TaxTMI 
TaxTMI 
2025 (5) TMI 499
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....-19 "Ground No. 1 Whether on the facts and in the circumstances of the caser and in law the Ld. CIT(A) erred in estimating the net profit @20% on unaccounted business receipts of Rs. 6,01,99,815/- by giving relief to the assessee without appreciating the fact that the assessee has not submitted any documentary evidences that @80% of the expenses were incurred for the earning of such income and ignoring the fact that the cases of Hon'ble High Courts on which reliance was placed by the Ld. CIT(A) are distinguishable on facts?" Ground No. 2 The appellant craves to leave, to add, to amend and/ or to alter any of the ground of appeal if need be." ITA No. 4471/MUM/2024 for AY 2019-20 "Ground No. 1 Whether on the facts and in the circumstances of the caser and in law the Ld. CIT(A) erred in estimating the net profit @20% on unaccounted business receipts of Rs. 6,01,99,815/- by giving relief to the assessee without appreciating the fact that the assessee has not submitted any documentary evidences that @80% of the expenses were incurred for the earning of such income and ignoring the fact that the cases of Hon'ble High Courts on whic....
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....or adjudication by passing a consolidated order. We draw facts from the appeal for Assessment Year 2018-19. Our observations and findings for this year shall apply mutatis mutandis to the other two years. The additional two issues for AY 2018-19 shall be dealt separately in this order itself. 4. Brief facts of the case are that assessee, a partnership firm is part of GNP group and was subjected to search u/s 132 of the Act on 23.09.2021 along with other entities of GNP group. In the present appeals, common issue is regarding disallowances made in respect of deduction of expenditure incurred from the on-money receipts based on seized documents as claimed by the assessee. In its return, assessee had offered these on-money receipts on a 'net basis' after claiming deduction towards expenditure incurred by it, found recorded in the seized documents though itemized claim of such expenditure was not made. Ld. Assessing Officer however, made the addition by taking 100% of such on-money receipts as gross level. Ld. CIT(A) considered the submission of the assessee and on the basis of various documents and evidences, including the Gross Profit declared by the assessee over the years, held ....
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....re, for taxation, it offered net income @ 20% of the on-money receipts received by it. In the present case for AY 2018-19 thus, assessee offered Rs. 1,75,31,665/-, which is 20% of Rs. 8,76,58,325/-. 5.2. Ld. AO did not accept the submissions of the assessee as it was submitted that on-money is to be taxed on the basis of accrual method of accounting followed regularly by the assessee. According to the assessee, sale proceeds received in cash on units sold which is based on seized material is not taxable in the year of receipt, since taxability of income on sale of units is always in the year when possession is given to the buyers, that is, when actual transfer takes places. Assessee had also contended that seized documents should be interpreted as a whole and not in parts. While not concurring with the submissions made by the assessee, ld. AO noted that since the on-money transactions are already being considered for addition in AY 2019-20 and 2021-22, he did not consider the deduction of 80% claim by the assessee from the receipt of on-money and added the same as unaccounted business income u/s. 28 on 'protective basis'. Thus, he made an addition of Rs. 7,01,26,660/- which is 8....
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.... Kaustub Latke Shanti Kutir 64,63,850 Q-68/69 Kaustub Latke Shanti Kutir 10,00,000 3 Girish Pawar Nariman Point 8,49,58,926 1 Girish Pawar Nariman Point 1,00,00,000 Q-80/81 Kaustub Latke Shanti Kutir 9,92,752 Total 43,18,56,383 8. Assessee further submitted that due to business compulsion, it had received business receipts in cash and also incurred various business expenses both of which were not recorded in regular books of accounts and therefore third-party evidences cannot be made available with respect to PAN, address etc. as required by the ld. AO. Source of such expenses is out of the on-money receipts and ld. AO has accepted the on-money as business receipts u/s 28 of the Act while making the addition. It was contended that provisions of the Act are not intended to restrict the business activities of the assessee. Ld. AO has not disputed the fact and nature of expenditure incurred as they form part of seized documents. 9. In this regard, assessee placed reliance on the decision of Co-ordinate bench of ITAT Mumbai in the case of Prime Developers vs. DCIT in ITA no. 175/Mum/2010 which was af....
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....vant grounds raised in the revenue's appeals are dismissed." 10. Further, according to the assessee, presumption u/s 132(4) of the Act is that when the receipts recorded in the seized document are believed to be income, the entries of expenditure recorded therein are also to be believed, without asking more evidence of such expenditure. The said view has been held by Hon'ble High Court of Delhi in the case of CIT vs. Indeo Airways Pvt. Ltd. [2012] 26 taxmann.com 244 (Del). Hon'ble Court held that - "If the revenue was of the opinion that the expenses claimed towards 'green boxes' was inadmissible or was excessive, or not genuine, in order to reject the entries in the books of account and other documents of the assessee, seized during the search, it ought to have relied on other materials. Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true, the revenue could not have, consistently with that presumption, proceeded to require the assessee to produce materials in support of the expenditure entries. Such an inconsistent approach in respect of the contents of the same book appear....
