2010 (3) TMI 1252 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 55 lakhs towards unexplained cash credits u/s 68.
2. Adoption of guidance value for sale of property u/s 50C.

Summary:

Issue 1: Addition of Rs. 55 lakhs towards unexplained cash credits u/s 68

The assessee company received Rs. 55 lakhs from M/s Bhuwania Brothers Pvt. Ltd. as an advance for a proposed contract for sale, which was later canceled, and the amount was repaid. The Assessing Officer (AO) treated this amount as unexplained cash credits u/s 68 due to lack of documentary evidence and non-compliance by M/s Bhuwania Brothers Pvt. Ltd. with summons. The CIT(A) deleted this addition, stating that the identity and genuineness of the transactions were established. However, the Tribunal found the explanations offered by the assessee to be self-serving and unsupported by documentary evidence, thus restoring the addition of Rs. 55 lakhs made by the AO.

Issue 2: Adoption of guidance value for sale of property u/s 50C

The AO adopted the guidance value of Rs. 200/sft for the sale of properties, leading to an addition of Rs. 45,37,800/-. The CIT(A) modified this value to Rs. 150/sft. The Tribunal agreed with the assessee's argument that sec. 50C, which pertains to the computation of capital gains, does not apply to the computation of business income from the sale of stock-in-trade. The Tribunal found no material evidence to support the AO's higher sale value and directed the AO to compute the profits based on the actual sale consideration accounted by the assessee.

Conclusion:

The appeal filed by the assessee is allowed, and the appeal filed by the Revenue is partly allowed. The Tribunal restored the addition of Rs. 55 lakhs towards unexplained cash credits and directed the AO to compute the profits on the sale of plots based on the actual sale consideration.