TaxTMI 
TaxTMI 
2020 (11) TMI 448
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....o recognize the income from the projects, hence on money is to be taxed in the year of completion of the relevant project from where the same has been earned. iii. On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs. 4,48,03,316/- as allegedly lower income offered on project completed, without considering the facts of the case. iv. On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not appreciating the fact that the profits offered to tax during the course of the search action were estimated profits for the entire project. v. On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not appreciating the fact that for the Projects whose profits were offered to tax during the course of the search, there was still closing stock lying, profits on which would accrue in future periods on sale of the same. vi. On the facts and circumstances of the case as well as....
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....lats sold during the financial year 2014-15. The amount has been worked out during the course of search and statement of various employees, which were confronted to Mr Sandeep Runwal a director of the assessee who has admitted the same in the statement recorded during the course of search. Mr Sandeep Runwal a director of the assessee has admitted a sum of Rs. 17.94 crore out of which only Rs. 1.20 crore was offered to tax by the assessee and balance 16.74 crore was added by the AO in the assessment framed as the assessee has failed to return the said income in the return of income filed u/s 139(1) of the Act. The on money as admitted during search was calculated on estimation basis taking highest rate of sale during the financial year 2014-14 relevant to assessment year 2015-16, which is evident from the annexures which are part of statement recorded U/s 132(4) of the Act. 6. The ld AR submitted before the bench that in the case of M/s Runwal Homes Pvt. Ltd., sister concern of the appellant company, similar disclosure was made which was also calculated on estimation basis without any supporting seized material and Hon'ble Tribunal vide ITA No. 5621/M/2017 assessment year 2....
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....s and estimation without any supporting evidences as the AO has applied adhoc rate on all the flats sold without any materials or finding as to the unrecorded asset / unrecorded expenses found to support the said addition. The operative part of the decision is reproduced as under:- "We have gone through the answer to question nos. 16, 17 and 18. We noted that in reply to question no.16, Director of the assessee company stated that initially the project was joint venture with HDFC Limited. Subsequently, when the market has become more competitive and due to the opening of the forest land they had to sell aggressively, in order to achieve the numbers from the calendar year 2014 and, therefore, in order to accommodate few customers who wanted to pay part consideration in cash, they accepted cash for few units. He has categorically stated that prior to that date they have never accepted any cash. In reply to question no.17, he has categorically stated that he did not agree that in all cases cash bas been accepted over and above the agreement value but he agreed to surrender the difference as its additional income over and above the regular income for the respective years as on....
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....rwise also since there has been a search in the case of the assessee, if the assessee would have earned such income there must have been some evidence found that either the assessee has made investment outside the books of account or has spend this income in one way or the other. Income tax is leviable u/s.4 of the I.T Act on the real income. If income has not accrued or received by the assessee, the assessee cannot be burdened for income tax liability. From the documents available on record, it is apparent that the Assessing Officer has estimated the booking amount and on that basis assumed that the assessee would have received the on-money. He made the presumption as if the assessee has sold all the flats @15750/- per sq. It and the shops@26000/- per sq. ft. From the documents in the booking, it is evident that different flats and different shops have been booked at different rates by the assessee. From page 443 of the paper-book, as found during the course of search, the assessee has given discount on the bookings at different rates to different customers. We noted that in respect of two shops although the base rate has been mentioned @21,000 per sq. It, the assessee has given d....
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....for various projects. Payments to labourers are made in cash whereas payments to sub-contractors are made in cheque. Q.14 Please give exact detail and source of cash payments made to the labourers. Ans. Sir, in case of all the works being executed, source of cash payment is withdrawal from bank which are duly reflected in my books of accounts. But, in case of project 'Runwal Anthurium' being developed by M/s. Runwal Developers P. Ltd., major source of cash payment is cash received from Runwal Group against contract work done by us as they had no bank balance to clear our bills through official banking channels. An informal arrangement was reached between us and Runwal group employee Sujmata Rao that as soon as they will get funds, the bills raised against the contract will be cleared and after encashment, the cash will be returned to them. Till date, we have received total amount of Rs. 8.70 crore in cash against bills raised by M/s. M.J. Construction and M/s. Senghani Associates. These amounts were collected on difference occasion in last one year by my son Mr. Sanjay Senghani from Miss Sujata Rao, employee of Runwal Group. Once, our bills are cleared, we....
