TMI Blog2018 (7) TMI 1814X X X X Extracts X X X X X X X X Extracts X X X X ..... eal filed by the assessee is partly allowed, for statistical purpose. - I.T.A No.5620/Mum/2017 - - - Dated:- 27-7-2018 - For The Appellant : Shri Rakesh Joshi For The Respondent : Shri K Madhusudan ORDER Per G Manjunatha, AM : This appeal filed by the assessee is directed against order of the CIT(A)-52, Mumbai dated 09-06-2017 and it pertains to AY 2015-16. The assessee has raised the following grounds of appeal:- 1) On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of ₹ 18,82,59,020/- as alleged on money received on sale of flats, without considering the facts and circumstances of the case. 2) On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not appreciating the fact that the appellant is following the Project Completion Method to^ recognize the income from the projects, hence on money is to be taxed in the year of completion of the relevant project from where the same has been earned. 2. The brief facts of the case are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 18,82,59,020 towards on-money receipts from sale of flats, failed to disclose undisclosed income in the return of income filed for the year. Therefore, called upon the assessee to explain as to why addition shall not be made towards undisclosed income admitted during the course of search. In response, the assessee, vide letter dated 23-09-2016 submitted that it has admitted undisclosed income of ₹ 18,82,59,020 towards on-money receipts from sale of flats based on certain incriminating documents found during the course of search; however, no disclosure has been made in the return of income owing to the fact that the assessee is following project completion method for recognition of revenue and the project from which the assessee has received on-money, has not been completed during the financial year relevant to AY 2015-16. Therefore, additional income has not been disclosed in the return of income for the impugned assessment year. The assessee further submitted that although the Managing Director of the company has admitted undisclosed income of ₹ 18,82,59,020 during the course of search in statement recorded u/s 132(4), such admission has been made under coerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of account as per ERP system is more than the amount recorded in application for booking flats. The quantification has been done by taking average rate of ₹ 21,400 per sq.ft. and compared it with the rate appeared in the books of account to determine difference, but fact remains that while comparing the rate as per books of account, the AO has taken average rate of sales by dividing the total carpet area of the flat ignoring the fact that if the saleable area of the flat is taken, the average rate works out to much more than the rate quantified by the AO. The assessee further submitted that although it had admitted additional income for AY 2015- 16, did not disclose such undisclosed income owing to the fact that it is following project completion method for recognition of revenue and the project on which on-money has been received is not completed during the under consideration. Therefore, the AO was erred in making addition towards on-money on the basis of estimated sale price and also ignoring the fact that the asssessee is following project completion method for recognition of revenue. 6. The CIT(A), after considering relevant submissions of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 lacs each, which were unaccounted. For clarity, the relevant statement has been reproduced as under: Q.No.45 I am showing you page number 35 of Annexure A-4, impounded during the course of survey from the site office of Runwal Symphony in which few things are written in your handwriting, please confirm? Ans. Yes, I confirm the same. It is the cost sheet given to the new client during visit of this site. Q.No.46 I am showing you page number 13 of Annexure A-2 impounded impounded during the course of survey from the site office of Runwal Symphony in which few things are written in your hand writing. Please confirm the same ? Ans--, Sir, I confirm that the details or, page no 33 of Annexure A-2 is written in mi/ handwriting and has been shown to me. Q No 47 Please explain the detail written in your writing on page 13: of Annexure A-2? Ans. Sir , as I told you in the answer to Q No 41, I was instrumental in making sale of the flat no A-904 co Chetna Chedda, sir, the details are reading the final deal of sate of flat wherein it is agreed that the total cost of flat is ₹ 2,36,98,500/- based on the rate of ₹ 15000 per square ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . I was asked to collect ₹ 50 lacs approx from a customer who has booked a flat at Runwal Anthurium. I have accepted the money from Shri Sanjeeva Rao, a real real esate broker / channel partner. Q.9 What is the proportion of on-mancy in sate price of flat. Ans The ratio of cash, to total agreed price, is decided and determined by Mr Sandeep Runwal. I have no knowledge about the rate or percentage of cash component i n the agreed sale price. 9. Likewise, statement of Shri Klshore P Jain, Head of Taxation, Runwal group was also recorded about the on-money and he too confirmed about receipt of the same. Finally, the statement of Shri Sandeep Runwal, Director of the company was recorded on oath, wherein he agreed of applying higher sale rate in respect of ail flats and consequently, offered additional income to the tune of ₹ 38,06,61,255/- as under: Particulars of sold premises / projects Name of the assessee in whose name such income is offered Additional income so offered (in Rs.) Financial year in which income is accruing Runwal Anthuriumshops ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue in such forms is comparabl y much higher. I am also showing you the sworn statement dated 30. 