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of <h1>ITAT Decision: Income Estimation, Unexplained Investment Deletion Upheld</h1> <h3>Sampada Homes Versus Asst. Commissioner of Income-tax, Central Circle – 2 (3), Hyderabad And Vice-Versa</h3> Sampada Homes Versus Asst. Commissioner of Income-tax, Central Circle – 2 (3), Hyderabad And Vice-Versa - TMI Issues Involved:1. Quantification of suppressed turnover.2. Treatment of suppressed turnover as income of the assessee.3. Estimation of profit percentage on suppressed turnover.4. Addition on account of unexplained investment in land.Detailed Analysis:1. Quantification of Suppressed Turnover:The case involved a search and seizure operation where incriminating materials were found, leading the Assessing Officer (AO) to quantify the undisclosed income for AYs 2012-13, 2013-14, and 2014-15. The AO quantified the undisclosed income at Rs. 18,75,85,000/-. The AO gave credit for the sale value disclosed as per the agreement while registering Villas, but the assessee appealed against this quantification, arguing that the AO overlooked the turnover disclosed in the return of income, which included both sales and contract receipts. The Income Tax Appellate Tribunal (ITAT) agreed with the assessee that the suppressed turnover should be the difference between the turnover found in the seized documents and the turnover declared in the return of income, amounting to Rs. 5,11,00,000/-.2. Treatment of Suppressed Turnover as Income:The AO treated the entire suppressed turnover as the income of the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the assessee's appeal by quantifying the suppressed income at 40% of the suppressed turnover, relying on the decision of the Hon’ble MP High Court in CIT Vs. Sharda Real Estate (P) Ltd. The ITAT agreed that only the income should be estimated and not the entire suppressed turnover. The ITAT directed the AO to estimate the income at 10% of the undisclosed turnover, considering it a reasonable rate for the real estate industry.3. Estimation of Profit Percentage on Suppressed Turnover:The CIT(A) had estimated the suppressed income at 40%, whereas the assessee had declared a profit of 5.12%. The ITAT found this estimation unrealistic and referred to similar cases where the profit estimation was around 12.5% for big contracts. The ITAT concluded that a 10% profit estimation on the undisclosed turnover was reasonable and directed the AO to adopt this rate.4. Addition on Account of Unexplained Investment in Land:The AO made an addition of Rs. 30,61,000/- as unexplained investment in land, as the assessee failed to furnish supporting evidence. The CIT(A) deleted this addition, noting that the land cost was duly recorded in the books and balance sheet, and the sources were self-evident. The ITAT upheld the CIT(A)’s decision, stating that no incriminating material was found during the search regarding the purchase of the land, and thus, no addition could be made to the income already assessed under section 143(3) of the Act.Conclusion:The ITAT allowed the assessee's appeal partly by directing the AO to estimate the income at 10% of the undisclosed turnover and upheld the deletion of the addition made on account of unexplained investment in land. The revenue's appeals were dismissed. The judgment emphasizes the importance of realistic profit estimation and the necessity of incriminating evidence for additions in search cases.
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