TaxTMI 
TaxTMI 
2026 (6) TMI 1455
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.... 260A of the Income Tax Act, 1961 (for short, "the Act"). Tax Appeal No. 500 of 2024 is filed by the revenue on the following questions of law arising out of the judgment and order dated 11.12.2023 passed by the Income Tax Appellate Tribunal, "C" Bench, Ahmedabad, (for short, "Tribunal") in IT(SS) Appeal No. 402/Ahd/2019 for the Assessment Year 2015-16:- "(a) Whether in the facts and circumstances of the case and in law, the order of the learned ITAT is erroneous, illegal and ex-facie perverse, because the learned ITAT has erred in confirming the order of CIT(A) who has considered Rs. 7,00,00,000/-on-money instead at of Rs. 8,75,17,850/- without appreciating all the facts brought out by the Assessing Order? (b) Whether in the facts and circumstances of the case and in law, the order of the learned ITAT is erroneous, illegal and ex-facie perverse, because the learned ITAT has erred in considering the profit element of merely 40% out of total on-money received by the assessee without appreciating the facts that the assessee company has already booked entire expenses on sale of facts in the P&L A/c. and also, that the assessee has not brought any evidence to prove th....
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....irmed by the Commissioner of Income Tax (Appeals) without giving any cogent reasons and solely on the basis of assumptions, surmises or conjectures? (ii) Whether, in the facts and circumstances of the case, the order passed by the Income Tax Appellate Tribunal was perverse in as much as the order of the Commissioner of Income Tax (Appeals) was modified without any cogent reasons and further the order has been passed without appreciating the facts of the case and settled legal principles in the correct perspective? 4. The brief facts of the case are as under:- 4.1 The assessee is a public limited company engaged in the business of real estate construction deriving income from the house property. The assessee company launched a project of residential apartments namely "Aman Heights" in July 2012, which was completed in April 2015. 4.2 The search proceeding under Section 132 of the Act was carried out on 20.09.2016 at the premises of the assessee and certain materials were found establishing that the assessee had received on-money on sale of residential units of "Aman Heights". 4.3 The assessee admitted that it had received on-money of Rs. 7.51 Crores, out of whic....
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....ny was incorporated on 14.03.2008 and since its inception, it has undertaken only one residential project namely "Aman Heights" consisting of 22 flats. The appellant filed its original return of income on 30.09.2015 declaring total income at Rs. Nil. A search action u/s. 132 of the Act was carried out on 20.09.2016 at the business premises of the appellant. The AO issued notice u/s. 153A of the Act on 26.06.2017 asking the appellant to file the return of income. The appellant also furnished its return of income u/s. 153A of the Act on 20.07.2017 declaring the same income i.e. Rs. 6,01,769/-. The AO then issued notice u/s. 143(2) of the Act on 16.04.2018 followed by notice u/s. 142(1) of the Act on 23.04.2018. The appellant furnished all the details as called for by the AO. During the course of search action, the key person of the appellant company Shri Prakash Parekh admitted a sum of Rs. 7.51 Crores as on-money received on sale of flats. However, while furnishing its return of income, it offered 15% profit of on-money received on sale of such flats as under :- Α.Υ. On money accepted Profit offered in return of income 2015-16 7,00,00,000/- 1....
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....ions are being made in respect of its sales price. Further, in respect of balance flats sold i.e. 41, 62, 31, 71, 72, 21, 81, 82, 42, 92, 91 & 102 the average sales price is taken at Rs. 52000 per yard (20800000/400). The rate is adopted on the basis of the statement of Shri Sanjay Salecha wherein he admitted that average sales price is Rs. 2.08 Crores per flat. In so far as the flat Nos. 91 and 102 are concerned, an average rate of Rs. 62,000/- per sq yard is adopted. This rate of Rs.62000/- per sq yard is arrived at after inflating the base sales price of Rs. 52000/- by 20% approx. Based on the above discussion, the revised on-money calculation is as under:- Flat No. Buyer Name Reg. Value (Rs.) Sale Deed Date Sq. Yards Avg. Sale Rate (Rs./ Sq.Yd.) Adopted Rate (Rs./Sq.Yd.) On-Money Rate Difference (Rs./ Sq.Yd.) On-Money Received (Rs.) 51 Divya Khatwani 12,271,350 04-Jul-2014 400 30,678 42,000 11,322 45,28,650 52 Muskan Khahwani 12,141,150 04-Jul-2014 400 30,353 42,000 11,647 46,58,850 61 Karishma Khatwani 12,271,350 04-Jul-2014 400 30,678 42,000 11,322 45,28,650 41 Sh....
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....pute to the fact that the assessee was in receipt of on-money on the sale of flats. But the quantum of the on-money received by the assessee on flats is one of the disputes before us. As per the AO, the on-money received by the assessee in the year under consideration stands at Rs. 9,80,17,850/-(over all Rs. 12,47,17,850/-) whereas as per the learned CIT(A), the same stand at Rs. 7 crores in the year in dispute (over all Rs. 8.39 crores). The basis adopted by the AO was based on the email dated 6th November 2014 where the proposed rate per square yard was quoted at 67000/- per square yard and the rate entered into the agreement dated 1st August 2014 between the assessee and M/s Ardor International Pvt Ltd where price was agreed at Rs. 57,106/- per square yard. As regards the basis adopted by the AO, we note that the rate recorded in the email cannot be adopted because it was the rate proposed by the assessee which cannot be treated as the actual sale price. Likewise, the rate entered between the assessee and M/s Ardor International Pvt Ltd at 57,106/- was not based under the normal business circumstances. As a there was the transaction between the parties for the purchase of goods ....
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....s only the element of income. However, in the cases where a portion of sale received outside books, the possibility of having expenses incurred against the sale outside the books cannot be ruled out. 11.3 Before parting, we find it pertinent to make the analysis about the rate of profit. In the year under dispute, the assessee has shown gross revenue from operation at Rs. 15,58,21,350/- and after claiming direct and indirect expenses shown net loss at Rs. 99,98,116/-only. If the on money of Rs. 7 crores are added to the revenue from operation then the revised revenue from operation will be at Rs. 22,58,21,350. Further, assuming no expense incurred outside the books and on-money only represents a profit element, the net profit of the assessee shall be Rs. 6,00,01,884/- only. In such a situation, the NP ratio comes at 26.5% of the gross turnover. However, in the real estate development industry, the NP ratio at the rate of 25% is considered unreasonably high. Therefore, we are not inclined to uphold the finding of the AO, that the on-money represents only an element of income. As such, in such facts and circumstances some element of guess work is required to be taken into co....