Taxation of profit element: unaccounted on money taxed as profit in year of sale deed, estimated by project data.

Reassessment initiation was held valid where search-derived material and requisite approvals were on record, applying coordinate-bench precedent; notices under reassessment procedure were sustained. Taxation was confined to the profit element of alleged unaccounted "on money," with the applicable profit rate reduced based on project-specific seized data and binding precedents, resulting in partial relief to the taxpayer. The timing of taxation follows the year of recognition-receipt on execution of the sale deed-not the earlier receipt date for developers following project completion accounting; ICDS-III was held inapplicable here. Telescoping relief was available, so additions treated as unexplained expenses were deleted accordingly.

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Issues: (i) Validity of initiation of reassessment proceedings under section 148/147 of the Income-tax Act, 1961; (ii) Correctness of estimation of profit element on alleged unaccounted "on-money" (rate of profit adopted); (iii) Year of assessment for taxing estimated unaccounted profit - year of receipt v. year of execution of sale deed/recognition; (iv) Deletion of addition treated as unexplained expenses under section 69C read with section 115BBE of the Income-tax Act, 1961.

Issue (i): Validity of initiation of reassessment proceedings under section 148/147 of the Income-tax Act, 1961.

Analysis: The Tribunal applied binding coordinate-bench precedent concerning search-based reassessments and considered the statutory scheme as amended for searches after 01.04.2021, including deemed satisfaction for relevant years; the reassessment notices were issued with required approval under section 151 and followed procedure including supply of seized material and opportunities under section 142/143.

Conclusion: Reassessment proceedings under section 147/notice under section 148 are valid and the assessee's grounds challenging initiation are dismissed.

Issue (ii): Correctness of estimation of profit element on alleged unaccounted "on-money" (rate of profit adopted).

Analysis: The Tribunal examined seized project-specific data, compared precedent authorities on taxing only the profit element in unaccounted receipts, and followed a binding coordinate-bench decision which evaluated comparable projects and held that a reduced profit rate is appropriate based on facts, book profits and established judicial ranges rather than the assessing officer's higher benchmark.

Conclusion: Estimated profit on "on-money" is adjusted downward in part; the assessee appeals are partly allowed to the extent indicated (profit estimation reduced as per the coordinate-bench direction).

Issue (iii): Year of assessment for taxing estimated unaccounted profit - year of receipt v. year of execution of sale deed/recognition.

Analysis: The Tribunal considered accounting recognition methods, applicability of ICDS-III, and precedents holding that for developers following project completion/sale-deed recognition, unaccounted profit on on-money is to be taxed in the year of execution/transfer when significant risks and rewards pass; ICDS-III was held not applicable to the contractee in this matter.

Conclusion: Unaccounted profit is taxable in the year in which sale deed is executed (year of recognition followed by the assessee); the revenue's grounds on this point are dismissed.

Issue (iv): Deletion of addition of Rs.10,47,22,650 treated as unexplained expenses under section 69C r.w.s. 115BBE.

Analysis: The Tribunal applied the coordinate-bench authority which addressed telescoping and confirmed that where estimated unaccounted profit covers the amount sought to be taxed as unexplained advances/expenses, telescoping benefit is available and deletion by the appellate authority is sustainable.

Conclusion: Deletion of the addition under section 69C r.w.s. 115BBE is upheld and the revenue's ground is dismissed.

Final Conclusion: The appeals filed by the assessee are partly allowed to the extent of adjustment in estimation of profit on unaccounted "on-money" and related deletions as indicated, while the appeals filed by the revenue are dismissed; the overall effect is a partial favourable outcome for the assessee consistent with binding coordinate-bench precedents.

Ratio Decidendi: In search-based reassessments, where reliable seized material shows unaccounted receipts and related unaccounted expenditures, only the profit element embedded in such receipts may be taxed (not full receipts); estimation of that profit must be founded on project-specific data and relevant precedents, and revenue recognition for developers following project-completion/sale-deed method is in the year of execution of sale deed.

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