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TMI Blog2020 (11) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... d from customers found during the search. AO will also verify availability of cash flow with the assessee group as stated above and if any shortage is noticed a further addition to the extent of such shortage may be further added in the hands of appellant - we set aside the issue to the AO for limited purpose of quantification of undisclosed income on the basis of incriminating materials/evidences and examining the availability of cash in the group. Ground 1 is allowed for statistical purpose. Income recognition - whether appellant has been following the Project Completion Method to recognize the income from the projects and hence on money is to be taxed in the year of completion of the relevant project from where the on money has been earned? - HELD THAT:- As perusing the material on record including the decision of the coordinate bench in the case of Runwal Homes Pvt Ltd. [ 2017 (12) TMI 1216 - ITAT MUMBAI] on this issue, since out of three projects two already completed during the year and recorded receipts already offered to tax in this year, hence unrecorded income shall also be taxable on all the units which are offered to tax in this year which has been rightly done so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15-16. 2. The grounds raised by the assessee are under:- i. On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of ₹ 16,74,14,102/- as alleged on money received on sale of flats, without considering the facts and circumstances of the case ii. On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not appreciating the fact that the appellant is following the Project Completion Method to recognize the income from the projects, hence on money is to be taxed in the year of completion of the relevant project from where the same has been earned. iii. On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of ₹ 4,48,03,316/- as allegedly lower income offered on project completed, without considering the facts of the case. iv. On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O made addition based on statement recorded during the course of search and subsequent letters filed by the assessee during the course of search. The AO estimated the undisclosed income by comparing the sale rate of flats/shops sold during the same period in the projects in the group concern. The AO framed assessment at Rs, 34,73,46,860/- vide order dated 30,12,2016 passed u/s 143(3) of the Act as against the returned income of ₹ 12,27,61,810/- 5. The issue raised in the 1st Ground is against the confirmation of addition of ₹ 16.74 crore on account of on money taken on sale of flats sold during the financial year 2014-15. The amount has been worked out during the course of search and statement of various employees, which were confronted to Mr Sandeep Runwal a director of the assessee who has admitted the same in the statement recorded during the course of search. Mr Sandeep Runwal a director of the assessee has admitted a sum of ₹ 17.94 crore out of which only ₹ 1.20 crore was offered to tax by the assessee and balance 16.74 crore was added by the AO in the assessment framed as the assessee has failed to return the said income in the return of income file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the ground no 1 may be allowed as being covered by the order of the coordinate bench in the case of sister concern as stated hereinabove. 9. We have heard both the parties and perused the materials/records as placed before us including the coordinate bench decision in the case of M/S Runwal Homes Pvt Lts ITA No. 5621/M/2017, AY 2015-16. Where is finding In this case before us an adhoc rate of ₹ 25,000/- in case of shops and ₹ 14970/- in case of flats were applied to arrive at on-money amount. In the above case Hon ble Coordinating Bench has deleted the addition as the same was purely on presumptions and estimation without any supporting evidences as the AO has applied adhoc rate on all the flats sold without any materials or finding as to the unrecorded asset / unrecorded expenses found to support the said addition. The operative part of the decision is reproduced as under:- 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 openin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flats and @26000/- per sq. ft. for shops. There has been search and seizure in the case of the assessee. If the assessee would have received consideration much more than what is stated in the documents, for which no evidence is found during the course of search, in our opinion, no addition can be sustained. There cannot be any agreement against the statute. The assessee agreed for declaration of the income for which no material was found merely to avoid protracted litigations with the department and buy peace. The assessee has earned income; the onus is on the Revenue to prove that the income has accrued to the assessee. Even otherwise also since there has been a search in the case of the assessee, if the assessee would have earned such income there must have been some evidence found 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 book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the returns of the assessee , director of the Assessee Mr Sandeep Runwal and other sister concerns. The ld AR referred to a few questions and answers in the statement recorded of the contractor Shri Himmatmal G. Patel Senghani. Further the contractor in his statement also admitted that the