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Income Tax Appellate Tribunal, A BENCH, MUMBAI
Appearance For the Appellant/Assessee : Shri Subodh Ratnaparkhi For the Respondent/Department : Smt. R.M. Madhavi Shri Manoj Kumar Sinha Date Conclusion of hearing : 10.03.2023 Pronouncement of order : 26.04.2023 O R D E R Per Bench 1. This is batch of 8 appeals consisting of four appeals preferred by the Assessee for the Assessment Years 2012-13, 2013-14, 2014-15 and 2015-16, and four appeals preferred by the Revenue for the Assessment Years 2010-11, 2012-13, 2013-14 and 2014-15. All the appeals arise from common order dated 08.06.2022 passed by Commissioner of Income Tax (Appeals), Pune-11 (hereinafter referred to as ‘the CIT(A) under Section 250 of the Income Tax Act (hereinafter referred to as ‘the Act’) partly allowing the appeals preferred by the Assessee for the Assessment Year 2010-11 and 2012-13 to 2015-16. Since the appeals involve common issues arising from identical set of facts, the same were heard together and are being disposed of by way of common order.
We would first take cross appeals for the Assessment Year 2012-13 as it covers most of the issues raised in the appeals. However, where relevant, we would also state facts relevant to appeals for the other assessment years for the sake of brevity and to avoid repetition. Assessment Year 2012-13 3. The Assessee has raised the following grounds in appeal for the Assessment Year 2012-13 [ITA No. 1936/Mum/2022] 2
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 “1. The Hon. CIT(A) erred in upholding addition of Rs.29,49,089/- (Rs.39,39,489/- - Rs.9,90,400/-), by estimating 45% of on- money receipts in respect of non-eligible projects u/s 801B(10) to be the income of the appellant, not appreciating that such profit element in the on-money receipts could not exceed 20%, which amount is already offered to tax by the appellant and therefore the addition confirmed by the Hon. CIT(A) is not justified and bears to be deleted.
2. The Hon. CIT(A) erred in holding investor booking advances of Rs.8.78,79,950, to be the revenue of the appellant and determining 45% of such advances, amounting to Rs.3,95,45,978/- to be the income liable for tax in the year under appeal, not appreciating the arguments that such revenue had not arisen in the year under appeal, considering the facts of the transaction and the method of accounting regularly followed by the appellant and therefore income in respect of these advances was not required to be estimated and consequently no addition was called for. The addition of Rs.3,95,45,978/- upheld by the Hon. CIT(A) on the above count may kindly be deleted.
Without prejudice, the Hon. CIT(A) erred in determining 45% of investor booking advances of Rs.8,78,79,950/-, to be income of the appellant, not appreciating that profit element in such advances would never exceed 20% and therefore determination of income @ 45% of such advances was excessive and consequent excess addition required to be deleted.”
On the other hand, the Revenue has raised the following grounds in appeal for the Assessment Year 2012-13 [ITA No. 2220/Mum/2022]:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in estimating 45% of 'on money' received by the assessee as undisclosed income without appreciating ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 the fact that the assessee has failed to furnish reliable, cogent & corroborative documentary evidences to prove and substantiate cash expenses claimed to have been incurred for real estate business.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)'s estimation of 45% of 'on money' received as undisclosed income of the assessee is ad-hoc, arbitrary, unwarranted, baseless, unreasonable and unjustified as the assessee has not been able to prove and substantiate cash expenses claimed to have been incurred for the real estate business.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing additional deduction u/s 801B(10) on the income embedded on 'on money' receipt without appreciating the fact that new claim of deduction or allowance cannot be made during reassessment / assessment under section 153A of the Income Tax Act, 1961.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing additional claim of deduction u/s 80IB(10) without appreciating that as per section 80A(5) of the Act the benefit of enhanced deduction u/s 80IB(10) is not permitted if the assessee fails to make a claim in its return of income for any deduction.
5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to consider the decision of the Hon'ble Apex Court in the case of CIT Vs Mandavi Builders [2021] reported in 133 taxmann.com 414 (SC) wherein SLP filed by the Department was granted by Hon'ble Apex Court against impugned order of Honb'le Karnataka High Court wherein it was held that when unaccounted money found during search proceedings at premises of assessee-company was treated as business income of assessee by the Assessing Officer, assessee could not be denied deduction under section 80IB(10) in respect of such amount.”
