TaxTMI 
TaxTMI 
2026 (3) TMI 949
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.... as well as by the Revenue for the A.Y. 2022-23. 3. The grounds taken by the assessee in ITA No.1700/Ahd/2024for the A.Y. 2022-23are as under: - "1. The Ld. CIT (A) has grossly erred in law and on facts in partly allowing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. 2. The Ld. CIT(A) has erred in law and on facts in estimating a flat rate of Rs. 7000/- psf by merely observing that the project "Seventy" is an ultra-luxurious project, therefore, cost psf in case of "Seventy" project has to be on a higher side as compared to Privilon and ParijatEclate, disregarding the neighboring sales instances so submitted by the appellant during the course of appellate proceedings. 3. The Ld. CIT(A) has erred in law and on facts in estimating on-money for all units sold in the project "Seventy" by relying upon stray loose paper found during the course of search from City Estate Management and VineetKanodia without considering that all those seized loose papers are dumb document in absence of any members diary, cash vouchers, members ledger account for any alleged on-money, signature ....
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.... the Ld. CIT(A) has erred in law and on facts by disregarding the contention of the appellant of reasonable profit margin of 8% to 10% on the estimated on-money without any basis to estimate the profit at 17% merely relying on the seized loose papers being dumb document and without disregarding the correct working of cost of project and the profit shown in the books. 8. The Ld. CIT(A) has erred in law and on facts in not appreciating the fact that the Ld.AO has not brought on record the statement recorded of departmental witness Shri Divyang Vyas from whose premises the seized material is recovered during search whose notings have been relied upon to allege on-money and failed to grant the opportunity of cross examination Shri Divyant Vyas through the Ld.AO has relied upon his statement for estimatingthe addition in the case of appellant. The Ld. AO ought to have granted the opportunity of cross examination of Shri Divyant Vyas once the Ld.AO has relied upon his statement recorded u/s.132(4)/131 of the Act in view of the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise Kolkata II [2015] 62 taxmann.com 3(SC) a....
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.... search under Section 132 of the Act was conducted on B-Safal Group on 28.09.2021 at their various offices, residential premises of the key persons of the group and also at the associated entities and connected persons. In the course of search, various incriminating materials and digital data were found and seized. A simultaneous search was also conducted on City Estate Group, a well-known real estate broker in Ahmedabad. 6.1 The evidence seized in the course of search from various premises including that of the broker reflected receipt of on-money by B-Safal Group entity while selling the units of project Seventy. The Assessing Officer has referred to various seized documents in the assessment order on the basis of which he concluded that the assessee had received on-money on sale of units of project Seventy. 6.2 On the basis of different rates as appearing in different seized documents, the Assessing Officer worked out the average sale price of the units of project Seventy atRs.10,600/- per sq. ft. and the sale consideration was worked out on this basis. The AO had allowed set off of the cost of the project at Rs. 2,26,38,40,959/- as per the books of accounts and the balanc....
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....m. He contended that none of the seized documents relied by the Assessing Officer had entry of any on-money receipt by the assessee. According to the Ld. AR, considering the nature of evidences as found in the course of search, no addition was called for in respect of any on-money receipt. Therefore, the Ld. CIT(A) was not correct in directing to estimate the income @ 17% of the on-money, worked out by applying average selling rate of Rs. 7,000/- per sq. ft. The Ld. AR relied upon the decision of Co-ordinate Bench of this Tribunal in the case of SKZ Developers LLP reported in 182 taxmann.com 296 (Ahmedabad Trib.). As an alternate argument, the Ld. AR submitted that the reasonable profit margin on the estimated on-money could be 8% to 10% only and, therefore, the Ld. CIT(A) was not correct in directing to estimate the profit @ 17% of the on-money. Submission of the Revenue 8. Per contra, Shri R.P. Rastogi, Ld. CIT-DR strongly supported the order of the Assessing Officer. He explained that the Assessing Officer had discussed in detail the evidences found in the course of search as well as the circumstantial evidences in order to establish that the assessee had received on-money....
