TaxTMI 
TaxTMI 
2025 (6) TMI 807
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....ent Years 2013-14 to 2019-20. A Search action under 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. 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 M/s. Sankalp Organisers Pvt Ltd's case as the lead case. Brief facts of the case are 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 evidence of on-money transactions in real estate projects, unaccounted cash sales were found which were not r....
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....Total unaccounted receipts (A) Rs.1,20,000 Rs.1,46,22,000 Rs.1,47,42,000 Unaccounted expenses - Rs.22,69,72,000 Rs. 22,69,72,000 Addition u/s 69C i - Rs.1,87,210 Rs. 1,87,210 Total unaccounted payments (B) - Rs.22,71,59,210 Rs. 22,71,59,210 2.5. Accordingly, entire unaccounted receipts and entire unaccounted payments, appearing in the seized material, were added as income of the respective assessment years and demanded taxes thereon. 3. Aggrieved against the assessment orders, assessee filed appeals before the Commissioner of Income Tax [Appeals] who has decided the issues for all the assessment years which are summarized as follows: Asst. Years Unaccounted receipts (A) Extrapolated on-money receipts (B) Total unaccounted receipts (C = A + B) Real income @ 14% of unaccounted receipts [C * 14%] 2013-14 -- Rs.2,16,73,000 Rs.2,16,73,000 Rs.30,34,220 2014-15 -- Rs.2,63,83,000 Rs. 2,63,83,000 Rs.36,93,620 20 15-16 -- Rs.3,14,61,000 Rs.3,14,61,000 Rs.44,04,540 2016-17 -- Rs.56,61,000 Rs. 56,61,000 Rs.7,92,540 2017-18 -....
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.... which is very much excess and considering the prevalent Market referred as on date in the said area i.e. Shilaj. Accordingly, the estimated On-money income from the said project Sankalp Grace-3 is calculated and summarized as under: A.Y. Area (SBA) (Sq.ft.) Estimated extrapolated On-money @ Rs. 1100 (6000 -4900) per Sq. ft. 2023-24 1,48,154.79 16,29,70,269 Total 1,48,154.79 16,29,70,269 Note: The BU permission for the said project has been received on 29/06/2022. (refer page no. 5 to 8 of this submission). 7.13. As per the settled provisions of the law, the request of the appellant that the alleged on money needs to be brought to tax as per the method of accounting regularly followed by the appellant is well valid and accepted principle under the law. Further, what has been referred to as amounts received by the appellant being unaccounted in nature and same is referred to as unaccounted receipts, the same then partakes the character of Business Income me and accordingly the same should be brought to tax as per the method of accounting as regularly employed. Further once the said amounts are sought to be brought to tax, there cannot be ....
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....it is observed that the profit % stands in the range of 2% to 4%. However, looking to the nature of business, the location and type of project and various discrepancies found during the search proceedings and it is a settled issue that in case of unrecorded sales, the profit margin remains higher than the recorded sates, the average profit is adopted at 14% for all the years under consideration. 7.18 Further, keeping in view of above discussion, relief is granted for the balance amount of the disallowance/additions made on unaccounted expenditures of Rs. 13,71,59,2101- (Rs.1,87,210/- + Rs. 13,69,72,000/-) for A.Y. 2019-20. 7.19 Considering above facts, the AO is directed to tax undisclosed income as per tabular chart herein above on year-to-year basis and also relief would be provided accordingly. 7.20 In view of above discussion and factual matrix of the case, the A.O. is directed to consider the amount of addition of Rs. 30,34,220/- in place of Rs. 2,16,73,000/- (addition made in the assessment order) while giving appeal effect of this order. Thus, the grounds of appeal no. 2.2.1 & 3 are partly allowed. 4. Aggrieved against the common Appellate Order....
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.... in law and on facts of the case in confirming an addition of Rs. 20,47,080/- by estimating profit margin at the rate of 14%. In the facts and circumstances of the case, such estimation is highly excessive and does not reflect the real income earned by the appellant. 5. The learned CIT(A) has erred in law and on facts of case in directing to confirm the addition on account of alleged on-money for AY 2023-24. He further erred in applying rate of 14% on gross receipts to compute net income which is highly excessive and not commensurate with the real income. 6. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered 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. 7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. A.O in initiating penalty under various sections of the Act. 8. The ap....
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....hat the income of the assessee is taxed under the head "income from business", whereas not appreciating the fact that the income earned & expenses incurred in cash being unaccounted and unexplained, addition was made u/s. 69A and 69C of the Act thereby attracting provisions of section 115BBE of the Act. 6. 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. 7 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. 6. Ld Senior Counsel Sri. Thusar Hemani appearing for the Assessee submitted that the assessee company is engaged in the real estate business basis. The seized material in question contained noting in respect of unaccounted receipts as well as unaccounted expenses. Unaccounted receipts (appearing in the seized material) were generated in the course of real estate business activities. It is not the case of the AO that such receipts were not related with the business activities of the assessee. Also there is nothing on record to demonstrate that the assessee had any other source of income from which, such receipts coul....
