Tribunal: On-money receipts taxed on project completion, not receipt year.

The Tribunal ruled in favor of the assessee, directing that income from on-money receipts should be taxed in the year of project completion, not in the year of receipt. It also determined that the on-money receipts should be treated as business receipts, not cash credits under Section 68. Additionally, the Tribunal instructed the application of a 12% profit rate on the on-money receipts, aligning with the Settlement Commission's findings. The Revenue's appeals were dismissed, while the assessee's appeals were partly allowed.

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Issues Involved:
1. Addition of income from on-money receipts.
2. Applicability of Section 68 of the Income Tax Act, 1961.
3. Estimation of profit percentage on on-money receipts.

Detailed Analysis:

1. Addition of Income from On-Money Receipts:
The primary issue in these appeals is the addition of income from on-money receipts. The assessee argued that the income quantified from on-money should be taxed only in the year when the project is completed, as per the Revised Guidance Note of 2012 issued by ICAI. The Ld. CIT(A) confirmed the addition of 25% of on-money receipts without considering the project completion method. The Tribunal, however, supported the assessee’s contention, citing multiple precedents where income was assessed in the year of project completion. The Tribunal directed that the income from on-money should be taxed in the year of project completion, not in the year of receipt.

2. Applicability of Section 68 of the Income Tax Act, 1961:
The Revenue contended that the cash received by the assessee should be treated as income under Section 68, as the identity, genuineness, and creditworthiness of the parties remained unexplained. However, the Tribunal noted that the nature and source of the on-money receipts were established as business receipts from the sale of flats. The Tribunal emphasized that once the nature and source of the credit are proved, Section 68 cannot be applied. The Tribunal upheld the CIT(A)'s view that the on-money receipts should be treated as business receipts and not cash credits under Section 68.

3. Estimation of Profit Percentage on On-Money Receipts:
The assessee argued that the income from on-money should be estimated at 12%, as was accepted for other group entities by the Hon’ble Settlement Commission. The CIT(A) had estimated the profit at 25%. The Tribunal found merit in the assessee’s argument, noting that the Settlement Commission had accepted a 12% profit rate for other group entities. The Tribunal directed the AO to apply a 12% profit rate on the on-money receipts, aligning with the Settlement Commission’s findings.

Conclusion:
The Tribunal's judgment addresses the issues of adding income from on-money receipts, the applicability of Section 68, and the appropriate profit percentage to be applied. The Tribunal ruled in favor of the assessee by directing that the income from on-money should be taxed in the year of project completion and at a 12% profit rate. The Tribunal also dismissed the Revenue's contention to apply Section 68, affirming that the on-money receipts are business receipts. The appeals by the Revenue were dismissed, and the appeals by the assessee were partly allowed.

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