TaxTMI 
TaxTMI 
2026 (1) TMI 817
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....issues involved. Assessee' Appeal in ITA No.1678/Ahd/2024) for AY-2022-23 2. The Assessee in this appeal has taken the following Grounds of Appeal: "1. In the facts and circumstances of the case, the Ld. CIT(A) ought to have quashed the Assessment being void ab initio, illegal, without jurisdiction and not following the principle of natural justice. 2. In the facts and circumstances of the case of the Assessee, the Ld. CIT(A) has erred in holding that the Assessee has received alleged on-money on sale of units at project "Privilon" and "Paarijat Eclate" developed by it when no evidence relating to alleged on-money was found during the course of search and relied upon by Assessing Officer in Assessment Order. 3. In the facts and circumstances of the case of the Assessee, the Ld. CIT(A) has erred in holding that on-money receipt in its case is required to be computed considering average fair market value of sale of units @ Rs. 6,500/- per Sq. Ft. when there was no reason to estimate on-money in case of Assessee and no evidence relating to receipt of on-money was found during the course of search. 4. Without prejudice to above, the Ld. CIT(A) ....
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....project cost at Rs. 399.31 crore (Rs. 223.86 crore for Privilon and Rs. 175.45 crore for Paarijat Eclate). The Assessing Officer further worked out the basic construction cost at around Rs. 5,000 per sq.ft. of super built-up area for Privilon and Rs. 4,600 per sq.ft. for Paarijat. The AO further noted that several registered sale deeds for units in both projects reflected basic rates which were significantly below the above estimated costs by the AO. The AO observed that in the ordinary course of business, no real estate developer would sell the flats below its construction costs. Therefore, he concluded that the difference between book rate/sale deed rate and the price as estimated by the AO represented unaccounted on-money received in cash by the assessee. 5.1. The assessee's submission that registered rates did not include certain other development and approval charges etc. was rejected by the AO by observing that the cost amount computed from seized material also did not include such charges and that even, after adding AEC/AUDA charges of Rs. 1,000 per sq.ft. for Privilon and Rs. 400 per sq.ft. for Paarijat, the accounted/booked rates remain below the construction cost estim....
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....ch. The CIT(A) categorically observed that the AO treated such loose excel sheets as conclusive proof of actual transaction value without any supporting, corroborating or legally admissible evidence. The learned CIT(A) observed that the loose excel sheets relied upon by the AO merely contained indicative floor-wise offer rates and appeared to be initial internal quotation workings, which did not contain any details of specific units sold, names of purchasers, dates of negotiation, terms of payment, confirmation of deal closure, or any evidence indicating receipt of cash component by the assessee. Therefore, such documents could not be assumed to represent actual sale price. The Ld. CIT(A) further noted that the AO had failed to establish any trail of cash movement either from the possession of the assessee or from any third party, and that no buyer or broker had confirmed any alleged cash payment. He observed that no evidence of investment, application or utilisation of any alleged unaccounted money had been found or established by the AO. The CIT(A), therefore, held that in the complete absence of corroborative evidence, it was not permissible to conclude that the assessee had sol....
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.... therein @ 17% of the recomputed price. 7. Being aggrieved by the said order of the CIT(A), the assessee has come in appeal before us, agitating not only the re-computation of the sale price but also the estimation and addition of 17% profit on such recomputed price. The Revenue on the other hand has come in appeal before us agitating the above action of the CIT(A) in setting aside the order of the AO making addition of the entire alleged on-money received by the assessee as estimated by the AO. 8. We have heard the rival contentions and gone through the record. The Ld. AR of assessee has contended that the impugned additions have been made solely on the basis of loose sheets, rough notings, third-party excel files and interpretative assumptions arising out of search proceedings in the B-Safal Group. That neither these documents bear signatures of the assessee, nor contained the names of actual buyers, none show dates of negotiations vis-à-vis final registered sale deeds, none indicate actual receipt of cash, and none of these documents have any linkage to the audited books of accounts or registered documents. That the AO has attempted to infer alleged "on-money" solel....
