TaxTMI 
TaxTMI 
2018 (7) TMI 1814
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....een earned." 2. The brief facts of the case are that the assessee is a private limited company engaged in the business of builders and developers and also running malls, filed its return of income for AY 2015-16 on 28-11-2015 declaring total income of Rs. 2,390. A search & seizure action u/s 132 of the Income-tax Act, 1961 was carried out on Runwal group of cases on 17-11-2014. During the course of search, incriminating material found and seized in the form of application for booking flats revealed that the assessee has sold flats in its project 'Runwal Elegante' and other projects at the rate ranging from Rs. 32,000 to Rs. 38,000 per sq.ft., whereas in the books of account maintained under ERP system shown much lesser amount. During the course of search, when seized materials were confronted to the assessee, the assessee has admitted receipt of on-money from sale of flats from various customers. During the course of search, statements from various persons including Shri Anand Runwal, head of Sales, Runwal group, Ms. Sujatha Rao, Sales and Customer Relation Manager & Personal Secretary to Shri Sandeep Runwal, shri Kishore P Jain, head of Runwal group and Shri Shamsher Dutt, Senio....
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....ade under coercion without verification of relevant documents, but fact remains that the assessee has collected on-money from sale of flats from certain customers. Therefore, the quantification made during the course of search on the basis of taking a higher rate of sale and adopting such rate for all flats is incorrect. 4. The AO, after considering relevant submissions of the assessee and also taking into account statements recorded from various personnel working for the assessee, including statement recorded from Shri Sandeep Runwal observed that the assessee continuously admitting the fact of receipt of on-money from sale of flats. The working of quantum of on-money has been done during search proceedings is also not being disputed by the assessee. However, the assessee is claiming that since it is following project completion method for recognition of revenue and the project from which on-money has been received is not completed during the year under consideration, whatever on-money received from sale of flats, may be allowed to offer for taxation in the year of completion of the project. But, fact remains that the method of accounting is relevant for the receipts that form pa....
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....and also taking into account statement recorded during the course of search from the personnel working for the assessee, including statement of Shri Sandeep Runwal, director of the company held that from the evidences gathered during the course of search it is very clear that the assessee has accepted receipt of on-money on sale of flats. Further, the employees of the assessee have also accepted the fact that onmoney was being received which were outside the regular books of account and was not intended to be shown or disclosed in the books of account. Although, the assessee has admitted undisclosed income on the basis of incriminating material found during the course of search, failed to admit such undisclosed income in the return of income without any valid retraction. Therefore, he opined that there is no merit in the arguments of the assessee that admission of additional income during the course of search is given under coercion and also such undisclosed income is taxable in the year in which the project is completed. The relevant portion of the order of the CIT(A) is extracted below:- 6. I have considered the facts nf the case, submissions of the asscs&cc a& well as the orde....
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....of Rs. 1,00,000/- on 8th September, 2014 and the other component which we use for cash payment on 13th September. 2014 - Rs. 50 lacs and on 16th September, 201 4 - Rs. 20 lacs. ' 7. Similarly, statement of Shri Anand Modi head of Sale of Runwal Group was recorded on oath during the course of search in which he admitted that there was receipt of non-money to the tune of Rs. 50 - 60 lacs in such deed. The relevant poruon of the statement of Shri An and Modi is reproduced as under; Q. During the course of serarch proceedings at your premises. 2O1, Sunrise, Yogi Hills, Mulund West Mumbai 400 0 080 on 13/11/2014, you have stated that there are instances where the company has accepted cash / on money towards sale of residential units in the project developed by Runwal Group. Please give examples and also elaborate upon cash transactions. Ans. One such instances is one of our clients, Mr Lal Punjabi has paid approx. Rs. 60 lacs in cash or his deaf to buy a flat in our project called Rumval Elegante, Lokhandwala, Mumbai in another instance, one Mr Vijay Dhirvani, who stays in the same complex where I am residing has approached me with a request to finalise his booking of flat ....
