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TMI Blog2025 (3) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... red in law and on facts of the case in estimating profit margin at the rate of 14%. In the facts and circumstances of the case, such estimation is highly excessive and does not reflect the real income earned by the appellant. 3. The Ld. CIT(A) has erred in law and on facts of the case in directing AO to confirm the addition on account of alleged on-money for A.Y. 2020-21 to A.Y. 2023-24 which were not the subject matter of appeal before CIT(A). He further erred in applying rate of 14% on gross receipts to compute net income which is highly excessive and not commensurate with the real income, 4. Both lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and principles of Natural Justice and therefore deserves to be quashed. 5. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appreciating the facts that assessee failed to establish that the cash expenditure was laid out wholly and exclusively for the purpose of business. 4. In the facts and on the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent." 2.2 We will take IT(SS)A No.45/Ahd/2023 filed by the assessee Ginger Properties Private Limited, for the Assessment Year 2018-19 as the lead case. Brief facts of the case 3. A search & seizure action was conducted on 30.10.2018 and on subsequent dates inter alia covering Kailash Goenka Group as well as Robin Goenka Group. The assessee is engaged in the business of Real Estate and had undertaken a real estate commercial project by the name of Sankalp Grace-II. This project has four buildings (A to D) which was constructed during the different periods of time and during the course of search only Building D in Grace-II was under construction (live project) and rest of the three buildings were completed prior to the date of search. The return of income for the Assessment Year (A.Y.) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in the A.Y. 2018-19 & 2019-20. 3.2 The assessee had further contended that if addition in respect of on-money receipt was required to be made, it has to be made on estimated percentage of 8% to 10% only in respect of unaccounted portion of on-money but this contention of the assessee was also rejected by the Assessing Officer. The AO on the basis of the seized diaries had worked out the on-money received as well as the expenses incurred in cash by the assessee, the details of which is tabulated in para-12.1 of the assessment order. As per the seized documents the on-money received by the assessee in A.Ys. 2018-19 and 2019-20 was to the extent of Rs. 4,82,000/- and Rs. 2,84,92,500/- respectively. Further, cash payment of Rs. 28,62,500/- pertaining to A.Y. 2019-20 was also found noted in the seized documents. The Assessing Officer held that during the year under consideration, the assessee had received an amount of Rs. 4,82,000/- towards on-money and the entire amount should be added to the total income of the assessee on account of unaccounted cash receipts. The addition for unexplained cash expenditure as per the seized document was also made in the A.Y. 2019-20. 3.3 The Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities carried on by the assessee ? b) Whether the CIT(A) was justified in restricting the impugned additions made by the Assessing Officer to the extent of real income earned in relation to the unaccounted business activities carried on by the assessee by adopting reasonable gross profit rate and applying the same to total unaccounted receipts reflected in the seized material ? 5.1 The Ld. AR submitted that it is well settled legal proposition that the entire unaccounted receipts cannot be added. Rather, only the profit element embedded therein can be added in the hands of the assessee. The Ld. AR relied upon the following decisions:- Sankalp Recreation P. Ltd. Vs. ACIT - IT(SS)A No.65/Ahd/2022 CIT vs. President Industries (2002) - 258 ITR 654 (Guj) CIT vs. Balchand Ajit Kumar (2003) - 263 ITR 610 (MP) CIT vs. Gurubachhan Singh (2008) - 302 ITR 63 (Guj) Man Mohan Sadani vs. CIT (2008) - 304 ITR 52 (MP) CIT vs. Samir Synthetics Mill (2010) - 326 ITR 410 (Guj) DCIT vs. Panna Corporation - Tax Appeal 323 of 2000 (Guj) Chetan C. Patel vs. ACIT - IT(SS)A No.522/Ahd/2011 and others CIT vs. Jay Builders (2013) - 33 taxman.com 62 (Guj) Greenfield Reality P. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival submissions. The first ground taken by the assessee is that the addition was not based on any incriminating material found during the search. We do not find any merit in this ground. The Assessing Officer had referred to seized materials found during the search on the basis which the on-money receipts as well as cash expenses have been worked out. The details of seized material based on which the on money receipts was quantified in the Assessment Order is duly found mentioned in paragraph no.12.1 of the Assessment Order wherein the Annexure & page number of the seized documents is also mentioned. Thus, it is found that the addition in respect of on money receipts as well as cash expenses were based on the seized material found during the search and once certain additions were made on the basis of seized material the Assessing Officer was free to consider the other material/issue as well. Therefore, ground no.1 as taken by the assessee is dismissed. 8. Ground nos.2 to 4 pertain to estimation of profit margin @ 14% in respect of on money receipts. The Assessing Officer had worked out on-money receipts as well as unaccounted expenses on the basis of the seized documents which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018-19 and 2019-20. On the other hand, the ld. CIT(A) had considered the extrapolated on-money receipts of Rs. 26,02,59,300/- for the A.Ys. 2020-21 to 2023- 24 as worked out by the assessee itself and estimated income therefrom by applying net profit rate of 14%. The income extrapolated by the assessee was as per the method of accounting regularly followed and considering the fact that though the certain on-money was received in earlier years, the sales had actually crystallised in the subsequent years only. Once having admitted that it was the normal practice for the assessee to receive on-money and the assessee itself had worked out the on- money receipts crystallized for the A.Ys. 2020-21 to 2023-24; the assessee cannot take a plea that the ld. CIT(A) was not correct in confirming the addition in the A.Ys. 2020-21 to 2023-24 when no appeal was pending before him for these years. The fact remains that the appeal was pending before the CIT(A) for the A.Ys. 2018-19 and 2019-20 and addition in these years were deleted on the basis of submissions of the assessee that the on-money received as per seized documents, did not accrue in these years. Thus, having derived the benefit from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following interest free loans and advances given by the assessee: Interest free loans to related parties (Dimple Goenka) Rs. 3,45,65,257/- Interest free loans and advances to others Rs. 1,56,30,562/- According to the AO the assessee had diverted its interest-bearing funds, on which interest was paid, towards interest free loans and advances. However, the AO had not established any nexus between the diversion of interest-bearing funds towards interest free advances as alleged in the assessment order. The assessee had sufficient funds of his own which could have been utilized towards interest free loans and advances. The ld. CIT(A) had given a finding that there never arose any debit balance in consolidated ledger of Dimple Goenka and hence there was no question of any interest that could have been charged from her and finding of the ld. CIT(A) has not been controverted by the Revenue. In In the absence of any nexus or any evidence on record that assessee had diverted its interest-bearing funds towards interest free loans and advances; no disallowance u/s 36(1)(iii) could have been made. We, therefore, do not find any infirmity in the order of ld. CIT(A) on this issue. The dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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