11, 2014 of Shrl Anant Modi Vice- president Sales of Rumval Group recorded on oath u/s 132(4) of IT Act wherein he has accepted various instances of on money receipts over and above the registered value of respective property. Further, the statements of various key persons of your organization as shown to you in the course of recording of statement till now also establish conclusively that out of books cash component is being accepted in sale of flats/ shops/ etc. under your supervision/ direction. In this background, you are requested to re-visit all the documentary evidences shown to you and in the light of facts gathered by the department during the course of ongoing search proceedings, you are requested to avoid any evasive reply and furnish your clear cut explanation on the above mentioned findings. Ans. Your above observation is based on comparison of price of fiats sold in the project Kunwal Elegante, Runwal Anthurium. There are various reasons f or such variations, i.e. marketconditions, terms of payment, negotiating power of the custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of his statement. Q.17 Please provide the details as to other flats in which similar practice is followed. Ans. Although in the other cases, I do not agree that in all the cases cash has been accepted by me over and above the agreement value. But to avoid protracted litigations with the department and to buy peace I accept the difference appearing in the chart beginning from 1st January, 2014 till date as my additional income over and above the regular income for the respective years as on-money (Cash received over and above the agreement value). I am submitting the working market as Annexure-1 to this statement which has two pages. Q.18 As per the working submitted as part of annexure to answer to question number 16, the amount of on money accepted in the project namely Runwal Greens (M/s Runwal Homes Private Limited), i.e. ₹ 63,39,52,372/-. Please confirm? Ans: Sir, due to reasons mentioned above I confirm the amount of ₹ 63,39,52,372/- (which as per Annexure-1), as the on money accepted in the projectsRrunwal Green (M/s Runwal Homes Private Limited), and the same has been offered as additional income over and above the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITAT, Mumbai in the case of M/s Runwal Homes Pvt Ltd in ITA No.5621/Mum/2017, wherein under similar set of facts the ITAT has held that additions cannot be made towards undisclosed income on account of on-money receipts only on the basis of admission of the assessee and what needs to be added is only the amount quantified on the basis of incriminating material found as a result of search. The Ld.AR further submitted that the ITAT, further held that when assessee is following project completion method for recognition of revenue, onmoney received towards sale of flats shall be taxed along with regular sale proceeds for the year in which such project is completed. The Ld. AR for the assessee further referring to the paper book filed, submitted that the AO has quantified on-money only on the basis of admission of the assessee during the course of search without appreciating the fact that in many cases, the booking amount mentioedn in application for booking is lesser than the amount recorded in the books of account. Therefore, quantifying undisclosed income by taking an average rate and applying that rate for all flats is incorrect. The Ld.AR further referring to the paper book page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made by the AO should be upheld. 9. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. The fact that the assessee is receiving on-money from sale of certain flats is not disputed. The assessee, during the course of search has categorically admitted that it has received on-money from certain customers. The assessee has quantified undisclosed income on account of on-money receipt based on incriminating material found as a result of search. Such admission has been reiterated by filing a letter during the course of assessment proceedings on 23-09-2016. The AO made addition towards undisclosed income quantified on account of receipts of onmoney from sale of flats on the basis of statement recorded during the course of search which is based on incriminating material in the form of application for booking flats found during the course of search. According to the AO, the assessee is selling flats for higher rate, whereas while recording sale consideration in the books of account in ERP system, showing much lesser sale consideration. The AO further observed that the sale price per sq.ft. in Runwal Elegante is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher than or equal to the amount recorded in the incriminating material found in the form of application for booking. We further observe that the AO has arrived at average rate of ₹ 21,400 per sq.ft. and then applied such rate to 21 flats and compared the rate as per books of account of the assessee recorded in ERP system to arrive at a difference of ₹ 18,82,59,020. While doing so, the AO has determined average rate as per books of account by dividing total sale consideration