TaxTMI 
TaxTMI 
2023 (4) TMI 1427
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....s 'the Act') partly allowing the appeals preferred by the Assessee for the Assessment Year 2010-11 and 2012-13 to 2015-16. Since the appeals involve common issues arising from identical set of facts, the same were heard together and are being disposed of by way of common order. 2. We would first take cross appeals for the Assessment Year 2012-13 as it covers most of the issues raised in the appeals. However, where relevant, we would also state facts relevant to appeals for the other assessment years for the sake of brevity and to avoid repetition. Assessment Year 2012-13 3. The Assessee has raised the following grounds in appeal for the Assessment Year 2012-13 [ITA No. 1936/Mum/2022] "1. The Hon. CIT (A) erred in upholding addition of Rs. 29,49,089/- (Rs. 39,39,489/- - Rs. 9,90,400/-), by estimating 45% of on money receipts in respect of non-eligible projects u/s 80IB(10) to be the income of the appellant, not appreciating that such profit element in the on-money receipts could not exceed 20%, which amount is already offered to tax by the appellant and therefore the addition confirmed by the Hon.CIT(A) is not justified and bears to be deleted. 2. The Hon.....
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....the case and in law, the Ld. CIT (A) has erred in allowing additional claim of deduction u/s 80IB(10) without appreciating that as per section 80A(5) of the Act the benefit of enhanced deduction u/s 80IB(10) is not permitted if the assessee fails to make a claim in its return of income for any deduction. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has failed to consider the decision of the Hon'ble Apex Court in the case of CIT Vs Mandavi Builders [2021] reported in 133 taxmann.com 414 (SC) wherein SLP filed by the Department was granted by Hon'ble Apex Court against impugned order of Hon'ble Karnataka High Court wherein it was held that when unaccounted money found during search proceedings at premises of assessee-company was treated as business income of assessee by the Assessing Officer, assessee could not be denied deduction under section 80IB(10) in respect of such amount." The grounds raised by the Assessee in the appeal are taken up hereinafter in seriatim along with the connected grounds raised in the cross appeal by the Revenue. 5. Ground No. 1, 2 &3 of Appeal by Assessee and Ground No. 1 & 2 of the Departmental Ap....
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....into account the incriminating material found during the course of the search and statement of the partners recorded under Section 132(4) of the Act. During the assessment proceedings under Section 153A read with Section 143(3) of the Act, the Assessing Officer noted that as against the aforesaid amount of INR 40,46,18,086/-, the Assessee had offered to tax additional income of INR 7,24,58,910/- only in the return of income filed in response to notice issued under Section 153A of the Act. The year-wise break-up of the additional income offered to tax as per the Assessing Officer is as under: Assessment Year Financial Year Cash received as per Statement u/s 132(4) (INR) Additional Income offered in Return u/s 153A (INR) 2007-08 23,77,320/- - 2009-10 2008-09 1,29,53,500/- 2,48,27,400/- 2010-11 2009-10 3,72,66,500/- 1,41,52,520/- 2011-12 2010-11 5,87,03,500/- 2,55,22,890/- 2012-13 2011-12 12,08,07,465/- 22,03,373/- 2013-14 2012-13 7,26,87,800/- 40,82,327/- 2014-15 2013-14 8,12,37,001/- 11,68,800/- 2015-16 2014-15 1,98,47,000/- 5,01,600/- Total Total 4....
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....ontention of the Assessee is that only 20% of the on-money receipts should be brought to tax as income, whereas the Revenue contends that the CIT (A) committed error in allowing deduction for expenses in absence of any proof of the same having been furnished by the Assessee during the assessment or first appellate proceedings and therefore entire amount of on-money receipts should be taxed in the hands of the Assessee. 13. The Learned Authorised Representative for Assessee submitted that the Assessing Officer had considered the entire cash receipts as income whereas the CIT (A) has restricted such income at 45% of the cash receipts. While doing so the CIT (A) has only granted deduction for the actual expenses as computed by the Assessing Officer in the remand proceedings based upon the seized records. The CIT (A) has failed to appreciate that during search entire record of cash expenses was not seized. He emphasized that the seized records were indicative of the expenditure incurred and did not represent the total of all cash expenditure. He submitted that the Assessee was developing residential units for lower income group at Virar, District Palghar and therefore, in all fairne....
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....ted that only a reasonable percentage of such receipts, which is 20% in the present case, could be considered as income. The CIT (A) has estimated income component of cash receipts at 45%, which is highly excessive taking into consideration, the nature of business, the location of development at Virar, District Palghar and the evidences of cash expenditure having been incurred discovered during the course of search action. During the assessment proceedings, all the entries found in the seized material were reconciled with the cash flow statement, however, the Assessing Officer/CIT(A) proceeded to make the addition on the basis of cash flow statement prepared by the Assessing Officer. 16. We have considered the rival submissions and perused the material on record. 17. We note that the Assessing Officer had accepted the fact that the expenses were incurred in cash but had denied deduction for the same by holding that the Assessee has failed to show that the provisions of Section 30 to 36, 37 and/or 40A(3) of the Act have been complied with. The Assessing Officer had, in paragraph 8.25 of the Assessment Order, distinguished the decisions cited by the Assessee during the assessme....
