TaxTMI 
TaxTMI 
2025 (6) TMI 490
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....der section 132 of the IT Act was carried out in Sankalp group on 30-10-2018, during the course of search premises of M/s. Sankalp Organisers Pvt Ltd,, M/s. Sankalp Venture LLP wherein Mr. Robin Ramavatar Goenka is the key person of the group and Substantial Additions were made in his hands, whereas Protective Additions made in the hands of his Accountant Mr. Dilipkumar Chhotalal Patel. Further Mrs. Dimple R Goenka is the wife of Mr. Robin R Goenka. Since the additions made are identical and inter connected, for the sake convenience all the above appeals are heard as a group and disposed of by this common order. 2. We have taken first Mr. Robin Ramavatar Goenka's case as the lead case. Brief facts of the case is that the assessee is engaged in real estate business. Assessee is a part of "Sankalp group" of Ahmedabad. A search and seizure action under section 132 of the Act was carried out in "Sankalp Group of Ahmedabad" on 30.10.2018 and on subsequent dates inter-alia covering "Kailash Goenka Group" as well as "Robin Goenka Group". Incriminating materials, including handwritten diaries, loose papers, unrecorded bills and other documents were seized. During the course of search ev....
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....ieved against the assessment orders, assessee filed appeals before the Commissioner of Income Tax [Appeals] who has decided the issues for all the assessment years as total unaccounted receipts aggregate to Rs. 29,44,43,392/- as against which total unaccounted payments aggregate to Rs. 31,04,39,180/-. Break-up of total unaccounted receipts of Rs. 29,44,43,392/- is as follows: Particulars AY 2018-19 AY 2019-20 Total Unaccounted receipts 1,74,90,000 27,49,02,539 29,23,92,539 Unaccounted cash receipts --- 2,00,000 2,00,000 Bogus loss in penny stock --- 18,50,853 18,50,853 Total 1,74,90,000 27,69,53,392 29,44,43,392 3.1. Break-up of "total unaccounted payments" of Rs.31,04,39,180/- is as follows: Particulars AY 2018-19 AY 2019-20 Total Unaccounted payments 24,74,37,451 5,34,32,500 30,08,69,951 Unaccounted expenses --- 2,50,000 2,50,000 Unexplained payment --- 36,50,000 36,50,000 Unexplained investment --- 15,57,000 15,57,000 Negative cash-in-hand --- 51,246 51,246 Payout on sale of stock --- 40,60,983 40,60,983 Total 24,74,37,451 6,....
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....ars as per below:- A.Y. Gross Amount 14% thereof 2018-19 24,75,00,000 3,46,50,000 2019-20 6,31,00,000 88,34,000 Total 31,06,00,000 4,34,84,000 7.6. Further it is also found that the substantial real income in the hands of the other group entities of the appellant i.e. Sankalp Venture LLP, Sankalp Organisers Pvt. Ltd. & Ginger Properties Pvt. Ltd. has also been brought to tax in respective assessment years from AY 2013-14 to AY 2019-20. The appellant is the main key person and controller of the appellants group entities. 7.7. Looking to the overall affairs of the group and the facts that addition of unaccounted receipts was already made as well as large amount has been confirmed in the various group concerns. the AO is directed to delete the addition made on account of unexplained expenditure/payments for the all assessment years under consideration as the same has been sourced from unaccounted receipts which have already been confirmed in the respective assessment years. Considering the overall facts of the case and as discussed in foregoing paras the addition of the following payments totaling to Rs. 31,04,39,180/- being allowe....
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....nsidered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty under various sections of the Act. 6. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 6. Aggrieved against the Appellate Order the Revenue is in appeal before us raising the following Grounds of Appeal in IT(SS)A No. 120/Ahd/2023 [A.Y. 2018-19]: 1. In the facts and on the circumstances of the case, Ld. CIT(A) erred in holding that the unaccounted income should be telescoped against the unaccounted expenditure to determine the real income of the assessee 2 In the facts and on the circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 1,74,90,000/- towards unaccounted cash receipts holding that the appellant suo-moto has offered income @14 of unaccounted expenses. 3. In the facts and on the circumstances ....
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.... element embedded therein can be added in the hands of the assessee. Reliance is placed on following decisions for the said legal proposition: * Sankalp Recreation P. Ltd. vs. ACIT - IT(SS)A 65/Ahd/2022; * Ginger Properties Pvt. Ltd. vs. ACIT - IT(SS)A 45/Ahd/2023; * CIT vs. President Industries - (2002) 258 ITR 654 (Guj.); * CIT vs. Balchand Ajit Kumar - (2003) 263 ITR 610 (MP); * CIT v. Gurubachhan Singh - (2008) 302 ITR 63 (Guj); * Man Mohan Sadani vs. CIT - (2008) 304 ITR 52 (MP); * CIT v. Samir Synthetics Mill - (2010) 326 ITR 410 (Guj); * DCIT v. Panna Corporation - Tax Appeal 323 of 2000 (Guj); * Chetan C. Patel v. ACIT - IT(SS)A 522/Ahd/2011 and others; * CIT v. Jay Builders - (2013) 33 taxmann.com 62 (Guj); * Greenfield Reality P. Ltd.- IT(SS)A 289/Ahd/2018 & others; 7.2. The next logical step is to determine the quantum of income element embedded in such "unaccounted receipts". Considering the actual profit ratio as per the books of accounts as well as actual unaccounted transactions and in order to pluck the leakage in Revenue, Ld CIT(A) estimated Real estate business pr....
