TaxTMI 
TaxTMI 
2020 (12) TMI 861
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....ls, with the consent of both the parties, the appeal for A.Y.2011-12 is taken as the lead case and the decision rendered thereon would apply with equal force for other assessment years in respect of identical issues except with variance in figures. 2. Ground No.1 raised by the assessee for A.Y.2011-12 is general in nature and does not require any specific adjudication. 2.1 The effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in granting deduction @50% of unaccounted on-money receipts on adhoc basis in the facts and circumstances of the instant case. 3. We have heard rival submissions and perused the materials available on record. We find that assessee is a partnership firm engaged in the business of construction of residential complex. A search and seizure action under section 132 of the Income-tax Act, 1961 was conducted on 26/02/2015 at the residence of Mr Vipul Mangal, partner of the assessee-firm. Simultaneously, the business premises of the assessee-firm was also covered under section 133A of the Act. During the course of search and survey action, various loose papers, notebook, diaries, etc. were found and seized / impounded, as th....
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....nt Constructions have incurred several expenses and hence, the net amount may be offered for taxation." 3.2. We find from page Nos.63-69 of the paper book containing a letter dated 18/06/2015 addressed by assessee to the Investigation Wing, DDIT, Unit-2(1), Mumbai wherein it has been categorically stated by the assessee that on-money receipts on sale of flats was Rs. 9,75,50,000/-, out of which Rs. 6,01,09,970/- totally spent by the assessee for the purpose of construction of the project belonging to the assessee firm which are not recorded in the books of accounts of the assessee. The details of these expenses were duly listed out in the seized document diaries and assessee sought deduction for the same. In this regard, the assessee also filed the entire details together with the narration and the nature of payment and the name of the party to whom such payments were made together with the complete break-up with dates for the total unaccounted expenditure of Rs. 6,01,09,970/-. Accordingly, the assessee offered for all the years put together unaccounted income as under:- Gross receipts representing on-money on sale of flats - Rs. 9,75,50,000/- Less unaccounted expenses used in ....
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....0 1,38,25,293 4 2014-15 82,36,807 2,14,61,000 1,32,24,193 5 2015-16 67,39,205 2,73,14,000 1,68,30,792 TOTAL 3,74,40,030 9,75,50,000 6,01,09,970 2,54,000 3.6. From the above table, it could be seen that for A.Y.2011-12 alone, the ld. AO had made further addition of Rs. 2,54,000/- on account of partner's capital contribution. 3.7. The ld. AO disregarded the claim of deduction towards expenses recorded in the seized diaries for the following reasons:- a) The assessee has not produced any documentary evidence to substantiate its claim of expenses. b) On perusal of the list provided towards expenses incurred, the ld. AO observed that assessee has provided only the nature of expenses, or the name of the person to whom payments were made. Assessee has not furnished the full name of the persons to whom payments were made. c) In majority of the cases address of the persons and PAN were not provided by the assessee. d) In most of these cases, expenses were incurred in cash in excess of Rs. 20,000/- thereby violating the provisions of Section 40A(3) of the Act. e) The claim of the assessee that the expenses reflected in the seized di....
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.... in respect of the unaccounted receipts are being considered to be true and considered while determining the undisclosed income of an assessee, the notings on the same seized documents in respect of the expenses are also required to be considered while determining its undisclosed income. It is also relevant to note that the unaccounted transactions are carried out primarily on trust and considering the inherit nature, the level of documentation is minimal. Therefore, it is not fair on the part of AO to insist on the complete details as well as documentation in respect of the said unaccounted cash expenses as held in the aforesaid two decisions of the Hon‟ble High Courts. Therefore, in principle, it is held that the AO should have allowed set off of the unaccounted cash expenses as per the notings on the seized documents. However, only those unaccounted cash expenses an be allowed as a deduction which relate to the said unaccounted on-money receipts of Rs. 9,75,50,000/-. Also, such unaccounted cash expenses should be revenue in nature and also not prohibited by law. Moreover as per the matching principle only such unaccounted expenses can be allowed as a deduction where th....
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....s undisclosed income. Further, if the component of on-money vis-à-vis the accounted / cheque receipt is higher, the profit embedded in the on-money component will be lower since more proportion of the on-money will be used for the unaccounted expenses as well as the regular expenses. In the instant case, the assessee itself has determined the net surplus/profit; to be of Rs. 3,74,40,030/- @38.38% after considering the unaccounted cash expenses in respect of the said on-money receipts. Moreover, as noted above primary verification itself revealed that the said unaccounted cash expenses of Rs. 6,01,09,970/- includes expenditure of Rs. 50,00,000/- related to some other project, expenses of Rs. 10,50,000/- which are prohibited by law and expenses of Rs. 1,00,000/- which are capital in nature. Moreover, as noted earlier, in terms of the matching principle, only that portion of such expenses can be allowed for which corresponding on-money receipts have been booked during the relevant year. Therefore, it will be fair and reasonable to estimate the profit in respect of the on-money receipts of Rs. 9,75,50,000/-by applying a margin of 50% which will factor the non-allowable expenses ....
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.... in his order which is not appealed by the revenue before us. We find that the ld. DR was trying to point out that assessee had incurred various expenses which are prohibited by law and the same is not restricted to Rs. 10,50,000/- alone as mentioned in the order of the ld. CIT(A). We find that the ld. DR was trying to improve the case of the revenue before us which is not permissible as per law. Reliance in this regard is placed on the Special Bench of Mumbai Tribunal in the case of Mahindra and Mahindra Ltd., vs. DCIT reported in 2009-TIOL-255-ITAT-Mum-SB. In case if the revenue is aggrieved against a particular finding of the ld. CIT(A), the revenue should have preferred appeal before us or cross objections before us which was admittedly not done in the instant case. Hence, the finding given in this limited aspect in the order of the ld. CIT(A) need not be disturbed at this second appellate forum. We also find that assessee had also tried to match the total expenses to the tune of Rs. 5,00,06,930/- out of the total expenses of Rs. 6,01,09,970/- by giving the name, address, mobile number, nature of payment of the parties for their respective amounts before the ld. AO itself. Howe....