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TMI Blog2021 (7) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in the year of receipt or in the year of completion of the project. The ground No.3 raised by the assessee is with regard to the issue of determination of profit element on the on-money receipts which has to be brought to tax. 3. We have heard rival submissions and perused the materials available on record. We find that there was a search and seizure action u/s.132 of the Act in Ahuja Group and their associates and at the residence of their Directors on 25/06/2015. During the course of search, it transpired that parallel book of accounts of Ahuja Group were maintained and analysis of data found during the course of search was confronted to the promoter of the group who admitted on the fact of receiving on-money in various construction and development projects undertaken by the group. Accordingly, a sum of Rs. 53,10,000/- was earmarked for A.Y.2010-11 representing on-money receipts during the year. The issues under consideration are as under:- (a) whether the said on-money is fully taxable at 100% or only profit element of such on-money could be brought to tax, and if so, what would be such profit element? (b) whether the said profit element of on-money would be chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission, therefore the same rate should be applied to assess the on money in the hands of the assessee also. We find the arguments of the assessee quite convincing and cogent and are inclined to set aside the order of Ld. CIT(A) on this issue and direct the AO to assess the same by applying 12% on Rs. 1,50,00,000/- and that too in the year when the regular income of the assessee is assessed to tax as per the regular method of accounting. In deciding so we find support from the decision of the ACIT vs. ISA Enterprises (supra) wherein it has been held that income has to be assessed on the basis of method of accounting followed by the assessee. The operative part is reproduced as under: "7. We have heard the rival submissions and perused the relevant materials on record. We give the reasons for our decision in the succeeding paragraphs. Having gone through the return of income filed by ISAE for the AY 2008-09 to AY 2014-15, we find that it is following the project completion method. It filed its return of income for the AY 2014-15 on 04.04.2015 declaring total income of Rs. 4,45,00,710/-. The above income has been accepted without any variation by ACIT-20(1), Mumbai in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, we see no reason to entertain the proposed question of law as the entire exercise would be academic. In the above view, the questions (a) to (c) as proposed cannot be entertained." 8. We have mentioned earlier that the return of income for A.Y. 2014- 15 filed by the assessee declaring total income of Rs. 4,45,00,710/- has been accepted by the ACIT-20(1), Mumbai u/s 143(3) of the Act. Therefore, we follow the decisions of the Hon'ble Bombay High Court mentioned at para 7 here-in-above and uphold the order of the Ld. CIT(A)." 9. Similar ratio has been laid down in the various other decisions as referred to by the Ld. A.R. during the hearing and stated hereinabove. We are therefore inclined to hold that onmoney received by the assessee would only be taxable as per the regular method of accounting of the assessee. In the present case the assessee is following project completion method and therefore this income has to be assessed along with the regular income of the assessee in the year of completion of the project. 10. The second issue raised by the assessee is against the order of Ld. CIT(A) sustaining the addition equal to 25% of the on money received. 11. The facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct by considering the value of scrap sales and adhoc disclosure in order to substantiate the offer of 12%. Hence, in our view, the said reference of 35% is not relevant here. 8. In view of the foregoing discussions, we do not find any reason to interfere with the order passed by Ld CIT(A)." 12. Similarly in the case of ACIT vs. Shankar Developers ITA No.6235/M/2012 A.Y. 2003-04 & ors. the co-ordinate bench of the Tribunal has held as under: "13. We heard the parties and perused the record. We notice that the assessing officer has determined the on-money receipts as per the disclosure made by the assessee before the Settlement Commission. There is no dispute that the Settlement Commission has agreed with the contentions of the assessee that the entire amount of on-money receipts cannot be considered as income of the assessee. Accordingly the Settlement Commission has estimated the income from on-money receipts @ 17% in AY 2005-06. Since the assessing officer has estimated the on-money receipts as per the disclosure made before Settlement Commission, we are of the view that the Ld CIT(A) was justified in estimating the income from the on-money receipts @ 17% for this year also by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / entries in the books of account and hence, the addition confirmed @25% of inflation of expenses is without any justification and liable to be deleted. 