TaxTMI 
TaxTMI 
2026 (9) TMI 762
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....d are being disposed of by this consolidated order. 2. At the outset, the learned counsel submitted that the legal grounds challenging the validity of the assessments, including the grounds relating to approval under section 153D of the Act, were not being pressed. The additional grounds raised in ITA No. 6893/Mum/2024 for Assessment Year 2020-21, ITA No. 6891/Mum/2024 for Assessment Year 2021-22 and ITA No. 6964/Mum/2024 for Assessment Year 2020-21 were also stated to be not pressed. Accordingly, all such legal and additional grounds are dismissed as not pressed. The only surviving issue in these appeals is whether, on the facts emerging from the seized material, the Assessing Officer was justified in estimating the profit embedded in the unaccounted "on-money" receipts at 15%, or whether a lower rate, as contended by the assessee's, ought to be adopted. 3. The relevant facts are that a search and seizure action under section 132 was carried out on 12.01.2021 in the case of the Span Group. The assessee's are partnership firms engaged in the business of real-estate development and have undertaken residential projects in and around Mira Road and Bhayander in the District of Th....
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.... rate of 8% suggested by the assessee's on the ground that no specific evidence had been furnished to demonstrate that the profit from these transactions was as low as 8%. Proceeding on the general premise that the profit margin in the real-estate business ordinarily ranges between 10% and 15%, the Assessing Officer adopted the higher rate of 15% and made corresponding additions in the respective assessment years. 6. The learned CIT(A) affirmed the action of the Assessing Officer. He observed that the assessee's had not brought any cogent material on record to demonstrate that the notings did not pertain to unaccounted "on-money" transactions. Upon examining samples of the seized material, he found that the documents contained project-wise details of receipts and also indicated the years in which such receipts had been realised. As regards the rate of profit, the learned CIT(A) noted that the judicial decisions relied upon by the assessee's involved estimation of profit at rates varying between 5% and 12%, but observed that the rate ultimately depended upon the facts of each case and that there were decisions in which profit had been estimated at 15% or even higher. He according....
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....ranging from 344 sq. ft. to 553 sq. ft., intended predominantly for purchasers belonging to the lower-middle and middle-income segments. The projects were situated in the Mira Road and Bhayander areas of Thane District and not in the prime real-estate locations of Mumbai. These commercial features, according to him, had an important bearing upon the likely margin and had been entirely overlooked by the Assessing Officer. He submitted that the rate of 15% was adopted merely on the basis of a general observation regarding the real-estate industry, without any reference to the assessees' past profit margins, comparable projects in the same locality, the size and character of the units, or any other objective benchmark. 10. The learned counsel clarified that the assessee's were not claiming that the aggregate excess of expenditure should be recognised as a business loss or that no addition should be made at all. His submission was that the substantial expenditure disclosed by the seized material materially eroded the assumption of a profit margin of 15%. To put an end to the controversy and to take care of any possible leakage of revenue, he urged that profit may reasonably be estim....
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....roject undertaken in the same locality, the prevalent margins in projects catering to a similar class of purchasers, or any other tangible material which could support adoption of the uppermost rate of 15%. The existence of unaccounted receipts undoubtedly justifies estimation of the income embedded therein, but it cannot, by itself, lead to the inexorable conclusion that such transactions must have generated profit at the highest rate generally attributed to the industry. 14. More importantly, the same seized documents which constitute the foundation of the additions record substantial expenditure incurred in cash. The evidentiary value of the seized material cannot vary according to the convenience of either party. If the record is accepted as reliable for determining the amount of unaccounted receipts, the corresponding expenditure appearing therein cannot be rendered otiose while determining the profit arising from those transactions. The year-wise charts demonstrate a fluctuating pattern: in some years the receipts exceed the expenditure, while in several other years the expenditure is substantially higher. Even on an aggregate basis, the expenditure reflected in the seized....