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....relation to which specific instances have been quoted by your goodself in the foregoing para of statement Runwal Developers Pvt Ltd 1,25,00,000 2014-15 Elegante Runwal Developers Pvt Ltd 18,82,59,020 2014-15 Olive Subash Runwal 1,20,85,030 2014-15 Runwal Symphony Runwal Developers Pvt Ltd 70,00,000 2014-15 Total 38,06,61,255 10. Accordingly as a result of the search action, the assessee has offered a sum of Rs. 38,06,61,235/- as additional income over and above the regular income in the hands of the respective above group concerns for the financial years concerned as per the above working. For clarity, relevant portion of his s "Q.16 .Please take reference of the above question and your response there to. In furtherance; of the same I would like to bring to your notice that we have analyzed some of the sale transactions recorded in the ERF system of your office which are for the sale of flats in the same project side. Runwal Elegante, Runwal Symphony & Runwal Anthurium. However, it is observed that the consideration value in all sauch instances which are entered in to ERP system is comparably much lesser than that of the consideration value of ....
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....rate to all the flats /shops sold during the current year to arrive at the lump sum amount of such on money receipts." 11. Similar details of receipt of on-money were found in respect of project handled by another director Shri Subodh Runwal which are tabulated by the AO in Para 5.10 of the assessment order. As per these details, on an average about Rs. 25-35 lacs has been charged by the assessee in the form of on-money on sale of individual flats / shop. These facts were once again confronted to Shri Subodh Runwal during the course of search and his statement was recorded on oath, wherein he admitted a sum of Rs. 63,39, 52.372/- as onmoney received. For clarity his statement is reproduced as under:- "Ans to Q.16: Sir as I have answered in earlier question I again reiterate that this project was a joint venture with HDFC Limited right from the inception till they excited. Subsequently to that the market has become very competitive and due to opening of a forest land we had to sell aggressively to achieve the numbers from the calendar year 2014, I accommodated a few customers who wanted to pay part consideration in cash. The difference in the above chart is specifically relate....
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.... was outside the regular books of accounts and was not intended to be shown or disclosed and would not have been detected had a search seizure action not been carried out in the case of the assessee . 14. On the basis of the above declaration at the time of search, the AO during the course of assessment proceedings confronted assessee with these facts and asked the assessee as to why the income may not be taken accordingly. In response, the assesses vide letter dated 23.09.2016 admitted that the amount of Rs. 18,82,59,020/- is liable to be added in their hands for the current year. 15. During the course of appeal proceedings, the Ld AR has brought no additional evidence before me as to how and why the addition of Rs. 18,82,59,020/- worked out by the AO was unfair or unjustifiable. Since, the addition has been worked out on the basis of hard evidence found during the course of search, and relevant facts have been confirmed both by Sri Sandeep Runwal and Sri Subodh Runwal directors in their statements on oath as reproduced above , as also by the other key functionaries of the company and the group as reproduced above , the same is upheld. Consequently, the grounds no 1 and 2 ta....
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....o the decision of Hon'ble Gujarat High Court in the case of CIT vs Advance Construction Co Pvt Ltd (2005) 275 ITRE 30 (Guj). The Ld.AR relied upon the decision of ITAT, Mumbai Special Bench in the case of Wall Street Construction Ltd & Others vs JCIT (2006) 101 ITD 156 (Mum)(SB). 8. On the other hand, the Ld.DR strongly supporting the order of the Ld.CIT(A) submitted that the assessee itself has quantified undisclosed income on account of receipts of on-money from sale of flat and such admission has been re-iterated by filing a letter during the course of assessment proceedings on 23-09-2016, therefore, there is no reason for the assessee to go back from its admission without any valid retraction. Even now, the Ld.AR for the assessee is not disputing the fact of receipt of on-money. Therefore, once the fact has been admitted and which is supported by incriminating material found during the course of search, then whatever on-money received should be taxed on receipt basis irrespective of the fact that the assssee is following project completion method of accounting for recognition of revenue. The AO as well as the Ld.CIT(A) have apprised the facts in the right perspective in the li....
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.... & A1601, the sale consideration as per ERP system in assessee's books is higher than or equal to amount recorded in incriminating material being application for booking. But the AO has taken average rate of Rs. 21,000 and then compared such rate to the average rate determined by dividing total sale consideration from total saleable area ignoring the fact that the average rate has been determined by taking into account rate per sq.ft. on carpet area of the flat. 10. There is no dispute with regard to the fact of receipt of on-money from sale of flats. This fact has been admitted by the assessee including its director in the statement recorded during the course of search. This fact is also supported by incriminating material found as a result of search. During the course of search, the department has found application form, booking form of certain flats as per which the rate charged for sales is higher than the amount recorded in the books of account. Accordingly, undisclosed income of Rs. 18,82,59,020 has been quantified from sale of 21 flats in project Runwal Elegante. The assessee has filed paper book containing copies of application for booking found during search. On perusal o....
