JT.COMMISSIONER OF INCOME TAX (OSD), CENTRAL CIRCLE 4(1), MUMBAI, MUMBAI vs. RUNWAL RESIDENCY PVT LTD, MUMBAI

Since all the issues involved in these appeals and cross-objections are common and identical, they have been clubbed, heard together, and a consolidated order is being passed. Firstly, we shall take AY 2023-24 as the lead year.

Further, certain incriminating documents/materials were found and seized by the Department during the course of search proceedings, pursuant to which the AO made various additions to the returned income of the assessee company.

Ld. AR submitted that a search and seizure operation was conducted under Section 132 of the Act at the office premises of the Runwal Group on 06.10.2023. During the search, a blue-coloured diary was found and seized from the cabin of Mrs. Lucy Roychoudhary, an employee of the

It was further submitted that the impugned diary and loose papers relied upon by the AO are in the nature of mere dumb documents and, in the absence of any independent and corroborative material evidence,

Furthermore, it was submitted that the AO has failed to bring on record any corroborative material whatsoever to demonstrate that the assessee had, in fact, received any amount in cash over and above the agreement value from any of its customers. Admittedly, during the course of search proceedings, no incriminating cash, bullion, jewellery or any other unaccounted asset was found or seized from the premises of the assessee. Further, no parallel books of account, unaccounted cash ledger, undisclosed bank account or any other incriminating financial trail evidencing receipt of alleged "on-money" has been discovered by the Department.

It was also brought to our notice that not a single purchaser has confirmed having paid any amount over and above the agreement value to the assessee company. In fact, during the course of assessment proceedings, the assessee had furnished sample confirmations from various flat purchasers categorically confirming that no payment over and above the registered agreement value was ever made to the assessee. The AO has neither disproved the said confirmations nor conducted any meaningful enquiry from the concerned purchasers. Thus, the entire addition has been made merely on assumptions, presumptions and conjectures without any legally sustainable evidence.

In support of the aforesaid contention, the assessee relied upon various judicial precedents and one such judicial precedent squarely applicable to the facts of the present case is the decision of the Hon'ble Jurisdictional Bombay High Court in the case of CIT v. Hariram Bhambhani (ITA No. 313 of 2013), wherein the Hon'ble Court categorically held that even where it is alleged that the assessee had received premium or "on-money" on booking of flats, the entire amount of such alleged receipts cannot be treated as undisclosed income of the assessee and only the net profit element embedded in such unaccounted sales/receipts could be subjected to tax by applying a reasonable profit rate.

The aforesaid detailed submissions of the assessee were duly considered by the Learned CIT(A). Upon appreciation of the facts of the case and after placing reliance upon various judicial precedents cited by

While adjudicating the issue, the Learned CIT(A) took note of the settled legal position that unaccounted receipts or "on-money" collections partake the character of gross turnover and not income per se, and therefore only the profit component embedded therein is liable to tax. In support of the said proposition, reliance was placed upon various judicial precedents cited by the assessee, inter alia, CIT v. President Industries [258 ITR 654 (Guj.)], CIT v. Hariram Bhambhani (Bombay High Court) and Guruprerna Enterprises relying upon Abhishek Corporation v. DCIT [63 TTJ (Ahd) 651], wherein it has been consistently held that the entire "on- money" receipts cannot be assessed as undisclosed income and only the net profit element embedded in such receipts can be subjected to tax.

The Learned CIT(A) further observed that the definition of "income" under Section 2(24) of the Act contemplates taxation only of profits and gains and not gross receipts. Accordingly, after considering the nature of the assessee's business as a real estate developer, prevailing industry

Accordingly, while partly allowing the appeal of the assessee, the Learned CIT(A) directed the Learned AO to restrict the addition to 15% of the alleged "on-money" receipts and delete the balance addition of 85% thereof.

The Ld. AR also brought to our notice the decision of the Coordinate Bench of the ITAT in the case of the assessee's sister concern, namely Horizon Projects Private Limited, vide its order dated 20.04.2026, wherein, while adjudicating an identical issue relating to alleged "on- money" receipts, the addition was restricted to 8% of such receipts after considering the settled legal position and placing reliance upon various judicial precedents. The relevant findings and ratio laid down by the Coordinate Bench are stated to be squarely applicable to the facts of the present case.

