Tribunal limits addition of cash for flat bookings, taxes only profit element, clarifies assessment rules

The Tribunal partially allowed the appeal by directing the Assessing Officer to restrict the addition of cash received for flat bookings to 25% of the amount. The Tribunal emphasized that only the profit element from "on money" should be taxed, not the entire cash amount, and rejected the Assessing Officer's approach of adding the full amount to the assessee's income. The judgment focused on balancing the treatment of cash amounts as income and the estimation of profit on "on money," providing clarity on the assessment of such transactions.

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Issues:
1. Addition of cash amount received for booking of flat.
2. Treatment of cash amount as income.
3. Estimation of profit on "on money."

Issue 1: Addition of cash amount received for booking of flat:
The appeal was against the order of the National Faceless Appeal Centre for the Assessment Year 2011-12. The assessee, a builder and developer, had received Rs. 48.00 lacs in cash for the sale of a flat, as per information found during a search and seizure action. The Assessing Officer believed that this income had escaped assessment and reopened the case under Section 147 of the Income Tax Act. The Assessing Officer added the entire amount to the assessee's income, leading to an appeal. The CIT(A) upheld the addition, stating that the assessee's contention to tax only the profit from the "on money" was not acceptable. The Tribunal directed the Assessing Officer to restrict the addition to 25% of the cash amount received.

Issue 2: Treatment of cash amount as income:
The Assessing Officer did not accept the assessee's explanation that the cash amount was returned by way of a cheque and the remaining amount was offered in the subsequent year. The CIT(A) found the assessee's arguments unconvincing, noting the lack of evidence for imaginary expenses. The Tribunal considered the stand of the Assessing Officer regarding the cash amount and referred to previous cases where only the profit element from "on money" was taxed, not the entire amount. The Tribunal directed the Assessing Officer to make the addition based on 25% of the cash amount.

Issue 3: Estimation of profit on "on money":
The Tribunal acknowledged the assessee's submission that only the income component of the alleged "on money" should be considered for additions. While previous cases added 5% to 18% of such amounts, the Tribunal in this case directed the Assessing Officer to restrict the addition to 25% of the cash amount received. The Tribunal emphasized that no fixed formula could be applied in such cases, leading to the partial allowance of the appeal.

This judgment addresses the addition of cash received for flat bookings, the treatment of such cash amounts as income, and the estimation of profit on "on money." The Tribunal balanced the assessee's arguments with the Assessing Officer's stance, ultimately directing a specific percentage addition to the income based on the cash amount received.

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