4. Without prejudice to the above and without accepting and admitting, the Ld. CIT(A) failed to appreciate that as per parallel books of account, the group had incurred overall huge loss and income from on money / inflation of expense was treated as part of unaccounted turnover and estimated income thereof @ 12% in other group entities before the Hon'ble Settlement Commission and the Settlement Commission accepted the same @12% and hence, the income from on money / inflation of expenses / accommodation entries may be estimated @12% as against estimated @25% by the Ld. CIT(A) and accordingly, relief may be given to the appellant. The Appellant craves leave to add, alter, amend all or any of the above grounds of appeal." 9. We have heard rival submissions and perused the materials available on record. We find that the aforesaid grounds have already been adjudicated by this Tribunal in ITA Nos. 2977/Mum/2019 and 2978/Mum/2019 for A.Yrs 2013-14 and 2014-15 in the case of M/s. Bhalachandra Trading P. Ltd., (sister concern of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Accordingly, the ld. AO sought to add the entire amount of Rs. 21,39,275/- on account of inflation of expenses for A.Y.2013-14. We find that the assessee had pleaded on without prejudice basis before the ld. CIT(A) that additional income offered by the assessee's group before the Hon'ble Income Tax Settlement Commission at 12% of inflation of expenses has been accepted by the Settlement Commission vide its order dated 28/06/2018 and requested the ld. CIT(A) to follow the same in assessee's case also. This was made on the plea that the cash which was received back by the assessee after issuance of cheque payments was utilised for incurring various business related expenses. The ld. CIT(A) however, ignored this submission of the assessee and proceeded to make an adhoc disallowance at 25% of inflated expenses for the assessment year under consideration after accepting to the contentions of the assessee that cash received back was indeed utilised for certain business related expenses which were kept outside the books. 4. Aggrieved, the assessee is in appeal before us. 5. We find the facts prevailing in assessee's case and facts prevailing in assessee's group cases who had pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 Nil 1,21,17,250/- (1,21,17,250)/- 2014-15 3,35,00,000/- 1,15,00,000/- 2,20,00,000/- 2015-16 38,80,000/- 65,00,000/- (26,20,000)/- TOTAL 11,97,01,750/- 8,05,17,250/- 3,91,84,500/- 7.2. We find that the assessee's group concerns also had offered 12% of on-money receipts as its income before the Hon'ble Income Tax Settlement Commission. The ld. CIT(A) categorically admitted in his order that the said receipt represents on-money received on sale of flats from which certain expenses were also incurred by the assessee and hence, only the profit element thereof could be brought to tax and not the entire on-money receipts. We find that the ld. CIT(A) accordingly estimated the profit element to be at 25% and restricted the addition to Rs. 55 lakhs as against Rs. 2,20,00,000 made by the ld. AO. Against this finding of the ld. CIT(A), the revenue is not in appeal before us. 7.3. It is not in dispute that assessee had indeed received on-money for sale of flats to the tune of Rs. 2,20,00,000/- during the year under consideration. It is not in dispute that the assessee had incurred certain business expenses out of such on-money which are kept outside the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, which fact is already considered in the aforesaid two grounds. Hence, the ground No.3 raised by the assessee is allowed. 15. In the result, appeal of the assessee is partly allowed. ITA No.2974/Mum/2019 A.Y.2011-12 16. This appeal in ITA No.2974/Mum/2019 for A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-54, Mumbai in appeal No.CIT(A)-54/IT-10387/DCCC-6(2)/2017-18 dated 11/02/2019 (ld. CIT(A) in short) against the order of assessment passed u/s. 153C r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 20/12/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle 6(2), Mumbai (hereinafter referred to as ld. AO). 17. The ground No.1 raised by the assessee is exactly identical to ground No.4 raised by the assessee for A.Y.2009-10 in ITA No.2972/Mum/2019. Hence, the decision rendered for A.Y.2009-10 for ground No.4 would apply with equal force for ground No.1 in A.Y.2011-12 except with variance in figures. 18. The ground No.2 raised by the assessee for this assessment year is similar to the ground No.3 raised by the assessee for A.Y.2009-10 in ITA No.2972/Mum/2019. Hence, the decision rendered for A.Y.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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