TMI Blog2021 (10) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... se in these appeals is, whether or not the learned CIT(A) was justified in holding that the cash received by the assessee was in the nature of business receipt and could not be treated as income under section 68 of the Income Tax Act, 1961 (for short the Act ). 3. The brief facts of the case are, the assessee is engaged in the business of construction. These appeals filed before us involves around the project undertaken by the assessee called Sion O2 and the issue involved relating to on money received in the above said project after a search operation conducted under section 132 of the Income Tax Act, 1961 (for short the Act ) was conducted in the Ahuja group of cases on 25th June 2015, and incriminating data in the form of loose papers and digital form relating to the tax evasion were found and seized. The premises of Shri Sunil Chowdhary, driver of Shri Jagdish Ahuja (promoter of the group) were also searched and parallel books of account of the Ahuja group were found in his premises. The analysis of the data found was confronted to the promoter Mr. Jagdish Ahuja, who had admitted to receiving on money in various projects undertaken by the group. Accordingly, notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of total on money received during the assessment year and making a submission that only net profit should be brought to tax on total on money received. Further it was submitted that assessee and other group companies represented before the Settlement Commission the issue of determining the percentage of profit on the on money, which was accepted by Settlement Commission to tax the profit element on the receipt of on money @12% and also made a plea that the income should be taxed in the year of realization of the profit. 5. After considering the detailed submissions of the assessee, the learned CIT(A) observed that it is accepted and admitted facts that assessee has received on money in the projects undertaken by it. However, he observed that the assessee group companies had also offered the on money received before settlement commission where five entities of the group made an application. He observed that this issue was present in three concerns of the Ahuja a group which approached the Settlement Commission and had offered 12% of the on money as income and the same was accepted by the Settlement Commission. He observed that the contention of the assessee that the mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons from them both at the assessment and appellate stages. Accordingly, he held that the amount of on money has to be taxed in the year of receipt which is the relevant assessment year which is under consideration. 7. Further, it is submitted by the assessee before the learned CIT(A) that there is no dispute about the fact that the income brought to tax is on money receipt from sale of flats, the Department also had referred to this income as on money. Therefore, the same has to be brought to tax as business receipt and not under section 68 of the Act as unexplained cash credit. The learned CIT(A) observed that Assessing Officer also refer to this income as on money/Cash sales in the assessment order but has ultimately brought to tax as unexplained cash credit under section 68 of the Act. He referred the matter to the Assessing Officer vide letter dated 2nd January 2019, directing him to verify the seized material and confirm whether the contention of the assessee i.e., treatment of this income as on money and, therefore, as business receipt is correct or not. In response, the Assessing Officer, vide his report dated 10th January 2019, by reference to the list of parties submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Hon ble Gujarata High Court in the case of Panna Corporation ITA No.323 and 325 of 2000, Hon'ble Jurisdictional High Court and the Tribunal, the learned CIT(A) held that in view of the above judgments including that of the binding judgment of the Hon'ble Jurisdictional High Court, it is held that the ends of justice would be made if the addition on account of on money is restricted to 25% of the on money received. Accordingly, he partly allowed the appeal filed by the assessee. 9. Considered the rival submissions and perused the material on record. We find that identical issue has been decided by the Tribunal in assessee s own Group company viz., Sai Ashray Developers Pvt. Ltd. v/s DCIT, ITA no.2967/Mum./2019, etc., order dated 11th June 2017, vide which the issue for our consideration is squarely covered in favour of the assessee and against the Revenue. For the sake of clarity, the operating para of the issue decided by the Co ordinate Bench cited supra, is reproduced below: 13. Considered the rival submissions and material on record. We noted that in these appeals the issue of on money received by the assessee is proved beyond doubt from the records found d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,20,00,000/- 2015-16 38,80,000/- 65,00,000/- (26,20,000)/- TOTAL 11,97,01,750/- 8,05,17,250/- 3,91,84,500 7.2. We find that the assessee s group concerns also had offered 12% of onmoney receipts as its income before the Hon ble Income Tax Settlement Commission. The ld. CIT(A) categorically admitted in his order that the said receipt represents on-money received on sale of flats from which certain expenses were also incurred by the assessee and hence, only the profit element thereof could be brought to tax and not the entire on-money receipts. We find that the ld. CIT(A) accordingly estimated the profit element to be at 25% and restricted the addition to ₹ 55 lakhs as against ₹ 2,20,00,000 made by the ld. AO. Against this finding of the ld. CIT(A), the revenue is not in appeal before us. 7.3. It is not in dispute that assessee had indeed received on-money for sale of flats to the tune of ₹ 2,20,00,000/- during the year under consideration. It is not in dispute that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of Ld. CIT(A) on this issue and direct the AO to assess the same by applying 12% on ₹ 1,50,00,000/- and that too in the year when the regular income of the assessee is assessed to tax as per the regular method of accounting. In deciding so we find support from the decision of the ACIT vs. ISA Enterprises (supra) wherein it has been held that income has to be assessed on the basis of method of accounting followed by the assessee. The operative part is reproduced as under: 7. We have heard the rival submissions and perused the relevant materials on record. We give the reasons for our decision in the succeeding paragraphs. Having gone through the return of income filed by ISAE for the AY 2008- 09 to AY 2014-15, we find that it is following the project completion method. It filed its return of income for the AY 2014-15 on 04.04.2015 declaring total income of ₹ 4,45,00,710/-. The above income has been accepted without any variation by ACIT-20(1), Mumbai in the assessment dated 28.12.2016 completed u/s 143(3) of the Act. Now it would be apposite to discuss the cited two decisions. In the case of M/s Jalaram Jagruti Development Pvt. Ltd. (supra), the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed cannot be entertained. 8. We have mentioned earlier that the return of income for A.Y. 2014- 15 filed by the assessee declaring total income of ₹ 4,45,00,710/- has been accepted by the ACIT-20(1), Mumbai u/s 143(3) of the Act. Therefore, we follow the decisions of the Hon'ble Bombay High Court mentioned at para 7 here-in-above and uphold the order of the Ld. CIT(A). 9. Similar ratio has been laid down in the various other decisions as referred to by the Ld. A.R. during the hearing and stated hereinabove. We are therefore inclined to hold that on money received by the assessee would only be taxable as per the regular method of accounting of the assessee. In the present case the assessee is following project completion method and therefore this income has to be assessed along with the regular income of the assessee in the year of completion of the project. With regard to Revenue s appeal, the issue is already considered in the above paras. 11. Consistent with the view taken as aforesaid, respectfully following the aforesaid findings, similar directions are issued on this issue. Consequently, grounds, raised by the assessee are partly allowed and groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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