DCIT CEN 1(2), MUMBAI, MUMBAI vs. ROMA BUILDERS PRIVATE LIMITED, MUMBAI

Since the issues involved in both the appeals are common and belongs to the same assessee, therefore, they have been clubbed together, heard together, and a consolidated order is being passed for the sake of convenience and brevity.

First, we shall take up ITA No. 8964/Mum/2025.

The brief facts of the case are that the Assessee is a company engaged in the business of construction and development of properties in and around Thane and is part of the Hiranandani Group.

A search and survey action was conducted on 22.03.2022 under sections 132 and 133A of the Act by the DDIT (Investigation) on the Hiranandani Group (including the Assessee).

Thereafter, assessment proceedings under section 143(3) culminated in the assessment order dated 26.02.2023, wherein the AO made certain additions under sections 69A and 69C read with section 115BBE of the Act.

Aggrieved by the said assessment order, the Assessee preferred an appeal before the ld. CIT(A). After hearing both the parties, the ld. CIT(A) granted partial relief to the Assessee, against which the Department has filed the present appeal on the above-mentioned grounds.

Ground No. 1 raised by the Revenue relates to challenging the order of the ld. CIT(A) in allowing telescoping of Rs. 9,67,921 against the surrendered income of Rs. 90,00,000 without appreciating that the said on- money represented a distinct and independent source of undisclosed income not covered by the surrendered amount.

In this regard, we have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we noticed that, based on the statements of various employees and the promoter recorded during the search conducted on 22.03.2022 under section 132(4) of the Act, the AO alleged that the Assessee had received on-money for the sale of office units Nos. 405, 205 and 902 in the Chesterton Project, which was not disclosed in the books of account.

Accordingly, the AO applied the average rate of Rs. 16,969 per sq. ft. to derive the sale consideration and compared the same with the actual agreement value of the aforesaid units. The difference of Rs. 9,67,921 was, therefore, treated as undisclosed income under section 69A read with section 115BBE of the Act.

Consequently, while passing the appellate order, the ld. CIT(A) accepted the computation of on-money based on the average rate adopted by the AO.

The operative portion of the order of the ld. CIT(A), while dealing with the said ground, is contained in paragraphs 10.1.10 to 10.1.17 at page No. 27 of the appellate order and the same is reproduced hereinbelow:

After considering the said order, we found that the ld. CIT(A), while granting partial relief to the Assessee, referred to the statement of Mr. Surendra Hiranandani recorded under section 131(1A) on 14.06.2022, wherein Mr. Surendra, in order to buy peace and cooperate with the Department and to avoid protracted litigation, accepted that the source of generation of cash of Rs. 1.5 crore kept with his wife was on account of on- money received by the Assessee and offered the same for taxation.

Since the AO had already taxed the surrendered income of Rs. 90,00,000 in the year under appeal, the ld. CIT(A), relying upon the aforesaid statement, allowed telescoping of the addition of on-money of Rs. 9,67,921 against the surrendered income of Rs. 90,00,000.

After evaluating the facts, we noticed that the basic contention of the Department is that the addition of Rs. 9,67,921 represented a distinct and independent source of undisclosed income not covered by the surrendered income. However, in this regard, the ld. AR submitted that the AO, in paragraph 9.3 of the assessment order, has himself accepted that the surrendered income of Rs. 90,00,000 was on account of unaccounted on- money received by the Assessee. Moreover, there is no reference to any other alternative source for the cash found in the assessment order. Therefore, in our view, the ld. CIT(A) has rightly telescoped the surrendered unaccounted income on account of on-money with the assessed on-money of Rs. 9,67,921 relating to the specific instances of sale.

Even otherwise, the Department has sought to distinguish the source of the surrendered income of Rs. 90,00,000 by contending that, as per the statement of Mr. Surendra, the said cash represented on-money received in respect of flats, whereas the addition made by the AO pertains to office units. To clarify the said contention, the Assessee submitted that while proposing the addition in respect of office units, the AO himself had referred to the office units as flats. It is, therefore, evident that during the course of the proceedings, the expressions "office units" and "flats" were used loosely and interchangeably without any intended distinction. Accordingly, the said contention has no relevance in the facts of the present case.

After hearing both the parties at length, we found that the AO himself, in the assessment order, had added the amount of Rs. 90,00,000 as undisclosed income attributable to on-money received from the sale of built- up area. The Assessee, therefore, sought telescoping of the sustained addition of on-money against the income already assessed for the same previous year so as to avoid double taxation.

Considering these facts, the ld. CIT(A) found the request for telescoping to be legally sustainable since the Assessee had disclosed unaccounted income on account of on-money for the previous year 2020-21 and the AO himself had assessed on-money with regard to specific instances of sale for the same previous year. Accordingly, the ld. CIT(A) directed the AO to allow telescoping of the on-money receipts against the undisclosed income offered by Mr. Surendra for the relevant previous year.

