2022 (4) TMI 1481 - AT - Income Tax

Addition of total on money received in cash - CIT-A estimating the profit @ 20% of on-money receipts - HELD THAT - Keeping in view the binding judgement, the ld CIT(A) held that only certain percentage of onmoney receipts should be taken as profit. Ongoing through the overall facts of the case and case laws cited, ld CIT(A) has considered it reasonable to determine 20% of on-money as profit. Therefore, ld CIT(A) restricted addition to Rs.38,95,000/- ( being 20% of Rs. 1,94,75,000/-). Based on these facts and circumstances, we do not find any infirmity in the order of ld CIT(A), therefore, we are of the view that the order of CIT(A) is just and proper and calls for no interference. We therefore uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue. Addition u/s. 68 r.w.s 115BBE - unexplained cash receipts - HELD THAT - Section 68 states that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation or explanation about the nature and source thereof or the explanation offered by him is found not satisfactory, the sum credited may be charged to income tax as the income of the assessee of that previous year. In this case, the director of the assessee company made disclosure on the basis of documents found and impounded during the course of survey, which is admitted the AO in the assessment order itself. The Director further stated that the income was earning from the project named Florence Fiona. The income from that project has been assessed as business income. Therefore, the additional income credited by the assessee is from the business activities. The assessee has offered explanation and AO had not given any reason for finding it non-satisfactory. When the disclosure was based on documents found during the course of survey, additional income is disclosed on the basis of such documents and on such additional income was stated as earned from specific project, the assessee's explanation cannot be held as non-satisfactory. Therefore, ld CIT(A) observed that the findings of the AO considering the same u/s. 68 r.w.s 115BBE of the Act is not found justified. Set off of carried forward of losses on account of unabsorbed depreciation - as contended that it has carried forward unabsorbed depreciation of previous years, which was claimed in the return of income as per provisions of the Act but the same was not allowed by the AO - HELD THAT - CIT(A) directed the AO to allow the carried forward unabsorbed depreciation to the assessee against the income of the current year. We note that ld CIT(A) passed a detailed and speaking order and we do not find any infirmity in his order. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed.

Summary

Issues Involved:
1. Estimation of profit on "on-money" receipts.
2. Addition of unexplained cash receipts.
3. Treatment of addition under Section 68 read with Section 115BBE.
4. Allowance of carried forward unabsorbed depreciation.

Detailed Analysis:

1. Estimation of Profit on "On-Money" Receipts:
The Revenue challenged the decision of the CIT(A) to estimate the profit at 20% of "on-money" receipts, arguing that the assessee could not produce evidence for the expenses incurred in relation to the "on-money" receipt of Rs.1,94,75,000/-. The CIT(A) restricted the addition to Rs.38,95,000/- (20% of Rs.1,94,75,000/-) without verifying the expenditure incurred against the unexplained cash receipts or calling for a remand report from the AO. The Tribunal upheld the CIT(A)'s decision, noting that it is a settled law that only a certain percentage of "on-money" should be considered as income for taxation purposes. The Tribunal cited precedents where similar profit percentages were applied and found the CIT(A)'s estimation reasonable.

2. Addition of Unexplained Cash Receipts:
The AO added Rs.1,94,75,000/- as unexplained cash receipts based on seized documents indicating "on-money" transactions related to the booking of a flat. The assessee contended that the documents were not related to them and that only the profit element should be taxed. The CIT(A) restricted the addition to 20% of the "on-money" receipts, which the Tribunal upheld, finding no infirmity in the CIT(A)'s order.

3. Treatment of Addition Under Section 68 Read with Section 115BBE:
The AO assessed an income of Rs.14.85 Crores under Section 68 read with Section 115BBE, treating it as unexplained cash credits. The CIT(A) treated this addition as business income, noting that the income was disclosed based on documents found during a survey and was related to specific projects. The Tribunal agreed with the CIT(A), stating that the AO did not provide reasons for finding the assessee's explanation unsatisfactory. The Tribunal found that the additional income disclosed was from business activities and should not be treated under Section 68.

4. Allowance of Carried Forward Unabsorbed Depreciation:
The AO did not allow the set-off of carried forward unabsorbed depreciation against the income assessed under Section 68 read with Section 115BBE. The CIT(A) allowed the set-off, relying on the judgment of the Gujarat High Court in CIT-II vs. Shilpa Dyeing & Printing Mills (P) Ltd., which held that current year losses could be set off against undisclosed income declared in a survey. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in allowing the set-off of carried forward unabsorbed depreciation against the current year's income.

Conclusion:
The Tribunal dismissed the Revenue's appeals for both AY 2014-15 and AY 2016-17, upholding the CIT(A)'s decisions on all issues. The Tribunal found the CIT(A)'s estimation of profit on "on-money" receipts, treatment of unexplained cash receipts, and allowance of carried forward unabsorbed depreciation to be reasonable and in accordance with the law.