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TMI Blog2020 (2) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... ion business, it would be reasonable to estimate 6% of net profit on total on-money receipts - Appeal of the assessee is partly allowed. - I.T.A No.1196/AHD/2013 - - - Dated:- 13-2-2020 - Shri Sandeep Gosain, Judicial Member And Shri O.P. Meena, Accoutant Member For the Assessee : Shri Sapnesh Sheth, CA For the Revenue : Shri Srinivas T. Bidari, CIT(D.R.) ORDER PER O. P. MEENA, AM: 1. This appeal by the Assessee is directed against the order of learned Commissioner of Income tax (Appeals)-I, Surat(in short the CIT (A) ) dated 01.02.2013 pertaining to Assessment Year 2009-10, which in turn has arisen from the assessment order passed under section 143 (3) dated 09.12.2011 of Income Tax Act, 1961 (in short the Act ) by the Income Tax Officer, Ward- 1(3),Surat (in short the AO ). 2. Ground No. 1 to 3: relating to disallowance deduction of ₹ 5,02,25,387 u/s. 80IB(10) are not pressed before us, by the Learned Counsel on the ground that the original return of income was not filed within statutory period for eligible to make claim of deduction under section 80IB(10) of the Act, ex-consequenti, these grounds of appeal are treated as dismissed as not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act. The AO has observed that total receipts as per impounded Page No. 5 to 39 of annexure B-I is at ₹ 10,39,86,000 whereas in the return of income same has been shown at ₹ 5,67,83,632 Hence, gross receipts are shown less by ₹ 4,72,02,368. The AO further observed that during the course of assessment proceedings the assessee has confessed to have received total receipts of ₹ 9,98,17,066 out of total gross receipts of ₹ 10,39,86,000 and balance receipts of ₹ 41,68,934 were not received during year. The AO further observed that the assessee has admitted additional income of ₹ 5.11 crores, in addition to regular income during survey before DDIT(Inv.) Surat for A.Y.2010-11. The assessee company also confessed to have received unrecorded receipts for the customers. The assessee has already claimed the expenses to the extent of ₹ 665 crores. In view of above discussion, the AO brought to tax, the unaccounted receipts of ₹ 4,72,02,368 and made addition to total income. 5. Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). However, the Ld. CIT(A) observed that the assessee has receipts at ₹ 6,90,92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made by the AO at ₹ 4, 72, 02,368 being entire unrecorded receipts was confirmed. 6. Being, aggrieved the assessee filed this appeal before the Tribunal. The learned Counsel submitted that the AO has made the addition of entire on money receipts, without allowing expense which were duly supported by the vouchers which were reflected in the impounded material. It is fact that the assessee has incurred expenditure corresponding to the gross receipts. The corresponding expenditure in cash is the requirement of construction business. The assessee has accordingly made a claim of expenditure by way of filing revised Profit Loss Account by which the expenditure was increased and also the gross receipts were increased. However, the AO based on impounded material computed gross receipts at ₹ 10 29 crores as against the receipts shown in the books of accounts at ₹ 5.67 crores, which was filed before survey under section 133A carried out. However, the AO has failed to considered expenditure so incurred and claimed by way of filing vouchers of the same. The AO has made addition of the difference between gross receipts and receipts in books of accounts of ₹ 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of such receipts, must bear an element of estimation. Further in the case of Abhishek Corporation v. Dy. CIT [1999] 63 TTJ (Ahd.) 651 it was held that Where it was found that assessee had been charging on money /premium in respect of booking of flats, the entire receipts on account of on money /premium charged by the assessee on booking of flats would not be the undisclosed income of the assessee for the block period, but only net profit rate could be applied on unaccounted sales/receipts for the purpose of making the addition. 7. In view of above stated judicial pronouncements, it was contended that only element of profit is to be considered. It was submitted that the net profit disclosed before tax by the assessee for the assessment year under consideration was @4.55% in assessment year 2009-10 and was @ 4.59% in assessment year 2010-11. Therefore, the only net profit should be adopted, and the entire on-money receipts of ₹ 4.72 crores. The learned counsel for the assessee further placed reliance on the decision of ITAT Surat bench in the case of ACIT V. M/s. Mansi Reality Pvt. Ltd. [I.T.A.No. 540/AHD/2016 A.Y. 11-12 dated 13.12.2019, wherein net profit of on-money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are of the considered opinion that only profit elements embedded in onmoney receipts is required to be taxed and not the entire on-money receipts. 10. The learned Counsel has further placed reliance on the decision of Honourable judicial High Court in the case of CIT v. President Industries [2002] 258 ITR 654 (Gujarat)head note reads Section 69B, read with section 256, of the Income-tax Act, 1961 - Undisclosed investments - Assessment year 1994-95 - Whether amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales - Held, yes - During survey it was found that assessee had not disclosed certain sales in books of account - Whether Tribunal was justified in holding that unless there was a finding that investment by way of incurring cost in acquiring goods which had been sold, had been made by assessee and that had also not been disclosed, only net profits embedded in sales, and not wholesale proceeds itself, would be treated as undisclosed income of assessee - Held, yes . 11. In the case of CIT v Abhishek Corporation [2000] 158 CTR 374 (Gujarat) the Hon ble Gujarat High Court of which catch note reads as under: addition on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in confirming the addition of entire on-money receipts amounting to ₹ 4,72,02,368. Therefore, only estimated net profit is required to be taxed. We find that the assessee has shown net profit at 4.55.% for the assessment year under consideration and 4.59% for A.Y. 2010-11. Further, the Hon`ble High Court in the case of CIT V. Abhishek Corporation (supra) has upheld the net profit at 1.31% as declared by the assessee in that case. The net profit rate disclosed at 4.55% during the assessment year under consideration by the assessee in books of accounts and considering the facts that the project undertaken by the assessee comes under deduction of section 80IB(10) of the Act, hence, there may not be any intention to disclose the lower rate of profit. Considering these facts, and taking in to account net profit in construction business, it would be reasonable to estimate 6% of net profit on total on-money receipts of ₹ 4,72,02,368. Accordingly, the AO is directed to tax net profit @6% on total on-money receipts of ₹ 4,72,,02,368. In view of these facts and circumstances, the Ground No. 4 to 6 of appeal are partly allowed. 14. In the result, the appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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