TaxTMI 
TaxTMI 
2026 (1) TMI 1470
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....ppeal in ITA No. 1450/Ahd/2024 for AY 2015-16. ITA No. 1450/Ahd/2024 for AY 2015-16 2. The Revenue, in this appeal, has taken following grounds of appeal: "1) In the facts and on the circumstances of the case and in law, the Id.CIT(A) has erred in deleting the addition of Rs. 8,52,10,308/- (Rs. 10,26,63,022 - Rs. 1,74,52,714) u/s.69A r.w.s. 115BBE of the I.T.Act on account of receipt of on money in Dreamland and Sicilia Projects. 2) In the facts and on the circumstances of the case and in law, the ld.CIT(A) has erred in giving the benefit of telescoping of income disclosed under IDS, 2016 against the confirmed addition of Rs. 1,74,52,714/-. 3) The Revenue craves leave to add/alter/armed and/or substitute any or all of the grounds of appeal." 3. At the outset, the Ld. Counsel for the assessee has raised the legal/jurisdictional issue that the impugned addition was made by the Assessing Officer (AO) by way of reopening of the assessment u/s.147/148 of the Act. That pursuant to the judgement of Hon'ble Supreme Court in the case of "Union of India and Ors. vs. had Ashish Agrawal (2022) 444 ITR 01 (SC)" notice issued u/s.148 between 01/04/2021 to 30/0....
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....is concerned, Revenue could not have issued the notices under section 3(1) of TOLA as considering the time period as prescribed under section 149 of the Act with effect from 01.04.2021, three years would be over on 31.03.2019 which is prior to coming into force of TOLA and six years would be completed on 31.03.2022 which is after operation of TOLA. In such circumstances, notices for Assessment Year 2015-2016 are held to be invalid by Hon'ble Apex Court in case of Rajeev Bansal (supra). 12. The Hon'ble Apex Court followed the decision of Rajeev Bansal (supra) in case of Deepak Steel and Power Ltd vs. Central Board of Direct Taxes reported in [2025] 174 taxmann.com 144 (SC) and after recording the concession of the learned advocate for the department and in view of the concession given before the Apex Court by learned advocate appearing for the Revenue as recorded in para 19(f) of the judgment in case of Rajeev Bansal (supra), has quashed and set aside the notice issued after 31.03.2021 under TOLA for Α.Υ. 2015-16 as under: "1. Leave granted. 2. These appeals arise from the order passed by the High Court of Orissa at Cuttack in Writ Pe....
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...., in such circumstances referred to above the original writ petition nos.2446 of 2023, 2543 of of 2023 and 2544 of 2023 respectively filed before the High Court of Orissa at Cuttack stands allowed. 7. The impugned notice therein stands quashed and set aside." .......... ......... ......... "19. In view of above, for the foregoing reasons, these petitions are also allowed. The impugned notices issued under section 148 of the Act for the Assessment Year 2015-16 are held to be invalid as same were issued during the extended period from 01/04/2021 to 30/06/2021 under TOLA." 4. In view of the above stated legal position, since notice issued u/s.148 of the Act for AY 2015-16 has been held to be not valid being barred by limitation, therefore, the very reopening of the assessment in the year under consideration is also bad in law and the same is hereby quashed. Accordingly, the impugned assessment order is not legally sustainable and hence, the same is quashed. Therefore, without going into the merits of the case, the appeal of the revenue (ITA No. 1450/Ahd/2024 for AY 2015-16) is hereby dismissed on this legal ground itself. ITA No. 1451....
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....ued under the newly added section (w.e.f. 1.4.2021) section 148A(b) of the Act. Further, the information and material relied upon by the Revenue which suggested that the income of the assessee for the year under consideration had escaped assessment, were supplied to the assessee vide notice dated 23/05/2022. The assessee submitted its reply on 09/06/2022, 22/07/2022 & 25/07/2022. 7.1. After considering the reply of the assessee, the AO passed order u/s.148A(d) of the Act on 22/08/2022 and notice u/s.148 of the Act was issued on the same date. In response to the said notice, the assessee filed its return of income on 11/10/2022 declaring total income of Rs. 2,66,14,510/- for the year under consideration. Subsequently, in the assessment carried out u/s.143(3) r.w.s.147 of the Act, the AO concluded that the assessee had accepted on-money, over and above the declared sale price relating to Dreamland and Sicilia Project. The AO rejected the contention of the assessee that the entire on-money received by the assessee cannot be considered as income of the assessee and that only profit element @ 15% of on-money received by the assessee can be treated as income of the assessee. He observ....