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....ion of the on money has to be made on the basis when the on money has been received or on the basis of the method of accounting followed by the assessee. It is not disputed that the assessee is following project completion method. The undisputed facts before us are that search and seizure action u/s. 132 of the IT Act took place on 17.11.2014 on the assessee as well as its group company. The assessee submitted return of income on 31.10.2015 declaring total income of Rs. 13,48,82,480/-, which was subsequently revised to Rs. 13,45,71,200/- on 7.07.2016 and finally revised the return on 30.12.2016 by including therein a sum of Rs. 72,50,000/- and paid taxes thereon. The sum of Rs. 72,50,000/- declared by the assessee relate to the Chestnut project, single building project completed during the year in respect of which evidence was found during the course of the search for on money received and it was also surrendered by the assessee company during the course of the search and is included in the sum of Rs. 63,39,52,372/- added by the Assessing Officer to the assessee's income. We noted that the Assessing Officer while computing the total income of the assessee has considered the revised....
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....earlier question I again reiterate that this project was a joint venture with HDFC Limited right from the inception till they exited. Subsequently to that the market has become very competitive and due to opening of a forest land we had to sell aggressively to achieve the numbers from the calendar year 2014, I accommodated a few customers who wanted to pay part consideration in cash. The difference in the above chart is specifically related to these customers who have been accommodated. I offer this difference as my income. I hereby farther reiterate and state that prior to this we have never accepted in cash for any of the units sold in that project." Thus the assessee has acknowledged the discrepancy and has accepted that "on-money" has been taken in all the above instances. Further the assessee was asked to state the other instances where unaccounted cash has boon taken in lieu of sale of residential / commercial units in their projects. Following Is the except of the relevant portion of his statement "Q.17 Please provide the details as to other fiats in which similar practice is followed. Ans: Although in the other cases, I do not agree that in all the cases cash ha....
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....n the basis of the seized documents, by the assessee in respect of flats comes to Rs. 13,44,68,725/-and in respect of shops comes to Rs. 6,50,10,096/-. For the rest of the addition in respect of which no incriminating material was found, we noted from pages 439 to 441 of the paper book, the Assessing Officer just estimated the on-money of the flat @15,750/- per sq. ft totaling to Rs. 33,47,33,101/- and that of the shops @26,000/- totaling to Rs. 9,97,40,450/-. But the Assessing Officer was fair enough to state that no incriminating material was found but had estimate @15750/- per sq. ft for flats and @26000/- per sq. ft. for shops. This is a case where assessment has been completed u/s. 143(3), therefore, the addition has been made by the Assessing Officer as if the assessee has received whatever is stated in the documents executed by the assessee. In our opinion, the onus is on the Revenue to prove that the assessee has actually received the consideration much more than what has been agreed to or stated in the documents executed between the intended buyer and the assessee. No cogent material or evidence was brought to our knowledge by the learned DR even though he has vehemently r....
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....0/- and ultimately booked the flat @13,350 per sq. ft. Even on the same very page had the details of the flats which had been booked @ 14550/-, 14300/- and Rs. 13225/- per sq. ft. Therefore, the conclusion drawn by the Assessing Officer while making the addition is based just on assumption as if the assessee the assessee has sold all the flats @15750 per sq. ft. In view of this fact, we delete the addition of Rs. 33,47,33,101/- made on the basis of estimating the sale consideration in respect of the flats @15750/- per sq. ft. and Rs. 9,97,40,450/- based on the presumption as having being booked shops @26000/-." 11. Coming to the second leg of arguments of the assessee. The Ld.AR for the assessee submitted that since the assessee is following project completion method for recognition of revenue, total receipts from the project including on-money receipts shall be taxed in the year in which the project has been completed. The Ld.AR further submitted that since the project was not completed during the year, the amount received by the assessee is merely a booking amount, i.e. only advance received for booking flat; therefore, the same cannot be added during the impugned assessment....