TaxTMI 
TaxTMI 
2025 (7) TMI 43
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.... income for respective assessment years. All returns were processed under section 143(1) of the Act. Subsequently, search and seizure action under section 132 of the Act was conducted on 31.01.2018 in the case of "Haathee & Ananta Group" of Vadodara. The assessee-firm being part of the group, was covered in the search proceedings. In the course of search and post-search investigation, various documents were found and seized from different premises of the group entities, including certain annexures marked as BS-3, BS-7, BS-9, BS-10 and others. The seized materials, as per the AO, indicated receipt of unaccounted cash (on-money) against sales of units in the two real estate projects developed by the assessee, namely, Ananta Savera and Ananta Swagatam. The statement of Shri Karan Thapa, the Sales Executive of the assessee-firm was recorded during the course of search proceedings under section 131(1A), wherein certain admissions were stated to have been made regarding collection of on-money over and above the regular sale consideration. Based on these statements and seized materials, the AO proceeded to reopen earlier assessments under section 153C for assessment years 2015-16 to 2017-....
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....07,000/- for the project Ananta Savera and Rs. 8,27,47,199/- for the project Ananta Swagatam) to Rs. 1,22,18,100/- (which is 20% of the total unaccounted receipts as decided by the Ld. CIT(A) i.e. Rs. 6,10,90,501/-) on the issue of unaccounted receipts under Sec. 69A of the Act in respect of sale of units of these two projects. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that only 20% of the unaccounted receipts are to be taken as income from the projects Ananta Savera and Ananta Swagatam ignoring the fact that the assessee was unable to produce the corresponding documentary evidences in relation to the expenses incurred during the year under consideration. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the fact that the total amount of 'on money' was worked out by the Assessing Officer on the basis of incriminating documents found and seized and averments made by the Sales Executive of the assessee, Shri Karan Thapa in his statement recorded on oath. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the add....
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....ccounted income. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that there was no tangible and clinching evidence brought on record by the Assessing Officer to prove that the assessee was indulged in the practice of receiving 'on money' from its customers on the booking / sale of units in the year under consideration, ignoring the incriminating documents found and seized in respect of sale of Units in the same projects by accepting 'on money' and admissions thereof made by the key persons of the group. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding the search assessment for the year under consideration was to be made on the basis of incriminating documents seized during the course of search despite the fact that The word "incriminating" is not used anywhere in the provision of section 153A of the Act which requires the total income to be brought under tax without restrictions. 5. It is therefore, prayed that the order of Ld. CIT(A)-12, Ahmedabad may be set aside and that of the AO may be restored to the above extent. 6. The appellant craves leave to add,....
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....s of Appeal in ITA No.158/Ahd/2021 For A.Y. 2018-19 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,34,91,000/- (total of Rs. 51,00,000/- for project Ananta Savera and Rs. 2,83,91,000/- for the project Ananta Swagatam) on the issue of unaccounted receipts under Sec. 69A of the Act in respect of sale of units of these two projects. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the fact that the total amount of 'on money' was worked out by the Assessing Officer on the basis of incriminating documents found and seized, averments made by the Sales Executive of the assessee, Shri Karan Thapa in his statement recorded on oath, considering the details of flats sold during the year under consideration as submitted by the assessee and also by adopting a proper method of computing the unaccounted income. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that there was no tangible and clinching evidence brought on record by the Assessing Officer to prove that the assessee was indulged in the practice....
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....-7, Page 10 was treated as a crucial document as it contained coded entries relating to unaccounted cash receipts. The decoding method, applied by the Investigation Wing and adopted by the AO, involved multiplying the coded figures by 100. For example, an entry of "17,012" at S.No. 7 on Page 10 of BS-7 was decoded to reflect Rs. 17,01,300 as unaccounted receipt from one customer. In support of the evidentiary value of these documents, the AO relied heavily on the sworn statement of one Shri Karan Thapa, Sales Executive, recorded under section 131. He confirmed that part of the sale consideration was routinely received in cash from customers over and above the documented amount. He further identified entries in the seized materials as representing such on-money transactions. In the case of Ananta Savera, out of 94 villas (61 Type-A and 33 Type-B), 72 villas were found to be sold as on the date of the search. For 36 villas, the AO had complete documentary and customer-wise data. These documents reflected unaccounted receipts aggregating to Rs. 7,53,80,999. For the balance 36 villas, the AO adopted an averaging method to estimate on-money. Based on this method, the average on-money pe....