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....bstantial unaccounted cash transactions, which were discovered only due to the search and seizure operations. The assessee had not provided any satisfactory explanation for the unaccounted receipts and expenses which led to the invocation of Sections 68 (unexplained credits) and 69C (unexplained expenditure) of the Act. Further the Ld DRs stated that there are violations of provisions of the Act and the assessee has not provided the details of expenses which will determine whether they are incurred wholly and exclusively incurred for the purpose of business; whether they are of capital or revenue nature and therefore, such expenses incurred in violation of the provisions of the Act cannot be allowed as a deduction under Section 37(1) of the Act. Further the assessee failed to demonstrate any nexus between the unaccounted receipts and expenses. In the above circumstances the Ld CIT(A) made ad-hoc estimation of the net profit rate and therefore requested to sustain the additions made by the A.O. 9. We have heard rival submissions at length and perused the materials available on record including the paper books and case laws filed by the parties. We had an occasion to deal with ide....
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....e, but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales. Such decision was carried in appeal by the revenue before the High Court. The High Court rejected the appeal, observing that unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed, such addition could not be sustained. It was observed that in absence of such findings of fact, the question whether the entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The High Court rejected the appeal holding that no question of law which requires to be referred arises. 11. In the case of Commissioner of Income Tax v. Gurubachhan Singh J. Juneja, reported in (2008) 302 ITR 63 (Guj.), once again a somewhat similar issue came up before this Court. In the said case, the assessee was engaged in the business of trading of tyres. Search proceedings were carried out at the residential and business premises....
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....expenditure incurred by the assessee, the entire amount received by the respondent should be treated as income. The Court concluded that the Tribunal was justified in considering that the respondent assessee ought to have spent reasonable amount for the purpose of receiving such gross receipt. 15. It can, thus, be seen that consistently, this Court and some other Courts have been following the principle that even upon detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation. 16. In view of the legal position that not the entire receipts, but the profit element embedded in such receipts can be brought to tax, in our view, no interference is called for in the decision of the Tribunal accepting such element of profit at Rs. 26 lakhs out of total undisclosed receipt of Rs. 62 lakhs. In other words, we accept the legal proposition, the Tribunal accepting of total undisclosed receipt of Rs. 62 lakhs, would not give rise to any qu....
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....he said addition made by the ITO and the Tribunal had rightly held that the claim at the increased rates as made by the assessee- company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the ITO did not represent the income which had really accrued to the assessee-company during the relevant previous years. The High Court, in our opinion, was in error in upsetting the said view of the Tribunal. 15. In the result, the appeals are allowed, the impugned judgment of the High Court is set aside and the questions referred by the Tribunal for opinion are answered in favour of the assessee-company and against the revenue. But in the circumstances, there will be no order as to costs." 9.5. Following the above judicial precedents and considering the actual profit ratio as per the books of accounts at 12.98% as well as profit ratio on actual unaccounted transactions at 6.75%. Therefore in the interest of justice, we deem it to estimate 13% as the reasonable profit margin considering the facts and figures in the present case. Thus the Jurisdictional Assessing Officer is directed to adopt 13% profit ....
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.... hands of Robin R. Goenka and Sankalp Organisers Pvt. Ltd. as follows: Particulars Robin Goenka SOPL(#) Total Assessment Year 2018-19 2019-20 2019-20 Unaccounted Cash Receipt (Protective Basis) 1,47,90,000 27,02,83,500 - 28,50,73,500 Unaccounted Cash Expenses(Protective Basis) 24,63,72,451 2,53,60,000 - 27,17,32451 Unexplained expenses u/s 69C of the Act(Protective Basis) - 2,50,000 - 2,50,000 Cash found during search (Protective Basis) - - 5,58,350 5,58,350 Unaccounted cash receipt (Protective basis) - - 2,00,000 2,00,000 Total 26,11,62,451 29,58,93,500 7,58,350 55,78,14,301 (#) - Sankalp Organisers Private Limited 15. On appeal, Ld. CIT(A) considered the submissions of the assessee and deleted the protective addition made in the hands of the assessee by observing as follows: "12.2 have perused the facts of the case, the assessment order and the submission of the appellant. From the perusal of the assessment order passed in the case of the Robin Goenka and Sankalp Organisers Private Limited, it has been observed that the same has been made on s....