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16
The grounds raised by the Assessee in the appeal are taken up hereinafter in seriatim along with the connected grounds raised in the cross appeal by the Revenue.
Ground No. 1, 2 &3 of Appeal by Assessee and Ground No. 1 & 2 of the Departmental Appeal 6. Ground No. 1 to 3 of appeal by Assessee and Ground No. 1 & 2 of Departmental Appeal are directed against the order of CIT(A) holding that 45% of on-money receipts constitute profit element liable to tax in the hands of the Assessee in the year of receipt of on-money. The Assessee contends that the profit element should be restricted to 20% of the on-money receipts which should be brought to tax as in the year completion of the project as per the method of accounting followed by the Assessee. Whereas it is the contention of the Revenue entire on-money receipts should be taxed in the year of receipts in the hands of the Assessee as the Assessee has failed to furnish document/evidence to support the claim of expenses incurred in cash and allowable as deduction as per the provisions of the Act.
7. The relevant facts in brief are that Assessee is a partnership firm carrying on business as a builder and real estate developer at Virar, District Palgarh.
On 31.07.2014 search and seizure action under Section 132 of the Act was carried out at the business and residential premises of Ameya Group of Companies (including the Assessee). Notice under Section 153A of the Act was issued on 15.12.2014 for the Assessment Years 2009-10 to 2014-15. The Assessee filed return of ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 income in response to notice under Section 153A of the Act for the aforesaid Assessment Years details of which are as under: Assessment Return Date of filing Returned Income Year 2009-10 Original Return 24.09.2009 11,78,600/- 153A Return 21.01.2015 2,40,55,601/- 2010-11 Original Return 22.09.2010 38,55,260/- 153A Return 21.01.2015 1,08,46,378/- 2011-12 Original Return 23.09.2011 30,22,150/- 153A Return 21.01.2015 2,39,38,417/- 2012-13 Original Return 17.09.2012 27,63,130/- 153A Return 21.01.2015 37,53,531/- 2013-14 Original Return 26.09.2013 93,00,210/- 153A Return 21.01.2015 103,10,406/- 2014-15 Original Return 27.11.2014 120,94,480/- 153A Return 07.02.2015 120,94,474/- 2015-16 Original Return 29.09.2015 126,08,110/- /153A Return 9. During the course of search action various incriminating documents were found. The total cash receipt pertaining to the Assessee at the time of the search were quantified at INR 40,46,18,086/- after taking into account the incriminating material found during the course of the search and statement of the partners recorded under Section 132(4) of the Act. During the assessment proceedings under Section 153A read with Section 143(3) of the Act, the Assessing Officer noted that as against the aforesaid amount of INR 40,46,18,086/-, the Assessee had offered to tax additional income of INR 7,24,58,910/- only in the return of income filed in response to notice issued under Section 153A of the Act. The year-wise break-up of the additional income offered to tax as per the Assessing Officer is as under:
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 Assessment Year Financial Cash received as per Additional Income Year Statement u/s 132(4) offered in Return u/s (INR) 153A (INR) 2007-08 23,77,320/- - 2009-10 2008-09 1,29,53,500/- 2,48,27,400/- 2010-11 2009-10 3,72,66,500/- 1,41,52,520/- 2011-12 2010-11 5,87,03,500/- 2,55,22,890/- 2012-13 2011-12 12,08,07,465/- 22,03,373/- 2013-14 2012-13 7,26,87,800/- 40,82,327/- 2014-15 2013-14 8,12,37,001/- 11,68,800/- 2015-16 2014-15 1,98,47,000/- 5,01,600/- Total Total 40,46,18,086/- 7,24,58,910/-
According to the Assessing Officer, for the Assessment Year 2012- 13, additional income of INR 12,08,07,465/- was disclosed during the course of search whereas additional income of only INR 22,03,373/- was offered to tax in the return of income filed in response to notice under Section 153A of the Act. Accordingly, the Assessee was asked to explain, vide notice, dated 05.05.2016, 18.07.2016 and 22.07.2016, how the cash receipts reflected in the seized material were accounted for in the regular books of accounts. In response, the Assessee filed reply letters and explained to the Assessing Officer that the seized papers reflected receipts as well as expenditure. Substantial amount of expenditure incurred by the Assessee in cash on acquisition of land, construction expenses, professional charges, interest stamp duty and registration charges and other expenses in cash for the purpose of business of the Assessee. It was contended on behalf of the Assessee that entire undisclosed income was offered to tax after claiming deduction for expenses incurred in cash. The Assessee also submitted a cash flow statement wherein, according to the Assessee, all the transactions reflected in the seized papers were stated to be reflected. It was the contention of the Assessee before
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 the Assessing Officer that 20% of the on-money receipts were offered to tax as income after taking into consideration all the relevant factors. However, the Assessing Officer was not convinced with the explanation offered by the Assessee and therefore, considered the entire amount of on-money receipts as income of the Assessee without allowing any deduction for expenses.