The Coordinate Bench of the ITAT held that although alleged "on- money" receipts in the real estate sector may constitute unaccounted business receipts, the entire gross receipts cannot be brought to tax as

Accordingly, it was held that only the profit element embedded in such receipts could be subjected to tax on a fair and reasonable basis. In support of the aforesaid proposition, reliance was placed upon several judicial precedents including CIT v. President Industries (258 ITR 654) (Guj.), Guruprerna Enterprises following the ratio of Abhishek Corporation v. DCIT, ITO v. Anand Builders and Hema Haresh Mehta v. DCIT, wherein it has been consistently held that only the net profit component embedded in the alleged "on-money" receipts is liable to tax and not the gross receipts themselves.

Furthermore, the Coordinate Bench of the Tribunal held that the estimation of profit at 15% sustained by the Learned CIT(A) was excessive and devoid of any specific empirical or comparative basis. Consequently, the Coordinate Bench of ITAT restricted the addition of 8% of the alleged “on-money” receipts and rejected the revenue’s appeal for taxation of entire on-money receipts. The operative portion of the same is reproduced herein below: "Tested on the aforesaid principles, we are unable to persuade ourselves to accept the Revenue's contention that the entire gross on-money receipts deserve to be taxed as income. That approach ignores the basic distinction between receipt and income. At the same time, we are also not inclined to accept the assessee's plea for complete deletion, because the seized material and statements, as concurrently appreciated by the authorities below, do point towards existence of unaccounted receipts in some transactions, and the learned CIT(A) was justified in not effacing the addition in toto. The only real question then is the appropriate rate at which the income embedded in such 15

The ratio of the above decision was also followed in the case of another group concern, M/s Runwal Enterprise Limited (ITA Nos. 8931 to 8935/Mum/2025), vide order dated 13.05.2026, wherein, in para 21, the Coordinate Bench of the ITAT directed the AO to compute income @ 8% of the gross on-money receipts. A copy of the said order is enclosed herewith.

Thus, on a conjoint reading of the findings of the Learned CIT(A) in the assessee's own case and the subsequent decisions of the Coordinate Bench of the ITAT in the cases of the assessee's sister concerns, it is evident that the settled legal position is that the entire alleged "on-money" receipts cannot be taxed in their entirety and only the profit element embedded therein can be brought to tax on a reasonable basis. While the Ld. CIT(A) had restricted the addition to 15% of the alleged receipts, the Coordinate Bench of the ITAT, on identical facts and circumstances, has further restricted the addition to 8% of such receipts.

Therefore, considering the totality of the facts and circumstances and keeping in view the decisions of the Coordinate Bench of the ITAT in the

In respect of the said addition, it was specifically contended by the Ld. AR during the course of first appellate proceedings that the additions made on account of alleged "on-money" receipts reflected in the Sales Confirmation Sheets (SCS) and Inter Office Memos (IOM) were made solely upon the statements recorded from certain employees of the group, and later these statements were retracted.

Furthermore, the assessee contended that the AO had made substantial additions towards alleged "on-money" receipts primarily on the basis of the diary found and seized from the possession of Mrs. Lucy Roy Choudhary, treating the said diary as the comprehensive and conclusive record of all unaccounted transactions pertaining to the appellant group. It was specifically submitted that several transactions referred to in the statements recorded during the course of search proceedings were also found reflected in the seized diary, albeit with certain variations in the amounts recorded therein, thereby clearly demonstrating that the Department itself had accepted and relied upon the said diary as the sole and exhaustive repository of the alleged unaccounted cash transactions. In such circumstances, once the seized diary had been accepted by the Department as embodying the entirety of the alleged unaccounted cash

The Learned CIT(A), after considering the submissions and material available on record, held that the additions made by the Assessing Officer on account of alleged "on-money" receipts were not sustainable in law. The AO had primarily relied upon the statements of Shreyas Khare and Chetan Chepurwar, wherein it was alleged that the "Discount" field in the Sales Confirmation Sheets (SCS) and the difference between the prescribed base rate in the Internal Office Memo (IOM) and the actual sale consideration represented unaccounted cash receipts received by the appellant on the sale of flats/commercial units. However, the assessee contended that both the statements stood retracted and that no independent corroborative evidence was found during the course of search to substantiate the allegations of cash receipts.

