TaxTMI 
TaxTMI 
2026 (3) TMI 732
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....efully perused all the grounds raised by the Assessee and Revenue. We find that most of the grounds raised by the Assessee, are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of the Assessee and Revenue. With this background, we summarize and concise the grounds raised by the Assessee and Revenue as follows: (i) The Ld. Commissioner of Income-tax(Appeals)-11, Ahmedabad erred on facts as also in law in dismissing ground of appeal related to validity of notice issued u/s 148 of the Income tax Act, 1961. That on facts as also in law, the proceedings-initiated u/s. 147 of the Act is invalid and assessment finalized on such invalid initiation deserves to be quashed and may kindly be quashed. (This is ground No.2 raised by the assessee, in ITA No. 528/RJT/2024 A.Y. 2019-20, Ground No. 2 in ITA No. 529-Rjt-24 A.Y. 2020-21) (ii) The Ld. CIT(A)erred on facts as also in law in retaining addition of Rs. 2,20,49,673/- by estimating profit at the 16% of so called on money receipt. The addition made and retained is bad in law as also on facts therefore the ....
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....nitiation deserves to be quashed and may kindly be quashed. (This is ground No. 2 raised by the assessee, in ITA No. 528/RJT/2024 A.Y. 2019-20, Ground No. 2 in ITA No. 529-Rjt-24 A.Y. 2020-21) 5. Brief facts of the issue in dispute are stated as under. The assessee, a partnership firm, is assessed to tax by the Assistant Commissioner of Income-tax, Central Circle-1, Rajkot (hereinafter referred as to the "assessing officer" It is engaged in the business of construction and has developed project "RK Empire". The assessee maintains its books of account as per generally accepted accounting standards and policies. Return of income for the assessment year under consideration was filed u/s. 139(1) of the Income-tax Act, 1961 (hereinafter referred as to the "Act" on 25.07.2019 declaring therein total loss at Rs. 48,098/- Search u/s. 132(1) of the Act was carried out at the premises of R K Group. During the course of search, premises of Shri Girish Vanjani was also covered, who was maintaining the accounts of the R.K. Group (including the unaccounted cash transactions) at the instructions of Shri Sarvanand Sonvani, the main person of the R.K. Group. The assessing officer has al....
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....accounted cash transactions of the R.K. Group were recorded. On perusal of such data, it was observed that the said data relates to the sale and purchase of various kinds of properties/project and the occurrence of such transactions can be verified with the data available in public domains on various government portals. The assessing officer further observed that the digital data contains the details of every project developed by the group in coded form. The project RK Empire has been recorded as "EMP" in such digital data assessing officer has concluded that the assessee has received the on-money cash payment in respect of project R.K. Empire which is evident from the seized data. The assessing officer estimated the net profit rate of 35% for the project undertaken by the assessee. Thus, addition of Rs. 4,82,70,755/- being unaccounted profit embedded in the net unaccounted receipts for the project RK Empire is made over and above the regular business income reported by the assessee in the Income-tax Return filed for the year under consideration. Consequently, total business income for the year under consideration is estimated by Rs. 4,82,70,755/- for the year under consideration i....
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..... As search was carried out in the case of the assessee after 01.04.2021, wherein, provisions of section 148 were amended and provides deemed satisfaction for three assessment years prior to the date of search, and even on this ground, the assessing officer has validly issued notice under section 148 of the Act. Hence, there is no defect in the reassessment proceedings, therefore, we dismiss the ground raised by the assessee and confirm the findings of the learned CIT(A). 12. In the result, ground No.2 raised by the assessee, in ITA No. 528/RJT/2024 A.Y. 2019-20, and ground No. 2 raised by the assessee, in ITA No. 529-Rjt-24 A.Y. 2020-21, are dismissed. 13. The summarised and concise ground no.(ii), is reproduced below for ready reference: (ii) The Ld. CIT(A)erred on facts as also in law in retaining addition of Rs. 2,20,49,673/- by estimating profit at the 16% of so called on money receipt. The addition made and retained is bad in law as also on facts therefore the same may kindly be deleted or alternatively, the addition made by estimating rate of profit is very much on higher side and therefore the same may kindly be directed to be reduced and oblige. (Th....