Being aggrieved, the Assessee carried the issue in appeal before CIT(A) who accepted the contention of the Assessee that entire amount of on-money receipts could not be taxed as income in the hands of the Assessee and deduction for expenses incurred in cash would also have to be allowed to bring to tax only be profit element. However, the CIT(A) computed the amount of profit element at 45% of on-money receipts as against 20% contended by the Assessee. Thus, the CIT(A) granted relief to the Assessee by allowing deduction at the rate of 55% of the on-money receipts vide order, dated 08.06.2022.
Being aggrieved, both, the Assessee and the Revenue have preferred appeal before us. The contention of the Assessee is that only 20% of the on-money receipts should be brought to tax as income, whereas the Revenue contends that the CIT(A) committed error in allowing deduction for expenses in absence of any proof of the same having been furnished by the Assessee during the assessment or first appellate proceedings and therefore entire amount of on-money receipts should be taxed in the hands of the Assessee.
The Learned Authorised Representative for Assessee submitted that the Assessing Officer had considered the entire cash receipts as ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 income whereas the CIT(A) has restricted such income at 45% of the cash receipts. While doing so the CIT(A) has only granted deduction for the actual expenses as computed by the Assessing Officer in the remand proceedings based upon the seized records. The CIT(A) has failed to appreciate that during search entire record of cash expenses was not seized. He emphasized that the seized records were indicative of the expenditure incurred and did not represent the total of all cash expenditure. He submitted that the Assessee was developing residential units for lower income group at Virar, District Palghar and therefore, in all fairness, the income component of the on-money receipts could not exceed 20%. The Assessee was already offering to tax, a healthy profit percentage as per the audited books of accounts. Year wise net profit percentage of the Assessee as per audited books of accounts is as under. Assessment Year Net Profit 2010-11 11.66 % 2012-13 12.11 % 2013-14 8.48 % 2014-15 13.07 % 2015-16 13.70 %
Per contra, the Learned Departmental Representative submitted that the contention of the Assessee that only 20% of on-money receipts should be taxed as income is without any basis. The receipts as well as the expenses were not reflected in the books of account. The Assessee was granted opportunity by the Assessing Officer and CIT(A) to furnish specific details of expenses but the Assessee failed to provide the same. No basis for claiming deduction of expenses at the rate of 80% has been furnished by the Assessee. No collaborative and supporting documents were provided by the Assessee to prove that the expenses incurred were ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 unlawful and have been incurred for the purpose of business of the Assessee. Mere statement by the Assessee that the expenses claimed were as per law did not discharge the Assessee from proving nature and legality of such expenses and that the same allowable as per the provisions of the Act such as Section 30 to 36, Section 37 and Section 40A(3). The Assessee had also failed to prove the nature of expenses and the identity of payee in response to notices issued by the investigation wing and by the Assessing Officer. Vide reply dated 30.05.2016, the Assessee submitted a cash flow statement incorporating the cash receipts and cash payments therein. Though the Assessee had stated that the cash flow was as per the seized records, on perusal of said cash flow statement, the Assessing Officer found that there was no linkage of entries in the cash flow statement with the seized documents. Thus, the transactions appearing in seized documents remained unexplained. The Assessee is seeking deduction for expenses without any verification.
In rejoinder, the Learned Authorised Representative for Assessee submitted that the contention of the Revenue that entire cash receipts should be considered as ‘income’ of the Assessee is contrary to the judicial precedents considered by the CIT(A) while granting relief to the Assessee. He reiterated that only a reasonable percentage of such receipts, which is 20% in the present case, could be considered as income. The CIT(A) has estimated income component of cash receipts at 45%, which is highly excessive taking into consideration, the nature of business, the location of development at Virar, District Palghar and the evidences of cash expenditure having been incurred discovered during the course of ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 search action. During the assessment proceedings, all the entries found in the seized material were reconciled with the cash flow statement, however, the Assessing Officer/CIT(A) proceeded to make the addition on the basis of cash flow statement prepared by the Assessing Officer.