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....rea 1. Loose paper was fond from the premises of Divyang Vyas at T-21 in Annexure A-3 at Pg No.17 Rs.8,500/- 2. Chat of Shri Daksh Nayak with lamAbhi dated 20.01.2021 Rs.12,500/- 3 Chat of Shri Daksh Nayak with Broker Niraj Patel dated 14.06.2021 Rs.12,500/- 4. Page no.15 from Annexure A/1 from Team T-7 from residential premise of Shri VineetKanodia for 803 Rs.10,483/- 5. Page no.16 from Annexure A/1 from Team T-7 from residential premise of Shri VineetKanodia for 903 Rs.10,533/- 6. Excel file namely "Seventy" as found and seized from City Estate Office premise (T-10) Rs.9,000/- 7. Excel file namely "Seventy" as found and seized from City Estate Office premise (T-10) Rs.10,500/- Average Rate Rs.10,574/- 10. We have gone through the seized documents relied upon by the Assessing Officer for working out the average selling price, which are reproduced in the assessment order. The loose paper found from the premises of DivyangVyas (at T-21 in Annexure A-3page no.17)is reproduced at page no.18 of the assessment order. The contention of the assessee is that this document was found from the premises of a thir....
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....nnot be used as evidence for making the addition in the hands of the assessee. 11.1 It is true that the rate quoted in the WhatsApp chat cannot be treated as conclusive. Nevertheless, the fact that the basic rate of Rs. 12,500/- was quoted for twopent-house of the project Seventy has not been denied.Shri Daksh from whose mobile the chat datawas recovered, was not a third party but an employee of the accounts department of B-Safal corporate office, who was fully aware about the ongoing market rate of the property. It is true that the rate of Rs. 12,500/-as quoted in the WhatsApp chat, might have been subject to further negotiations, which is a common feature for such sales. Nevertheless, the fact that the ongoing market rate of the unit wasRs.12,500/- per sq. ft.(subject to negotiations) does gets established from this Whatsapp communication. Therefore, AO had rightly relied upon this document and considered this rate to work out the average sale rate. 12. The Assessing Officer has next relied upon page nos.15 & 16 of Annexure-A1 seized from the residential premises of one Shri VineetKanodia, which is reproduced at page nos.20 & 21 of the assessment order. As per these seized ....
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....y such evidence, the explanation of the assessee cannot be accepted. As per the excel sheet found in the course of search (HD-12 Terminal Server), the estimated cost of super built up area of project Seventy was Rs. 228,08,41,361/- which worked out to Rs. 6,000/- (approx..) per square feet. Considering this fact, the assessee could never have sold or negotiated the sale of Flats 803 and 903 at a rate lower than its cost of construction. The Assessing Officer, therefore, had rightly considered the basic rate of the flats at Rs. 5,483/- and Rs. 5,533/- respectively and taken the handwritten figure of Rs. 5,000/- per sq. ft. as the rate of on-money involved in these transactions and accordingly considered the total rate for working out the average sale price. 13. The next two evidence relied upon by the Assessing Officer was excel file namely Seventy found and seized from the premises at City Estate Office, which are reproduced at page nos.-23 and 24 of the assessment order. City Estate Group was involved in selling the units of Project Seventy and many receipts for sale of units of this project were seized from their premise. As per the excel sheets, the basic value of two units o....
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....ith suitable adjustment) for ascertaining the fair market value of the properties and the final sale consideration received by the assessee. The Assessing Officer was, therefore, correct in considering the rates as mentioned in the various seized documents to find out whether the sale consideration disclosed by the assessee was correct and also, to work out the average sale price of the units of project Seventy on that basis. 15. The Assessing Officer has reproduced the seized document page no.17 of Annexure-23, on page no.4 of the assessment order which reflects the rate at which the sale deeds were executed by the assessee. The AO has also discussed the data seized from corporate office of B-Safal group in excel sheet "Seventy flat details.xlsx" and in "SEVENTY DOCUMENT.xlsx" in para-5 of the assessment order and after analyzing the entries appearing therein had given a finding that the assessee had camouflaged the basic rate per sq. ft. of unit by keeping the sale/documented price of each unit as a predetermined amount. The basic price was obtained by reverse calculation considering the price at which documentation was intended to be done divided by the area of each unit. As ....
