TaxTMI 
TaxTMI 
2026 (7) TMI 1959
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....by the assessee) & 3284/PUN/2025 (by the Revenue) for assessment year 2020-21 as the lead case. 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of sale and purchase of land, plots and development of land. It specializes in purchase of litigated agricultural or raw plot of land and develops roads after resolving the litigated issues, creates layouts of saleable plots and sells the plots to the end users for residential projects, townships. It is also involved in construction of residential flats as well as commercial shops. The group, as a part of its modus operandi, to buy land has formed many companies to transact through these entities. It filed its original return of income on 23.12.2020 declaring total income of Rs. 17,59,360/-. 4. A search and seizure action u/s. 132 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') was conducted in 'Viraj Group of cases' on 20.04.2023 at the residential premises of its directors, key employees and members of Viraj family during which various incriminating documents and digital data were found and seized. Consequent upon the search action, the case was selected for verification ....
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....ordingly, findings of incriminating documents found and seized from office premises of 'Viraj Group' is incorrect. Vide response dated 10.03.2025, the assessee reiterated the issue citing reliance on the statement of Shri Rohit Manilal Shah recorded u/s. 132(4) of the Act, wherein he stated that the premises YO-2 is not on rent or owned by Viraj Group and the premises is owned by Vilas Joshi. The assessee drew the attention of the Assessing Officer to the answer to Q. No. 31 of statement of Shri Karan Rajendra Shah, wherein he has stated that the description 'VR' represents different Viraj Group entities like VEPL, VRPL, individuals, proprietorship, firms, etc. and therefore, findings of handwritten cashbook cannot be attributed in the hands of the assessee. The assessee averred that statement Shri Karan Rajendra Shah is inadmissible as the statement is signed by various members of the Viraj family as recorded in an unusual manner. Vide response dated 31.01.2025, the assessee raised objection stating that documents are found and seized from third party premises and therefore, presumption under Section 292C of the Act as to the found & seized documents from the premi....
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....e arising from the documents found and seized from the disputed premises proportionately in the hands of M/s. Viraj Estates Pvt Ltd and M/s. Viraj Realty Pvt Ltd., therefore, he rejected the objections raised by the assessee. 9. During the course of assessment proceedings the Assessing Officer further noted that Shri Karan R. Shah in his answer to question No. 31 recorded u/s. 132(4) of the Act on 24.04.2023 while explaining the entries of handwritten cash book had categorically stated that the credit entries with 'VR' notation represent different 'Viraj Group' entities like M/s VEPL, VRPL, etc. He had further stated that it also includes individuals, proprietorship concerns, firms and all other entities falling under Viraj Group and that credit entries with 'VR' notation represent cash of his group altogether. He had further stated that any other entry that states "Karan", "Viraj" etc. also represent cash of his group. During the post search proceedings the assessee in response to the queries raised by the Assessing Officer submitted the basis for categorization of transactions of entries recorded in Handwritten Cash Book based on seized documents identifying in....
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....of the regular books of accounts. 11. The Assessing Officer on analysis of the seized documents in digital data noted that the entries in the seized handwritten cash book which are maintained digitally by the entities of 'Viraj Group' under file name 'CON' & 'V89' by reducing two zeros. The entries made therein are those which have taken place under the umbrella of Viraj Group. During the post search proceedings, the entries made in the handwritten cashbooks, Tally Data in files V89 and "CON", data found in Pen drives found with the employees of Viraj Group and data in loose chits was exported in Excel format /digitized as Digital Cash Book (DCB) to assist reading the entries having several narrations. The Digital Cash Book (DCB) was prepared during post search proceedings incorporating the contents of the found & seized documents. On examination of the seized material the Assessing Officer noted that the seized material found from 19 premises having economic sense has found place in the DCB. He observed that the DCB has entries on both sides i.e. receipts and expenditure. The entries in the handwritten cashbook were stated to be maintained since the year 2008 and contain the tr....
