9911796707
TMI Blog2018 (7) TMI 1814X X X X Extracts X X X X X X X X Extracts X X X X ..... rch and to make addition in the year in which project is complete. In the result, the appeal filed by the assessee is partly allowed, for statistical purpose. X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 18,82,59,020 towards on-money receipts from sale of flats, failed to disclose undisclosed income in the return of income filed for the year. Therefore, called upon the assessee to explain as to why addition shall not be made towards undisclosed income admitted during the course of search. In response, the assessee, vide letter dated 23-09-2016 submitted that it has admitted undisclosed income of ₹ 18,82,59,020 towards on-money receipts from sale of flats based on certain incriminating documents found during the course of search; however, no disclosure has been made in the return of income owing to the fact that the assessee is following project completion method for recognition of revenue and the project from which the assessee has received on-money, has not been completed during the financial year relevant to AY 2015-16. Therefore, additional income has not been disclosed in the return of income for the impugned assessment year. The assessee further submitted that although the Managing Director of the company has admitted undisclosed income of ₹ 18,82,59,020 during the course of search in statement recorded u/s 132(4), such admission has been made under coe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the books of account as per ERP system is more than the amount recorded in application for booking flats. The quantification has been done by taking average rate of ₹ 21,400 per sq.ft. and compared it with the rate appeared in the books of account to determine difference, but fact remains that while comparing the rate as per books of account, the AO has taken average rate of sales by dividing the total carpet area of the flat ignoring the fact that if the saleable area of the flat is taken, the average rate works out to much more than the rate quantified by the AO. The assessee further submitted that although it had admitted additional income for AY 2015- 16, did not disclose such undisclosed income owing to the fact that it is following project completion method for recognition of revenue and the project on which on-money has been received is not completed during the under consideration. Therefore, the AO was erred in making addition towards on-money on the basis of estimated sale price and also ignoring the fact that the asssessee is following project completion method for recognition of revenue. 6. The CIT(A), after considering relevant submissions of the assessee and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs each, which were unaccounted. For clarity, the relevant statement has been reproduced as under: "Q.No.45 I am showing you page number 35 of Annexure A-4, impounded during the course of survey from the site office of Runwal Symphony in which few things are written in your handwriting, please confirm? Ans. Yes, I confirm the same. It is the cost sheet given to the new client during visit of this site. Q.No.46 I am showing you page number 13 of Annexure A-2 impounded impounded during the course of survey from the site office of Runwal Symphony in which few things are written in your hand writing. Please confirm the same ? Ans--, Sir, I confirm that the details or, page no 33 of Annexure A-2 is written in mi/ handwriting and has been shown to me. Q No 47 Please explain the detail written in your writing on page 13: of Annexure A-2? Ans. Sir, as I told you in the answer to Q No 41, I was instrumental in making sale of the flat no A-904 co Chetna Chedda, sir, the details are reading the final deal of sate of flat wherein it is agreed that the total cost of flat is ₹ 2,36,98,500/- based on the rate of ₹ 15000 per square feet as per carpet area, further the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um. I have accepted the money from Shri Sanjeeva Rao, a real real esate broker / channel partner. Q.9 What is the proportion of on-mancy in sate price of flat. Ans The ratio of cash, to total agreed price, is decided and determined by Mr Sandeep Runwal. I have no knowledge about the rate or percentage of cash component in the agreed sale price." 9. Likewise, statement of Shri Klshore P Jain, Head of Taxation, Runwal group was also recorded about the on-money and he too confirmed about receipt of the same. Finally, the statement of Shri Sandeep Runwal, Director of the company was recorded on oath, wherein he agreed of applying higher sale rate in respect of ail flats and consequently, offered additional income to the tune of ₹ 38,06,61,255/- as under: Particulars of sold premises / projects Name of the assessee in whose name such income is offered Additional income so offered (in Rs.) Financial year in which income is accruing Runwal Anthuriumshops Runwal Devlopers Pvt Ltd 7,36,15,000 2013-14 R. Square Runwal Developers Pvt Ltd 1,32,40,000 2014-15 Runwal Anthurium Runwal Developers 6,69,62,205 2014-15 residential premises Pvt Ltd Runwal Anthuriu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vasive reply and furnish your clear cut explanation on the above mentioned findings. Ans. Your above observation is based on comparison of price of fiats sold in the project Kunwal Elegante, Runwal Anthurium. There are