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....s. 2 In the facts and on the circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 3,00,000/- made by Assessing Officer on protective basis on account of cash found during the search, considering that the assessee regularly maintaining cash in hand-between 3 to 4 lakh. However, assessee failed to explain the source of same before A.O 3. In the facts and on the circumstances of the case, Ld. CIT(A) erred in holding that the addition made in the case of Shri Robin Goenka and M/s Sankalp Organisers Pvt. Ltd. on substantive basis and are owned up by them, which is factually incorrect. The addition was made on protective basis and appeal proceedings are still pending in the case of M/s. Sankalp Organisers Pvt Ltd and Shri Robin Goenka at various stages of appeal." 17. The Revenue could not dispute that substantive addition made in the hands of Robin R. Goenka and Sankalp Organisers Pvt. Ltd. Consequently the Protective addition made in the hands of the employee Accountant is liable to be deleted for both the Asst. Years 2018-19 and 2019-20. 17.1. In the Asst. Year 2019-20, the A.O. made another addition of Rs.3,00,000/- which was deleted by ....
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.... JRI Industries & Infrastructure Limited 31,50,000 - - - - 31,50,000 B Kushal Tradelink - - - 1,50,01,944 - 1,50,01,944 C Alora Trading - - - - 28,73,400 28,73,400 2 Unsecured Loans u/s 68 of the Act 6,55,72,706 5,22,51,753 15,86,80,953 5,53,96,556 33,19,01,968 3 Disallowance of expenses u/s 14A r.w. Rule-80 1,07,373 65,658 4,29,347 47,81,026 13,97,966 1,50,01,944 Total Additions 6,88,30,079 65,658 5,26,81,100 17,84,63,923 5,96,67,922 36,79,29,256 Assessed Income 7,16,65,029 21,96,158 5,89,69,570 18,79,18,043 6,47,06,912 38,54,55,712 20. On appeal against the assessment orders, Ld CIT[A] deleted the additions by observing as follows: "6.1. During the course of appellate proceedings, the appellant has filed written submission in support of its claim. In the submission, the appellant has stated that the AO has sought to make the addition on the basis of verification of return of income (i.e. computation of total income and balance sheet) filed u/s.139 of the Act and not on the basis of any i....
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.... search. It is observed that no live nexus with the incriminating material found during the course of search in the case of the appellant was established by AO related to the additions. 21. Aggrieved against the appellate orders Revenue are in appeal raising the following Grounds of Appeal IT(SS)A No. 72/Ahd/2023 [A.Y. 2013-14] are as follows: 1 In the facts and on the circumstances of the case, the Ld.CIT(A) has erred IN law in deleting the additions made in the assessment order, relying on the decision of Hon'ble Gujarat High Court in the case of Saumya Construction without appreciating the facts that there is no restrictive provision as per section 153A, for the AO to assess or reassess the income of the assessee only on the basis of the incriminating material. 2. In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition made of Rs. 26,47,500/- made on account of disallowance of short term capital loss. 3. In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition made of Rs. 5,02,500/- made on account of payout on sale of penny stock. 4. In....
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.... circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition made of Rs. 1,50,01,944/- made on account of payout on bogus sale of penny stock. 3. In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition made of Rs. 15,86,80,953/- made u/s 68 of the Act. 4. In the facts and on the circumstances of the case, the Ld CIT(A) has erred in law in deleting the addition made of Rs. 47,81,026/- disallowance made u/s 14A r.w.r. BD of the Act. 5. In the facts and on the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 6. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 21.3. The Grounds of Appeal raised by the Revenue in IT(SS)A No. 75/Ahd/2023 [A.Y. 2017-18] are as follows: 1. In the facts and on the circumstances of the case, the Ld CIT(A) has erred on facts and law in deleting the additions made in the assessment order, relying on the decision of Hon'ble Gujarat High Court in the case of Saumya Construction without appreciating the facts that ther....
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....T(SS)A 40-41/Ahd/2022; • PCIT - Kutch Salt & Allies Ind Ltd. - TA 283 of 2023 (Guj) • PCIT vs. Backbone Projects Ltd. - TA88& 205 of 2023 (Guj) 22.2. Thus Ld CIT(A) has rightly held given a factual finding that none of the additions in the captioned appeals are based on any incriminating material found during the course of search. Under such facts and circumstances, additions made by AO in all the years in question have been rightly deleted by CIT(A). 23. Ld DR appearing for the Revenue could not contravent the facts and not placed on record any seized material from the premises/related of the assessee. 24. We have given our thoughtful consideration and perused the materials available on record. It is undisputed fact that the Ld AO made entire addition of addition on account of sale of shares as penny stock, unsecured loan u/s.68 of the Act and disallowance u/s.14A rwr 8D, though there is no seized material during the course of search proceedings. Further perusal of assessment orders nowhere discuss about any seized materials for the asst. years 2013-14, 2015-16 to 2017-18 which are also abated assessment years. 24.1. The Hon'ble Supreme Court ....