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....t of the income declared under IDS and observed that the assessee had also made disclosure of Rs. 3 crores under IDS- 2016, which was more than the addition confirmed of Rs. 1,52,18,158/-. He, therefore, directed the AO to give the benefit of telescoping of the income disclosed under IDS-2016 and set off/delete the addition accordingly. 10. Being aggrieved by the said order of the Ld. CIT(A), the Revenue has come in appeal before us. 11. We note that identical issue was there before the Ld. CIT(A) in relation to AY 2015-16 and the Ld. CIT(A) has made discussion on merits as well as on the legal issue while adjudicating upon the appeal of the assessee for AY 2015-16. So far as legal issue relating to the validity of the reopening of the assessment/issue of notice u/s.148 of the Act is concerned, the Ld. CIT(A) in paragraph Nos. 4.1 to 4.3. of the impugned order has observed as under: "4.1 I have carefully perused the reassessment order and submission filed by the appellant. In this case, it is necessary to discuss the brief facts of the case. The facts as enumerated from the assessment order are that during the year under consideration, the appellant was a bu....
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..../09 dated 27.10.2010, upheld reopening proceedings, holding that it is settled law that at the stage of issue of notice u/s.148, the only question is whether there was relevant material on the basis of which a reasonable person could have formed the requisite belief. Whether that material would conclusively prove escapement of income is not the concern at that stage. It is a settled law that at the time of issuing notice u/s 148 of the Act, the AO simply has to be satisfied and should have "reasons to believe" that income has escaped assessment. The investigation of whether it has actually escaped assessment or not can only be done once the assessment proceedings are reopened. Further, I have also gone through the record and find that the AO has followed due procedure while reopening the assessment proceedings. It is further observed that in response to notice u/s.148 of the Act, the assessee had filed return of income on 11.10.2022 declaring total income of Rs. 1,95,04,030/- for the year under consideration. Further, the AO had also issued notice u/s.143(2) of the Act on 12.01.2023. The AO had also offered opportunities of being heard to the appellant by issuing various statutory ....
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....pening of the assessment. 12.1. So far as the addition on merits is concerned, the Ld. CIT(A) while considering the case of the assessee for AY 2015-16, has observed as under: "5. The ground of appeal no. 2 to 4 are interlinked, hence dealt together, are against the action of the AO in making addition of Rs. 10,26,63,022/- on account of Unexplained money u/s.69A of the Act by ignoring the claim of the appellant for taxing the net income only and by not allowing deduction of Rs. 3,00,00,000/- from on-money considered as income on account of income already declared by the appellant under the Income Disclosure Scheme, 2016 for Α.Υ.2015-16. 5.1 I have considered the facts of the case and the legal submissions of the appellant carefully. The brief facts of the case has already been discussed in para no. 4 of this order. Based on the evidences of 71 diaries impounded during the survey action, it was noticed that the assessee had received on-money of Rs. 10,26,63,022/- on sale of the flats/shop, during the A.Y.2015-16 in Dreamland and Sicilia Projects. During the course of reassessment proceedings, the assessee had claimed that the total receipt of on-mo....
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....ddition in respect of on-money is made, the entire receipt cannot be charged to tax, but only the profit element is to be charged. iii) Without prejudice to above, the appellant further submits that it is evident that the evidence of incurring of expenses were available in the seized documents/material. Even otherwise assuming that the details of expenses was not furnished, then also from various judicial pronouncements relied upon by the appellant the ratio comes out is that the gross receipts should not be the income but a reasonable net profit based on past records of the assessee or industry average should be considered as income. The appellant has relied on recent judgment of the Hon'ble Jurisdictional ITAT, Ahmedabad in the case of JCIT v. Narayan land Estate reported in 2022 Tax Pub(DT) 4075 (Ahd-Trib). The relevant para/observation of ITAT is reproduced hereunder- "8.5 The decisions of the jurisdictional ITAT and High Court are binding on the Commissioner (Appeals). However, the appellant in its submission has not given the working of profit on such on-money and has not given the justification as to how the profit of 15% (as mentioned in the submission....
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....39;ble Jurisdictional ITAT, Ahmedabad that Entire 'on money' receipts in relation to booking or sale of flats could not be treated as undisclosed income, but under section 158BC, a reasonable amount of profit which assessee could have earned by charging 'on money' in relation to flats booked and sold by him and the same would be either 8 per cent on gross receipts under section 44AD or any figure admitted by the assessee if it was higher than 8 per cent, hence assessing officer was not justified in charging entire 'on money' receipts as assessee's undisclosed income. (d) Abhishek Corporation 63 TTJ 651 (Ahd.) (e) Calcutta Co. Ltd 37 ITR 1 (SC) (f) Unreported decision of the Hon'ble Jurisdictional Ahmedabad Bench of ITAT in the case of ITO vs. Anand Builders, wherein the Hon'ble Tribunal held that only 8% of gross receipt could be taxed in the case of a builder out of the on-money. Reference to the Hon'ble High Court was rejected and SLP against such rejection was also turned down as reported in 265 ITR 37 (St.) (g) M/s. Adinath construction vs. DCIT (unreported judgment of Hon'ble Ahmedabad tribunal) IT....