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.... [2023] 153 taxmann.com 23 (Chennai) e) CIT vs. Santosh Jain [2008] 296 ITR 324 (P&H) f) CIT vs. Purshottam Lal Tamrakar [2004] 270 ITR 314 (MP) 12. Assessee also submitted that no addition u/s 69C can be made once the on-money/unaccounted receipts are considered as "revenue receipts" while making addition to income and any expenditure out of such money cannot be treated as unexplained expenditure as it would amount to double addition. Assessee referred to the decision Hon'ble Bombay High Court in the case of CIT vs Golani Brothers [2017] 85 taxman.com 355 (Bom) wherein it held in Para 21 as under: "The Tribunal found that if the unaccounted expenditure is determined, then, necessarily the question which would arise for consideration before the Tribunal is whether the Assessing Officer was justified in making addition under section 69C for the years under consideration. The Tribunal, found that the explanation as derived from the records and placed by both can be traced to the on-money received at the time of booking/sale of shops. The statement of the senior partner is referred. The senior partner admitted that the sums have been received as on mo....
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....naccounted business receipts and would require fare estimation of net income earned by the assessee out of receipt of on-money. 15.1. Ld. CIT(A) also noted that assessee had offered its income in the returns for AYs 2018-19 to 2022-23 based on percentage of completion method of accounting and recognizing its revenue which remains an uncontroverted fact. He analyzed the net income offered by the assessee from the real estate business as reported in the audited financial statements which evidently demonstrated that net profit of the assessee as per its books of accounts ranges from 3% to 21% in the relevant period from AY 2018-19 to 2022-23. These details are tabulated as under for ease of reference: AY Sales as per books of accounts Net Income offered by assessee on percentage completion method Net Profit as per books (in %) 2018-19 - - 2019-20 - 48,14,624 2% 2020-21 19,87,42,792 3,58,02,617 18% 2021-22 37,53,09,099 7,92,52,078 21% 2022-23 29,49,76,974 5,71,14,977 19% 15.2. In this respect, he also referred to the consolidated income offered by the assessee from its real estate business for the peri....
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.... types of expenditure for the purpose of business which includes brokerage, steel purchase, tiles purchase, contractor payment, salary and administrative expenses, etc. Assessee had explained the recordings in the seized materials which relates to both, receipts of on-money as well as incurring of expenditure against the receipt of such on-money. In the statement recorded during the course of search, assessee through its partners/employees had categorically stated that cash received was used in construction payments. It was also stated in the statement so recorded that assessee did not record such unaccounted cash transactions in its books of account. It had spent the unaccounted cash receipts in projects undertaken by it. There is no 'after thought' on this fact since it was explained in the course of search itself as recorded in the statements made u/s 132(4) of the Act. 17.2. Further, it is noted that Ld. AO has not doubted the fact of incurring of such expenditure. He has merely disallowed the same in absence of details relating to identity of payees which according to the assessee is not available since the said expenditure are not recorded in the books of accounts and are ....
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.... 18. Similar ground is raised by the revenue in other two appeals for AY 2019-20 and 2021-22. Since there is no change in fact pattern and applicable law, our observations and findings on this issue in appeal for AY 2018-19 apply mutatis mutandis to these two years also. Thus, relevant ground raised by the revenue for these two years are also dismissed. 19. We now take up ground no. 3 for AY 2018-19 in respect of addition of Rs. 50,00,000/- made u/s 69C towards unexplained expenditure. In this respect, ld. AO had made addition of unaccounted business receipts u/s 28 and did not allow deduction of expenses against the same. He made the addition of Rs. 50,00,000/- as unexplained expenditure even though source for the same was explained to be the same business receipts for which separate addition was made. The said addition relates to payment made to construction contractor which forms part of the seized document. In terms of our observations and findings on ground no. 2 in the above paragraphs, wherein treatment of expenses found recorded in seized material has been extensively dealt with, in our considered view, no separate addition in respect of unexplained expenditure can be....
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....or for persons other than assessee is not sustainable in law. However, since we have already affirmed the deletion of addition in ground no. 2, finding in this ground no. 1 has no bearing to alter the outcome in the appeal. Ground no. 1 raised by the revenue is dismissed. 21. In the result, all the three appeals by the revenue are dismissed. Order pronounced in the open court on 25^th April, 2025. ============= Document 1 Unacccounted Construction Entity Sr no Question Number Date Particulars Pag no Assessee Response In Statement Fin Year Dr Cr Unit No 1 Q-50 03-09-2021 Given to Prasad More(GM of Roshni Enterprises) by GP 1|Project Galaxy Ambernath 2021-22 12,64,800 2 Q-68 03-09-2021 Received from Prasad More 1 Received back from prasad out of amount of Rs.12,64,800 given in sr no 2 above 2021-22 (10,00,000) Q52 07-09-2021 Paid to Prasad More 3 For Roshni Galaxy Project 2021-22 19,74,000 4 2.52 08-09-2021 Paid to Prasad More 5 For Project 2021-22 7,00,000 5 Q-52 09-09-2021 Paid to Prasad More 6 Expense for Construction site 2021-22 84,700 6 Q-52 11-09-2021 Received from Prasad More 8 Received towards unit No. G-19 & G-20 of M/S Roshn....