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....n-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. After going through the wellreasoned order of the Id. CIT(A), and in the light of judgment of Hon'ble jurisdictiona' High Court in the case of Panna Corporation [2014 (11) TMI 797 GUJARAT HIGH COURTI as well as Koshor Mohanlal Telwala [1998 (9) TMI 106-ITAT AHMEDABAD-AI we are of the view that only element of income embedded in the on-money received by the assessee for booking of flats/shops in "Vesu Project" is required to be assessed in its hand in all these years. Element of income involved in this on-money assessee is showing income at 8%, AND CIT(A) is estimating it at 20% HELD THAT:- CIT(A) has also not mentioned any attending circumstances for harbouring a belief that 20% could have been earned from this activity. Thus after taking guidance from the judgment of Kishor Mohanlal Telwala [1998 (9) TMI 106- ITAT AHMEDABAD-Al we deem it proper that the assessee has rightly disclosed the profit element embedded in the gross profit at 8%. Accordingly, we all....
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....come on sales could be assessed as undisclosed income and could be subjected to tax. Case laws to the point are as under: 1. Dr. T.A. Quereshi (157 taxmann.com 514) (Supreme Court) 2. Piara Singh (124 ITR 40) (Supreme Court) 3. S.C. Kothari (82 ITR 794 (Supreme Court) 23.5 The assessee admitted such profit at Rs. 45,00,000/- and disclosed that on said transactions income in PMGKY, 2016 and paid due tax thereon. The copy of certificate issued by PCIT is placed on record. Thus when that transactions are of unrecorded purchase and sale of gold, which Ld. assessing officer also admits in assessment order, then simply that name & address of purchasers are not provided the entire amount of sale cannot in law be treated as undisclosed income, only profit earned from said transactions which has been admitted by assessee at Rs. 45,00,000/- can only be assessed to tax more so when the assessee has disclosed in PMGKY the said undisclosed income of Rs.45,00,000/- and paid tax in accordance with scheme and received certificate there for from Pr. Commissioner of Income Tax, hence the same disclosed income cannot be included as income is assessment as per Secti....
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....ee has received cash, over and above, the amounts stated in the booking register. This cash was not accounted for in the books. It has been treated as on-money for sale of flats/shops. Simultaneously certain loose papers were found disclosing the fact that the expenditure were incurred in cash and accounted in the books. The Ld. CIT(A) made an analysis of this, and then held that the moment assessee's income is being assessed at 8% of the gross on-money, then the remaining amount 92% could take care of unexplained expenditure. It can be explained by a simple, viz. an assessee has received Rs. 100/- in cash for sale of flat. Out of that, element of income embedded in this Rs. 100/-has been determined by us at Rs. 8/-. Remaining Rs. 92/- must have been incurred by the assessee for developing that flat. Thus, in other words, the expenditure whose details were found being incurred in cash could be construed as coming out of these Rs. 92/-. Thus, there cannot be any separate addition of unexplained expenditure. The Ld. CIT(A) has rightly deleted the addition." 15. We note that the assessee is in appeal before us and praying the Bench that estimated addition is very higher side an....