from the saleable area of the flat to arrive at average rate per sq.ft., whereas while determining undisclosed income average rate has been arrived at on the basis of total carpet area of the flat. There is a lacunae in the quantification of undisclosed income inasmuch as that by adopting average rate of ₹ 21,400 per sq.ft. and applying such rate uniformly to all flats without any evidence found as a result of search. In fact it is the case of the assessee also. The assessee never disputed the fact of receipt of onmoney; however, disputed the manner in which the undisclosed income has been quantified. Therefore, we are of the considered view that the AO was incorrect in quantifying undisclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- has to be confirmed and, accordingly, we confirm the said addition of ₹ 72,50,000/-.The assessee has also included the said amount in its revised computation and paid taxes thereon on 27.12.2016. 8. Now coming to the other addition included in the sum of ₹ 63,39,52,372/-. The following additions were made by the Assessing Officer - Project namely Runwal Greens Towers -1,2 3 and Commercial ₹ 31,14,02,412/- Project namely Runwal Greens Towers - 4, 5, 6, 7 8 Rs.31,52,99,960/- Total Rs.63,39,5 2,372/- It is not disputed that the on-money on the basis of the seized material received by the assessee comes to ₹ 19,94,78,821/-out of which the addition of ₹ 72,50,000/- has already been confirmed by us and has been duly taken in to account by the assessee in the revised computation of income submitted by the assessee during the course of hearing before the Assessing Officer and on which the assessee has duly paid the tax. Now the question before us remains to the disputed addition amounting to ₹ 62,67,02,372/- Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar practice is followed. Ans: Although in the other cases, I do not agree that in all the cases cash has been accepted by me over and above the agreement value. But to avoid protracted litigations with the department and to buy peace I accept the difference appearing in the chart beginning from 1st January 2014 till date as my additional income over and above the regular income for the respective years as on- money (Cash received over and above the agreement value), I am submitting the working marked as Annexure~1 to this statement which has two pages. Q.18 As per the working submitted as part of annexure to answer to question number 16, the amount of on money accepted in the project namely Runwal Greens (M/s Runwal Homes Private Limited}, is ₹ 63,39,52,372/- Please confirm ? Ans; Sir, due to reasons mention above I confirm the amount of ₹ 63,39,52.372A (which as per Annexure-1), as the on money accepted in the projects Runwal Green (M/s. Runwal Homes Private Limited), and the same has been offered as additional income over and above the income declared in the M/s. Runwal Homes Private Limited. Here / want to state that Olive project is under the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intended buyer and the assessee. No cogent material or evidence was brought to our knowledge by the learned DR even though he has vehemently relied on the order of the Assessing Officer as well as the statement of the Director of the company, which may prove that the assessee has received consideration @15750/- per sq. ft for flats and @26000/- per sq. ft. for shops. There has been search and seizure in the case of the assessee. If the assessee would have received consideration much more than what is stated in the documents, for which no evidence is found during the course of search, in our opinion, no addition can be sustained. There cannot be any agreement against the statute. The assessee agreed for declaration of the income for which no material was found merely to avoid protracted litigations with the department and buy peace. The assessee has earned income; the onus is on the Revenue to prove that the income has accrued to the assessee. Even otherwise also since there has been a search in the case of the assessee, if the assessee would have earned such income there must have been some evidence found that either the assessee has made investment outside the books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, the amount received by the assessee is merely a booking amount, i.e. only advance received for booking flat; therefore, the same cannot be added during the impugned assessment year. In this regard, he relied upon the decision of ITAT, Mumbai Bench D in assessee s group concern s case cited supra wherein the co-ordinate bench, by following various decisions including the decision of Hon ble Supreme Court in the case of CIT vs Bilhari Investments Pvt Ltd (supra) and also Special Bench decision of Mumbai Benches of the Tribunal in the case of Wall Street Construction Ltd vs JCIT 101 ITD 156 (Mum)(SB) held that when assessee is following project completion method for recognition of revenue, total receipts from the project including on-money received should be taxed in the year in which the project is completed. The relevant portion of the order is extracted below:- . The learned AR at this juncture has taken a argument that it is a case where the assessee was following project completion method. Project completion method has been followed consistently by the assessee. Both the projects relating to the flats and the shops in respect of which the evidence were found for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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