We have considered the rival submissions and perused the material on record.
17. We note that the Assessing Officer had accepted the fact that the expenses were incurred in cash but had denied deduction for the same by holding that the Assessee has failed to show that the provisions of Section 30 to 36, 37 and/or 40A(3) of the Act have been complied with. The Assessing Officer had, in paragraph 8.25 of the Assessment Order, distinguished the decisions cited by the Assessee during the assessment proceedings holding that in the cases cited, the income was computed on percentage basis or ratio basis whereas in present case the unaccounted sale and expenditure has been worked out based on the seized documents. However, in our view, given the facts and circumstances of the case, it cannot be said that in the income of the Appellant has not been estimated. The income of the Appellant has been estimated by the Assessing Officer after taking into account the information/material gathered. In our view, where income has estimated on the basis of information/material gathered, as is the situation in the present case, an Assessee cannot be deleted to a possession worse than in a case where income has estimated on ad-hoc basis, say in a case where an Assessee chooses not to furnish relevant document/details or not to participate in the assessment proceedings, and the estimate is made on ad-hoc basis 11
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 any supporting information/details. A perusal of the decision relied upon by the Assessee during the course of hearing (placed at pages 15 to 38 of the Compendium of Cases) shows that estimation of profits as ad-hoc percentage of the cash receipts has been accepted. In the case of Bhalchandra Trading Pvt. Ltd. Vs. DCIT: [ITA No. 2977/Mum/2017, dated 25.02.2021] and ACIT Vs. Om Constructions [ITA No. 6234/Mum/2012, dated 09.01.2015] 12% of the cash receipts from sale of flats was accepted as profit element liable to tax. Similarly, in ACIT Vs. M/s Sahakar Developers [ITA No. 6235/Mum/2012, dated 30.01.2017] 17% of the cash receipts were accepted as profit element liable to tax. In the aforesaid cases the assessee was not required to establish that the provisions of Section 30 to 36, Section 37 and/or Section 40A(3) were complied with. In our view, in the present case the Assessee is on a better footing as the profits have been estimated on the basis of documents/information which indicates that expenses were incurred by the Assessee. However, while estimating taxable profits the fact that an assessee has not recorded all transactions in the books of accounts and has not maintained proper documents supporting incurring of expenditure can surely be taken into consideration and a higher profit rate could be adopted keeping in view the facts and circumstances of the case, and the nature of income/business of assessee. In this regard, we note that the CIT(A) has accepted the contention of the Assessee that only profit element embedded in cash receipts can be brought to tax by placing reliance on the decisions of the Hon’ble High Courts in the case of Lalchand Gopaldas Vs. CIT: 48 ITR 324 (All), DCIT Vs. Panna Corporation: Tax Appeal 323 & 325 of 2000 (16.06.2012)(Gujarat High Court) and CIT Vs. P D Abrahm : 20 Taxmann.com 823 (Ker). The CIT(A)
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 has also taken into consideration the abovesaid decisions of Mumbai Bench of the Tribunal in the case of Bhalchandra Trading Pvt. Ltd. (supra), Om Constructions (supra) and Sahakar Developers (supra). We have perused the aforesaid judgments/decisions wherein it has been held that only profit element embedded in cash/on-money receipts could be brought to tax in the hands of the Assessee. Therefore, we find no infirmity in the order passed by the CIT(A) to the extent that the CIT(A) holds that only profit element embedded in the cash receipts is liable to be taxed in the hands of the Assessee. In view of the aforesaid, we reject the contention of the Revenue that entire cash receipts should be brought to tax.
18. This takes us to the issue of computation of profit element. The CIT(A) has concluded that 45% of the on-money receipts are the profit element liable to tax in the hands of the Assessee. The relevant extract of the decision of CIT(A) reads as under:
“33. In the present case, the appellant contends that the profit element out of the 'on-money should be computed by applying the rate of 20%. However, no reasonable basis for adopting this figure of 20% has been given by the appellant. The appellant has attempted to justify this percentage on the basis of net profit percentage declared by it in the Income Tax Returns filed for the A.Y. 2009-10 to 2015-16 which ranges between 8.48% to 25.75%. The huge unaccounted 'on-money' uncovered during search is sufficient evidence that the Net Profit being returned was grossly suppressed. Another basis given by the appellant for adopting the rate of 20% is the profit rate on the basis of seized documents, in the case of M/s Jupiter Constructions. However, the said argument is also incorrect because in the case of M/s Jupiter Constructions (sister concerns of the appellant), my predecessor has finally estimated the income @ 46% of unaccounted receipts. Therefore,
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 the profit rate of 20% as argued by the appellant cannot be applied.