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.... 15.7 Grounds of appeal nos. 21.12 to 21.14 are without prejudice grounds of appeal whereby the appellant has contended that entire amount of gross on-money receipts cannot be taxed as income and only reasonable profit percentage be applied to the same. I am inclined to accept and agree with this contention of the appellant that gross amount of on-money cannot be taxed as income and reasonable percentage of the same be taxed. In the facts of the appellant case, it is not in dispute that the seized records evidences noting of expenses and in fact, the handwritten cash book itself has noting of various expenses on the payment side, which the AO has completely ignored while taxing the gross amount of on-money receipts. In any case, it has been held in number of decisions of the Hon'ble Courts that direct evidence co-relating the expenditure to the on-money receipts is not practical and reasonable estimate of profit to be computed. In this regard, the following observations made by Mumbai ITAT in the case of Prime Developer v. DCIT, ITA Nos. 175 to 178/M/2010 and 321 to 324/M/2010, order dated 22.03.2013 are relevant- "42. Scope of Reasonable Expenditure: Assessee n....
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....Panna Corporation reported in ITA No. 323/325 of 2000 held that there is a consistent view which the various High Courts have been following and that is the principle that even upon detection of "on money" receipts or unaccounted cash receipts what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. If that be the legal position, then reasonable profit is to be estimated. The relevant extracts are as under: "It can, thus, be seen that consistently, this Court and some other Courts have been following the principle that even upon detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation." 15.9 Similar view also been held in case of CIT vs. Shri Hariram Bhambhani reported in ITA No. 313 of 2013 (Bom.) and CIT vs. President Industries (2002) reported in 258 ITR 654 (Guj.), Further, in fact the Hon'ble Bombay High Court in case of CIT v/s Golani Brothers reported in ITXA 17, ....
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....h the Hon'ble ITAT have held that 15% profit rate of "on money" is a reasonable rate. 15.12 Further, Hon'ble Ahmedabad ITAT in case of Kishor Mohanlal Teliwala vs. ACIT 64 TTJ 543 (Ahd) held that 8% profit of unaccounted turnover was reasonable by the ITAT. The relevant extracts are as under: "Thus, what can be added as the undisclosed income of the assessee under section 158BC, is a reasonable amount of profit which the assessee could have earned by charging "on money" in respect of flats and the Mumbai Bench of the Tribunal in the case of Mrs. Mehroo N. Irani in ITA No. 1140/Bom/89 has taken the view that when a person is found to have been engaged in building construction activity and has received unaccounted money, what is required to be taxed is not the receipt but only 5 per cent of the receipt which is to be taken as a net profit. As against the above decision the assessee has himself offered 8 per cent profit on the total receipts which should be considered fair and reasonable. In any case it is to be seen that after the exhaustive search and obtaining the disclosure of Rs. 17 lakhs the search party has not been able to find any unaccounted assets ....
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....In its order, the Settlement Commission accepted the contentions of the assessee that the impounded papers itself show that there are numerous instances of unaccounted expenses and also the builders have to incur lots of expenses outside books of account. The assessee had offered profit @ 12% of the undisclosed receipts. It was further submitted that the above said net profit amount along with the value of scrap sales and adhoc disclosures work out to more than 35%. The Hon'ble Settlement Commission accepted the submissions of the assessee and accordingly upheld the estimation of net profit at 12% of the on-money receipts in assessment year 2005-06. 5. In the appeal filed by the assessee before Ld CIT(A) challenging the assessment order of AY 2006-07, the first appellate authority considered the order of the Hon'ble Settlement Commission and accordingly held that the net profit calculated at 12% (it was stated that it was wrongly mentioned as 17% by Ld CIT(A)) on the on-money receipts should only be assessed. The revenue is aggrieved by this decision. 6. We have already noticed that the Hon'ble Settlement Commission has accepted the contentions of the ....