various reasons for such variations, i.e. marketconditions, terms of payment, negotiating power of the customer, requirement of liquidity & location of the flat i.e.garden view, road view etc, 1 state that it is not true that we have taken on money in case of instances where agreement value is lower in comparison to other fiats in the Elegante and Anthorium project. Further, I would like to state that as mentioned earlier there are genuine delays for entering bookings into the ERP system. I also like to confirm that no money is charged separately from customers for various amenities/ parking. However at the same time I do not deny acceptance of on money in some cases due to liquidity crunch in the group und because of our concern of not to lose customers in a buyer's market. At present,I am not in position to identify such instances where cash component is involved in the total sale consideration. But at your insistence and in order to buy peace of mind I a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to reasons mentioned above I confirm the amount of ₹ 63,39,52,372/- (which as per Annexure-1), as the on money accepted in the projectsRrunwal Green (M/s Runwal Homes Private Limited), and the same has been offered as additional income over and above the income declared in the M/s Runwal Homes Prviate Limited. Here I want to state that Live project is under the proprietorship of Mr. Subhash Runwal." 12. On tht: basis of the above declaration at the time of search, the AO during the course ol assessment proceedings confronted assessee with these facts and asked the assessee as to why the income may not be taken accordingly. In response, the assessee vide letter dated 23.09,2036 admitted that the amount of Rs I8.82,59,020/- is liable to be added in their hands for the current year in respect of Runwal Elegante project at Oshiwara Andheri West for the A.Y. 2015-16. Relevant declaration made by the assessee is appearing in para 6, page 16 of the assessement order . 13. From the above it is quite clear that the assessee has very clearly and categorically accepted the fact of receipt of on money on sale of flats . Further the employee of the assessee have also accepted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for booking is lesser than the amount recorded in the books of account. Therefore, quantifying undisclosed income by taking an average rate and applying that rate for all flats is incorrect. The Ld.AR further referring to the paper book page 60 submitted that in four flats in Runwal Elegante, the sale value as per books of account is higher than the amount shown in application for booking. Even for these four flats, the AO has determined difference by adopting sale rate of ₹ 21,400 per sq.ft., but the fact remains that the assessee has charged ₹ 23,000 to ₹ 32,000 per sq.ft for these flats, whereas the AO has adopted ₹ 21,400 per sq.ft. and then compared that rate to average rate worked out on the basis of saleable area of the flat. The Ld.AR further submitted tht when the assessee is following project completion method for recognition of revenue, the total receipts including on-money receipts should be taxed in the year in which the project is completed in all respects, whereas the AO has taxed total on-money in the year of admission by the assessee. In this regard, he relied upon various judicial precedents including the decision of Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is selling flats for higher rate, whereas while recording sale consideration in the books of account in ERP system, showing much lesser sale consideration. The AO further observed that the sale price per sq.ft. in Runwal Elegante is between ₹ 23,000 to ₹ 32,000 per sq.ft. whereas in the books of account the assessee has considered much lesser sale price which is ranging between ₹ 12,000 to ₹ 21,600. Accordingly, the AO has determined undisclosed income by taking average rate of ₹ 21,400 per sq.ft. and applied such rate for 21 flats sold in project Runwal Elegante to determine undisclosed income of ₹ 18,82,59,020. It is the contention of the assessee that undisclosed income quantified during the course of search is under mistaken facts and also under coercion without referring to necessary documents. Therefore, only on the basis of admission during the course of search in statement recorded u/s 132(4), addition cannot be made, more particularly, when the assessee has demonstrated with evidence that in many cases, the amount shown in the books of account is much higher than the amount recorded in incriminating material being applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee also. The assessee never disputed the fact of receipt of onmoney; however, disputed the manner in which the undisclosed income has been quantified. Therefore, we are of the considered view that the AO was incorrect in quantifying undisclosed income by adopting average rate and then applying such rate to all flats sold in the project without any evidence found as a result of search. This finding of ours is supported by the decision of ITAT, Mumbai Bench "D" in assessee's group company, M/s Runwal Homes Pvt Ltd in ITA No.5621/Mum/2017 dated 20-12-2017, wherein under similar set of facts, where the assessee is also a party to the search proceedings, after considering relevant materials, the co-ordinate bench held that on-money receipt should be worked out on