Capital Gains On Silver Articles Wrongly Estimated By I-T Authorities: Chennai ITAT Deletes Addition & Penalty Levied U/s 271(1)(C)
On finding that lower authorities had erred in computing the estimated gain on silver articles, the Chennai ITAT deleted the addition made by CIT(A) and levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961.The Bench of the ITAT comprising V. Durga Rao (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) observed that, “the shortage of 693.85 grams in gold jewellery is...
On finding that lower authorities had erred in computing the estimated gain on silver articles, the Chennai ITAT deleted the addition made by CIT(A) and levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961.
The Bench of the ITAT comprising V. Durga Rao (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) observed that, “the shortage of 693.85 grams in gold jewellery is well covered by the stated purchase of 1950 grams of gold jewellery by the assessee. This being the case, the estimation of gains on silver articles as computed by lower authorities could not be said to be perfect and accurate one. Considering this fact, it is not a fit case for imposition of penalty as done by CIT(A) in the impugned order.” (Para 4)
As per the brief facts of the case, the assessee belongs to Challani group of concerns which was subjected to search action. The returned income of Rs.9.39 Lacs as filed by the assessee was assessed at Rs.187.92 Lacs which travelled up to the level of Tribunal wherein the assessment was restored back to AO for re-adjudication after bringing on record the incriminating material, if any, found in the course of search. The AO reframed assessment at Rs.170.83 Lacs after certain additions of excess gold and diamond jewellery and also determined long term capital gain on silver articles and jewellery for Rs.21 Lacs.
The CIT(A) allowed partial relief against gold jewellery addition but levied penalty of Rs.4.54 Lacs on the deficit of silver.
The Bench noted that there is actually shortage of silver article to the extent of 97.735 Kg in comparison to silver articles declared in the wealth tax returns filed by the assessee group.
The Bench observed that the assessee has purchased 1950 grams of gold jewellery and 35.570 carats of diamond jewellery out of sale proceeds of silver articles. If the credit of the same is allowed, there would be no excess gold and diamond jewellery in the hands of the assessee.
Therefore, on finding that computation done by authorities was not perfect, the ITAT allowed the assessee's appeal.
Counsel for Appellant/Taxpayer: D. Anand
Counsel for Respondent/Department: AR.V.Sreenivasan
Case Title: Padam J. Challani verses ACIT
Case Number: ITA No.602/Chny/2023