In the present case, the total cash receipts for the period A.Y. 2009-10 to 2015- 16 as discussed earlier in this order, after modification as per the remand report comes to Rs. 36,20,77,167/. The cash expenses on stamp duty and registration charges comes to Rs. 4,06,84,117/- Other cash expenses as quantified earlier in this order as per modifications suggested in the remand report comes to Rs. 16,11,23,822/-. Thus, the profit on cash transactions comes to Rs. 16,02,69,228/- (36,20,77,167 - 4,06,84,117 - 16,11,23,822). Thus, the net profit ratio on cash transactions, comes to 44.27%.So, this profit ratio can be an indication to be used for estimating the income embedded in the 'on-money' received by the appellant. It may here be mentioned that the appellant has claimed that some of the expenses recorded in the seized documents pertain to other group concerns, in that situation, the net profit of the appellant should be higher that 44.27% as computed above. It may also be mentioned that in the case of sister concern of the appellant namely M/s Jupiter Constructions, my predecessor has finally estimated the income @ 46% of unaccounted receipts. It is a well settled legal principle that the net profit rate estimated in the sister concerns, engaged in the similar business, can also be taken as basis for estimating the net profit rate in other group concerns. Therefore, keeping in view the facts of the case in entirety and the proposition laid down by various High Courts as discussed above, the Assessing Officer is directed to take 45% of the "on- money as the appellant's income for each year, rather than treating the entire amount (as reduced by the stamp duty and registration charges) as suppressed income.” (Emphasis Supplied)
On perusal of the above we can see, that while estimating the profit at the rate of 45% the CIT(A) has taken into account the Stamp Duty & Registration Charges as well as Other Expenses computed on the basis of ceased material by the Assessing Officer and which have been accepted to have been incurred in cash. However, the CIT(A) has not considered the expenses incurred in cash for ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 purchase of land. We note that while estimating the amount of cash receipts from the Promoters the payments made in cash for purchase of land have been taken into account and deficit of INR 1,75,13,115/- for the Assessment Year 2009-10 has been considered as cash receipt [as noted by the CIT(A) in paragraph 7 of the order and computed in paragraph 10.4 of the Assessment Order]. In our view, since payments in cash for purchase of land were not taken into consideration by the CIT(A), the aforesaid deficit estimated for the Assessment Year 2009-10 and included in cash receipts on the assumption that such payment towards purchase of land were made in cash should also be excluded from cash receipts. The exclusion of the aforesaid amount of INR 1,75,13,115/- from cash receipts results in reduction of net profit ratio as computed by CIT(A) to around 39.43%. During the hearing it was contended on behalf of the Assessee that the Assessee was engaged in construction of housing for low income group at Virar, Palghar. The actual expenses incurred in cash were more than those recorded in material ceased. The Assessee had disclosed healthy net profits in the range of 8.48% to 25.75% for the Assessment Year 2009-10 to 2015-16. On the basis of the aforesaid, it was submitted by the Learned Authorised Representative for Assessee that the net profit rate of 20% be adopted. We note that the CIT(A) had stated that the profits declared by the Assessee range from 8.48% to 25.75% for Assessment Year 2009-10 to Assessment Year 2015-16. Thus, for the Assessment Year 2009-10 to 2015-16, the maximum net profit rate declared by the Assessee was 25.75%. The average of the profit for the Assessment Year 2009-10 to 2015-16 comes to around 14.15% whereas it has been contended on behalf of the ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 Assessee that rate of 20% be adopted for determining the profit element embedded in cash receipts. Keeping in view the facts and circumstances of the case, and to meet the ends of justice we hold that 22.5% of on-money receipts would be fair estimate of profit element which should be brought to tax in the hands of the Assessee.
The next issue that arises for consideration is the year in which 22.5% of on-money receipts should be brought to tax.