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....ted the contention of the Assessee that only profit element embedded in cash receipts can be brought to tax by placing reliance on the decisions of the Hon'ble High Courts in the case of Lalchand Gopaldas Vs. CIT: 48 ITR 324 (All), DCIT Vs. Panna Corporation: Tax Appeal 323 & 325 of 2000 (16.06.2012)(Gujarat High Court) and CIT Vs. P D Abrahm : 20 Taxmann.com 823 (Ker). The CIT (A) has also taken into consideration the abovesaid decisions of Mumbai Bench of the Tribunal in the case of Bhalchandra Trading Pvt. Ltd. (supra), Om Constructions (supra) and Sahakar Developers (supra). We have perused the aforesaid judgments/decisions wherein it has been held that only profit element embedded in cash/on-money receipts could be brought to tax in the hands of the Assessee. Therefore, we find no infirmity in the order passed by the CIT (A) to the extent that the CIT (A) holds that only profit element embedded in the cash receipts is liable to be taxed in the hands of the Assessee. In view of the aforesaid, we reject the contention of the Revenue that entire cash receipts should be brought to tax. 18. This takes us to the issue of computation of profit element. The CIT (A) has concluded th....
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.... It is a well settled legal principle that the net profit rate estimated in the sister concerns, engaged in the similar business, can also be taken as basis for estimating the net profit rate in other group concerns. Therefore, keeping in view the facts of the case in entirety and the proposition laid down by various High Courts as discussed above, the Assessing Officer is directed to take 45% of the "on- money as the appellant's income for each year, rather than treating the entire amount (as reduced by the stamp duty and registration charges) as suppressed income." (Emphasis Supplied) 19. On perusal of the above we can see, that while estimating the profit at the rate of 45% the CIT (A) has taken into account the Stamp Duty & Registration Charges as well as Other Expenses computed on the basis of ceased material by the Assessing Officer and which have been accepted to have been incurred in cash. However, the CIT (A) has not considered the expenses incurred in cash for purchase of land. We note that while estimating the amount of cash receipts from the Promoters the payments made in cash for purchase of land have been taken into account and deficit of INR 1,75,13,115/- for ....
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....and therefore, all the advances received by the Assessee are reflected as liability in the balance sheet till the completion of the project. When the project is completed the advance is recognized as income and offered to tax. Accordingly, the advance received by the Assessee should be taxed in the year in which the project is completed. 22. Per contra, the Ld. Departmental Representative relied upon the order passed by the Assessing Officer and the CIT(A), and submitted that the receipt of cash was an independent transaction complete in itself. Since the aforesaid transaction is not recorded in the books of accounts, the on-money receipts cannot be brought to tax as per the method of accounting followed by the Assessee and must be brought to tax in the year of receipt. 23. In rejoinder, the Ld. Authorised Representative for the Assessee submitted that advance received has been offered the tax as and when the project work was completed. Providing clarification in relation to the aforesaid, the Ld. Authorised Representative for the Assessee submitted that out of cash receipts pertaining to the Assessment Year 2012-13 amount of INR 2,11,71,000/- is yet to be offered to tax and ....
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.... to 5 raised by the Revenue are directed against the order of CIT (A) granting benefit of deduction under Section 80IB(10) of the Act in respect of on-money receipts pertaining to the eligible projects brought to tax in the hands of the Assessee. 27. We have considered the rival submissions and perused the material on record. We note that the CIT (A) has granted benefit of Section 80IB(10) of the Act to the Assessee observing that the Assessee had claimed deduction under Section 80IB of the Act in the original return of income. It is admitted position that on-money/cash receipts pertain to project eligible for deduction under Section 80IB(10) of the Act. The additional income on account of on-money receipts enhances the business income derived by the Assessee from the eligible projects and therefore the Assessee is entitled to claim deduction under Section 80IB(10) of the Act in respect of the same. While arriving at the aforesaid conclusion, the CIT (A) has relied upon a number of decisions/judgments including judgment of the Hon'ble Bombay High Court in the case of CIT vs. Sheth Developers Private Limited: [2012] 254 CTR 127 (Bombay)[27-072012] wherein it was held that while c....
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....he additional income is offered in a search related assessment proceeding under section 153C of the Act, assessee's claim of deduction cannot be disallowed. This view of ours is fortified by the decision of the co-ordinate bench in case of Malpani Estates vs ACIT (supra). The co-ordinate bench, while considering more or less identical issue of claim of deduction under section 80IB(10) in respect of additional income offered because of on-money in an assessment proceeding under section 153A of the Act, has held as under: "10. In the present case, it is not in dispute that.................. xx xx 17. In-fact, the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra) was considering the claim of deduction u/s 80IB(10) of the Act in relation to the undisclosed income declared consequent to the search action. In the case before the Hon'ble High Court, it was factually emerging that undisclosed income was earned by the assessee in the course of carrying on his business activity of a 'builder' and the same was accepted by the Department, but the claim of the deduction u/s 80IB(10) was denied in relation to such income. Howeve....
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....tled to claim deduction under Section 80IB(10) of the Act in case of additional income arising from on-money receipts pertain to eligible projects provided the Assessee had claimed deduction under Section 80IB(10) of the Act in the original return of income and had not made claim for deduction under Section 80IB(10) of the Act for the first time for the relevant assessment year in the return of income filed response to notice issued under Section 153A of the Act. 29. In view of the above, we do not find any infirmity in the order passed by CIT (A) on this issue. Accordingly, Ground No. 3 to 5 raised by the Revenue in the appeal are dismissed. 30. Both the sides had agreed that our findings /adjudication in respect of issues raised in cross appeals for the Assessment Year 2012-13 shall apply mutatis mutandis to the grounds/issues raised in the appeals pertaining to the other assessment years. Accordingly, we proceed to decide the other appeals preferred by Assessee and Revenue Appeal of the Revenue for the Assessment Years 2010-11, 2013-14 and 2014-15 31. Ground No. 1 to 5 raised in these three appeals are identical to the Ground No. 1 to 5 raised in appeal for the Asses....