TaxTMI 
TaxTMI 
2021 (6) TMI 420
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....isposed off by this common order for the sake of convenience. With the consent of both the parties, the cross appeals for A.Y.2013-14 is taken as the lead case and the decision rendered thereon would apply with equal force for A.Y.2014-15 also except with variance in figures. 2. The assessee has raised the following grounds of appeal in A.Y.2013-14:- Addition of Rs. 2,36,07,250/- as income from on money may be deleted 1. The Ld. CIT(A) erred in confirming the addition of Rs. 2,36,07,250/- being 25% of on money of Rs. 9,44,29,000/- without appreciating that the income, if any, quantified on the amount of on money ought to be taxed only in the year/s in which project has completed construction in accordance to the conditions prescribed as per the Revised Guidance Note of 2012 issued by ICAI and thus, the income estimated @25% of on money and taxed in the year of receipt is unjustified and liable to be deleted. 2. The Ld. CIT(A) failed to appreciate that relevant working as per the conditions prescribed in the Revised Guidance Note of 2012 issued by ICAI was duly filed before the Ld. CIT(A) and according to which, the income, if any, quantified in respect....
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....d as per the Revised Guidance Note of 2012 issued by ICAI and thus, the income estimated @25% of on money and taxed in the year of receipt is unjustified and liable to be deleted. 2. The Ld. CIT(A) failed to appreciate that relevant working as per the conditions prescribed in the Revised Guidance Note of 2012 issued by ICAI was duly filed before the Ld. CIT(A) and according to which, the income, if any, quantified in respect of on money could not be taxed in the relevant year as the conditions and parameters prescribed in Revised Guidance Note of 2012 issued by ICAI for taxing income from project were not satisfied in the relevant year and hence, whatever income quantified from the construction project ought to be taxed in accordance with the Revised Guidance Note of 2012 issued by ICAI and thus, the income estimated from on money and taxed in the year of receipt is unjustified and liable to the deleted. 3. Without prejudice to the above, the Ld. CIT(A) has erred in estimating the income @25% of on money received without appreciating the fact that as per parallel books of account, the overall group had incurred huge loss and income from on money was estimated @12%....
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....ransactions of the assessee. The search was extended to Ahuja Group Associates and residences of their directors and also Mr. Sunil Chaudhary, driver of the promoter of the group Shri Jagadish Ahuja. During the course of search parallel books of accounts were found of Ahuja Group at the residence premises of Mr. Sunil Chaudhary, the driver of the promoter. A statement of Mr. Sunil Chaudhary was also recorded under section 132(4) of the Act and he admitted the said documents were belonging to the Ahuja Group. During the course of search proceedings the statement of Shri Jagadish Ahuja principal promoter of Ahuja Group was also recorded. During the course of search it was found that the assessee has received cash to the tune of Rs. 1,82,50,000/- as per details below: Date Particular V. Type Debit Credit 17-03-2015 Sanjay Agrawal Bhiwandi A/c Cash Sales - Bhiwandi Project 10,00,000 23-03-2015 Kailash Devnani Bhiwandi Cash Sales- Bhiwandi Project 22,50,000 08-04-2015 Sanjay Agrawal B....
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....ssed in the year when the project is completed or substantially completed and not in the year of receipt. The Ld. A.R. relied on a series of decisions in defence of his arguments as under: 1. Order of the Hon'ble Tribunal in the case of ACIT v. ISA Enterprises in ITA No. 4597/Mum/2015 dated 11.09.2017 2. Order of Hon'ble Tribunal in the case of M/s D.R. Constructions v ITO in ITA No. 2735/Ahd/2010 dated 08.04.2011 3. CIT vs. M/s Jalaram Jagruti Development Pvt. Ltd. (ITA No. 1537 of 2010) dated 23.11.2010 (Bombay High Court) 4. CIT vs. M/s Guruprerana Enterprises (ITA No. 1849 of 2011) dated 04.03.2013 (Bombay High Court). 5. Asst. CIT v. Layer Exports P Ltd [184 TTJ 469 (Mum)] 6. Dhanvarsha Builders & Developers (P.) Ltd. Vs. DCIT 102 ITD 375 (Pune) 7. S.G.R.Enterprises v ACIT [112 TTJ 377 (Bang)] 8. DCIT v Tejas Constructions [ITA 934/PN/2009 Order dated 31.1.2012] 9. Fort Projects (P) Ltd. v DCIT [145 TTJ 340 (Kol)] 10. Rakesh K. Kapadia [48 ITD 283 (And)] 11. ITO v Karda Construction P. Ltd. [ITA no.971/PN/2011 dated 31.07.2012] 12. South Calcutta Promoters (Pvt.)....
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....We give the reasons for our decision in the succeeding paragraphs. Having gone through the return of income filed by ISAE for the AY 2008-09 to AY 2014-15, we find that it is following the project completion method. It filed its return of income for the AY 2014-15 on 04.04.2015 declaring total income of Rs. 4,45,00,710/-. The above income has been accepted without any variation by ACIT-20(1), Mumbai in the assessment dated 28.12.2016 completed u/s 143(3) of the Act. Now it would be apposite to discuss the cited two decisions. In the case of M/s Jalaram Jagruti Development Pvt. Ltd. (supra), the issue before the Hon'ble Bombay High Court was the following: "Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal in law, was right in holding that receipts of Rs. 3,46,250/- recorded in the documents seized during the course of search were reflected in the books of accounts and could be taxed only in the year in which the project was completed?" The Hon'ble High Court held that: "The finding of fact recorded by the Tribunal is that the receipts in question had direct nexus with the project of the assessee ....
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....therefore inclined to hold that on money received by the assessee would only be taxable as per the regular method of accounting of the assessee. In the present case the assessee is following project completion method and therefore this income has to be assessed along with the regular income of the assessee in the year of completion of the project. 10. The second issue raised by the assessee is against the order of Ld. CIT(A) sustaining the addition equal to 25% of the on money received. 11. The facts of the case are already narrated while dealing with the ground No.1. The only issue involved here is whether at what rate of the on money should be brought to tax. The Ld. Counsel, at the outset, submitted that since in the cases of group concerns the settlement commission has already accepted that on money is to be assessed at the rate of 12%. We therefore find merit in the contentions of the assessee's counsel that following the settlement commission's order the same should be applied in the case of the assessee also. The case of the assessee is supported by the following decisions: 1. ACIT vs. Om Construction ITA No.6234/M/2012 A.Y. 2006-07 & ors. ....
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....efore the Settlement Commission. There is no dispute that the Settlement Commission has agreed with the contentions of the assessee that the entire amount of on-money receipts cannot be considered as income of the assessee. Accordingly the Settlement Commission has estimated the income from on-money receipts @ 17% in AY 2005-06. Since the assessing officer has estimated the on-money receipts as per the disclosure made before Settlement Commission, we are of the view that the Ld CIT(A) was justified in estimating the income from the on-money receipts @ 17% for this year also by following the order passed by the Settlement Commission. Accordingly we confirm the order passed by Ld CIT(A). Accordingly we reject the appeal filed by the revenue." 13. Following the above decisions, we are inclined to held that the Ld. CIT(A) is not correct in not following the order of settlement commission wherein a rate of 12% has been applied on the on money to assess income embedded therein. Accordingly, we modify the finding of Ld. CIT(A) and direct the AO to assess the on money @ 12% as per the system of accounting followed by the assessee as has been decided by us in ground No.1. 14. In th....