The CIT(A) observed that certain entries appearing in the SCS/IOM corresponded with entries recorded in the blue-coloured diary seized from Mrs. Lucy Roy choudhary and, accordingly, the AO had already made separate additions on the basis of such seized material while granting relief for overlapping entries. It was further submitted that the addition of 15%

The AO had himself treated the seized blue diary as the complete and accurate record of the appellant group's unaccounted transactions and, therefore, could not simultaneously allege additional unaccounted receipts outside the diary merely on the basis of retracted statements.

Relying upon various judicial precedents and CBDT Circular F. No. 286/2/2003-IT (Inv.), the CIT(A) held that confessional statements recorded during search proceedings, in the absence of corroborative evidence, do not have independent evidentiary value and cannot by themselves justify additions in search assessments. Accordingly, since the alleged additions were based merely on retracted and unsubstantiated statements without any independent incriminating material, the balance additions made by the AO on account of alleged "on-money" receipts were deleted.

Thus, in view of the aforesaid facts and findings of the Learned CIT(A), it was submitted that once the alleged "on-money" transactions have already been identified, quantified, and brought to tax on the basis of the incriminating material in the form of the seized blue-coloured diary, duly corroborated by digital evidence and other supporting materials, no

Thus, considering the totality of the facts as discussed above, and upon perusing the material placed on record and the judgments cited, we are of the view that the Ld. CIT(A) has passed a well-reasoned order on this issue which requires no interference.

Thus these grounds raised by the assessee stands partly allowed. And the Grounds Nos. 1 to 10 raised by the Revenue stands dismissed.

In this regard, it was submitted by the Ld. AR that during the course of assessment as well as appellate proceedings, the assessee had furnished extensive documentary evidence to establish the genuineness of the impugned expenditure, including Quality Certificates, Health & Safety and Labour Compliance Certificates, abstract sheets certifying quantities and amounts, invoices, work orders, challans, reconciliation statements,

The Learned CIT(A), after examining the assessment order and documentary evidence, held that the disallowance made under Section 37(1) and the consequential reduction in WIP were based solely on the GST findings against the subcontractor, M/s. Jaatvedas Construction Company Pvt. Ltd. (JCC), without any independent inquiry establishing bogus expenditure in the hands of the assessee. The CIT(A) observed that the assessee had furnished sufficient documentary evidence proving the genuineness of the transactions, while the AO failed to bring any material on record to show that the expenses were fictitious or represented accommodation entries.

It was further held by the Ld. CIT(A) that the alleged GST defaults or fake ITC availed by JCC could not automatically justify disallowance in

However, considering the GST findings and surrounding circumstances, the CIT(A), relying upon judicial precedents including the decision in the case of Middle Earth Enterprises, adopted a reasonable approach and restricted the disallowance to 8% of the sub-contract expenses, along with a corresponding restriction in the reduction of WIP, directing the AO to recompute the income accordingly.

The Coordinate Bench of the ITAT, vide order dated 20.04.2026 in the case of the assessee's sister concern, namely Horizon Projects Private Limited (supra), while adjudicating an identical issue pertaining to alleged bogus sub-contracting expenses paid to R. Senghani, deleted the impugned addition entirely on the ground that the assessee had duly substantiated the said expenditure by submitting various documentary evidences. The findings and ratio laid down by the Coordinate Bench of the ITAT are squarely applicable to the facts of the present case.

Therefore, considering the totality of the facts and circumstances and keeping in view the decisions of the Coordinate Bench of the ITAT in the cases of the assessee's sister concerns, and respectfully following the

In this regard, it was submitted that the impugned addition was made by the AO solely on the basis of the statement of Vijay Bhaskar Madne and certain images retrieved from WhatsApp messages, despite the fact that the said statement was subsequently retracted by the concerned person. The assessee further placed reliance on the provisions of Section 2(24) of the Act and submitted that the addition, if any, ought to be restricted only to the extent of the profit element embedded in the cash receipts and not on the gross amount of cash received. The Learned CIT(A), after duly considering the detailed submissions and evidence furnished by the assessee, adopted a reasonable approach and restricted the addition to 15%.

