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TMI Blog2025 (5) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the caser and in law the Ld. CIT(A) erred in estimating the net profit @20% on unaccounted business receipts of Rs. 6,01,99,815/- by giving relief to the assessee without appreciating the fact that the assessee has not submitted any documentary evidences that @80% of the expenses were incurred for the earning of such income and ignoring the fact that the cases of Hon'ble High Courts on which reliance was placed by the Ld. CIT(A) are distinguishable on facts?" Ground No. 2 The appellant craves to leave, to add, to amend and/ or to alter any of the ground of appeal if need be." ITA No. 4471/MUM/2024 for AY 2019-20 "Ground No. 1 Whether on the facts and in the circumstances of the caser and in law the Ld. CIT(A) erred in estimating the net profit @20% on unaccounted business receipts of Rs. 6,01,99,815/- by giving relief to the assessee without appreciating the fact that the assessee has not submitted any documentary evidences that @80% of the expenses were incurred for the earning of such income and ignoring the fact that the cases of Hon'ble High Courts on which reliance was placed by the Ld. CIT(A) are distinguishable on facts?" Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is year shall apply mutatis mutandis to the other two years. The additional two issues for AY 2018-19 shall be dealt separately in this order itself. 4. Brief facts of the case are that assessee, a partnership firm is part of GNP group and was subjected to search u/s 132 of the Act on 23.09.2021 along with other entities of GNP group. In the present appeals, common issue is regarding disallowances made in respect of deduction of expenditure incurred from the on-money receipts based on seized documents as claimed by the assessee. In its return, assessee had offered these on-money receipts on a 'net basis' after claiming deduction towards expenditure incurred by it, found recorded in the seized documents though itemized claim of such expenditure was not made. Ld. Assessing Officer however, made the addition by taking 100% of such on-money receipts as gross level. Ld. CIT(A) considered the submission of the assessee and on the basis of various documents and evidences, including the Gross Profit declared by the assessee over the years, held that the income from on-money receipts offered on 'net basis' at 20% of such on-money receipts deserved to be accepted. Against the said relief gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AO did not accept the submissions of the assessee as it was submitted that on-money is to be taxed on the basis of accrual method of accounting followed regularly by the assessee. According to the assessee, sale proceeds received in cash on units sold which is based on seized material is not taxable in the year of receipt, since taxability of income on sale of units is always in the year when possession is given to the buyers, that is, when actual transfer takes places. Assessee had also contended that seized documents should be interpreted as a whole and not in parts. While not concurring with the submissions made by the assessee, ld. AO noted that since the on-money transactions are already being considered for addition in AY 2019-20 and 2021-22, he did not consider the deduction of 80% claim by the assessee from the receipt of on-money and added the same as unaccounted business income u/s. 28 on 'protective basis'. Thus, he made an addition of Rs. 7,01,26,660/- which is 80% of the on-money receipt by the assessee, in the Assessment Year 2018-19. 6. Before the Ld. CIT(A), in addition to the submissions made before the Ld. AO, assessee also submitted that during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that due to business compulsion, it had received business receipts in cash and also incurred various business expenses both of which were not recorded in regular books of accounts and therefore third-party evidences cannot be made available with respect to PAN, address etc. as required by the ld. AO. Source of such expenses is out of the on-money receipts and ld. AO has accepted the on-money as business receipts u/s 28 of the Act while making the addition. It was contended that provisions of the Act are not intended to restrict the business activities of the assessee. Ld. AO has not disputed the fact and nature of expenditure incurred as they form part of seized documents. 9. In this regard, assessee placed reliance on the decision of Co-ordinate bench of ITAT Mumbai in the case of Prime Developers vs. DCIT in ITA no. 175/Mum/2010 which was affirmed by the Hon'ble jurisdictional High Court of Bombay in ITXA 2452 of 2013, wherein Hon'ble Court explained the scope of reasonable expenditure to be allowed as there are hidden expenses and evidencing such expenses is impossibility and no need to demonstrate genuineness of claim of unaccounted expenses and held reasonable profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said view has been held by Hon'ble High Court of Delhi in the case of CIT vs. Indeo Airways Pvt. Ltd. [2012] 26 taxmann.com 244 (Del). Hon'ble Court held that - "If the revenue was of the opinion that the expenses claimed towards 'green boxes' was inadmissible or was excessive, or not genuine, in order to reject the entries in the books of account and other documents of the assessee, seized during the search, it ought to have relied on other materials. Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true, the revenue could not have, consistently with that presumption, proceeded to require the assessee to produce materials in support of the expenditure entries. Such an inconsistent approach in respect of the contents of the same book appears to have been founded only on suspicion that they were not genuine. However, suspicion cannot replace proof. Moreover, the full effect of the presumption should be effect to, whenever the statute directs a particular non-existent state of affairs to be assumed. Therefore, in the absence of any materials, in the form of documents, the revenue could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure as it would amount to double addition. Assessee referred to the decision Hon'ble Bombay High Court in the case of CIT vs Golani Brothers [2017] 85 taxman.com 355 (Bom) wherein it held in Para 21 as under: "The Tribunal found that if the unaccounted expenditure is determined, then, necessarily the question which would arise for consideration before the Tribunal is whether the Assessing Officer was justified in making addition under section 69C for the years under consideration. The Tribunal, found that the explanation as derived from the records and placed by both can be traced to the on-money received at the time of booking/sale of shops. The statement of the senior partner is referred. The senior partner admitted that the sums have been received as on money. Therefore, both the amounts, namely the on-money as well as the unexplained expenditure cannot be brought to tax, according to the Tribunal. If the unaccounted expenditure so incurred was from the on money received by the assessee, then, the question of making any addition under section 69C does not arise because the source of the expenditure is duly explained. It is only the on-money which can be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estate business as reported in the audited financial statements which evidently demonstrated that net profit of the assessee as per its books of accounts ranges from 3% to 21% in the relevant period from AY 2018-19 to 2022-23. These details are tabulated as under for ease of reference: AY Sales as per books of accounts Net Income offered by assessee on percentage completion method Net Profit as per books (in %) 2018-19 - - 2019-20 - 48,14,624 2% 2020-21 19,87,42,792 3,58,02,617 18% 2021-22 37,53,09,099 7,92,52,078 21% 2022-23 29,49,76,974 5,71,14,977 19% 15.2. In this respect, he also referred to the consolidated income offered by the assessee from its real estate business for the period from AYs 2018-19 to 2022-23 as per books of accounts and as a result of search which worked out to be @ 20%. Details of the same are tabulated below: AY Sales as per books of accounts "On money" receipts offered by Assessee Total Turnover Net profit offered as per books of accounts Net income offered u/s. 132(4) Total income offered by assessee u/s. 132(4)/139(1) Avg. profit 2018 -19 - 8,76,58,325 8,76,58,325 - 1,75,31,665 1,75,31,665 2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot record such unaccounted cash transactions in its books of account. It had spent the unaccounted cash receipts in projects undertaken by it. There is no 'after thought' on this fact since it was explained in the course of search itself as recorded in the statements made u/s 132(4) of the Act. 17.2. Further, it is noted that Ld. AO has not doubted the fact of incurring of such expenditure. He has merely disallowed the same in absence of details relating to identity of payees which according to the assessee is not available since the said expenditure are not recorded in the books of accounts and are typical of the Real Estate industry. It is also noted that assessee follows accrual basis of accounting and sales are booked when the possession is given to the buyer, that is, when the transfer takes place. 17.3. Assessee had offered the entire on-money of Rs. 29,45,28,341/- spread during the period of five years from AY 2018-19 to AY 2022-23, details of which are already tabulated above, based on booking dates since, according to the assessee, on-money is typically received at the time of booking of the flat i.e. when initial purchase deal is done and before the first cheque is paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of expenses against the same. He made the addition of Rs. 50,00,000/- as unexplained expenditure even though source for the same was explained to be the same business receipts for which separate addition was made. The said addition relates to payment made to construction contractor which forms part of the seized document. In terms of our observations and findings on ground no. 2 in the above paragraphs, wherein treatment of expenses found recorded in seized material has been extensively dealt with, in our considered view, no separate addition in respect of unexplained expenditure can be made u/s 69C. We do not find any reason to interfere with the finding arrived at by the ld. CIT(A) in this respect. Accordingly, ground no. 3 raised by the revenue in appeal for AY 2018-19 is dismissed. 20. On ground no. 1 in appeal for AY 2018-19 relating to addition made on 'protective basis' by the ld. AO, we note that in the impugned assessment order, ld. AO stated that since on-money transactions are already being considered for addition in AY 2019-20 and 2020-21 based on evidences found during the course of search proceedings, in the impugned year 2018-19, the addition is made on 'prot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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