1992 (5) TMI 51 - AT - Income Tax

Acquisition Proceedings, Assessing Officer, Assessment Proceedings, Capital Gains, Closing Stock, Factory Building, Fair Market Value, High Court, Registered Valuer, S. 10

Summary

Issues:
1. Addition of Rs. 1,11,000 as income from undisclosed sources.
2. Valuation of property sold by the assessee for calculating profit under section 41(2) and capital gains.

Analysis:

Issue 1: Addition of Rs. 1,11,000 as income from undisclosed sources

The Assessing Officer made an addition of Rs. 1,11,000 as income from undisclosed sources due to various defects in the accounts of the assessee. These defects included discrepancies in the declared gross profit and sales figures, absence of consumable stores in closing stock, and undervaluation of machinery items. Additionally, the Assessing Officer found that the cash sales of machineries worth Rs. 1,11,000 were fictitious as the assessee failed to provide necessary details like names of buyers, challans, or mode of transport. The Income-tax Appellate Tribunal (ITAT) considered the arguments presented by the assessee regarding the addition. The ITAT noted that the assessee initially objected to the addition but later argued that if the cash sales were not considered genuine, the gross profit rate on reduced sales should be accepted. The ITAT upheld the addition of Rs. 1,11,000, as directed by the Income-tax Officer (ITO) and the first appellate authority, based on the findings and contentions presented during the proceedings.

Issue 2: Valuation of property sold by the assessee

The Assessing Officer valued the property sold by the assessee at Rs. 18,54,976 for calculating profit under section 41(2) and capital gains. However, the competent authority initiated acquisition proceedings against the purchaser and referred the valuation to the Government valuer, who estimated the fair market value at Rs. 18,31,000. Subsequently, the ITAT accepted a lower valuation of Rs. 9,98,334 provided by another valuer. The first appellate authority deleted the addition based on the cancellation of the acquisition order by the ITAT. The ITAT upheld the decision of the first appellate authority but added a condition that the order would be modified according to the directions of the High Court once the appeal filed by the Revenue against the ITAT's decision in the acquisition case is decided.

In conclusion, the ITAT upheld the addition of Rs. 1,11,000 as income from undisclosed sources and supported the valuation of the property sold by the assessee, subject to potential modifications based on the High Court's decision in the acquisition case.