Assessee's Appeal Partially Allowed: Tax Only Profit Element in On-Money Receipts at 8%

The Tribunal partially allowed the assessee's appeals, ruling that only the profit element embedded in the on-money receipts should be taxed at 8%. The Tribunal upheld the deletion of additions related to unexplained expenditure and unexplained credits under Section 68 of the Income Tax Act.

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Issues Involved:
1. Admission of additional grounds of appeal.
2. Determination of income from on-money received by the assessee.
3. Deletion of addition on account of unexplained expenditure.
4. Deletion of addition under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Admission of Additional Grounds of Appeal:
The assessee filed an application to admit additional grounds of appeal, which was allowed on 8.1.2020. The grounds included:
- The framing of assessment under section 143(3) r.w.s. 153A based on material found from a third party without recording satisfaction in the case of the third person and the appellant.
- The assessment based on material found from a third party, with the contention that the amended provision is applicable prospectively from 01/06/2015.

However, the assessee did not press these additional grounds during the hearing, leading to their rejection.

2. Determination of Income from On-Money Received by the Assessee:
The main issue was the determination of income from on-money received by the assessee on its real-estate projects, discovered during search proceedings. The AO added the entire gross on-money receipts of Rs. 66.40 crores to the income, while the CIT(A) reduced this to 20% of the gross receipts. The Tribunal, referencing judicial precedents, held that only the profit element embedded in the on-money should be taxed, estimating it at 8%. The Tribunal noted:
- The assessee had shown cash receipts totaling Rs. 58.76 crores.
- The Tribunal referred to the case of Kishor Mohanlal Telwala, where the profit element was estimated at 8%.
- The Tribunal concluded that the profit element embedded in the on-money receipts should be assessed at 8%.

3. Deletion of Addition on Account of Unexplained Expenditure:
The AO added Rs. 2,92,76,625/- and Rs. 3,05,00,000/- in the assessment years 2012-13 and 2013-14, respectively, as unexplained expenditure based on seized documents. The CIT(A) deleted these additions, reasoning that the income was being estimated at a percentage of the gross on-money receipts, which would cover the unexplained expenditure. The Tribunal upheld this view, stating:
- The gross on-money receipts included unaccounted expenditures.
- Once the profit element is estimated, the remaining amount covers the unexplained expenditures.

4. Deletion of Addition under Section 68 of the Income Tax Act:
The AO treated certain amounts as unexplained credits under Section 68, adding Rs. 26,49,500/- and Rs. 16,81,600/- in the assessment years 2014-15 and 2015-16, respectively. The CIT(A) deleted these additions, finding that the amounts were booking advances, supported by confirmations, PAN details, and received through account payee cheques. The Tribunal upheld the CIT(A)'s decision, noting:
- The initial burden under Section 68 was discharged by the assessee.
- The amounts were received through regular banking channels and supported by necessary documentation.

Conclusion:
The Tribunal allowed the assessee's appeals partly, holding that only the profit element embedded in the on-money receipts should be taxed at 8%. The Tribunal rejected the Revenue's appeals, confirming the deletion of additions on account of unexplained expenditure and unexplained credits under Section 68.

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