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....ne 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 profit at 14% to determine real income, which is substantially on higher side. Therefore, in the interest of justice, some reasonable rate of profit may be decided. Further it is well settled that only real income has to be taxed in the hands of the assessee. Reliance is placed on Godhra Electricity Co. Ltd.-vs-CIT (1997) 225 ITR 746 (SC). Further it is well settled principle of law that AO is duty bound to give relief to an assessee wherever due, even if it has not been claimed by the assessee. Reliance is placed on decision in the case of S. R. Koshti Vs- CIT (2005) 276 ITR 165 (Guj). 6.3. Thus Ld Senior Counsel pleaded that the methodology adopted by Ld CIT(A) is not absolutely scientific and leaves room for arbitrariness. It is further submitted that the very same seized materials contain noting of 'unaccounted receipts' and 'unaccounted payments'. Such receipts as well as payments are relating to the business ....
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....xpenses. In the above circumstances the Ld CIT(A) erred in making ad-hoc estimation of the net profit rate at 14% and charging to tax under provision instead u/s. 115BBE of the Act, therefore requested to sustain the additions made by the A.O. 8. 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 identical issue in the group case namely Sankalp In [IT[ss]A Nos.45 to 48/ Ahd/2022 dated 31-01-2025] were similar activities and search action taken palace in Robin R Goenka group. The ratio held in that decision is squarely applicable in these cases also. At the outset Ground No.1 & 2 namely jurisdiction to invoke assessment u/s. 153A of the Act are NOT PRESSED recording the same Ground Nos.1 & 2 raised by the assessee are dismissed. 8.1. It is well established mechanism to calculate profit is provided under sections 28 to 40 of the Act and when the books of accounts are rejected, invoking section 145, the estimation has to be resorted to. Various judicial precedents including the judgements of Hon'ble Gujarat High Court in case of DCIT Vs. Panna Corpor....
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....as 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 of the assessee. On the basis of loose sheets which were seized during such search operation, the Assessing Officer held that sales to the extent of Rs. 10.85 lakhs was not found in the books of account. Such amount was included in the total income of the assessee. The Commissioner (Appeals) gave substantial relief to the assessee and reduced the income on the basis of gross profit rate. The Tribunal confirmed the order of the Commissioner (Appeals). On further appeal before the High Court by the revenue, the High Court refused to re....
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....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 question of law." 8.2. Thus, the primary issue under consideration is whether the entire unaccounted receipts should be taxed as income or whether only the profit element embedded in these receipts should be considered. The assessee has relied on the Gujarat High Court's judgement in President Industries (cited supra), wherein it was held that the entire amount of unaccounted sales cannot be treated as income. In that case, the Hon'ble Court have ruled that only the net profit element should be taxed, as the sales represent receipts ....
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....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." 8.6. 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 margin on real estate business in the place of 14% as determined by the Ld CIT[A]. In the result the Ground Nos. 3 to 6 raised by the assessee are partly allowed and the Ground Nos. 1 to 3 raised by the Revenue are hereby dismissed. The remaining ground nos.7 to 9 raised by the assessee are consequential or general in nature which does not require any adjudication and are dismissed. 9. In the result, the appeal filed by the Assessee in IT[SS]A No.47/Ahd/2023 is partly allowed and the appeal filed by the Revenue IT[SS]....
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....'51 Rs.4,56,95,783 14. The Grounds of Appeal raised by the Assessee/Sankalp Venture LLP in IT(SS)A No. 53/Ahd/2023 [A.Y. 2018-19] are as follows: 1. The learned CIT(A) has erred in law and on facts of the case in confirming the assessment order u/s 153A of the Act which is passed in violations of provisions of the Act and against the scheme of assessment related to search cases. 2. The learned CIT(A) has erred in law and on facts of the case in confirming the additions made by learned Assessing Officer without any incriminating material found during the search. 3. The learned CIT(A) has erred in law and on facts of the case in rejecting the books of accounts of the appellant u/s. 145 of the Act. 4. The learned CIT(A) has erred in law and on facts of the case in confirming an addition of Rs. 33,56,982/- by estimating profit margin at the rate of 14%. In the facts and circumstances of the case, such estimation is highly excessive and does not reflect the real income earned by the appellant. 5. The learned CIT(A) erred in law and on facts of the case in considering the amount of expenses of Rs. 4,07,474/- as on-money received and ....