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....zed documents, whatsapp messages of the employee of the assessee. The Ld. CIT(A) had considered this aspect and given a finding that as per assessee's own calculation the cost of construction was _ 4,516/- psf and the assessee had not explained the reason for selling certain units at a rate lower than the cost of construction. Of the three projects developed by the assessee adjacent to each other with common boundary wall, project Seventy was a high end ultra-luxurious project which was different from other two projects cost wise as evident from whatsapp messages of the employee of the assessee. On the website this project is described as under: Nothing else is Seventy Rising 70 meters into the sky, offering 70 stunning homes; Seventy is unlike anything the city has seen. This is Ahmedabad's first ultra-luxurious project designed by renowned, award-winning international architects. Promising a lifestyle unparalleled. Two shimmering towers, between them, a lush oasis of greenery and reflective pools. At the pinnacle floats 'The Cloud': a luxurious escape in the air, bridging the sky in between. Every home is a villa in the sky, with double height ceilings ....
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....rred to any statement of any person, there cannot be any question of providing copy of statement(s) to the assessee or allowing any opportunity to cross-examine them. Therefore, the objections and the grounds taken by the assessee in this respect are otiose and are rejected. 18. The assessee has also contended that no material or evidence was found in the course of search that the assessee had made any sale at the rates as mentioned in the seized excel sheets, as relied upon by the AO. It is true that negotiations in respect of the seized material related to cost/rate was admitted by assessee to the extent of variation in the rate. In fact, most of the units were sold at a basic price of less than Rs. 6,000/- per sq. ft. which was less than the cost of construction. The assessee has not explained the reason for registering the sale deed of units of project Seventy at less than the cost of construction. It is precisely for the reason that no sale deed was executed at the rates as appearing in the seized documents that the Assessing Officer had concluded that on-money payment was involved in these transactions. Had the assessee registered the sale documents at the rate as appearin....
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....74/- could not have been held as correct. The Ld. CIT(A), however, had taken the average rate of sale of units of project Seventy at Rs. 7,000/- per sq. ft. as against the average sale price of Rs. 10,570 per sq. ft. adopted by the Assessing Officer. The relevant part of the Ld. CIT(A)'s order in this respect is reproduced below: - "7.24 It is observed that all three projects being Privilon, ParijatEclat and Seventy are in located in the same vicinity adjoining each other at Iscon Circle, AmbliBopal Road, Ahmedabad and have a common boundary wall and were constructed during same period as have also been stated by the AO in the assessment order. It is further observed that project Seventy is an ultra-luxurious project, therefore, cost psf in case of Seventy project has to be on a higher side as compared to Privilon and ParijatEclate. It is observed that various loose paper found during the course of search as discussed herein above indicates that appellant has received on money on sale of units. The prices as referred by the AO are in range of Rs. 8,500/- psf to Rs. 12,500/- psf but such rates are not final rates but subject to negotiations as discussed herein above. It is ....
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....n his order. It is true that those rates were not final but only initial offer price, subject to further negotiations. Therefore, the addition as made by the AO on the basis of average sale price as worked out him was not justified. The Ld. CIT(A) has been reasonable in adopting the average sale price on the basis of cost-plus margin. 22. The assessee has relied upon the decision of Co-ordinate Bench of this Tribunal in the case of SKZ Developers LLP (supra). In that case also the onmoney was worked out by the AO on the basis of average sale rate as per seized documents; which was upheld by the Ld. CIT(A) with a direction to work out profit @ 17% by applying average sale rate of Rs. 6,500/- per square feet. The Tribunal had held in that case that the documents relied upon by the AO were dumb documents and no corroborative evidence for receipt of any on-money was found in the course of search. Further, that the assumption of flat rate for all units without any corroborative evidence was not justified. With due regard to the order of the Tribunal, it is found that the nature of the evidences found in the course of search and the evidentiary value thereof was not discussed in detai....
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....f search were, therefore, required to be looked into and couldn't have been ignored merely for the reason that no direct evidence for receipt of on-money was found in the course of search. It is not a case that the relied upon documents and the materials analysed by the AO reflect a conclusion which is not possible. The conclusion of receipt of on-money made in the assessment order was a possible conclusion in the factual matrix and surrounding circumstances as discussed earlier and, therefore, we are inclined to hold that the preponderance of probabilities weighs against the assessee. In the assessment order, the AO has been able to correlate materials on record to justify an estimate which can be utilized to work out the escaped taxable income of the assessee for the purpose of assessment. And the Ld. CIT(A) has further refined the estimation in a rational way, which can't be faulted. 24. Hon'ble Supreme Court in the case of Udhavdas Kewalram v. Commissioner of Income-tax (66 ITR 462) (SC), has held that the Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act and it is invested with authority to determine finally all questions of fact. Th....