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.... in mind the principle laid down by Hon'ble Supreme Court in the case of H. M. Esufali Abdulali that the method to be adopted must be which is approximately nearer to the truth. 17. Considering the facts and circumstances, narrated above, we find that the estimation done by the assessing officer, and re-estimated addition, sustained by the Ld. CIT(A) @ 16% is very higher side. Therefore, we are of the view that the estimated addition on "on-money" should be @ 10%, which will take care of inconsistency in the undisclosed income of the assessee. Therefore, the assessing officer, is directed to make the addition in the hands of assessee, at the rate of 10%, on "on-money". Hence, we allow above appeals of these assessee partly and dismiss all the appeals of the revenue. 18. In the result, following appeals of the assessee are allowed partly (groundwise): (i) Ground No.3 and 4, in ITA No. 528/RJT/2024 A.Y.2019-20, (ii) Ground No. 3 and 4 in ITA No. 529-Rjt-24 A.Y. 2020-21, (iii) Ground No.2 and 3 in ITA No. 530-Rjt-24 A.Y. 2021-22, (iv) Ground No.2 and 3 in ITA No. 531-Rjt-24 A.Y. 2022-23. Whereas, following appeals of the Revenue are dis....
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....enue in the year in which the transaction/sale of flat is registered. 23. We have considered the submissions of both the parties, and we note that ICDS-3 refers to Income Computation and Disclosure Standard-III, issued by the Central Board of Direct Taxes under section 145(2) of the Income-tax Act, 1961. It deals with computation of income from construction contracts for tax purposes. It is largely based on the earlier Accounting Standard AS-7 but contains important differences relevant for income tax computation. We note that ICDS-III applies to construction contracts of contractors, however, assessee under consideration is not a contractor, but he is a contractee. A person who undertakes contract to do a job/work for others, is contractor. However, assessee under consideration is not a contractor but a contractee, who gets the work done from contractor and assessee pays the amount to the contractors for services rendered by them to it ( assessee), therefore, ICDS-III is not applicable to the assessee under consideration. Hence, we are of the view that ICDS-III applies to Contractors (not contractees). Fundamental Accounting Principle, as per ICDS-III is the Percentage of Co....
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....ed position that out of this on money assessee has incurred various expenditure/investment. Therefore, 'on money' as such and as a whole cannot be taxed over and above the income accruing on the basis of entries recorded in the books of account on the basis of decision held in E.D, Sassoon & Co. Ltd. & Ors. vs. CIT (1954 (5) TMI 2 SUPREME COURT we hold that advance money received either by way of cheque or by way of cash will partake the character of taxable income when registered sale deed of the flats is executed in subsequent years. As a result, the sum of 10 crores will not taxable in Asst. Year 2008-09. The appeal of assessee is accordingly allowed." 26. On the similar facts, the learned CIT(A) relied on the judgement of the Hon'ble Supreme Court. The Hon'ble Supreme Court upheld the order passed by the Hon'ble Jurisdictional High Court of Gujarat in the case of CIT vs. Happy Home Corporation [2018] 94 taxmann.com 292 wherein it was held as under: "Section 145 of the Income-tax Act, 1961 Method of accounting (Project completion method) - Assessee was engaged in construction business - It was subjected to a survey action which was conducted on bu....
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....appealwise): (i) Ground No.2 in ITA No. 518-Rjt-24 A.Y. 2019-20, (ii) Ground No.2 in ITA No. 519-Rjt-24 A.Y. 2020-21, (iii) Ground No.2 in ITA No. 520-Rjt-24 A.Y. 2021-22, (iv) Ground No.2 in ITA No. 521-Rjt-24 A.Y. 2022-23. 29. The summarised and concise ground No.4 is reproduced below for ready reference: "(iv) Ground raised by the revenue. "On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 97,30,000/- u/s.69A r.w.s. 115BBE of the I.T. Act on account of unaccounted cash loans given by the assessee." (This is ground No. 3 in Revenue`s appeal in ITA No. 521-Rjt-24 A.Y. 2022-23). 30. The brief facts qua the above summarise ground are that during the assessment proceeding, the assessing officer had found that the promissory notes seized from the premises of Shri Deepak Puruswani reveals that the assessee -firm had advanced cash loan to various persons. In this regard, the assessee- firm had objected the allegation of the assessing officer and denied of advancement of cash loan. However, without prejudice, the assessee had requested to provide benefi....