2007 (1) TMI 229 - AT - Income Tax

Tribunal allows appeal, removes unexplained cash addition, taxes profit from unrecorded sales, applies specific rates.

Sher Mohammad. Versus Deputy Commissioner Of Income-tax (Inv.).

The Tribunal partly allowed the assessee's appeal by deleting the addition of Rs. 80,000 as unexplained cash. The Tribunal held that the cash came from ... Block Assessment Issues involved: Cross-appeals by assessee and Revenue regarding order passed by CIT(A) for block period of asst. yrs. 1990-91 to 1999-2000 and upto 29th July, 1999.Assessee's Appeal:The appeal was time-barred by 200 days, but delay condoned due to valid reasons. Additional ground raised regarding surcharge under s. 158BC, which was admitted. Tribunal held in favor of assessee based on Special Bench order, surcharge cannot be levied retrospectively. Other grounds not pressed by Authorized Representative. Addition of Rs. 80,000 on unexplained cash was disputed.Regarding unexplained cash addition, AO made the addition as the claim of Rs. 80,000 from cash sales not recorded in books was not made during search. Tribunal found that short stock was found, and GP rate on sales made outside books was upheld by CIT(A), indicating sales outside books were proven. As sale proceeds would be available with assessee, the explanation that cash of Rs. 80,000 came from sale proceeds was accepted. Addition of Rs. 80,000 was deleted.Revenue's Appeal:First ground against direction to AO for addition only for profit element in unrecorded sales was dismissed. Tribunal held that profit element in unrecorded sales should be taxed, not entire sale proceeds. Second ground against direction to adopt local PWD rates and allow deduction for self-supervision was also dismissed. Tribunal upheld CIT(A)'s decision to apply PWD rates, scale down CPWD valuation by 20%, and allow 10% deduction for self-supervision.In conclusion, Revenue's appeal was dismissed, and assessee's appeal was partly allowed.