the basis of evidence found as a result of search. The relevant portion of the order of ITAT is extracted below:- "7. We have heard the rival submissions and carefully considered the same along with the orders of tax authorities below. The first issue involved in this ground before us is whether the Assessing Officer was correct in law in adding a sum of ₹ 63,39,52,372/- as alleged on money received on sale of the flats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y paid the tax. Now the question before us remains to the disputed addition amounting to ₹ 62,67,02,372/- The total on-money on the basis of the seized material found during the course of search relate to the period of the booking done from March 2014 to November 2014. The amount so worked out comes to ₹ 19,94,78,821/- as detailed under:- On-money of flats as per seized material - ₹ 13,44,68,725/- On-money of shops as per seized material - ₹ 6,50,10,096/- Out of the said sum ₹ 72,50,000/- has already been confirmed by us in the preceding paragraph, therefore, on-money on flats as per seized material remains at ₹ 19,22,28,821/-. We noted that the Assessing Officer on the basis of seized material found during the course of search relating to the period of March 2014 to November 2014 took the view that the assessee might have received on-money in all the bookings and therefore, he estimated cash portion on other units sold by taking the highest rate of sale of other units although no on-money evidence were found during the course of search. The Assessing Officer while confirming the addition relied on the statements of the staff of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited. Here / want to state that Olive project is under the proprietorship of Mr. Subhash Runwal." We have gone through the answer to question nos. 16, 17 and 18. We noted that in reply to question no.16, Director of the assessee company stated that initially the project was joint venture with HDFC Limited. Subsequently, when the market has become more competitive and due to the opening of the forest land they had to sell aggressively, in order to achieve the numbers from the calendar year 2014 and, therefore, in order to accommodate few customers who wanted to pay part consideration in cash, they accepted cash for few units. He has categorically stated that prior to that date they have never accepted any cash. In reply to question no.17, he has categorically stated that he did not agree that in all cases cash bas been accepted over and above the agreement value but he agreed to surrender the difference as its additional income over and above the regular income for the respective years as on-money to avoid protracted litigations with the department and buy peace. On that basis the total on-money received was worked out at ₹ 63,39,52,372/- and added to the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that either the assessee has made investment outside the books of account or has spend this income in one way or the other. Income tax is leviable u/s. 4 of the I.T Act on the real income. If income has not accrued or received by the assessee, the assessee cannot be burdened for income tax liability. From the documents available on record, it is apparent that the Assessing Officer has estimated the booking amount and on that basis assumed that the assessee would have received the on-money. He made the presumption as if the assessee has sold all the flats @15750/- per sq. ft and the shops @26000/- per sq. ft. From the documents in the booking, it is evident that different flats and different shops have been booked at different rates by the assessee. From page 443 of the paper-book, as found during the course of search, the assessee has given discount on the bookings at different rates to different customers. We noted that in respect of two shops although the base rate has been mentioned @21,000 per sq. ft, the assessee has given discount around ₹ 4150 per sq. ft. and booked the shops @17500 per sq. ft including the club charges of ₹ 750/-. Similarly, in respect of flat a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the flats and the shops in respect of which the evidence were found for receipt of on-money by the assessee were not completed during the year. Since these projects were not completed during the year, the amount received by the assessee is merely a booking amount i.e. only the advance received for booking of the flat/shop. These amounts therefore in our view cannot be added during the impugned assessment year. We are of the view that the project completion method is one of the method of accounting where the expenses identifiable with the project are to be allowed in the year when the project is completed. Similarly, the receipt from the project is to be accounting for as income only in the year in which the project is completed. Since both the project for the flats as well as shops were not completed during the year therefore, respectfully following the decision of the hfon'ble Supreme Court in the case of CIT vs. M/S Bilahari Investment (P) Ltd 299 ITR 1 (SC), Special Bench decision of the Mumbai Benches of the Tribunal in the case of Wall Street Construction Ltd. vs. JCIT 101 ITD 156 (SB)(Mum); ITO vs. Panchvati Developers 115 TTJ 139 (Mum) and that of JCIT vs. K ..... X X X X Extracts X X X X X X X X Extracts X X X X
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