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2022 (5) TMI 459 - AT - Income TaxAddition made on account of on-money received by the assessee - on-money was received by the assessee in the year under consideration as found from the relevant documents seized during the course of search, it is observed that the said on-money was received by the assessee in respect of flats sold not in the year under consideration but in other years - HELD THAT:- Entire receipts or on-money representing undisclosed sales proceeds of the flats cannot be the income of the assessee and only the income embedded in such on-money can be taxed as the undisclosed income of the assessee. He also relied on the observations made by the AO himself that it was difficult to comprehend how the assessee could meet the cost of construction when he was selling flats on huge discounts, meaning thereby that the construction cost was met by the assessee even from the on-money representing unaccounted sales proceeds of the flats. Profit element embedded in the on-money - As regards the net profit rate of 20% adopted by the learned CIT(A) to estimate the profit element embedded in the on-money, it is observed that the same was arrived at by the learned CIT(A) by relying on the decision of Hon’ble Gujarat High Court in the case of Jay Builder[2012 (12) TMI 1194 - GUJARAT HIGH COURT] wherein the decision of ITAT adopting the net profit rate of 15% to estimate the income embedded in on-money was upheld by their Lordships. Keeping in view the said decision of the Hon’ble jurisdictional High Court and having regard to all the facts of the case, we are of the view that the net profit rate of 20% adopted by the learned CIT(A) to estimate the income of the assessee embedded in on-money of Rs.3,03,50,000/- is fair & reasonable and there is noting brought on record by the learned DR to dispute the same. We, therefore, find no infirmity in the order of the learned CIT(A) restricting the addition of Rs.3,03,50,000/- made by the Assessing Officer on account of on-money to Rs.60,70,000/- and upholding the same, we dismiss Ground No.1 of the Revenue’s appeal. Addition made on account of deemed rent - unsold units (Flats) in the hands of builder at the year end - property is used as stock-in-trade - Income from house property or income from business -HELD THAT:- As observed that this issue is squarely covered in favour of the assessee by various judicial pronouncements relied upon by the learned Counsel for the assessee. In one of such decisions rendered in the case of Neha Builders Pvt. Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT] as held by the Hon’ble Gujarat High Court that “if property is used as stock-in-trade, then it would become and partake character of stock and any income derived from stock would be ‘income from business’ and not ‘income from house property’”. As rightly contended by the assessee, it therefore follows that the deemed rent concept cannot be applied or invoked in case of property which is stock-in-trade of the business of the assessee and the addition made by the Assessing Officer on account of deemed rent cannot be sustained as rightly held by the learned CIT(A). We, therefore, uphold the impugned order of the learned CIT(A) on this issue and dismiss Ground No.2 of the Revenue’s appeal.
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