It was argued that Ld. CIT(A) was not justified in restricting the said receipts to the extent of 15% of the gross receipts. The entire addition is based merely on an Excel sheet maintained by the site supervisor and not on any other evidence of cash receipts or confirmation from any counterparty. The assessee had awarded the entire work on a contract basis with material. However, in order to control the quality of material used, the assessee purchased the material and supplied the same to the contractor,

Alternatively, it was also argued that the project to which this material pertains has not yet been completed and the entire cost of the material has been debited to Work-in-Progress (WIP). Since the assessee has not claimed any deduction in respect of the gross purchases, the recovery from the sale of scrap of such material should be reduced from the corresponding WIP and should not be added separately.

After having heard the parties at length and considering the material placed on record and the decisions being relied upon, we direct the AO to reduce the same from the WIP to which the corresponding purchases have been debited. Accordingly, the grounds raised by the assessee stands allowed and the grounds raised by the Revenue stands dismissed.

In this regard, it was submitted that the assessee, during the course of assessment as well as appellate proceedings, had duly furnished comprehensive documentary evidence including tax invoices, ledger accounts, bank statements, and the relevant agreements executed with Last Mile Enterprises Limited to substantiate the genuineness of the professional fees paid for availing bank loans. Further, it is a matter of fact

The Ld. CIT(A) deleted the disallowance made under Section 37(1) of the Act in respect of professional fees paid to Last Mile Enterprises Limited, along with the consequential adjustment made to Work-in- Progress (WIP), after observing that the assessee had duly established the genuineness of the transaction through agreements, invoices, ledger accounts, bank statements, and proof of TDS deduction. The Learned CIT(A) further noted that the assessee had paid professional fees at the rate of 3% of the capital raised for availing financial advisory services and had obtained borrowings from IndusInd Bank during the relevant financial year, as duly disclosed in Note 20 of the audited financial statements. It was further held that no incriminating material or cash trail was found during the course of search to suggest that the transactions were bogus or that any cash had been received back by the assessee.

The Ld. CIT(A) also observed that the addition was made solely on the basis of the uncorroborated statement of an employee, without any independent inquiry or supporting evidence, and therefore such statement lacked evidentiary value in the eyes of law. Accordingly, relying upon settled judicial precedents, the impugned additions were deleted.

Thus, in view of the aforesaid facts and upon carefully going through the findings of the Learned CIT(A), we uphold the well-reasoned findings of the Learned CIT(A) in deleting the additions.

In this regard, it was submitted that the said additions towards unexplained cash expenditure have been made solely on the basis of bald and uncorroborated statements of certain employees of the company, most of whom had subsequently retracted their statements. Further, during the course of first appellate proceedings, the assessee duly submitted before the Ld. CIT(A) that the alleged expenditure was sourced out of the very same funds which had already been brought to tax in the hands of the assessee as unexplained cash credits and, thus, taxing the same again would lead to double taxation. The Ld. CIT(A), after duly examining the material available on record, accepted the contention of the assessee and accordingly deleted the impugned addition.

The Coordinate Bench of the ITAT, vide order dated 20.04.2026 in the case of the assessee's sister concern, namely Horizon Projects Private 26

Thus, in view of the findings of the Ld. CIT(A) in the assessee's own case as well as the subsequent decisions of the Coordinate Bench of ITAT in the cases of the assessee's sister concerns, the settled position of law is that once the profit element on the alleged "on-money" receipts is taxed, no separate addition on account of corresponding unaccounted cash expenditure can survive.

Therefore, considering the totality of the facts and circumstances and keeping in view the decision of the Coordinate Bench of the ITAT in the

Thus these grounds raised by the Revenue stands dismissed.

In the result appeal filed by the assessee stands partly allowed and appeal filed by the Revenue stands dismissed.

As the facts and circumstances in these appeals are identical to those in ITA Nos. 9291/Mum/2025 (AY 2023-24) and ITA No. 784/Mum/2026 (AY 2023-24), the findings recorded in the aforesaid paragraphs shall apply mutatis mutandis to these appeals as well.