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....and additions under section 69A were made in A.Ys. 2016-17 to 2018-19, which form part of the present appeals. The additions made by the AO under these grounds are tabulated as follows: Assessment Year Project Name Addition u/s 69A (Rs.) 2015-16 Ananta Savera 1,49,07,000 2015-16 Ananta Swagatam 8,27,47,199 2015-16 Total 9,76,54,199 2016-17 Ananta Savera 5,83,73,400 2016-17 Ananta Swagatam 4,93,32,000 2016-17 Total 10,77,05,400 2017-18 Ananta Savera 3,31,41,000 2017-18 Ananta Swagatam 3,68,83,000 2017-18 Total 7,00,24,000 2018-19 Ananta Savera 51,00,000 2018-19 Ananta Swagatam 2,83,91,000 2018-19 Total 3,34,91,000 9. The learned CIT(A), in the impugned consolidated appellate order, has adjudicated upon the additions made by the AO on account of alleged unaccounted on-money receipts from sale of units in the real estate projects "Ananta Savera" and "Ananta Swagatam", spread across four assessment years, namely A.Ys. 2015-16 to 2018-19. The CIT(A)'s adjudication proceeded on the touchstone of the evidentiary value of the seized material, the scope and applicability o....
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....on various judicial precedents and held that taxing the full cash receipt would convert the addition into turnover taxation, which is contrary to settled law. 10. Accordingly, the CIT(A) applied an embedded profit margin of 20% on the Rs. 6.10 crore of verified on-money receipts, and sustained an addition of Rs. 1,22,18,100 under section 69A for A.Y. 2015-16. 11. In regard to the statement of Shri Karan Thapa, the then Sales Executive of the assessee group, the CIT(A) exercised cautious judicial discretion. While noting that the statement contained general observations and claims of systematic receipt of on-money, the CIT(A) was of the view that such oral statements could not be given primacy unless they were independently corroborated by contemporaneous documentary material pertaining to the year in question. The CIT(A) therefore placed very limited reliance on the said statement, using it only as a corroborative indicator where direct documentary evidence existed. Lastly, the CIT(A) proceeded to delete all post-A.Y. 2015- 16 additions on the ground that those were founded solely on projection and extrapolation, without any seized document or corroboration for the relevant y....
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....omer-wise transaction details. The DR further submitted that the addition made by the AO represented a mixed approach partly based on actual seized documentary evidence, and partly through logical extrapolation from representative data and indexed rate differentials, which is a permissible estimation technique in search-related assessments. In conclusion, the DR submitted that the findings of the AO were well-reasoned, based on credible evidence and consistent with settled legal principles, and therefore deserved to be upheld. 13. On the other hand, the learned Authorised Representative (AR) for the assessee strongly supported the order passed by the learned CIT(A), contending that the appellate authority had rightly restricted the additions only to those amounts for which there existed specific incriminating material seized during the course of search. It was submitted that the additions sustained by the CIT(A) for A.Y. 2015-16 were solely based on deciphered documentary evidence found in the form of Annexures BS-7 and BS-10, and to that extent, the assessee had not disputed the underlying factual substratum. However, the AR asserted that the AO's attempt to extend this data by....
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....tabulated as follows: Source - Annexures Ananta Savera (Rs.) Ananta Swagatam (Rs.) BS-7, Page 1 (Aug 2014) - 4,54,35,201 BS-10, Page 34 (Sept 2014) 17,01,300 80,74,000 BS-10, Page 36 (Oct 2014) - 58,80,000 Total (verified on-money) 17,01,300 5,93,89,201 Grand Total (Combined) 6,10,90,501 15. This chart confirms that the addition of Rs. 6,10,90,501/- for A.Y. 2015-16 was based on direct and specific documentary evidence. The AO's broader extrapolated figure of Rs. 14.99 crore was rightly rejected. 16. Under Paras 6.17-6.18 of the CIT(A)'s order, the statement of Shri Karan Thapa recorded under section 131 was subjected to rigorous scrutiny. We agree with the CIT(A)'s evaluative approach. The reliance placed by the AO on the statement of Shri Karan Thapa is misplaced and unsustainable in law. Shri Thapa, being merely a sales executive, held a subordinate position within the organisational hierarchy and had no authority to negotiate or finalise sale transactions. His statement, recorded under section 131 of the Act, consisted largely of generalised assertions regarding the alleged practice of receiving cash over and ab....
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....sidered to be a fair and conservative estimation considering the margins typically earned in the real estate business. The CIT(A) also relied on various judicial precedents where profit margin ranging from 8% to 16% was adopted. During the course of appellate proceedings, when queried as to why the assessee accepted a higher profit margin of 20%-despite judicial precedents suggesting acceptance of profit margins in the range of 8% to 16% in comparable cases, the learned AR submitted that the assessee chose to accept such estimation in order to buy peace of mind and bring finality to the long-drawn controversy. It was submitted that the assessee, while maintaining that only the embedded profit on verifiable on-money receipts could be brought to tax, did not press for further reduction in the profit percentage so as to avoid protracted litigation. This submission, in our considered view, further reinforces the bona fides of the assessee's stand and lends credence to the reasonableness of the estimation adopted by the CIT(A). 17. We also considered the specific ground raised by the Revenue, wherein the Revenue has challenged the finding of the learned CIT(A) to the effect that addi....
