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TMI Blog2025 (3) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... issues in other years. The ITA No. 762/SRT/2024 is taken as 'lead case'. 2. The grounds of appeal raised by the revenue in ITA No.762/SRT/2024 are as under: "1) On the facts and in the circumstance of the case and in law, the Id. CIT(A) has erred in restricting the addition of Rs. 24,45,10,934/- made by the AO on account of unaccounted income of the assessee to Rs. 12,26,05,467/- by observing that it would be just and reasonable to take 50% of the gross cash receipt despite the fact the assessee has not furnished documentary evidences in support of the claim the expenses and to prove genuineness of any expenses incurred outside of the book of the account and the addition has been made on the basis of incriminating details/documents recovered during the search proceedings. 2) In addition and without prejudice to the ground no. 1 above, on the facts and in the circumstance of the case and in law, the Id. CIT(A) has erred in restricting the addition of Rs. 24,45,10,934/- made by the AO on account of unaccounted income of the assessee to Rs. 12,26,05,467/- by observing that it would be just and reasonable to take 50% of the gross cash receipt despite the fact that as per the seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case and in law, the Ld. CIT (A)-4, Surat ought to have upheld the order of the Assessing Officer." 3. The grounds of appeal raised by the assessee in ITA No.41/SRT/2024 are as under: "1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(Appeals) has erred in confirming the addition of Rs. 12,16,05,467/- on account of profit element of on-money receipts of Rs. 24,32,10,934/- instead of profit of Rs. 10,79,13,346/- on admitted onmoney of 19,28,12,916/- which is declared in the return of income. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(Appeals) has erred in confirming addition of Rs. 77,44,500/- (being 50% of Rs. 1,54,89,000/-) as profit element of on-money receipts without considering that the said plots were not sold to the parties mentioned in the loose papers. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(Appeals) has erred in confirming addition of Rs. 1,44,26,328/- (being 50% of Rs. 2,88,52,656/-) as profit element of on-money receipts without considering that the said plots were not sold to the parties mentioned in the loose paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not pressed. 8. Brief facts of the case are that the assessee is a partnership firm engaged in the business of real estate development. It belongs to the Laxminarayan Jethmal Garg group of Vapi. A search and seizure action u/s 132 of the Act was carried out in case of the assessee on 08.12.2021. Additionally, a search and seizure operation u/s 132 of the Act was also carried out at the residence of Shri Kanubhai M. Patel, where various diaries, documents and loose papers belonging to assessee were found and seized. The assessee filed e-return u/s 139 of the Act for AY.2021-22 on 10.12.2021, declaring total income of Rs. 5,31,89,271/-. The case was centralized with the ACIT, Central Circle - 1, Vapi who issued various notices u/s 143(2) and 142(1) to the assessee. As stated earlier, various documents, diaries and loose papers were found and seized during the search proceedings. The Assessing Officer (in short, 'AO'), on verification of page no.7 of Annexure - 54, found that assessee had received cash of Rs. 8,61,04,656/- on sale of plots in Radha Madhav Eco-Industrial Park during the year under consideration, which was not entered into the regular books of account of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.1836/2019, dated 10.06.2022 (Guj.). In all these decisions, it has been held that on-money / unaccounted sales cannot be totally brought to tax because developers have to incur various unaccounted expenses for procurement of land, approval of the projects and other civil expenses. The appellant also submitted that there are no other details of receipts, but there are details of expenditure in the incriminating materials. Hence, normal business expenditure is to be allowed from the gross cash receipts. The CIT(A) found that assessee had shown net profit of 55.43% in the return filed u/s 139 of the Act. The assessee also offered Rs. 10,79,13,346/- as additional income during the assessment proceedings. The additional income was 44.37% of the gross cash receipt of Rs. 24,32,10,934/-. Considering that there were details of expenditure in the incriminating material and also the totality of facts, the CIT(A) held that 50% of gross cash receipts would be just and reasonable net income of the assessee in addition the income offered by it in the return of income filed u/s 139 of the Act. Accordingly, addition of Rs. 12,16,05,467/- out of Rs. 24,42,10,934/- was sustained. 