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2021 (5) TMI 265 - AT - Income TaxUnexplained income as reflected in the seized material in search -.on money receipts - Before the ld CIT-A, the assessee explained initially that the notings do not relate to the assessee and they do not reflect income of the assessee - HELD THAT:- We find that the ld AR before us had completely owned up the entire entries as noted in the seized materials on behalf of the assessee Shri Haresh Mohanlal Mehta by reaffirming the earlier stand taken before the ld AO and at the time of search proceedings before the Investigation team. Hence the receipts mentioned in the loose papers represent on monies received by the assessee from his business. It is a settled principle that what can be taxed in respect of on money is only a profit element since the seized material clearly shows evidences of expenditure out of the said receipts.The summary of the total receipts as per seized material and duly quantified as per tally accounts, is provided. We find that the total on money receipts reflected in the seized materials for the Asst Yea₹ 2006-07 to 2011-12 is only ₹ 14,44,54,717 as tabulated supra, whereas the addition made by the ld AO in the hands of Shri Haresh Mohanlal Mehta itself works out to ₹ 16,56,97,919/- on account of business receipts and expenses and personal outgoings and investments. This results in great anamoly as total additions made exceeds the total on money receipts itself. It is not in dispute that the only source of unaccounted income for the assessee is the receipt of on money from construction business - total additions made cannot exceed the construction on money receipts. Obviously, the on money receipts cannot be taxed in its entirety as assessee had also incurred certain business expenditure which were also kept out of books and which are also reflected in the same seized materials. It is well settled that the seized documents should be considered in its entirety and the revenue cannot consider that part of the seized material which is favourable to it and ignore that portion which is detrimental to revenue. Only the reasonable profit percentage of the aforesaid total on money receipts is to be estimated for the purpose of taxation in the hands of Shri Haresh Mohanlal Mehta. In this regard, we find that the Co-ordinate Bench of this Tribunal in the case of M/s. Platinum Properties [2014 (12) TMI 800 - ITAT MUMBAI] had dealt with the similar issue, wherein the profit percentage @ 8% was determined on on-money receipts - Thus we direct the ld AO to consider profit percentage at 8% of on money receipts to be taxed as business profits of the assessee for the relevant Asst Years. Peak addition - addition on account of unexplained investment in LIC policies - HELD THAT:- We have already held that profit percentage on money receipts should be determined at 8% of ₹ 35,90,000/- for the Asst Year 2006-07. Accordingly, the question of any addition on account of peak credit does not arise. Further, the business payment as well as administrative expenses are deemed to be allowed once the profit percentage is applied to the total turnover. Further, with respect to the personal expenses, the year wise details of the same were filed by the ld AR in a tabular form which was also placed before the ld CITA.Once the business profit is determined at 8% of undisclosed receipts, then what is required to be seen is whether the said profit of 8% is sufficient to explain all the outgoings in the form of personal expenses and personal investments made by the assessee year on year and accordingly the assessee would be entitled for benefit of telescoping. Hence there cannot be any separate addition for personal expenses as made by the lower authorities. Wherever, there is positive cash balance in any year, the same would get carried forward as opening cash balance and would be considered as available cash for explaining the cash outgoings as stated supra. A separate chart is enclosed as an annexure to this order, wherein the actual amounts to be taxed for the respective Asst Year is clearly mentioned after considering all the outgoings in the seized materials together with the on money receipts reflected thereon. Unexplained expenditure - HELD THAT:- There is absolutely no allegation or even mention of any cash payment made by Shri Haresh Mohanlal Mehta to Shri Jerry D’Cunha. There cannot be any addition towards alleged investment in Hotel Haredia to the tune of ₹ 48,50,000/-, which was made merely by placing reliance on the statement of a third party Shri Jerry D’Cunha, which is absolutely without any basis and substance. Hence the addition made in this regard deserves to be deleted. Accordingly, the said alleged outgoing of ₹ 48,50,000/- is not considered by us in the tabulation (separately enclosed as an annexure to this order) while working out the cash available with Shri Haresh Mohanlal Mehta.
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