payments were made by the assessee and its group companies over the year. For the sake of ready reference we would like to reproduce the relevant portion of the said statement as under:- Q.13 Please go through page no. 36 to 64 of Annexure A1 and comment on the same. Ans. These pages contain the details of payments made to labourers and labour contractors for various projects. Payments to labourers are made in cash whereas payments to sub-contractors are made in cheque. Q.14 Please give exact detail and source of cash payments made to the labourers. Ans. Sir, in case of all the works being executed, source of cash payment is withdrawal from bank which are duly reflected in my books of accounts. But, in case of project 'Runwal Anthurium' being developed by M/s. Runwal Developers P. Ltd., major source of cash payment is cash received from Runwal Group against contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxed in the year of completion of the relevant project from where the on money has been earned. 14. The facts are that the assessee is following project completion method to recognize income from sale of units. During the year under consideration the following projects were going on:- 1. Runwal Anthurium Commercial 2. Runwal Anthurium Residential 3. Runwal Symphony 4. R Square During the year, Runwal Anthurium Commercial as well as residential and Runwal symphony were completed and income offered in the return filed for A Y 2015-16. The assessee claimed that on-money received on sale of flats can not be assessed to tax in the year of receipt but in the year of completion as the assessee is following project completion method when income from the said project is offered to tax. Out of three projects two projects namely Runwal Anthurium and Runwal Symphony completed during the year and accordingly income offered to tax. As far as year of taxability of on money receipts from other project i.e. R Square is concerned , it can not be taxed in this year. 15. Ld AR vehemently submitted before the bench that the on money has to be taxed in the year of completion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the decision of the Hon 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 Raheja (P) Ltd. 102 ITD 314 (Mum), we delete the addition during the impugned assessment year and direct the AO to make the addition in respect of these on-money in the respect assessment years in which the projects have been completed. 17. We, therefore, respectfully following the coordinate bench decision, allow the ground no.2 in favour of the assessee. The AO is directed accordingly. 18. The issue raised in the ground no. 3 to 5 are inter-related and are being disposed of and decided together. The issue is against the confirmation of addition of ₹ 4,48,03,316/- by the ld. CIT(A) as made by the AO on the ground that the income offered as per books of account on the completed projects is lower vis a vis income estimated as per tentative profit and loss account prepared at the time of search. 19. The facts in brief are that in these grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The case of the assessee is squarely covered by the decision of the coordinate bench in the case of M/S Runwal Homes Pvt Ltd. (Supra) wherein identical issue has been decided by the tribunal in the case of sister concern(supra). The operative part is extracted below: We have perused the explanations. It is not a case where the assessee has not explained as to why there is difference in the estimated profit with the actual profit as per the audited books of account. For each and every difference in respect of the actual cost incurred as well as the estimated cost taken at the time of the search while working out the profit from this project at ₹ 25.46 crore, the assessee has explained and filed a reconciliation how the actual cost incurred by the assessee as per the audited Profit loss account differ from the cost estimated at the time of the search. It is notdenied that as on the date of the search, while estimating the profit At ₹ 25.46crore, the assessee has shown the sales at ₹ 98.83 crore and estimated expenses at ₹ 73.37 crore but subsequently, as per the audited accounts the sales consideration realized by the assessee also increased from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of ₹ 1,23,67,631/- from the business income on the ground that the said expenses were claimed by the appellant against the Income from House Property, without considering the facts and circumstances of the case . 24. The facts are that the assessee company is engaged in the business of building, developing of properties, running and managing mall, more particularly, R-Mall at Mulund Mumbai. During the year under consideration, the assessee had was leased out the immovable properties and earned leave and licence fees of ₹ 5,30,46,965/- The assessee has credited the same to its business and profit and loss account. While computing the income of the house property, the assessee reduced the property tax and standard deduction @ 30% deduction towards Repairs charges as per the provisions of section 24 of the Act and paid tax accordingly. Accordingly to the AO, the assessee, while computing its income from business, has failed to apportion and disallow the expenses debited to the profit loss account on account of 30% repairs allowed by the statute as a standard deduction against the House Property Income. Accordingly, the assessee should have suo moto apportioned cert ..... 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