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....,58,761/- 33,94,12,121/- 5,46,46,640 13.87% 2014-15 38,81,40,644/- 32,36,85,617/- 6,44,55,027 16.61% 2015-16 80,80,34,419/- 73,42,79,957/- 7,37,54,462 9.13% In view of the above settled judicial rulings, in the case of the appellant maximum of 15% of gross receipt Rs. 10,26,63,022/- which comes to Rs. 1,53.99.454/- could be considered as income that was not accounted in the books of account. (1) It is further submitted that the appellant had made a disclosure under IDS, 2016 of Rs 10 crores out of which disclosure for A.Y. 2015-16 is Rs. 3,00,00,000/- (Rupees three crores) which is far more than Rs. 1,53,99,454/- Therefore, the unaccounted income comprised in the on money received during AY 2015-16 is fully taxed. In view of these facts, there was no income chargeable to tax that has escaped assessment within the meaning of section 147/148 of the Act. In support of the same copy of Form no 4 issued by the PCIT was annexed with paper book. (m) In view of the above facts, the appellant has requested to delete the addition made. 5.3 In this regard, it is observed that the appellant with regards to the taxation ....
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....sessee had taken appeals to higher authorities or courts which failed. The appeal was consequently allowed and the judgment of the High Court was set aside. 5.4.1 The above said contention is also supported by judgement of Jay Builder v. Assistant Commissioner of Income-tax, Circle 6 (2) [2013] 33 taxmann.com 62 (Gujarat) (HC): "Section 253, read with section 69A, of the Income-tax Act, 1961 - Appellate Tribunal Appealable orders [Aggrieved party Assessee, a builder, received on money while selling properties constructed by it - Assessing Officer taxed entire on money received by assessee - Assessee contended before Tribunal that not entire on money received but only profit element could be taxed in its hands - Tribunal substantially accepted contention and sustained addition at rate of 15 per cent of on money received by assessee -Whether when assessee's sole contention before Tribunal was substantially accepted, appeal of assessee did not survive - Held, yes [Para 3] [In favour of revenue]" 5.5 The above said contention is also supported by various other judicial pronouncements. The head note of the decisions are as under:- (i) Commissioner....
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....0 taxmann.com 154 (Ahmedabad) (ITAT): "Held that the excise authorities have noted that the assessee had made unaccounted sales of Rs. 3,86,14,825 (Rs. 58,85,530 plus Rs. 3,27,29,295). The Assessing Officer without any basis presumed higher sales made outside the books of account. The Commissioner (Appeals) was, therefore, justified in taking the figure of unaccounted sales computed by the excise authorities as against the figure taken by the Assessing Officer. Since the Assessing Officer himself had not made any addition on account of excess stock of Rs. 25,98,924 as the telescoping effect was given to the assessee, therefore, such material could not be used against the assessee for the purpose of enhancing the unaccounted sales it is settled low that the entire undisclosed sales could not be Ireated as profit of the assessee" (v) The Commissioner of Income Tax8 vs. Shri Hariram Bhambhani INCOME TAX APPEAL NO.313 OF 2013 (BOM)(HC): "In any view of the matter, the CIT(A) and Tribunal have come to the concurrent finding that the purchases have been recorded and only some of the sales ore unaccounted. Thus, in the above view, both the authorities held that ....
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....e on booking of flats and shops in "Vesu Project" was found, but details of certain expenditure, which are not recorded in the also found. This included cash payment for purchase of land Therefore, the Ld. CITTA) has rightly observed that the grass on-money noticed on the seized paper cannot be considered as income of the assessee There are certain expenditures which were not recorded in the books. Those expenditure must have been made from this on-money Therefore, after going through the well reasoned order of the Ld CIT(A), IT(SS)A No 289 /Ahd/2018 (7 Others) Greenfield Reality P. Ld Vs. DCIT and in the light of judgment of Hon'ble jurisdictional High Court in the case of Panna Corporation (supra) as well as Kishor Mohantal Telwale (supra), we are of by the assessee for booking of flats/shops in "Vesu Project" is required to the view that only element of income embedded in the on-money received be assessed in its band in all these years. 17. Next question arose, what is the element of income involved in this on-money. On one hand, the assessee is showing income at 8%, on the other hand, the id CIT(A) is estimating it at 20% It is pertinent to observe that section 144....