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....hasers, and the application of a reverse indexation method lacking statutory or judicial backing, cannot sustain the additions beyond what is found in the seized documents. The CIT(A) has rightly applied the settled principle that only the embedded profit in unaccounted receipts can be brought to tax. We, therefore, uphold the findings and conclusion of the CIT(A) on this issue, and dismiss the Revenue's grounds relating to unaccounted cash receipts. Ground relating to addition on account of alleged Unaccounted Land Investment - Rs. 2,86,00,000 [IT(SS)A No.78/Ahd/2021 - A.Y. 2015-16] 19. During the course of the search operation conducted at the premises of the assessee group, the Investigation Wing seized various documents from the Bhavani Nagar back office, including Annexures BS-7 and BS-9. In particular, the AO relied upon Page 56 of Annexure BS-9, which, according to him, indicated cash payments aggregating to Rs. 2,86,00,000/- purportedly made towards purchase of land used in the assessee's residential projects-Ananta Savera and Ananta Swagatam. The AO treated these cash transactions as unexplained investments under section 69 and added the same to the total income of t....
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....to para 9.7 of the assessment order, wherein the AO has reproduced a detailed date wise chart of the alleged cash payments based on page no. 56 of seized Annexure BS-9. This chart clearly demonstrates that all twelve payments aggregating to Rs. 2.86 crore were made during the financial year 2014-15, relevant to A.Y. 2015-16, the very year in which the on-money receipts have been assessed to tax. The AR thus contended that there was no temporal disconnect between the receipt and application of funds, and the AO's observation that these were "initial investments" made in earlier years is factually unsustainable. Further, the AR submitted that once the Revenue has brought to tax the source of such funds (i.e., on-money receipts), and the assessee has explained the application thereof toward land acquisition, the benefit of telescoping must be granted in accordance with well-settled principles of law. The AR emphasized that the AO did not bring on record any contrary evidence to establish that the cash used for land payments emanated from a source other than the on-money receipts already taxed. 23. We have carefully considered the rival submissions, the material placed on record....
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....e to the assessee's specific claim that these land payments were made out of unaccounted receipts already taxed. There is no material brought on record to show that the cash payments emanated from any independent or unexplained source. Nor has the AO shown that the timing or quantum of the payments was inconsistent with the flow of receipts assessed in the same year. 24. The learned CIT(A), in our considered view, has rightly appreciated the factual matrix and allowed the assessee's claim by observing that taxing the land payments separately under section 69 would result in double taxation of the same income, once as unaccounted receipts and again as unexplained investment. The CIT(A) has further noted that the explanation of the assessee was not only plausible but supported by the very evidence relied upon by the AO i.e., seized Annexure BS-9 and BS-7, the cash flow pattern, and the admitted fact that the land transactions were executed for the same real estate projects for which on-money receipts were assessed. Accordingly, we find no infirmity in the decision of the CIT(A) in deleting the addition of Rs. 2,86,00,000/- made under section 69 of the Act. The conclusion reach....
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....ts of the assessee firm. In the absence of a direct and cogent nexus between the impugned documents and the assessee's affairs, it was contended that no addition was legally permissible in the hands of the assessee. 27. The CIT(A), after considering the material on record and examining the seized documents in question, concurred with the assessee's position. It was observed that the identity of the person to whom the cash payments were allegedly made was neither established nor verified by the AO. The vouchers in question did not contain the name of the assessee, and no effort was made to demonstrate how or in what manner the amounts reflected in such documents were connected with the business activity or real estate projects of the assessee. The CIT(A) held that the absence of any corroborative material linking the seized notings to the assessee's accounts or operations was a serious flaw. In such circumstances, where the documents were recovered from a third-party residential premise and lacked any direct linkage to the assessee, the addition based solely on assumption or presumption could not be sustained. Accordingly, the CIT(A) deleted the addition of Rs. 23,30,400/- made u....
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....t that the seized vouchers did not carry its name, were not recorded in its books, and appeared to pertain to a personal project or other group entity. It was also submitted that, in any case, the cash flow between various entities of the Ananta Group was often intermingled, and that a large number of firms within the group had approached the Hon'ble Income Tax Settlement Commission. The AO, in paras 9.4 to 9.6 of the assessment order, rejected this explanation, observing that the matter had not been admitted by the Settlement Commission and that the assessee had failed to discharge its statutory burden under section 69C. The AO thus concluded that the said expenditure remained unexplained and added Rs. 23,30,400/- to the total income. Before the CIT(A), the assessee reiterated that the vouchers were not in its name, did not pertain to any expenditure recorded or incurred by it, and that no nexus had been established by the AO between the impugned payments and its projects. The CIT(A), upon perusal of the seized vouchers, found that they did not bear the name of the assessee, nor did the AO bring any material on record to establish that the expenditure was actually incurred by the ....