10. Aggriev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... get benefit of deduction of expenses in cash and only profit element should be taxed. Since the assessee has already offered additional income of Rs. 10,79,13,346/-, the AO may be directed to accept the returned income. The ld. AR further submitted that percentage of profit can only be taxed, which should be based on the books of account of the assessee and other comparison cases. He relied on the decisions in cases of DCIT vs. M/s M. Poonam Developers, ITA No.284/SRT/2022, dated 26.06.2023 and submitted that the ITAT, Surat Bench has restricted the addition to 8% of the gross receipt. In view of the above, the ld. AR requested that the additional income offered by assessee, which is 45.83% of gross receipt of Rs. 23,54,54,302/- [as per CIT(A)] may be accepted. Alternatively, the average book profit rate for AYs.2017-18 to 2020-21, which comes to 44.79% should be considered. Given that assessee had already offered profit @ 45.83%, which is higher than the average profit of last 4 years, the returned income may be accepted. 11.1 Regarding ground No.2 of revenue's appeal that unaccounted expenses as per seized material was only Rs. 8,45,99,570/-, the ld. AR submitted that the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings before him. 13. Regarding request of the ld. AR to reduce Rs. 10,00,000/- from the addition of Rs. 24,42,10,934/- on account of receipt of on-money in cash, the CIT(A) has given a categorical finding that the terms of payments were subsequently changed and Mrs Maya Garg has paid Rs. 10 lakhs more in cheque and reduced the cash component by same amount. The finding of CIT(A) is at para 6.3(ii) at page 16 of the appellate order. As the total amount paid by Mrs Maya Garg has remained the same and only the cash component has been reduced due to increase of equivalent amount in cheque, the finding of the CIT(A) cannot be faulted with. Accordingly, the ground of revenue is dismissed. 14. The next issue is as to whether the entire receipt in cash should be taxed as income of the assessee. The AO, in the assessment order, has added the entire cash receipt of Rs. 24,42,10,934/- as unaccounted business income of the assessee. He has also initiated penalty proceedings u/s 270A of the Act for under-reporting of income due to misreporting. The CIT(A), while deciding the issue, has accepted plea of the assessee that only profit element on the cash receipt has to be taxed. He has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. 15. In the result, appeal of the assessee is partly allowed and appeal of the revenue is dismissed. ITA Nos.626/SRT/2024 & 633/SRT/2024 (AY:2019-20): 16. The facts of the case are similar to the facts in ITA Nos.762/SRT/2023 and 41/SRT/2024. The grounds raised by the parties are also similar. The ld. AR at the time of hearing, has not pressed ground No.1 and 2 of ITA No. 633/SRT/2024. Hence, they are dismissed as not pressed. 17. Ground No.3 of assessee's appeal pertains to addition of Rs. 2,29,85,400/- on account of profit element of on-money receipt of Rs. 4,59,17,800/- in cash instead of profit of Rs. 2,28,33,410/-, declared in the return of income filed u/s 148 of the Act. The revenue, on the other hand, raised the ground that the CIT(A) erred in restricting the addition of onmoney to 50% of the cash receipt of Rs. 4,59,70,800/-. The facts of the case are similar and the arguments put forth by both sides are similar. We have already decided the above issue in ITA No.762/SRT/2023 and 41/SRT/2024 wherein we have held that 47% of the on-money received in cash would be the net income of the assessee for the subject year in addition to the income filed by the assessee u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned CIT(Appeals) has erred in confirming addition of Rs. 1,51,20,000/- (being 50% of Rs. 3,02,40,000/-) as profit element of on-money receipts without considering that the cash receipts were received from Shri Rishab Agarwal in FY 2016-17 and not FY.2017-18. 6. On the facts and circumstances of the case as well as law on the subject, the learned CIT(Appeals) has erred in confirming addition of Rs. 70,96,013/- (being 50% of Rs. 1,41,92,025/-) as profit element of on-money receipts without considering that said receipts without considering that said receipts were received from various parties in FY 2014-15. 7. It is therefore prayed that the above addition/disallowance by the assessing officer may please be deleted. 