2002 (12) TMI 209 - AT - Income Tax

Issues Involved:
1. Validity of the assessment u/s 148.
2. Estimation of profit in respect of trading in machinery items.
3. Addition in respect of investment made in purchases for machinery items.
4. Net profit rate on estimated sales in the business of precious and semi-precious stones.
5. Unexplained investment in purchase of precious and semi-precious stones.
6. Unexplained investment, net profit, and further investment for purchasing raw material in M/s Shree Engineering.
7. Addition on account of alleged violation of s. 40A(3).
8. Addition on account of low household withdrawal.
9. Addition on account of unexplained investment in share capital.
10. Addition on account of unexplained loan to Smt. Prameshwari Devi.
11. Addition on account of estimated interest from debtors.
12. Benefit of telescoping on the basis of theory of "investment and expenditure".

Summary:

1. Validity of the assessment u/s 148:
The assessee challenged the validity of the assessment u/s 148, claiming it was time-barred. The Tribunal upheld the assessment, stating that the assessment proceedings commenced only after the issuance of notice u/s 143(2) and not at the stage of notice u/s 148.

2. Estimation of profit in respect of trading in machinery items:
The AO estimated the sales at Rs. 18,00,000 and applied a net profit rate of 15%, resulting in an addition of Rs. 2,70,000. The CIT(A) reduced the turnover to Rs. 16,47,500 and applied a net profit rate of 7.5%, estimating the profit at Rs. 1,23,562. The Tribunal upheld the CIT(A)'s estimation.

3. Addition in respect of investment made in purchases for machinery items:
The AO computed unexplained investment u/s 69 at Rs. 2,10,000. The CIT(A) reduced this to Rs. 60,702. The Tribunal, following its earlier decision, deleted the addition of Rs. 60,702.

4. Net profit rate on estimated sales in the business of precious and semi-precious stones:
The AO estimated the turnover at Rs. 18,00,000 and applied a net profit rate of 10%. The CIT(A) reduced the turnover to Rs. 16,64,000 and confirmed the net profit rate of 10%. The Tribunal, however, directed the AO to apply a net profit rate of 1.5%.

5. Unexplained investment in purchase of precious and semi-precious stones:
The AO made an addition of Rs. 3,32,800. The Tribunal deleted this addition, stating that the assessee was only doing billing business and not making any investment.

6. Unexplained investment, net profit, and further investment for purchasing raw material in M/s Shree Engineering:
The AO made various additions for unexplained investment and profit estimation. The Tribunal restored some issues to the AO for fresh adjudication and deleted others, such as the addition of Rs. 2,10,000, reducing it to Rs. 50,000.

7. Addition on account of alleged violation of s. 40A(3):
The AO made an addition of Rs. 1,00,000 for cash payments violating s. 40A(3). The Tribunal deleted this addition, following its earlier decision that no disallowance is possible when income is estimated.

8. Addition on account of low household withdrawal:
The AO estimated household expenses at Rs. 78,000, making an addition of Rs. 46,848. The Tribunal modified the estimate to Rs. 60,000, giving partial relief to the assessee.

9. Addition on account of unexplained investment in share capital:
The AO made an addition of Rs. 3,000 for unexplained investment in shares. The Tribunal upheld this addition, finding no nexus for claiming telescoping benefit.

10. Addition on account of unexplained loan to Smt. Prameshwari Devi:
The AO made an addition of Rs. 20,000 for a loan given in cash. The Tribunal deleted this addition, accepting the assessee's explanation and verifying the bank entries and sale agreement.

11. Addition on account of estimated interest from debtors:
The AO estimated interest on unexplained payments, making an addition of Rs. 61,536. The Tribunal restored the issue to the AO to determine whether the payments were loans or for purchases.

12. Benefit of telescoping on the basis of theory of "investment and expenditure":
The Tribunal found no merit in the ground taken by the assessee for telescoping benefit due to the absence of any nexus

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