The Learned Authorised Representative for the Appellant submitted that on-money receipts were in the nature of advance and therefore, the same should be brought to tax as per the regular method of accounting followed by the Assessee and not in the year of receipt. The Assessee has been consistently following completed contract method of accounting and therefore, all the advances received by the Assessee are reflected as liability in the balance sheet till the completion of the project. When the project is completed the advance is recognized as income and offered to tax. Accordingly, the advance received by the Assessee should be taxed in the year in which the project is completed.
Per contra, the Ld. Departmental Representative relied upon the order passed by the Assessing Officer and the CIT(A), and submitted that the receipt of cash was an independent transaction complete in itself. Since the aforesaid transaction is not recorded in the books of accounts, the on-money receipts cannot be brought to tax as per the method of accounting followed by the Assessee and must be brought to tax in the year of receipt.
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 23. In rejoinder, the Ld. Authorised Representative for the Assessee submitted that advance received has been offered the tax as and when the project work was completed. Providing clarification in relation to the aforesaid, the Ld. Authorised Representative for the Assessee submitted that out of cash receipts pertaining to the Assessment Year 2012-13 amount of INR 2,11,71,000/- is yet to be offered to tax and furnished the following details vide letter dated 21.03.2023: Assessment Amount Amount Refunded Amount Offered Balance Year Received (INR) to Tax Amount to (INR) (INR) be offered to Tax (INR) A.Y.2012-13 8,78,79,950 75,21,750 4,86,68,450 1,90,71,000 (AY 2014-15) (2019-20) 1,26,18,750 (AY 2015-16) A.Y.2013-14 5,66,63,310 - 5,45,63,310 21,00,000 (2019-20) A.Y.2014-15 4,97,51,024 - 25,08,000 - (2015-16) 28,00,000 (2017-18) 4,44,43,024 (2019-20) A.Y.2015-16 1,64,62,179 - 10,53,000 - (2017-18) 1,54,09,179 (2019-20) Total 2,01,40,500 16,94,44,963 2,11,71,000 24. We have considered the rival submissions and perused the material on record pertaining to this issue. We note that the paragraph 7.26 of the Assessment Order, the Assessing Officer has rejected the ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 contentions raised by the Assessee holding. Before the CIT(A) the it was contended on behalf of Assessee that on-money receipts were offered to tax in the subsequent year. The CIT(A) rejected has observed that the Assessee has not substantiated that on-money receipts were offered to tax in subsequent assessment years. However, in appellate proceedings before us the Ld. Authorised Representative for the Assessee reiterated the submission that Assessee has offered the on-money receipts to tax in subsequent years and has provided the above details. The on-money receipts offered to tax by the Assessee in the subsequent assessment years have been accepted by the Revenue. It is settled legal position that same income cannot be taxed twice. We have allowed already held that only the profit element consisting of 22.5% of on-money recipes can be brought to tax (as opposed to the entire on-money receipts as contended by the Revenue). Accordingly, we restrict the addition under consideration for the Assessment Year 2012-13 to 22.5% of INR 1,90,71,000/- being the balance amount of on- money receipts not offered to tax by the Assessee till the date and the same shall be taxed in the year of sale of flats booked by the Assessee.
In view of the above, Ground No. 1 to 3 raised by the Assessee are partly allowed, and Ground No. 1 and 2 raised by the Revenue are dismissed.