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....timating the income from the on-money receipts @ 17% for this year also by following the order passed by the Settlement Commission. Accordingly, we confirm the order passed by Ld CIT(A). Accordingly, we reject the appeal filed by the revenue." 15.15 In view of the above, the gross on-money receipt addition made by the AO is not correct and only reasonable profit on the same needs to be added. In the facts of the appellant case, in the regular books of account, the appellant has disclosed profit on sale of shops / offices / flats from year to year and the profit percentage chart is tabulated as under- AY Total Turnover Net profit Before Tax Net profit ratio 2014-15 45,09,704 2,87,315 6.37% 2015-16 3,14,12,349 1,55,11,730 49.38% 2016-17 23,63,67,840 1,39,44,434 5.90% 2017-18 17,05,45,623 49,91,495 2.93% 2018-19 8,04,55,274 23,51,126 2.92% 2019-20 5,49,75,518 7,07,637 1.29% 2020-21 8,36,85,690 5,86,856 0.70% 2021-22 5,46,94,779 -17,91,559 -3.28% 2022-23 8,10,160 54,783 6.76% 2023-24 450 -8,239 0.00% Weighted Average 71,74,57,387 3,66,35,....
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.... approval under Section 148B was given mechanically and without application of mind, failing to follow jurisdictional High Court precedents, making the entire assessment order invalid and void ab initio 6. The learned CIT(A) erred in sustaining additions based solely on original, retracted statements, without addressing the authenticity, possession, and consistency of the core material they relate to (HCB, V89/CON files). 7. The learned CIT(A) erred in applying the statutory presumption of truth under Section 132(4A) or Section 292C to seized materials (Tally files "V89" and "CON") that were not found or seized from the appellant's possession or control, but from third-party premises. 8. The learned CIT(A) erred in sustaining additions related to alleged on-money without the department definitively establishing the movement of cash, identifying the ultimate recipient of funds, or providing corroborative evidence of actual transactions. 9. The learned CIT(A) erred in holding that all statements were recorded without duress, mental stress, or that signatures constituted valid, independent statements under Section 132(4) when the seized material....
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....rest of justice PRAYER It is most humbly prayed that the Hon'ble Income Tax Appellate Tribunal may be pleased to quash the assessment order and further prayed to delete the addition of Rs. 60,14,550/- made towards net profit relating to flats/shops for the AY 2020-21 in the order of Commissioner of Income Tax, (Appeals). Grounds raised by the Revenue in ITA No. 3284/PUN/2025 1. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in restricting the addition on account of unaccounted on-money receipts to 15% of the such receipts, instead of confirming the entire unaccounted on-money receipts of Rs. 4,00,97,000/- added by the Assessing Officer, despite the assessee having failed to establish, with evidence, any corresponding expenditure relatable to such receipts. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in restricting the addition on account of unaccounted on-money receipts to 15%, without appreciating the fact that the receipts of on-money in cash received by the assessee are over and above the registered sale consideration of....
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....ed or inferable, whereas in the instant case of assessee, the on-money represents cash premium over and above recorded and registered sale consideration, and no cost component relatable to such receipts has been demonstrated. (b) In the case of DCIT v. Panna Corporation (ITA No. 323/325 of 2000 Gujarat High Court), the Hon'ble Court has inferred that some expenditure is inherently embedded in turnover, based on the facts of that case, whereas in the instant case of assessee, the assessee has not proved any such embedded expenditure, nor furnished any working or supporting evidence. (c) In the cases of Anand Builders/ Nalini V. Shah/ Kishor Mohanlal Teliwala, these cases involved either admitted unaccounted expenditure based on evidence or corroborative material indicating cost components, whereas in the instant case of assessee, no such admission or corroboration exists. (d) in the cases of Om Construction, Shahkar Developers, etc. (Settlement Commission cases), the facts are that orders of the Settlement Commission are based on compromise, voluntary disclosure and specific factual matrices, and are not binding precedents for regular assessment procee....
