return of income, the AO has declined to consider assessee s claim of amount having been received under family settlement and not liable to tax. By the impugned order the CIT(A) confirmed the action of AO. From the record we found that during the year assessee sold shares of NPCL to the company itself, under a family arrangement scheme, endorsed by Company Law Board's order dated 30.03.2006, 13.04.2006 26.02.2007. Long term Capital gain arising out of said sale is Rs.16,23,94,604/-. Assessee invested the same in house property u/s 54F and residual amount of Rs.2,08,64,396/- was offered for capital gain and paid taxes accordingly. Assessee filed its return of income for the present year under assessment on 01.08.2007 declaring a total income of Rs. 2,81,83,911/- which includes the said capital gain. The said return was filed voluntarily by the assessee u/s 139 (1). No revised return has been filed by the assessee till date. In view of the decision of Hon ble Supreme Court in case of National Thermal Power Co. Ltd. 1996 (12) TMI 7 - SUPREME COURT we accept the additional ground raised which is purely legal in nature. All the related facts are already on the record of the lower authorities, therefore, there is no hesitation in accepting the legal ground.

Summary

Issues Involved:
1. Addition of Rs.50 lakhs alleged to be received by the assessee from Natvar Parikh & Co.
2. Addition of Rs.74,565 as the value of jewellery not matching the declared income.
3. Treatment of capital gain received out of family settlement.

Analysis:

Issue 1: Addition of Rs.50 lakhs alleged to be received by the assessee from Natvar Parikh & Co.
The appeal was filed by the assessee against the order of CIT(A) for the assessment year 2007-2008 regarding the addition of Rs.50 lakhs. The AO made the addition based on alleged payment from Natvar Parikh & Co. The CIT(A) deleted the addition stating that the AO failed to justify the addition on any cogent ground. The Tribunal in the case of Natvar Parikh & Co. Pvt. Ltd. found that no extra payment was made, confirming the CIT(A)'s decision. The Tribunal, in the present case, followed the earlier decision, confirming the deletion of the Rs.50 lakhs addition.

Issue 2: Addition of Rs.74,565 as the value of jewellery not matching the declared income
The assessee contested the addition of Rs.74,565 as the value of jewellery, which did not align with the declared income. The Tribunal found that the jewellery was acquired by the assessee out of drawings for personal expenses. Considering the withdrawals made by the assessee and the declared income, the Tribunal concluded that there was no merit in the AO's addition of Rs.74,565.

Issue 3: Treatment of capital gain received out of family settlement
The assessee raised an additional ground claiming that the capital gain offered was received out of a family settlement and thus not liable to tax. The AO and CIT(A) declined to consider this claim as no revised return was filed. The Tribunal, considering relevant judgments and legal principles, accepted the additional ground raised by the assessee as purely legal in nature. The matter was remanded back to the AO for fresh consideration in light of the available materials.

In conclusion, the appeal of the Revenue was dismissed, while the appeal of the assessee was allowed in part, with the Tribunal directing a fresh decision on the treatment of capital gains received out of a family settlement.