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TMI Blog2016 (1) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 was no compliance from the assessee side. Anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Madras Port on 20/12/1985 by using the licence and the material was imported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Neeta P. Doshi (ITA No.6859/Mum/2013), the relevant portion of which is reproduced hereunder for ready reference:- "The assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 question: a) Jewellary valuation Report dt.1.11.1995 of Suresh C Kapoor, Government Approved Value (during search action in 1995) b) Jewellary valuation Report dt.23.4.2004 as on 3 1.3.2004 of Shrenik R Shah (Jewellary Report obtained for Wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 match with the description made in the approved valuers' reports. He, therefore, confirmed the additions in respect of items of gold jewellery mentioned in chart No.II. The Ld. CIT(A) also directed the assessee to prepare similar charts in respect of diamond jewellery. The assessee su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 attention to page No1 of the paper book which is the summary of the gold jewellery. He has explained that the total gold jewellery shown by the assessee and his family members in the books was of 9919.790 gms. whereas the jewellery found and valued by the Departmental Valuer was of 9145.380 gms. which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 the ornaments declared in the wealth tax return. The possibility that some of the items could have been remade cannot be ruled out. The important point is that the ornaments found should not be in excess in quantity as compared to the ornaments declared in the Wealth Tax returns. Our attention has also been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. From the agreement, the A.O. observed that the assessee was to receive three more flats i.e. two flats having a carpet area of 1200 sq.ft. each and one flat having carpet area of 750 sq.ft. and three parking spaces (two stilt and one open) as part of additional consideration. However, the additional consideration was not shown as part of the total consideration re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 transfer or has constructed a new residential' house within a period of three years from the date of transfer of the house property (original). The flats (alongwith car 'parking spaces) received by the assessee in the proposed building as 'additional consideration' agreed upon in the agreement dated 28.4.2006 was over and above her share in the monetary consideration. These flats (alongwith car parking spaces) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 residential house within a period of one year before the transfer or within two years after the date of transfer or has constructed a residential house property within a period of three years after the date of transfer. The appellant has fulfilled the precondition mentioned at point Nos.(a) & (b) above was not in doubt. This was also not in dispute that the assessee had purchased new residential property by way of construction. This was because it was clear from the agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee 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 flat only. In this regard, we found that the details of allocation of area of new residential property between co-owners are as follows :- Name Ratio Area in Sq.Ft. Description Mr. Peter S. Pereira 77% 2400 Flat No.301 & 302 adjacent flats @ 1200 Sq.Ft. each on 3 rd floor and two Stilt car parking space Ms Vilma M. Pereira 23% 750 Flat No.402 on 4th floor and one car parking space The aforesaid ratio of allocation between co-owners is already on record of the AO as well as in the valuation rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utually 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 necessary implication prohibited. Tribunal was therefore justified in allowing exemption under s.54 in respect of entire investment in construction of basement, ground floor, first floor, second floor and third floor." 13. In view of the above discussion, we do not find any merit in the action of the AO for decline of claim of deduction u/s.54 in respect of residential flats allotted by builder in consideration of sale of old house. 14. In the result, appeals of both the assessees are allowed. Order pronounced in the open court on this 27th Feb.2015." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 furni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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