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....see who records all transactions in book, as had the assessee accounted its on-money receipts and cash expenses in its book properly, the expenses would have invariably been disallowed u/s. 40A(3). 12. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that assuming the net on-money income as arrived at by estimating @15% on unaccounted on-money receipts as correct without corroborative and contemporaneous evidence would be playing into the hands of the assessee ignoring the position of law that would entail in view of the above grounds. 13. The appellant craves leave to add, alter, amend or modify any of the above grounds of appeal at or before the time of hearing. 16. In ground of appeal No. 1 the assessee has challenged the validity of assessment proceedings due to foundational jurisdictional defect in issuing notice u/s. 143(2) of the Act. 17. After hearing both the sides, we find this ground is identical to the ground No. 1 in the case of Viraj Estates Pvt Ltd. raised by the assessee vide ITA No. 3001/PUN/2025 for assessment year 2014-15 We have already decided this issue and dismissed the sam....
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....der of even date by observing as under: "37. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Hon'ble Delhi High Court in the case of PCIT vs. Agroha Fincap Ltd. (supra) has held that where the competent authority used 'Yes, I am convinced it is a fit case for reopening of assessment u/s. 147 by issuing notice u/s. 148', same would satisfy mandate of section 151. The relevant observations of the Hon'ble High Court read as under: "20. So it must be held, that the language "Yes, I am convinced it is a fit case for re-opening the assessment u/s. 147 by issuing notice u/s. 148 satisfies the mandate of Section 151A of the Act in this case. The Tribunal has clearly erred in not appreciating the above language used by the Competent Authority while granting approval. Hence, the impugned order dated 07.07.2023 passed by the ITAT allowing the appeal filed by the Respondent/Assessee is untenable and is liable to be set aside. We order accordingly. The substantial question of law is d....
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....he sides, we find this ground is identical to the grounds of appeal No. 7, 10 and 15 raised in the case of Viraj Estates Pvt Ltd vide ITA No. 3001/PUN/2025 for assessment year 2014-15. We have already decided this issue and dismissed the same vide order of even date by observing as under: "56. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. Since the so-called third party evidences as argued by the Ld. Counsel for the assessee have already been held to be belonging to the assessee in the subsequent paragraphs i.e. para 61 of the impugned order, therefore, this ground raised by the assessee is dismissed." 28. Following similar reasonings, the ground of appeal No. 6 raised by the assessee is dismissed. 29. In ground of appeal No. 7, the assessee has challenged the order of the Ld. CIT(A) confirming the addition made by the Assessing Officer based on material seized from the third party premises. 30. After hearing both the sides we find this ground is identical to the ground of appeal N....
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....ount of the Viraj group including the assessee. Since a part of the seized documents is matching with the accounted transactions recorded in the books of the assessee, therefore, we find merit in the argument of the Ld.CIT-DR that it is logical inference that the other part would also belong to the assessee and its group. Therefore, it is apparent that the seized documents / materials are related to the assessee and its group. We further find the assessee and the group during search and post-search proceedings had accepted and deciphered the seized documents and on-money receipts. The assessee had helped in creation of the Digital Cash Book (DCB), has duly correlated noting / entries in seized records with the survey nos, names of the buyers, etc. Under these circumstances, it cannot be accepted that the seized documents do not relate to Viraj group on the ground that the two premises referred hereinabove are not owned by them. Merely because the ownership of the two premises referred hereinabove are of third parties, the possession and control thereof was exclusively with Viraj group and duly accepted by the key persons of the group during the course of search action and statement....
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....ts and shops. No entry shall be excluded or maintained in a separate pool. 2) The unified common peak must legally crystalize entirely in the hands of the present assessee which according to the Revenue is the flagship company. No separate addition on the basis of the entries found in the DCB / HCB is to be made in the hands of any of the entities / individuals of the Viraj group and the entire peak addition is to be made in the hands of the present assessee i.e. Viraj Estates (P) Ltd. 3) Since the seized HCB is a continuous record containing entries prior to the assessment years in question, therefore, the Assessing Officer is directed to compute the peak balance as on the last date of assessment year 2013-14. This closing peak of assessment year 2013-14 shall be brought forward and applied as opening peak balance for the computation of peak for assessment year 2014-15. 4) The Assessing Officer shall calculate the running daily cash balance by using the single consolidated ledger. The peak credit for any given assessment year shall be the highest unexplained possible balance reached during the specific financial year. 5) To prevent double taxati....