Even otherwise, no new facts, circumstances, or documents have been placed on record by the ld. DR to controvert or rebut the well-reasoned findings recorded by the ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings recorded by the ld. CIT(A). Accordingly, we dismiss Ground No. 1 raised by the Revenue and uphold the order of the ld. CIT(A).

Ground No. 2 raised by the Revenue relates to challenging the order of the Ld. CIT(A) in deleting the addition of Rs. 90,00,000 made by the AO under Section 69A read with Section 115BBE of the Act.

We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we noticed that, in the post-search enquiries, Mr. Surendra had offered Rs. 1.5 crore to buy peace and avoid protracted litigation. Even though Mr. Surendra had offered the said amount in AY 2021-22 and AY 2022-23, while filing the return of income under Section 139 of the Act for AY 2022-23, the assessee had offered cash amounting to Rs. 1.5 crore as a revenue receipt.

Thus, while passing the assessment order, the AO rectified the above and taxed Rs. 90,00,000 in the year under appeal and Rs. 60,00,000 in AY 2022-23, based on the statement of Mr. Surendra. However, the AO made the said addition under Section 69A read with Section 115BBE of the Act.

After having considered the facts of the case, we find that it is a settled proposition of law that the deeming provisions of Section 69A can be invoked only when the assessee is found to be the owner of unexplained money, the same is not recorded in the books, and no satisfactory explanation regarding its nature and source is offered.

Keeping in view the above proposition, we proceed to decide this issue on merits. Before proceeding further, it is necessary to evaluate the order passed by the Ld. CIT(A) on the said issue. The operative portion of the same is contained in paragraphs 12 to 12.1.5 and the same is reproduced herein below:

After having considered the order passed by the Ld. CIT(A) and the pleas of the parties, we find that, in the present case, Mr. Surendra explained that the funds represented on-money receipts from the assessee's real estate business, and the AO himself, in paragraph 9.3 of the assessment order, accepted this explanation and did not record any dissatisfaction regarding the source. Therefore, once the nature and source of the receipts are explained as business receipts, Section 69A and the special rate of tax under Section 115BBE cannot be invoked. Reliance in this regard is placed on the following rulings:

Even the Ld. CIT(A) has taken the same view.

No new facts, circumstances, or documents have been placed on record by the Ld. DR to controvert or rebut the well-reasoned findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings so recorded by the Ld. CIT(A). Accordingly, we dismiss the ground raised by the Revenue and uphold the order of the Ld. CIT(A).

Ground Nos. 3 and 4 raised by the Revenue are interrelated and interconnected and relate to challenging the order of the Ld. CIT(A) in deleting the addition of Rs. 47,00,000 made under Section 69C read with Section 115BBE of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities.

As noted in the preceding paragraphs, with the intention of buying peace and avoiding protracted litigation, the assessee voluntarily disclosed an income of Rs. 15.22 crores as undisclosed expenses in the subsequent AY 2022-23. However, the AO made an addition of Rs. 47,00,000 (out of Rs. 15.22 crores) in the year under appeal, based on the statement of Mr. Mahesh Pamnani, an employee of the assessee, recorded under Section 132(4) of the Act on 22.03.2022, wherein Mr. Mahesh indicated that cash expenses of Rs.

It is important to mention here that Mr. Mahesh Pamnani subsequently retracted the said statement. Be that as it may, even otherwise, since the source of such cash expenditure was established to be on-money received by the assessee during the course of the search proceedings, the AO erred in making the addition of Rs. 47,00,000 under Section 69C read with Section 115BBE of the Act.

Before proceeding further to decide the merits of these grounds, it is necessary to evaluate the order of the Ld. CIT(A) dealing with the said issue. The operative portion of the order of the Ld. CIT(A) is contained in paragraphs 14 to 14.1.18 and the same is reproduced herein below:

After having considered the impugned order, we find that before the CIT(A), the assessee relied upon the statement of Mr. Dilip Kapadia, an employee of the assessee, recorded under Section 132(4) of the Act on 23.03.2022 (Question No. 38), wherein Mr. Dilip admitted the facts regarding acceptance of on-money by the assessee and the utilisation of such cash for liaison expenses relating to various project clearances through Mr.

The Ld. CIT(A), while adjudicating this ground, accepted the contention of the assessee and treated the aforesaid expenditure as undisclosed business expenditure.

Thus, we are of the view that where unaccounted expenditure has been incurred out of on-money receipts, the same cannot again be brought to tax under Section 69C of the Act, and consequently, the special rate of tax under Section 115BBE cannot be applied.

No new facts, circumstances, or documents have been placed on record by the Ld. DR to controvert or rebut the well-reasoned findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings so recorded by the Ld. CIT(A). Accordingly, we dismiss the grounds raised by the Revenue and uphold the order of the Ld. CIT(A).

In the result, appeal filed by the Department stands dismissed.