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2022 (8) TMI 516 - AT - Income TaxEstimation of profit - estimation of income @18.8% - determination of estimation of average profit earned - HELD THAT - Assessee is a concern of Shakti Group and above said group is carrying on three projects namely Shakti Villa, Shree Rudra and Shakti Lake City. During search revenue had found incriminating material relating to the above projects and Assessing Officer has estimated the profit in the project Shakti Lake City @45.76% and he adopted the same percentage to estimate the profit in the other projects also. AO has estimated the profit in Shree Rudra project also @45.76% and we observe that Ld.CIT(A) considered the submissions and after verifying the records, he determined the average profit earned by the group in the project Shakti Lake City @18.8%. CIT(A) estimated the same percentage of profit in the case of Shree Rudra also, considering the fact that AO also treated all the projects run by the group are similar. Since the Coordinate Bench has adjudicated the issue involved in the case of Shri Parth Vinod Gadhiya and the project of Shakti Lake City and Coordinate Bench sustained the findings of the CIT(A) in the case of above project. Therefore, the project involved in this case are also part of the same and similar projects carried on by the assessee, we deem it fit and proper to sustain the findings of the CIT(A) and we do not find any reason to disturb the findings of the Ld.CIT(A) in this project also.
Issues:
1. Estimation of profit in real estate projects based on incriminating material found during search. 2. Application of profit ratio determined in a related case to the present case. 3. Jurisdictional issues and violation of principles of natural justice. 4. Addition made on account of unaccounted money and application of Accounting Standard-9. Issue 1: Estimation of Profit in Real Estate Projects: The appeals involved the estimation of profit in real estate projects based on incriminating material found during a search operation under the Income-tax Act. The Assessing Officer estimated the profit in the Shakti Lake City project and applied the same percentage to estimate the profit in the Shree Rudra project. The Ld.CIT(A) considered the submissions, verified the records, and determined the average profit earned by the group in the Shakti Lake City project at 18.8%. The Ld.CIT(A) then applied the same profit ratio to the Shree Rudra project, as all projects run by the group were treated as similar. The Tribunal sustained the findings of the Ld.CIT(A) based on a similar case involving Shakti Lake City project, dismissing the appeals filed by both the assessee and the revenue. Issue 2: Application of Profit Ratio from Related Case: The Ld.CIT(A) followed the findings in a related case involving Shri Parth Vinod Gadhiya to determine the profit ratio for the Shakti Lake City project. The profit ratios determined for the A.Y. 2014-15, 2015-16, and 2016-17 in the related case were 0.72%, 28.8%, and 26.8% respectively. The Ld.CIT(A) adopted an average profit ratio of 18.8% for the Shakti Lake City project based on the related case. The Tribunal upheld the Ld.CIT(A)'s decision, as the projects involved in the present case were deemed to be part of the same and similar projects carried out by the assessee. Issue 3: Jurisdictional Issues and Violation of Principles of Natural Justice: The assessee raised several grounds before the Ld.CIT(A) related to the jurisdiction of the Assessing Officer, violation of principles of natural justice, and the addition made on account of unaccounted money. The Ld.CIT(A) dismissed the grounds raised by the assessee concerning jurisdiction and estimated the income at 18.8% similar to the related case. The Tribunal did not find any reason to disturb the Ld.CIT(A)'s findings on these issues. Issue 4: Addition on Account of Unaccounted Money and Application of Accounting Standard-9: The revenue raised grounds related to the addition made by the Assessing Officer on account of unaccounted money and the application of Accounting Standard-9. The revenue argued that the Ld.CIT(A) wrongly applied estimated profit based on the related case, overlooking the fact that the receipts and payments were in the form of unrecorded cash transactions. However, the Tribunal upheld the Ld.CIT(A)'s decision, as the receipts and payments were considered unrecorded cash transactions, and accounting standards were deemed not applicable in this context. In conclusion, the Appellate Tribunal ITAT Mumbai upheld the Ld.CIT(A)'s decision in estimating profits in real estate projects based on incriminating material found during a search operation. The Tribunal dismissed the appeals filed by both the assessee and the revenue, following the decisions in related cases and sustaining the profit ratios determined by the Ld.CIT(A). The issues related to jurisdictional matters, violation of natural justice, and the application of accounting standards were also addressed and decided in favor of the Ld.CIT(A).
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