Ground No.3, 4 & 5 of Appeal by Revenue 26. Ground No. 3 to 5 raised by the Revenue are directed against the order of CIT(A) granting benefit of deduction under Section 80IB(10) of the Act in respect of on-money receipts pertaining to the eligible projects brought to tax in the hands of the Assessee. 18
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16
We have considered the rival submissions and perused the material on record. We note that the CIT(A) has granted benefit of Section 80IB(10) of the Act to the Assessee observing that the Assessee had claimed deduction under Section 80IB of the Act in the original return of income. It is admitted position that on-money/cash receipts pertain to project eligible for deduction under Section 80IB(10) of the Act. The additional income on account of on-money receipts enhances the business income derived by the Assessee from the eligible projects and therefore the Assessee is entitled to claim deduction under Section 80IB(10) of the Act in respect of the same. While arriving at the aforesaid conclusion, the CIT(A) has relied upon a number of decisions/judgments including judgment of the Hon’ble Bombay High Court in the case of CIT vs. Sheth Developers Private Limited: [2012] 254 CTR 127 (Bombay)[27-07- 2012] wherein it was held that while computing undisclosed income for block period as per Section 69A read with Section 158BB of the Act the assessee was entitled to claim deduction from its income under section 80-IB of the Act. The aforesaid judgment was relied upon by the Mumbai Bench of the Tribunal while allowing deduction under Section 80IB(10) of the Act to the sister concern of the Assessee in the identical facts and circumstances in the case of Jupiter Construction vs. ACIT, Circle-3, Thane [ITA No. 6620- 6622/Mum/2019, dated 12.11.2021]
“6. We have considered rival submissions in the light of decisions relied upon and perused materials on record. Undisputedly, in course of search and seizure operation conducted in case of some other assessee incriminating material was found and seized indicating that the assessee had received on-money in cash towards sale consideration of ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 the project. The receipt of on-money has also been accepted by the assessee as would be evident from additional income offered by the assessee in the returns of income filed in pursuance to notices issued under 153C of the Act. The issue arising for consideration is, whether against the receipt of such on-money, the assessee can claim deduction under section 80IB(10) of the Act. The departmental authorities have not disputed the fact that the receipt of on-money is in respect of the very same project from which the assessee has not only declared income in the original return of income but has also claimed deduction under section 80IB(10) of the Act. It is also a fact on record that assessee’s claim of deduction under section 80IB(10) in respect of the very same project has been allowed in the original assessment proceedings. Therefore, the deduction claimed under section 80IB(10) of the Act in the returns filed under section 153C of the Act is in continuation to the claim made in the original returns of income. Therefore, in our considered opinion, the prohibitory conditions of section 80A(5) would not be applicable. In any case of the matter, the revenue does not dispute the fact that the assessee is otherwise eligible to claim deduction under section 80IB(10) of the Act in respect of the profit earned from the subject project. The additional income offered by the assessee because of receipt of on-money, undoubtedly, forms part of the profit earned from the subject housing project. Therefore, merely because the additional income is offered in a search related assessment proceeding under section 153C of the Act, assessee’s claim of deduction cannot be disallowed. This view of ours is fortified by the decision of the co-ordinate bench in case of Malpani Estates vs ACIT (supra). The co-ordinate bench, while considering more or less identical issue of claim of deduction under section 80IB(10) in respect of additional income offered because of on-money in an assessment proceeding under section 153A of the Act, has held as under:
“10. In the present case, it is not in dispute that………………
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 xx xx
In-fact, the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra) was considering the claim of deduction u/s 80IB(10) of the Act in relation to the undisclosed income declared consequent to the search action. In the case before the Hon'ble High Court, it was factually emerging that undisclosed income was earned by the assessee in the course of carrying on his business activity of a 'builder' and the same was accepted by the Department, but the claim of the deduction u/s 80IB(10) was denied in relation to such income. However, the claim was upheld by the Hon'ble Bombay High Court. In the present case, factually, there is no material to negate the assertion of the assessee, which are borne out of the material on record, that the additional income in question has been received in the course of carrying on its business activity of developing the housing project, The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits. Therefore, in terms of the parity of reasoning laid down by the Hon'ble Bombay High Court in the case ofSheth Developers (P) Lid. (supra), the claim of the assessee is justified.
In-fact, once it is factually explicit that the additional income in question is derived from the housing project, The Crest' at Pimple Saudagar, Pune, which is eligible for section 801B(10) benefits, such an income merely goes to enhance the 'business income1 derived from the eligible housing project and shall be entitled for section 80IB(10) benefits, even as per the ratio of the judgment of the Hon'ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. (supra], 19. In the result, on the basis of the aforesaid legal position and the material and evidence on record, assessee is eligible for deduction u/s 80IB(10) of the Act in relation to impugned additional income offered in a statement u/s 132(4) of the Act in the course of search and subsequently declared in the return filed in response to notice u/s 153A(l)(a) of the Act. In the result, appeal of the ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 assessee for assessment year 2008-09 is allowed.”
As can be seen, the co-ordinate bench, after taking note of the ratio laid down by the Hon’ble Supreme Court in case of Sun Engineering Works (P) Ltd (supra) has held that since the additional income offered by the assessee goes to enhance the business income derived from the eligible housing project, the assessee would be entitled for deduction under section 80IB(10) of the Act. Thus, in our considered opinion, the view expressed by the co-ordinate bench in the case cited supra clinches the issue in favour of the assessee. Therefore, respectfully, following the aforesaid decision of the co-ordinate bench, we allow assessee’s claim of deduction under section 80IB(10) of the Act. Grounds are allowed.”
