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2021 (5) TMI 950 - AT - Income TaxAddition of on-money - Quantification of the income assessable - assessee argued estimation of the profit element embedded in the on-money receipts @20% by the CIT(A) be substituted by that shown by the assessee @12% - Quantification of the income assessable - HELD THAT:- s the receipt of on-money is inextricably interlinked and in fact interwoven with the corresponding sale transaction accounted for by the assessee in its books of account, the same, thus, cannot be divorced therefrom, and the income element therein embedded would be required to be brought to tax in the same year in which the sale transaction had been accounted for or would be accounted for by the assessee as per its regular method of accounting that has been accepted by the department.Our aforesaid view that the conduct of search and seizure operation in a particular year does not lead to an inference that the undisclosed income detected as a consequence thereof has to be taxed in the assessment year relevant to the previous year in which search was conducted, and the accounting of such income have to be made on the basis of the method of accounting followed by the assessee is supported by the order of the ITAT, Pune bench in the case of Dhanvarsha Builders and Developers Pvt. Ltd [2005 (10) TMI 276 - ITAT PUNE-A] - We, thus, direct the A.O to subject the income element embedded in the onmoney received by the assessee to tax in terms of our aforesaid observations.The Ground of appeal No. 1 raised by the assessee is allowed in terms of our aforesaid observations Addition w.r.t the income element of the amount of on-money - change in the method of accounting adopted by the assessee - HELD THAT:- Where the change in the method of accounting adopted by the assessee is for a bonafide reason and such new method of accounting is thereafter regularly employed by the assessee, no fault can be found with the same. Our aforesaid viewis fortified by the judgment of the Hon‟ble High Court of Bombay in the case of Bajaj Auto Ltd. [2016 (9) TMI 1047 - BOMBAY HIGH COURT].Also, the Hon‟ble High Court of Bombay in its earlier judgment passed in the case of Melmould Corporation [1993 (2) TMI 82 - BOMBAY HIGH COURT] relying on the decision of Corporation Bank Ltd. [1988 (8) TMI 90 - KARNATAKA HIGH COURT] had held that where the change in the method of accounting is a bonafide one which was thereafter consistently followed by the assessee year after year, then, the change would have to be accepted irrespective of the fact that during the year when the change wsa brought about a deteriment was caused to the revenue. As observed by us hereinabove while disposing off the assessee's appeal above as the receipt of on-money is inextricably interlinked and in fact interwoven with the corresponding sale transaction accounted for by the assessee in its books of account, the same, thus, cannot be divorced therefrom, and the income element therein embedded would be required to be brought to tax in the same year in which the corresponding sale transaction had been accounted for or would be accounted for by the assessee as per its regular method of accounting that has been accepted by the department. Our aforesaid view that the conduct of search and seizure operation in a particular year does not lead to an inference that the undisclosed income detected as a consequence thereof has to be taxed in the assessment year relevant to the previous year in which search was conducted, and the accounting of such income have to be made on the basis of the method of accounting followed by the assessee is supported by the order of the ITAT, Pune bench in the case of Dhanvarsha Builders and Developers Pvt. Ltd.[2005 (10) TMI 276 - ITAT PUNE-A]. We, thus, direct the A.O to consider our aforesaid observations while subjecting the income element embedded in the on-money received by the assessee to tax. Additions of on-money made u/s 68 on the basis of notings in loose sheets and data retrieved from the mobiles - HELD THAT:- We are unable to comprehend that as to on what basis the revenue is seeking inclusion of loose sheets and data retrieved from mobile phones within the scope and gamut of the definition of “books or books of accounts” as provided in Sec. 2(12A) of the Act. Alternatively, we also find substance in the observation of the CIT(A), that as both the Investigation wing and the A.O had held that the impugned notings were the on-money received by the assessee on sale of flats/shops in the building projects undertaken by it thus, in absence of any dispute as regards the nature of such receipt, the same, was liable to be assessed as a “business receipt” and not as an income u/s 68 of the Act. We concur with the view taken by the CIT(A) that now when the A.O had in the assessment order mentioned the flat wise and year wise receipts of on-money thus, the same leaves no iota of doubt that the same were in the nature of “business receipts” which were inseparable from the assessee‟s business of a builder and developer. Accordingly, on the basis of our aforesaid deliberations, we are of a strong conviction that no infirmity arises from the order of the CIT(A) who in our considered view had rightly concluded that the impugned additions could not have been made u/s 68.
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