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2017 (5) TMI 1741 - ITAT SURATOn-money receipt - material found during the course of survey is to be taxed intoto or income is to be determined by applying a specific rate of profit out of this “on-money receipt” - HELD THAT:- Survey team was well aware about this aspect and that is why net income of ₹ 15 crores was accepted as a declaration on behalf of the assessee. Had that not been in the knowledge of the Department, then the survey team would have emphasized the assessee to declare ₹ 36.53 crores. Consistently approach of the Revenue was to work out profit element embedded in those on-money receipts. Tribunal has also considered this aspect in the case of Jay Builders [2010 (9) TMI 1194 - ITAT AHMEDABAD]. Thus, there was no clinching evidence with the Department to demonstrate that gross-receipts of on-money calculated out of impounded material found during the course of survey is deserved to be considered as net profit. As far as statement of Shri Murarilal Agarwal, that statement has duly been considered by the ld.First Appellate Authority. Reply to question no.7 has been specifically dealt by the ld.CIT(A) on pages 8, 9 and 10 of the impugned order. In other words, it is a cumulative analysis of all the facts at the end of the First Appellate Authority to demonstrate that alleged calculation of gross on-money at the end of AO was not the income of the assessee. It contained certain expenditure also which are noted on those very pages and credit of those expenditure are also to be considered. Taking into consideration these aspects, books were not considered as reliable and profit element embedded in the receipts has been added. This profit has been calculated at the rate of 16%. Therefore, we do not find any error in the order of the ld.CIT(A), and first ground of appeal is rejected. Applying net profit rate at 16% - HELD THAT:- As applied at the rate of 42%. We find that this rate has been applied by the ld.CIT(A) after taking into consideration comparable cases of eight assessees. Specific example has been given on page no.16 of the impugned order. Thus, in our opinion, the ld.CIT(A) has exercised his discretion after taking into consideration various other factors. Disallowance u/s 40A - HELD THAT:- Once income of the assessee has been estimated after rejection of the books of accounts, there cannot be other disallowance specifically under section 40A(2), 40A(3) etc. We do not find any error in the observation of the ld.CIT(A) in this regard. Therefore, this ground of appeal is also rejected. Profit from unaccounted business on the money attributable to the sale of flats during the year - According to the CIT(A), the income of the assessee would be assessed on the method of accountancy followed by the assessee and the revenue would be recoginised in the year in which the sales have been made by the assessee - HELD THAT:- After taking into consideration finding of the ld.CIT(A), we do not find any error because the assessee itself has offered an income of ₹ 15 crores in different years and recognized this income on sale of flats. In this year, the project was not completed. It was under construction, therefore, it cannot be said that the income has accrued to the assessee. In a given case, booking of flats may be canceled, advance taken by the assessee including on-money could be returned, therefore, the ld.CIT(A) has took a view in right perspective. We do not find any error in the finding of the ld.CIT(A) on this issue. Addition of investment added u/s 69/69C and u/s 68 - HELD THAT:- Once the receipts are accounted, expenditure cannot be added. The source of expenditure is on-money receipts. Out of the on-money receipts, the income would be assessed in the year when the flats would be sold. Similarly, the ld.CIT(A) has observed that ₹ 36.49 lakhs cannot be considered as cash credit because the assessee has already explained that these are on-money receipts. The assessee has also identified flat numbers against which such amounts have been received. CIT(A) has entertained additional evidence in violation of Rule, 46A of the Income Tax Rules - AO was not provided an opportunity of hearing on this issue - income of the assessee embedded in on-money receipts is to be estimated, then this should be estimated at the rate of 42% and not at the rate of 16.25% as done by the ld.CIT(A) - HELD THAT:- CIT(A) has not entertained any additional evidence, rather reappreciated existing material available on the file of the AO. Thus, there is no force in such ground. We find that the ld.CIT(A) has adopted rates after taking into consideration relevant material and comparable cases. The ld.CIT(A) made reference to eight comparable cases before adopting percentage of 16% required to be applied on on-money receipts. Similarly, thereafter, the ld.CIT(A) made reference to order of the ITAT in different cases. Thus, we are of the view that the ld.CIT(A) has appreciated the facts and circumstances in right perspective and has applied pragmatic rate of profit on-money receipts. We do not find any merit in these grounds of appeal. They are rejected. Unexplained investment plus expenditure - HELD THAT:- The assessee has pointed out that entry of ₹ 1,14,12,000/- in the Asstt.Year 2009-10 has been made twice by the AO in table no.3 on page 36-38 of the assessment order. This aspect has been appraised from the seized material also. CIT(A) has considered it an error at the end of the AO. No material was brought to our notice pointing out as to how the ld.CIT(A) has erred in construing this figure. Therefore, after going through the order of the ld.CIT(A), we do not see any error in it. As far assessment of income from the on-money receipt is concerned, we have already adjudicated this issue in the Asstt.Year 2008-09, wherein we have upheld the finding of the ld.CIT(A) that gross-receipt of on-money cannot be taxed. Only income part embedded on this receipt is to be taxed. In view of our finding in the Asstt.Year 2008-09, we do not find any merit in other alternative arguments of the Revenue. Addition u/s 68 - share application money received during the F.Y.2007-08 that is relevant to Asstt.Year 2008-09 - AO treated this amount as unexplained cash credit and made addition - CIT(A) has deleted the addition on the ground that perusal of ledger account as well as bank account statement would indicate that these amounts have been received by the assessee in the accounting year relevant to A.Y.2008-09 and cannot be taxed in the Asstt.Year 2009-10 - HELD THAT:- Since this amount has not been received in this year and is not taxable in this year, therefore, the ld.CIT(A) has rightly deleted the addition.
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