TaxTMI 
TaxTMI 
2026 (5) TMI 1409
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....nd seizure action under section 132 of the Act was conducted in the Middleman/Businessmen group on 23.09.2021, wherein the assessee was also covered. Consequent to the search, the case of the assessee was reopened and notice under section 148 was issued on 28.03.2024. In response, the assessee filed return of income on 09.04.2024 declaring total income at Rs. 1,91,29,780/-. Thereafter, statutory notices under section 143(2) and section 142(1) were issued and assessment was completed under section 143(3) read with section 147 on 26.06.2024 determining total income at Rs. 9,56,48,890/-. 3. During the course of search, incriminating material in the form of "on-money" sheets and WhatsApp chats was found and seized from the premises of the assessee group. The said material reflected unaccounted cash receipts from sale of commercial units in the project "GNP Arcadia". Statements recorded under section 132(4) of Shri Kapil Talreja and Shri Girish Pawar confirmed that amounts reflected in column "N" represented cash receipts not recorded in the books of account and that such receipts were utilized for business purposes including construction expenses. 4. Based on the seized material,....
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....corded under section 132(4). The assessee relied upon various judicial precedents and also pointed out that in its own case for other assessment years, net profit had been estimated at around 22% of such receipts. 8. The CIT(A), after considering the submissions and material on record, observed that there was no dispute regarding receipt of unaccounted cash from sale of commercial units. The only issue was regarding allowability of unaccounted expenditure. The CIT(A) noted that the Assessing Officer had not categorically denied the existence of seized material indicating expenditure and therefore it could be inferred that such expenditure had been incurred. At the same time, the CIT(A) held that the quantum of expenditure required estimation. The CIT(A), following the orders passed in the assessee's own case for A.Ys. 2019-20 and 2021-22 as well as the decision of the Co-ordinate Bench in group cases, estimated net profit at 22% of unaccounted receipts instead of 20% offered by the assessee. Accordingly, the CIT(A) directed that only 22% of the unaccounted receipts be treated as taxable income and granted partial relief to the assessee. 9. Aggrieved by the order of CIT(A), th....
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....e very same seized documents amounted to Rs. 43.18 crore (summary of the same placed on page 96 of the paper book), which is approximately 80% of the receipts. Therefore, the assessee has consistently offered income at 20% of such receipts, representing the profit element embedded therein. 13. The Ld. AR emphasised that it is an undisputed fact that documents pertaining to unaccounted expenditure were found during the course of search and that even the Assessing Officer has not disputed the existence of such documents (as per para 2.2. of order of Assessing Officer. Accordingly, it was submitted that once the receipts are accepted as income based on seized material, the corresponding expenditure reflected in the same material cannot be ignored and must be allowed while determining the taxable income. 14. The Ld. AR further invited our attention to the relevant portion of the assessment order wherein the statement of Shri Girish Pawar recorded under section 132(4) was reproduced by the Assessing Officer, particularly the reply to Question Nos. 31 and 44.Referring thereto, the Ld. AR submitted that the partner of the assessee firm has categorically admitted that in the construc....
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....ied in taxing the entire on-money receipts as income, as the settled position of law is that only the profit element embedded in such receipts can be brought to tax. In this regard, reliance was placed on the decision of the Hon'ble Delhi High Court in Indeo Airways Pvt. Ltd. (26 taxmann.com 244) for the proposition that where receipts recorded in seized documents are accepted, the corresponding expenditure recorded therein is also to be accepted without insisting on further corroboration. Further reliance was placed on the judgment of the Hon'ble Bombay High Court in CIT vs. Hariram Bhambhani (ITA 313 of 2013) wherein it was held that only the profit attributable to unaccounted sales can be taxed and not the entire sales consideration. Reliance was also placed on CIT vs. President Industries (124 Taxman 654) in support of the same proposition. 17. In view of the above submissions, the Ld. AR contended that the estimation of profit at 22% of on-money receipts, as upheld by the Ld. CIT(A), is reasonable, consistent with judicial precedents as well as past history of the assessee group, and therefore the order of the Ld. CIT(A) deserves to be upheld. 18. We have carefully consi....
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....sh receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. 22. Further, the Hon'ble Delhi High Court in CIT vs. Indeo Airways (P.) Ltd. has laid down that where the Revenue relies upon seized documents to treat receipts as income, it cannot disregard the expenditure recorded in the very same documents. The Court held: "...having once drawn the presumption that the contents of the documents... were true, the revenue could not... require the assessee to produce materials in support of the expenditure entries... Such an inconsistent approach... appears to have been founded only on suspicion that they were not genuine. However, suspicion cannot replace proof." (para 16) 23. In the present case, the Assessing Officer has accepted the seized material to the extent of receipts but has rejected the corresponding expenditure reflected in the same material and admitted in the statement recorded under section 132(4). Such an approach, in our considered view, is legally untenable. The Hon'ble Gujarat High Court in Glass Lines Equipments Co. Ltd. has held that a document must be read as a whole and it is not permissible ....