8. Appellant craves leave to add, alter or delete ground(s) either before or in the course of hearing of the appeal." 20. Since jurisdictional issue are involved, let us first discuss ground nos.1, 2 and 3, the appellant has not pressed ground nos.2 and 3 and hence they are dismissed as not pressed. 21. Ground Nos.1.1 and 1.2 pertain to validity of issue of notice u/s 148 without providing at least 7 days to reply the notice u/s 148A(b) and the order of CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no requirement to conduct enquiry and provide opportunity u/s 148A of the Act before issue of notice u/s 148 in cases covered u/s 132 of the Act. He observed that the AO appears to have provided opportunity u/s 148A of the Act before issuing notice u/s 148 out of abundant precaution. As provisions of section 148A are not mandatory requirement for cases covered u/s 132 of the Act, the grievance of the assessee for not providing adequate time before passing order u/s 148A(d) of the Act is devoid of merit. Accordingly, he dismissed the ground of the assessee. 22. Aggrieved by the decision of CIT(A) as above, the appellant raised ground Nos.1, 2 and 3 of which ground Nos.2 and 3 were not pressed by the ld. AR. Therefore, we are required to decide ground Nos.1.1 and 1.2 of the appeal filed by the assessee. The ld. AR has more or less made similar submission, which was made before the CIT(A). He has also relied on the decisions, namely, CIT vs. Amit K. Jain, (2017) 79 taxmann.com 430 (Gujarat) and Sudman Consultant LLP vs. ACIT, SCA No.2354 of 2023, dated 05.03.2024 (Gujarat HC). The ld. AR submitted that only 4 days were provided by the AO to furnish the reply in response to notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied authority to issue such notice. Explanation 1.-For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,- (i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act. Explanation 2.-For the purposes of this section, where,- (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,- (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee were found and seized. In fact, statements of both the above persons were recorded who admitted that Annexure A-1 to A-55 belong to Shri Laxminarayan Garg, partner of the assessee-firm. Therefore, the AO had information, which suggests that income chargeable to tax has escaped assessment in case of the assessee for the relevant assessment year. It is also evident from the assessment order that the AO has taken approval before issuing notice u/s 148 of the Act. It is further seen that the AO has passed the order u/s 143(3) r.w.s. 147 with prior approval of JCIT on 14.06.2023. 26. As regards, the provisions of section 148A are concerned, it may be stated that section 148A was also simultaneously inserted as part of series of amendments to reform the system of assessment or re-assessment or income escaping assessment and the assessment or search related cases. It provides that before issuance of notice u/s 148, the AO shall conduct inquiries, if required and provide an opportunity of being heard to the assessee. After considering reply of the assessee, the AO shall decide, by passing an order, where it a fit case for issue of notice u/s 148 and served a copy of such order alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions. The ld. CIT-DR, on the other hand, relied in the case of Anandkumar Dhanraj Rathod (supra). We have carefully gone through the decisions relied upon by the rival parties. There is no dispute that only 4 days' time was given by the AO in the notice issued u/s 148A(b). This is not even disputed by the revenue. However, the ratio of the decisions relied upon by the ld. AR are not applicable because facts of those cases are different from the facts of the present case. In case of Amit K. Jain (supra), the Hon'ble Court held that the words "not less than 15 days" means clear 15 days. In case of Sudman Consultants LLP (supra), the assessee filed return for AY.2018-19 on 16.08.2019. The case was selected for limited scrutiny under e-assessment scheme and order u/s 143(3) was passed on 23.03.2021. Subsequently, notice u/s 148A(b) was issued on 21.03.2022, requiring the assessee to file reply on or before 28.03.2022, giving only 6 days' time to respond, which is contrary to the provisions of section 148A(b) of the Act, which requires to provide minimum 7 days' time. Hence, the impugned notice u/s 148A(b) was held to be invalid as a consequence of which the order u/s 148A(d) and notic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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