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....ing rate. The Ld. AR has further submitted that the fact that the year and date of chat were subsequent to the booking of the flats showed that the rates mentioned by the broker might be resale proposal/price by first buyers. He in this respect submitted that this fact is further fortified from the fact that one third-party excel sheet showed that in a resale transaction, the assessee received only the cheque portion i.e. Rs. 5,000 per sq. ft. and any excess amount was exchanged between first and second buyers without involving the developer. He therefore, has submitted that this categorically proved that any difference in the ultimate resale consideration cannot be attributed to the assessee. 8.2. The Ld. AR has also stated that the AO has mechanically adopted the highest quoted rate of a given date and applied it to all units sold on that date, without appreciating that in real estate business, the prices are not uniform rather, it involves complex negotiation process. He therefore, has contended that the additions made by the lower authorities were not supported by any corroborative material such as unaccounted cash, unexplained expenditure, investments, confirmation of buyer....
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....wever, explained that "P" actually stood for "Painting" (interior finishing works like painting and panelling), which is an optional service. This type of abbreviations, in our view, can be well explained by the person who has written these abbreviations or the person in whose possession these documents were found. If such a person gives the explanation/full-form of these abbreviation and the same are found convincing, looking into the facts and circumstances of the case, then, in our view, the other interpretation done by the AO to assume higher sale price would not be justified, especially when there is no corroborative evidence to such assumptions. In this case, even the AO did not verify his assumptions as no buyers were questioned to confirm if they paid any cash over and above the sale price mentioned in the deed. Even, the AO used internal Excel files containing budget projections to calculate the project cost of Rs. 5,000 per sq. ft. The AO then assumed that any unit sold below this rate implies that the difference was collected in cash. However, the case of the assessee is that these excel-sheets were internal estimates and budgets, not actual sales. Moreover, neither any ....
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.... cannot be held to be justified. 10.3. The facts and issue involved in this case are covered by the decision of the Hon'ble Gujarat High court in the case of "Maulikkumar K. Shah" 307 ITR 137,wherein, in somewhat identical circumstances, the Hon'ble High Court has held as under: "The assessee had constructed certain shops. There was a search at the assessee's premises and a diary was seized in which the assessee had estimated rates of these shops. The assessee had booked/sold 35 shops as on date of search. Because of the difference in rates as mentioned in the seized paper and the books of account, the Assessing Officer calculated the 'on-money' and made addition accordingly. Held that notings in the seized diary found from the premises were the only material on the basis of which the Assessing Officer had made the impugned additions. The Assessing Officer had not brought any corroborative material on record to prove that such sales were made and 'on-money' was received by the assessee outside the books of account. The Assessing Officer had not examined any purchaser to whom the sales of shops were effected. Onus heavily lay on the revenue t....
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....ace of evidence. 10.6. The facts in the hands clearly suggest that both the lower authorities have proceeded on the basis of their own assumptions and presumptions to assume the receipt of 'on-money' by the assessee on sale of units without any corroborative evidence being found during the search action or during the course of post-search inquiries. In view of detailed discussion made herein above, entire addition of on money made by the AO for Rs. 20,24,12,970/- for project "Privilon" and Rs. 33,12,61,018/- for project Parijat Eclate" is ordered to be deleted. Therefore, Ground of Appeal Nos. 2 to 4 of assessee appeal are allowed. 11. Ground No.5:- Vide Ground No.5, the assessee has contested the addition of deemed rent made by the AO @7.5 of the value of the property, however, restricted by Ld. CIT (A) @ 3% of market value of unsold unit. The AO observed that BU permission for project developed by assessee was taken on 22-01-2019 and as per provision of Section 23(5) of the Act, two years had passed on 31-03-2021, hence, addition of deemed rent @ 7.5% of value of property was required to be made. The AO, accordingly, estimated deemed rent u/s 23(5) of the Act at Rs. 2,79,39....
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....on account of onmoney received at 17% of the same ignoring the detailed reasoning given by the AO. 2. In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting deemed rent to the extent of 3% as against 7.5% computed by AO as per the decision of Hon'ble Supreme Court of India in Dr. Balbir Singh V/s Municipal Corporation, Delhi [1985]. 3. The Revenue craves leave to add/alter/amend and/or substitute any or all of the grounds of appeal. 17. Ground No.1:- The Revenue vide Ground No.1 has agitated against the action of the Ld. CIT(A) in estimating/recomputing the sale consideration at flat rate of Rs. 6,500/- per sq.ft. and thereafter, estimating the profit element on such sales @ 17% and has pressed for the confirmation of additions made by the AO on this issue. In view of our discussion made above, while adjudicating the Ground Nos.2 to 4 of the assessee's appeal, wherein, we have also discussed about the action of the Ld. CIT(A) in estimating such profits and held that such action of the Ld. CIT(A) was not justified and, hence, ordered to delete the additions made by the AO on this issue. In view of this, there is....