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.... we are required to find out a reasonable percentage of income which could have been alleged as earned by the assessee out of such gross receipts. (ix) The Hon'ble ITAT, Ahmedabad in the case of ITO Vs. Anand Builders whereby it has been held that in such circumstance, 8% of the unaccounted on money could be taxed in place of the entire unaccounted on money receipts. It is needless to mention that the entire on money receipts cannot be taxed for the reason that against the unaccounted receipts there is always the unaccounted payments. Therefore, certain part of such unaccounted receipts only remains in the hands of appellant and the same can only be taxed. Subsequently, the above decision of the Hon'ble ITAT was upheld by the Hon'ble Gujarat High Court and the SLP filed against the judgment of Hon'ble Gujarat High Court was dismissed as reported in 265 ITR 37. For ready reference, the relevant para of the Hon'ble Apex Court's decision is reproduced as under: "dismissed the special leave petition filed by the Department against the judgement dated January 21, 2002 of the Gujarat High Court in ITA No. 52 of 20-02 whereby the High Court dismis....
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....nfirmity in the order of the Ld. CIT(A) on this issue also. In this case, it is not disputed that the assessee had also incurred cash expenditure out of the on-money receipts. The observation of the AO that the assessee had not furnished proof that the assessee had incurred 85% expenditure of the on-money receipts, in our view, is not justified as the assessee has not maintained the record in the shape of cash book/cash flow relating to the unaccounted expenditure incurred by the assessee. The Ld. CIT(A) has estimated the profit element over and above the average profit declared by the assessee in the last three years. After considering the overall facts and circumstances of the case, the CIT(A) has estimated the income/profit element @ 17% of the receipts, which, in our view, is justified. 13.1. Further, the Ld. CIT(A) has given the benefit of the IDS-2016. So far as the observation by the AO that there was a general message circulated that Hindva Group was accepted the demonetization currency is concerned, in our view, that cannot be said to be reliable evidence to deny the telescopic benefit of the income declared by the assessee under IDS-2016, which was immediate before the....
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..... CIT(A) has also given his finding for the year under consideration on the basis of his adjudication on this issue for AY 2015-16. In view of the discussion made above, our finding given above will mutatis mutandis apply on this issue for the year under consideration also. The ground No.1 of the Revenue's appeal is, accordingly, dismissed. 16. Ground No.2:- So far as ground No.2 is concerned, the Revenue is aggrieved by the action of the ld. CIT(A) in deleting the addition of Rs. 40,50,000/- on account of unsecured loan received by the assessee from three parties and also of corresponding payment of interest of Rs. 1,84,110/- on the aforesaid loan. 17. During the assessment proceedings, the AO noted that the assessee had received unsecured loans totaling Rs. 40,50,000/- from three parties as detailed below: 1. Hetvi Enterprise :Rs. 5,50,000/- 2. Prakash K. Patel :Rs. 10,00,000/- 3. Ghanshyam D. Isamalia :Rs. 25,00,000/- 17.1. The AO observed that the assessee had failed to prove the identity and creditworthiness of the creditors and genuineness of the transaction. He, therefore, treated the entire loan amount of Rs. 40,50,000/- as income of the ....
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.... income-tax return for the year under consideration and declared returned income of Rs. 2,29,510/-. He further observed that on perusal of balance-sheet, it was seen that Prakash K. Patel had capital of Rs. 31.53 lakhs which showed that there was sufficient balances available with him to lend the unsecured loan of Rs. 10 lakhs. He, accordingly, deleted the addition in respect of loan received from Prakash K. Patel. 18.3. In respect of loan of Rs. 25 lakhs from Ghanshyam D. Isamalia, the Ld. CIT(A) observed that the assessee had furnished copy of confirmation, copy of ITR and computation of income for AY 2017-18 and copy of bank statement as well as ledger account of the creditor. He further observed that the entire loan was repaid along with interest. He further observed that the entire loan was received through banking channel and that the lender was an income- tax assessee and had declared an income of Rs. 4,01,050/- in the return of income for the year under consideration. That the entire amount was repaid and TDS was duly deducted on the interest payment. He, in this respect, relied upon the ledger account and bank statement. 18.4. The Ld. CIT(A) also referred to the vari....
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.... erred in directing to estimate the profit arising on account of on-money received at 17% of entire on money only on the basis of assumption and not on the basis of any documentary evidences." (2) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,83,000/- on account of unexplained cash credit u/s. 68 of the Income Tax Act ignoring the facts of the case that no copy of cash books was submitted by the assessee during the course of assessment proceedings." (3) The Revenue craves leave to add/alter/armed and/or substitute any or all of the grounds of appeal." 22. This appeal is relating to the assessment framed after reopening of the assessment u/s.147 of the Act. 23. Ground No.1 is relating to the estimation of profit of 17% out of the on- money received by the assessee on sale of flats. This issue is identical to that has been discussed above for AY 2016-17. Our finding given above will mutatis mutandis apply on this issue for the year under consideration also. The ground No.1 of the Revenue's appeal is, accordingly, dismissed. 24. Ground No.2: Vide ground No.2, the Revenue has agitat....