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2020 (4) TMI 844 - AT - Income TaxEstimation of income - on-money received by the assessee on booking of flats and shops in Vesu Project - income offered by the assessee at 8% of the alleged gross receipts - source of payment of cash for purchase of the land - HELD THAT - On an analysis of the record, it would reveal that during the course of search not only details of on-money received by the assessee on booking of flats and shops in Vesu Project was found, but details of certain expenditure, which are not recorded in the books were also found. This included cash payment for purchase of land. CIT(A) has rightly observed that the gross on-money noticed on the seized paper cannot be considered as income of the assessee. There are certain expenditures which were not recorded in the books. Those expenditure must have been made from this on-money. After going through the well reasoned order of the ld.CIT(A), and in the light of judgment of Hon ble jurisdictional High Court in the case of Panna Corporation 2014 (11) TMI 797 - GUJARAT HIGH COURT as well as Koshor Mohanlal Telwala 1998 (9) TMI 106 - ITAT AHMEDABAD-A we are of the view that only element of income embedded in the on-money received by the assessee for booking of flats/shops in Vesu Project is required to be assessed in its hand in all these years. Element of income involved in this on-money - assessee is showing income at 8%, AND CIT(A) is estimating it at 20% - HELD THAT - CIT(A) has also not mentioned any attending circumstances for harbouring a belief that 20% could have been earned from this activity. Thus after taking guidance from the judgment of Kishor Mohanlal Telwala 1998 (9) TMI 106 - ITAT AHMEDABAD-A we deem it proper that the assessee has rightly disclosed the profit element embedded in the gross profit at 8%. Accordingly, we allow the ground of appeal raised by the assessee, and hold that profit which has been directed to be adopted by the ld.CIT(A) at 20% of the alleged turnover should be taken at 8%. The income of the assessee is to be computed thereafter. Unexplained expenditure - HELD THAT - No dispute that during the course of search certain material/loose papers were found exhibiting the fact that the assessee has received cash, over and above, the amounts stated in the booking register. This cash was not accounted for in the books. It has been treated as on-money for sale of flats/shops. Simultaneously certain loose papers were found disclosing the fact that the expenditure were incurred in cash and accounted in the books. CIT(A) made an analysis of this, and then held that the moment assessees income is being assessed at 8% of the gross on-money, then the remaining amount 92% could take care of unexplained expenditure. It can be explained by a simple, viz. an assessee has received ₹ 100/- in cash for sale of flat. Out of that, element of income embedded in this ₹ 100/-has been determined by us at ₹ 8/-. Remaining ₹ 92/- must have been incurred by the assessee for developing that flat. Thus, in other words, the expenditure whose details were found being incurred in cash could be construed as coming out of these ₹ 92/-. Thus, there cannot be any separate addition of unexplained expenditure. CIT(A) has rightly deleted the addition. Addition u/s 68 - unexplained cash credit - HELD THAT - These are not loans rather these are booking amount and the assessee has produced necessary details viz. PAN, addresses etc. CIT(A) correctly after going through the details deleted the addition by recording the following finding in the Asstt.Year 2014-15. The facts in the Asstt.Year 2015-16 are identical. - Decided against revenue
Issues Involved:
1. Admission of additional grounds of appeal. 2. Determination of income from on-money received by the assessee. 3. Deletion of addition on account of unexplained expenditure. 4. Deletion of addition under Section 68 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Admission of Additional Grounds of Appeal: The assessee filed an application to admit additional grounds of appeal, which was allowed on 8.1.2020. The grounds included: - The framing of assessment under section 143(3) r.w.s. 153A based on material found from a third party without recording satisfaction in the case of the third person and the appellant. - The assessment based on material found from a third party, with the contention that the amended provision is applicable prospectively from 01/06/2015. However, the assessee did not press these additional grounds during the hearing, leading to their rejection. 2. Determination of Income from On-Money Received by the Assessee: The main issue was the determination of income from on-money received by the assessee on its real-estate projects, discovered during search proceedings. The AO added the entire gross on-money receipts of ?66.40 crores to the income, while the CIT(A) reduced this to 20% of the gross receipts. The Tribunal, referencing judicial precedents, held that only the profit element embedded in the on-money should be taxed, estimating it at 8%. The Tribunal noted: - The assessee had shown cash receipts totaling ?58.76 crores. - The Tribunal referred to the case of Kishor Mohanlal Telwala, where the profit element was estimated at 8%. - The Tribunal concluded that the profit element embedded in the on-money receipts should be assessed at 8%. 3. Deletion of Addition on Account of Unexplained Expenditure: The AO added ?2,92,76,625/- and ?3,05,00,000/- in the assessment years 2012-13 and 2013-14, respectively, as unexplained expenditure based on seized documents. The CIT(A) deleted these additions, reasoning that the income was being estimated at a percentage of the gross on-money receipts, which would cover the unexplained expenditure. The Tribunal upheld this view, stating: - The gross on-money receipts included unaccounted expenditures. - Once the profit element is estimated, the remaining amount covers the unexplained expenditures. 4. Deletion of Addition under Section 68 of the Income Tax Act: The AO treated certain amounts as unexplained credits under Section 68, adding ?26,49,500/- and ?16,81,600/- in the assessment years 2014-15 and 2015-16, respectively. The CIT(A) deleted these additions, finding that the amounts were booking advances, supported by confirmations, PAN details, and received through account payee cheques. The Tribunal upheld the CIT(A)'s decision, noting: - The initial burden under Section 68 was discharged by the assessee. - The amounts were received through regular banking channels and supported by necessary documentation. Conclusion: The Tribunal allowed the assessee's appeals partly, holding that only the profit element embedded in the on-money receipts should be taxed at 8%. The Tribunal rejected the Revenue's appeals, confirming the deletion of additions on account of unexplained expenditure and unexplained credits under Section 68.
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