Unaccounted real estate receipts: only profit element is taxable, and amounts taxed in partners' hands cannot be added again.

In alleged unaccounted real estate turnover, only the profit element embedded in the receipts was assessable because tax applies to income, not gross turnover, and the reconciliation used was incomplete as later project receipts were ignored. Amounts collected for unsold flats and extra work were shown in the partners' individual returns, and the Revenue failed to prove that they represented the firm's income for the relevant year. The additional addition in the firm's hands was therefore unsustainable, and the relief granted below was maintained.

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Issues: (i) Whether the entire alleged unaccounted turnover could be brought to tax or only the profit element embedded in such turnover. (ii) Whether the amount collected against unsold flats and over and above sale consideration could be added in the assessee-firm's hands for the year under consideration.

Issue (i): Whether the entire alleged unaccounted turnover could be brought to tax or only the profit element embedded in such turnover.

Analysis: The addition was founded on material furnished during assessment and on the turnover reconciliation, not on any incriminating material found in survey. The turnover figures used by the Assessing Officer were incomplete because later-year receipts from the same project were not considered. The receipts represented business turnover from a real estate project, and the settled principle applied was that tax is leviable on income and not on gross receipts. Where turnover is treated as unaccounted, only the embedded profit can be assessed, not the entire amount.

Conclusion: The entire alleged unaccounted turnover could not be taxed as such, and estimation of profit alone was justified.

Issue (ii): Whether the amount collected against unsold flats and over and above sale consideration could be added in the assessee-firm's hands for the year under consideration.

Analysis: The amount was explained as consideration for extra work executed by the partners in their individual capacity and was shown in their individual returns, which the Revenue did not successfully rebut. The Assessing Officer did not establish that the amount was received by the firm as its income for the relevant year, and amounts relatable to unsold flats could not be taxed in the firm's hands in that year merely because they were collected earlier or reflected in customer files. The finding was also supported by the partners' separate business receipts and tax disclosures.

Conclusion: The addition in the assessee-firm's hands was not sustainable and was deleted.

Final Conclusion: The Revenue's appeal failed on both substantive additions, and the relief granted by the first appellate authority was sustained.

Ratio Decidendi: In a case of alleged unaccounted business turnover, the assessable income is limited to the profit element embedded in the receipts, and an amount explained and taxed in the hands of another taxable person cannot be added again in the assessee-firm's hands without proof that it constituted the firm's income for the relevant year.

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