DCIT, CENTRAL CIRCLE-3(2), MUMBAI vs. EXCEL DEVELOPERS, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH: MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 1948/Mum/2025 (Assessment Year: 2018-19)

DCIT, Central Circle-3(2) Excel Developers Room NO 402, Kautilya vs. 304, Bhaveshwar Arcade Bhawan, BKC, Mumbai-400051, Ghatkopar (W), l B S Marg, Mumbai, Maharashtra, 400086 PAN: AACFE0445M (Appellant) (Respondent) For Assessee : Dr. K. Shivram a/w. Shri Rahul Hakani For Revenue : Shri Hemanshu Joshi, SR. DR Date of Hearing : 28.04.2026 Date of Pronouncement : 24.07.2026 O R D E R PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeal) 51, Mumbai [‘Ld. CIT(A)’], dated 23.01.2025, pertaining to Assessment Year (AY) 2018-19, wherein the Revenue has taken the following grounds of appeal: 1. "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer by rejecting the books of accounts under Section 143(3), despite the presence of significant discrepancies in revenue recognition, unaccounted cash transactions, and related party transaction." 2. "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer on the basis of the survey statement and corroborative evidence, ignoring the fact that the survey proceedings revealed suppressed income and unaccounted cash transactions. " 3. "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition for under valuation of sales under Section 43CA of the Income Tax Act, 1961, despite the fact that multiple flats were sold below the ready reckoner value, particularly to related parties, indicating possible receipt of unaccounted cash consideration". 4. "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in reducing the estimated profit rate from 15% to the lower amount declared by the assessee, without considering industry benchmarks and comparable cases, despite the AO's reasonable estimation based on prevailing real estate sector profit margins."

“6.1 During the course of survey proceedings, certain incriminating material were found and impounded, which were duly examined in the course of assessment proceedings coupled with the submissions made by the assessee from time to time. The discrepancies noticed in the books of accounts and the submissions made by the assessee are summarized hereunder: - “1. In the written submissions filed on 11.02.2021 and 01.03.2021, the assessee has made attempts to mislead that the survey was not on its entity and it was carried out on other concern M/s Aster Developers having identical partners.

Then, it was made aware of the fact that authorization u/s 133A of the Act was drawn in the name of M/s Excel Developers and it was duly shown and served on one of the partners Mr Virendra Maneklal Vora and he signed on the Authorization. 2. Impounded records were provided to the AR of the assessee with a request to furnish page-wise explanation to each and every page. In response it has replied very casually like just mentioned that it is a ledger or it is payment detail so on and so forth which shows that the assessee firm has not furnished any explanation as to how the transactions mentioned on the impounded records are reflected in the regular books of accounts and what is the tax implication of the same. 3. Merely filing a reply that the transaction is reflecting in the books of accounts would not suffice the requirement of 'explanation'. This factum has been brought to the notice of the assessee firm vide letter dated 12.03.2021 and it had been asked to furnish a revised page-wise explanation, elaborating each transaction as to how the transaction is accounted for in its books of accounts. In response, the assessee firm filed a letter on 19.03.2021 and had stated that the reply is attached as Annexure - A. Although it has been replied that the annexure is attached therewith, no ANNEXURE has been attached to the submissions. It had merely made a submission to claim that they filed the page- wise explanation. ETAX DEPAR 4. The assessee firm has not offered any income in respect of Building No. 7 (Excel Plaza) in any of the preceding years despite the fact that the construction of the project is completed long back. The assessee has accepted booking, substantial consideration was received and the agreement was made with the buyer and in some of the cases it was registered with the registration authorities. As such revenue was to be declared in the relevant years however the assessee has evaded the tax to be paid. 5. When in the survey action u/s 133 A all these aspects and the incriminating records confronted it has offered revenue in respect of the entire project in the year under consideration. 6. The total revenue shown in the year under consideration is Rs.38,00,59,338/- as against the opening stock of Rs.39,56,17,932/- (image reproduced in para 5 above). This is a unique case that after completion of survey, the inventory worth Rs.39,56,17,932/- has been shown as sales of Rs.38,00,59,338/-. On examination of the details filed it was found that such miracle has been made possible due to making sale of finished and high rise floors to the partners or their family members as if it was a distress sale at a convenient price. This aspect of sale of units to related parties is being discussed separately. 7. Therefore, it is clear the assessee has not offered the correct income and accordingly, it has been asked to justify the same. In response, it had not replied to the specific query and the reply revolved around the project only. No new submissions have been submitted by the assessee firm.