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....d to tax in the year of receipt but in the year of completion as the assessee is following project completion method when income from the said project is offered to tax. Out of three projects two projects namely Runwal Anthurium and Runwal Symphony completed during the year and accordingly income offered to tax. As far as year of taxability of on money receipts from other project i.e. R Square is concerned , it can not be taxed in this year. 15. Ld AR vehemently submitted before the bench that the on money has to be taxed in the year of completion of the project when the income is offered to tax and not in the year of receipt. The ld AR relied upon the decision of the coordinate bench in sister Concern case M/S Runwal Homes Pvt Ltd (Supra) wherein the coordinating Bench has held that unrecorded receipts can not be treated differently than the recorded receipts and both the type of income should be taxed in the year of completion of project. The ld AR therefore prayed that the second ground may be allowed accordingly. The ld DR relied on the orders of authorities below. 16. After hearing the rival contentions and perusing the material on record including the decision of the co....
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....ecision, allow the ground no.2 in favour of the assessee. The AO is directed accordingly. 18. The issue raised in the ground no. 3 to 5 are inter-related and are being disposed of and decided together. The issue is against the confirmation of addition of Rs. 4,48,03,316/- by the ld. CIT(A) as made by the AO on the ground that the income offered as per books of account on the completed projects is lower vis a vis income estimated as per tentative profit and loss account prepared at the time of search. 19. The facts in brief are that in these grounds the addition was made on account of profit offered for tax as per books being lower than the profits as per the profit and loss account prepared at the time of search for the projects completed during the year. During the course of search, the appellant submitted tentative profit & Loss account for the projects completed during the year which were prepared at the time of search and thereafter in the statement recorded U/s 132(4), the assessee agreed to pay tax on the said profit from these projects. The said tentative profit & Loss was prepared considering sales upto the date of search and also various matching expenditure on the s....
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....e profit from this project at Rs. 25.46 crore, the assessee has explained and filed a reconciliation how the actual cost incurred by the assessee as per the audited Profit & loss account differ from the cost estimated at the time of the search. It is notdenied that as on the date of the search, while estimating the profit At Rs. 25.46crore, the assessee has shown the sales at Rs. 98.83 crore and estimated expenses at Rs. 73.37 crore but subsequently, as per the audited accounts the sales consideration realized by the assessee also increased from Rs. 98.83 crore to Rs. 107.56 crore. Simultaneously, there is also increase in the cost from73.37 crore to 94.07 crore and, ultimately, the profit derived by the assessee came to Rs. 13.49 crore. We noted from the estimation of the profit at the time of search at Rs. 25.46 crores, the figures have been taken in rounded off while the real profit cannot be round off even from the working at the time of the search. It is apparent that the nomenclature is to estimate profit worked out in the estimated Profit and loss account for the F.Y 2014-15. We have also perused pages 25 to 127 of the paper-book, which contains the evidence and the details ....
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.... house property, the assessee reduced the property tax and standard deduction @ 30% deduction towards Repairs charges as per the provisions of section 24 of the Act and paid tax accordingly. Accordingly to the AO, the assessee, while computing its income from business, has failed to apportion and disallow the expenses debited to the profit & loss account on account of 30% repairs allowed by the statute as a standard deduction against the House Property Income. Accordingly, the assessee should have suo moto apportioned certain expenses to the rental income while computing the income and disallowed while computing business income. In absence of any explanation from assessee about actual expenses related to rental income, the AO has disallowed 30% of rental income as expenses claimed by the assessee under the head business income. 25. Before CIT(A), the appellant submitted that in the A.Y. 2010-11 & 2011-12 this issue was examined by the AO and made disallowance to the extent of 30% of income from the house property. However, the matter travelled upto the level of ITAT and the issue is restored to the AO to examine and quantify the actual expenditure incurred. However, the CIT(A) d....