JUDGMENT
P.D. Dinakaran, J.
1. The tax case appeal is directed against the order of the Tribunal dt. 18th June, 2002 in ITA No. 1381/Mad/1995 for the asst. yr. 1990-91.
2.1 The Revenue is the appellant. The assessee filed his return of income declaring a total income of Rs. 18,260. Thereafter he also filed a revised return. Subsequently, the assessment was taken up for scrutiny and the AO, while completing the. assessment for the asst. yr. 1990-91 under Section 143(3) of the IT Act (hereinafter referred to as the ‘Act’) on 26th March, 1993, made the following additions :
Rs.
1. Business : Income from tea shop/cold drinks 1,08,000
2. Exemption claimed under Section 53 35,000
3. Other sources :
(i) Investment in purchase of property at 220, Mint
Street, Madras 70,000
(ii) Investment of purchase of jewellery 1,30,560
2.2 Against the order of the AO, the assessee filed an appeal before the CIT(A), who allowed the appeal only in respect of the capital gains and upheld the order of the AO with regard to the investment in jewellery.
2.3 Aggrieved against the order of the CIT(A), the assessee as well as the Revenue filed appeals before the Tribunal. The Tribunal allowed the appeal filed by the assessee and dismissed the appeal filed by the Revenue.
3. Not satisfied with the order of the Tribunal dt. 18th June, 2002, the Revenue has filed the present appeal raising the following substantial questions of law :
(i) Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the assessee was eligible for the benefit of Section 53 or Section 54 of the IT Act ?
(ii) Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the Department had erred in making an addition on account of investment in jewellery without adequate proof ?
(iii) Whether, in the facts and circumstances of the case, the Tribunal was right in casting the burden of proof for source of funds for the jewellery purchased on the Department ?
4.1 Issue No. 1 :
Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the assessee was eligible for the benefit of Section 53 and Section 54 of the IT Act ?
4.2 In this regard it is apt to refer Section 54 of the IT Act, which reads as follows :
54. Profit on sale of property used for residence.–(1) Subject to the provisions of Sub-section (2), where, in the case of an assessee being an individual or an HUF, the capital gain arises from the transfer of a long-term capital asset being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head ‘Income from house property’ (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,–
(i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in the section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under Section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under Section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under Section 139, shall be deposited by him before furnishing such return (such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under Sub-section (1) of Section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of Sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in Sub-section (1), then,–
(i) the amount not so utilised shall be charged under Section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
4.3 It is admitted by the assessee that he sold a house property at Bangalore. Therefore, it is clear that the assessee owned a house property and sold the same. He also admits that he purchased a property at Madras in the name of his wife Smt. Meera out of the money obtained by him by the sale of the property at Bangalore.
4.4 Section 54 of the Act clearly says that if the assessee is the owner of the property, he is not (SIC) entitled for exemption.
4.5 In the instant case, the assessee purchased a house at Anna Nagar in the name of his wife Smt. Meera after selling the property at Bangalore. But the same was assessed in the hands of the assessee. Hence, as correctly held by the CIT(A) as well as by the Tribunal that the assessee is entitled for exemption under Section 54 of the Act.
4.6 The assessee sold a property at Bangalore and purchased a property at Anna Nagar in the name of his wife is only a question of fact. It is a settled law that the factual findings of the Tribunal cannot be disturbed in exercise of the powers under Section 260A of the Act vide M. Janardhana Rao v. Jt. CIT (2005) 193 CTR (SC) 585 : (2005) 273 ITR 50 (SC). Hence, we do not see any question of law much less, substantial question of law arises for consideration. Accordingly, the first question fails and the same is rejected.
5.1 Issue No. 2 :
Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the Department had erred in making an addition on account of investment in jewellery without adequate proof ?
Issue No. 3 :
Whether, in the facts and circumstances of the case, the Tribunal was right in casting the burden of proof for source of funds for the jewellery purchased on the Department ?
5.2 The second and third questions are inter-related with regard to the purchase of jewellery, they are dealt with together.
5.3 It is the case of the assessee that his father-in-law was a landlord and these jewels were gifted to his wives by him. But the explanation offered by the assessee was not believed by the AO as well as by the CIT(A) merely raising a doubt or suspicion holding that the said explanation was not convincing to them.
5.4 On the other hand, the Tribunal accepted the explanation offered by the assessee that the jewellery in question were gifted to his two wives on various ceremonies including the marriage and reversed the findings of the AO as well as the CIT(A) that suspicion itself cannot be a ground to reject the explanation offered by the assessee particularly in the context that the assessee had two wives and their father was a landlord and the jewels in question, namely, 60 sovereigns, were gifted to them during the marriage and on various ceremonies.
5.5 While dealing that suspicion cannot be a ground to reject the explanation, the Punjab High Court, in a case of Indo-European Machinery Co. v. CIT (1955) 28 ITR 493 (Punj) held that :
Where there is a credit entry of an amount in the bank account of one of the partners of a firm, there is a duty on the firm to explain the nature of the credit entry, but the IT authorities cannot come to a finding that the sum represented the firm’s income from some undisclosed sources and deposited in the bank in the name of one of the partners unless there is some material on record to come to such a finding. They cannot come to such a finding on mere suspicion.
5.6 In the instant case also, the Revenue authorities have not placed any convincing materials to disallow the claim of the assessee. The assessee disclosed the purchase of jewellery weighing five sovereigns in each of the assessment years viz., 1987-88, 1988-89 and 1989-90 and also the purchase of diamond jewellery. Hence, accepting the explanation offered by the assessee, the Tribunal correctly allowed the claim of the assessee.
6. For all these reasons, we do not see any reason to interfere with the order of the Tribunal and accordingly, the appeal stands dismissed.