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....me Court of India SLP(C) No. 16118 of 2008 (Supreme Court) 5. Commissioner of Income Tax v. Maulikkumar K. Shah High Court of Gujarat 307 ITR 0137 (Gujarat) 6 Amar Natvarlal Shah V. Assistant Commissioner of Income-tax ITAT Ahmedabad [1997] 60 ITD 560-(AHD.) 7. DCIT V Shri Pushkar Construction Co. ITAT Ahmedabad ITA No. 1452/Ahd/2018 8. Principal CIT v. Shri Pushkar Construction Co. Gujarat High Court [2023] 154 taxmann.com 22 9 Savaliya Buildcon v. Dy. CIT ITAT Ahmedabad [IT Appeal No. 401/Ahd/2014 and 3188/Ahd/2014] (Ahmedabad-Trib) 10. DCIT v. M/S Soham Infracon ITAT Ahmedabad IT(SS)A No. 120/Ahd/2018 with CO. No. 4 109/Ahd/2019 11 ACIT Central Circle - 4, Surat vs. M/s. Dhara Associates ITAT Ahmedabad ITA No. 1945/Ahd/2007 12 Meenamani Ganga Builder LLP vs. ACIT, Central Circle 2(3), Pune ITAT Pune ITA Nos.871 to 873/PUN/2024 13 DCIT Central Circle-4(3) v. Era Realtors (P) Ltd ITAT Mumbai taxmann.com 180 (Mumbai trib) [2025] 175 14 Mani Square Ltd. v. ACIT ITAT Kolkata [2020] 118 taxmann.com 452 (Kolkata-Trib) 15. Fort Projects (P) Ltd. v. Deputy Commissioner Income-tax of ITAT Ko....
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....ther hand, the Ld. CIT(A) had applied cost plus 15% margin to work out the on-money amount. The contention of the assessee is that the average rate was worked out by the AO on the basis of the rates appearing in seized documents, which were not final rates but were subject to further negotiations. The Ld. CIT(A) has worked out the average rate which is about 33% lower than the average rate applied by the AO, which is found to be quite reasonable as the final price couldn't have been negotiated below this limit. In order to maintain a judicial balance between the claims of the public revenue and the assessee, we upheld the estimation of on-money on the basis of average rate of Rs. 7,000/- as adopted by the Ld. CIT(A). Accordingly, the grounds taken by the assessee as well as by the Revenue in this respect, are dismissed. Estimation of Profit: 26. The next grievance of the assessee is against adopting the rate of 17% for estimating the profit on the on-money computed on the basis of the direction of the Ld. CIT(A). According to the assessee, the profit rate of 17% was much higher and the reasonable profit margin on the estimated on-money could be 8% to 10% only. On the other ha....
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.... re-compute business income in case of appellant as stated supra. Thus, the grounds of appeal no.1 to 17 are partly allowed." 27. The Ld. CIT(A) has referred to the seized documents which recorded details of cash expenses. In the business of real estate, many expenses are incurred in cash and it is for that reason that part of the sale consideration is received in cash as on-money. As per the finding recorded by the AO the assessee had sold many of the units below the cost price of Rs. 6,000/- psf, still it had disclosed profit in its P&L account. This also confirms the fact that certain expenses must have been incurred in cash and were not accounted for in the books of accounts. Therefore, the entire on-money could not have been considered as income of the assessee. The Hon'ble Jurisdictional High Court in the case of PCIT vs. Anupam Organiser (Tax Appeal No.168 of 2020) dated 10.09.2020 has held that not the entire receipt of on-money but only profit embedded therein can be added. Similarly, in the case of DCIT vs. Panna Corporation - Tax Appeal 323 of 2000 (Guj) the Hon'ble jurisdictional High Court had held as under: 15. It can, thus, be seen that consistently, this....