The CIT(A) has followed the above decision of the Tribunal while holding that the Assessee would be entitled to claim deduction under Section 80IB(10) of the Act in case of additional income arising from on-money receipts pertain to eligible projects provided the Assessee had claimed deduction under Section 80IB(10) of the Act in the original return of income and had not made claim for deduction under Section 80IB(10) of the Act for the first time for the relevant assessment year in the return of income filed response to notice issued under Section 153A of the Act.
In view of the above, we do not find any infirmity in the order passed by CIT(A) on this issue. Accordingly, Ground No. 3 to 5 raised by the Revenue in the appeal are dismissed.
Both the sides had agreed that our findings /adjudication in respect of issues raised in cross appeals for the Assessment Year 2012-13 shall apply mutatis mutandis to the grounds/issues raised in the appeals pertaining to the other assessment years. Accordingly, we
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 proceed to decide the other appeals preferred by Assessee and Revenue
Appeal of the Revenue for the Assessment Years 2010-11, 2013-14 and 2014-15 31. Ground No. 1 to 5 raised in these three appeals are identical to the Ground No. 1 to 5 raised in appeal for the Assessment Year 2012- 13. Since Ground No. 1 to 5 raised by the Revenue in appeal for the Assessment Year 2012-13 have been dismissed, Ground No. 1 to 5 raised in all the three appeals raised by the Revenue are also dismissed by adopting the same reasoning.
Appeal of the Assessee for the Assessment Year 2013-14
Ground No. 1 to 3 raised by the Assessee in appeal for the Assessment Year 2013-14 are identical to Ground No. 1 to 3 raised in appeal for the Assessment Year 2012-13. Ground No. 1 to 3 raised by the Assessee in appeal for the Assessment Year 2012-13 have been restricted the addition to 22.5% of on-money receipts pertaining to the Assessment Year 2012-13 which has not been offered to tax till date. Accordingly, Ground No. 1 to 3 raised by the Assessee in appeal for the Assessment Year 2013-14 are also partly allowed. Accordingly, the addition under consideration for the Assessment Year 2013-14 is restricted to 22.5% of INR 21,00,000/- being the balance amount of on-money receipts not offered to tax by the Assessee till date.
Ground No. 4 raised by the Assessee in the present appeal is directed against the order of CIT(A) rejecting the claim of deduction under Section 80IB of the Act in respect of additional income
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 arising out of on-money receipts pertaining to the eligible project on the ground that the Assessee had failed to make the claim for deduction in the original return of income filed under Section 139 of the Act and had made the claim for deduction under Section 80IB(10) of the Act only in the return of income filed in response to Section 153A of the Act. During the course of hearing, the Ld. Authorised Representative for the Assessee, under instruction stated that the Assessee does not wish to press this ground of appeal
. Accordingly, Ground No. 4 raised by the Assessee is dismissed as being not pressed. Appeal of the Assessee for the Assessment Year 2014-15 and 2015- 16
34. Ground No. 1 and 2 raised in the appeals for the Assessment Years 2014-15 and 2015-16 are identical to Ground No. 2 and 3 raised in appeal for the Assessment Year 2012-13. Accordingly, we restrict the addition for the Assessment Year 2014-15 and 2015-16 to 22.5% of the balance amount of on-money receipts not offered to tax by the Assessee till date. Since for the Assessment Years 2014- 15 and 2015-16, balance amount of on-money receipts not offered to tax by the Assessee till date is ‘Nil’, the amount of addition to be sustained in the hands of the Assessee gets reduced to ‘Nil’ in view of the reasoning given while partly allowing identical grounds raised in appeal for the Assessment Year 2012-13. Accordingly, Ground No. 1 and 2 raised by the Assessee in appeal for the Assessment Year 2014-15 and 2015-16 are partly allowed.
35. Thus, in result, (a) the appeals preferred by the Revenue for the Assessment Year 2010-11 ( Assessment Year 2012-13 (ITA No. 2220/Mum/2022), Assessment Year 2013- 24
ITA Nos. 1936-1939/Mum/2022 & AY 2010-11, AY 2012-13 to 2015-16 14 (ITA No. 2221/Mum/2022), and Assessment Year 2014-15 (ITA No. 2222/Mum/2022) are dismissed, whereas (b) the appeals preferred by the Assessee Assessment Years 2012-13 to 2015-16 (ITA No. 1936 to 1339/Mum/2022) are partly allowed.
Order pronounced on 26.04.2023.