Flat No. Name of Ready Agreement Variation purchaser Recknor Value Value

903-904B 12261500 9800000 2461500 06.11.2 Mahendra J Parekh 503B Jenil Steel Pvt Ltd 6325500 4400000 1925500 16.03.2

603B Chitan P Thakkar 6325500 4400000 1925500 15.03.2

901-902B 9585500 7700000 g 1885500 06.11.2 Mahendra J Parekh 504B Jenil Steel Pvt Ltd 5790500 4027500 1763000 16.03.2

604B Chitan P Thakkar 5790500 4027500 1763000 15.03.2

501B Jenil Steel Pvt Ltd 4816500 3355000 1461500 16.03.2

601B VUB Engg Pvt Ltd 4816500 3355000 1461500 15.03.2

201/202B Rajan R Chhiber 9129000 7700000 1429000 06.11.2

502B Jenil Steel Pvt Ltd 4427500 3080000 1347500 16.03.2 602B VUB Engg Pvt Ltd 4427500 3080000 1347500 15.03.2 Fortans Steel Pvt 803-B 5037500 4117500 920000 17.01.2 Ltd

804 5037500 4117500 920000 17.01.2 Fortans Steel Pvt Ltd 802 4317500 3510000 807500 17.01.2 Fortans Steel Pvt Ltd 801 4191000 3442500 748500 17.01.2 Fortans Steel Pvt Ltd There are other instances of minor differences between the agreement value and market value, which have not been incorporated in the above table. Thus, it is clear that a number of flats have been sold at less than the market value. On being asked to explain the differences, it was stated by the assessee firm that section 43CA was not applicable as the section was introduced in Finance Act, 2016. It is true that the agreements were executed prior to the insertion of Section 43CA, but the assessee has not filed any evidences to explain the differences between the agreement value and market value and the circumstances entailed the assessee firm to make sales below the market value. All these agreements were executed at the very initial stage of the project and therefore, there is no chance of distress sale. Thus, it is construed that the asssessee has followed the common mode adopted by the real estate developers that the difference between the agreement value and market value was received in the mode of 'cash' by the assessee firm, which was not disclosed in the books of accounts. 1. Noteworthy to highlight the related party transactions made. Examination of the sales summary, it is noticed that the assessee firm had made sales to the related parties, who are the family members of the partners of the firm and the details are tabulated as under: -

Flat No. Name of Agreement Value Agreement Date Area purchaser 1201B-W Vibha Vora 29970000 23.07.2014 250.93

1301 Nemin Vora 29970000 23.07.2014 250.93 B-W 1401 Pruthvi 13050000 23.07.2014 109.85 Patel B-W 1403 Sagar P 16850000 23.07.2014 140.52 Patel B-W 1501 - Vibha Vora 23668500 01.07.2015 178.99 1502 It can be seen from the above tabular form that the assessee firm has sold the entire 12th, 13th and 14th floors to the family members of the partners of the assessee firm. No details have have been furnished by the assessee firm about the payments received from the above parties. Furthermore, it had sold 1001- 1004 B to M/s Jiya Sanbro Enterprises (250.93 sq.mtrs.) at a consideration of Rs.3,14,10,000/- in the same time line, but it had sold 1201B-W (250.93 sq.mtrs) to Ms Vibha Vora at a consideration of Rs.2,99,70,000/-. Thus, it is very clear that the assessee firm had made the sales to the related parties at a price lower than the sales made to other parties. 1. The above observations of accepting cash component over and above the agreement value are further strengthened with the material impounded during the course of survey action. In view of the clinching evidences impounded during the course of survey action, it becomes very clear that the assessee has indulged in acceptance of cash from various customers in lieu of sale of units, which was utilized in making the payments to the contractors in connection with the construction work and also in distribution amongst the partners without paying any tax.

6.2 In view of the above findings, it is summarized that the project ‘Excel Plaza’ has been completed long back and the assessee firm has not disclosed the ‘Sales’ in respect of this project despite the fact that a substantial portion was completed and also most of the units were booked and substantial advances were received. Thus risk and reward was shifted to a definite extent and accordingly the income was to be offered on percentage completion basis. However, with the intent of not paying tax and to claim unwarranted loss the assessee firm has intentionally concealed real income. 6.3 The profit offered by the assessee in respect of the entire project is Rs.1.41 cr only from the beginning to till the completion of the project. Evidences of cash receipts and cash payments are found during the course of survey action, which are were discussed above. This proves that the transactions in cash were executed in respect of project 'Excel Plaza'. Moreover, the profit offered by the assessee in respect of this project is very nominal and not in consonance with the profits offered by the real estate entities. 6.4 Therefore, the profit declared by the assessee firm in survey proceedings is far below the actual profit earned by the assessee as compared to other real estate entities. Therefore, profit has to be estimated on the basis of the comparable cases and rather the actual profit is much higher as the assessee is indulged in the unaccounted transactions and the time gap which has resulted in the assessee's benefit as the real estate prices were increased multi-fold in this period.” The Assessing Officer issued a show-cause dated 12.03.2021, wherein 3. the assessee was asked to explain why the profit should not be estimated on the basis of comparable cases and incriminating records available and thereafter, considering the submissions filed by the assessee, the Assessing Officer invoked the provisions of section 145(3) of the Act stating that he was not satisfied with the correctness or completeness of the accounts. As per the Assessing Officer, despite several opportunities, the assessee provided inadequate explanation for impounded records, failing to substantiate transactions or their tax implications. It was also discovered that the assessee firm did not declare the revenues for the completed project in prior years despite bookings, payments and agreements. The Revenue for the entire project was offered in the instant year, wherein the sale data showed that inventory worth Rs. 39.56 crore was recorded as sales of Rs. 38 crores achieved through transactions with related parties at low market prices, the flats were sold below the ready reckoner stamp duty value and the assessee firm failed to justify this discrepancy suggesting unaccounted cash transactions. Further, corroborated by impounded evidence of cash dealings which pointed to undisclosed income used for construction payments and partner distribution. The AO further held that the declared profit of Rs. 1.41 crores was unusually low compared to industry standards indicating intentional under-reporting and the assessee failed to provide complete books of accounts for verification prompting invocation of Section 145(3) of the Act. Discrepancies in stock, gross profit and transactions supported the conclusion that the firm's financials were unreliable warranting income estimation based on available records. The AO thereafter, held that the profit shown by the assessee firm in the return of income or the profit declared by in survey proceedings is not in line with the profit earned by the assessee and also much less than the profit declared by the other entities who are in similar line of real estate business. Referring to the comparative financials of M/s. Ajmera Realty and Infra Ltd, the Assessing Officer held that it would be proper and justifiable in estimating net profit at the rate of 15% of reported turnover i.e. 15% of Rs. 38,00,59,338/- and net profit was worked out at Rs. 5,70,08,900/- and after allowing credit of the income declared in the return of income amounting to Rs. 1,41,32,460/-, an amount of Rs. 4,28,76,440/- was brought to the tax in the hands of the assessee firm.

(i) Inappropriate Comparison: The AO compared the GP of the appellant with that of M/s Ajmera Realty & Infra India Ltd., which operates at a much larger scale and is not involved in redevelopment projects. This comparison is inaccurate, as the scale and nature of operations differ significantly. Financial statements of M/s Ajmera Realty have been submitted to substantiate this point. Furthermore, the appellant incurred Rs.6.73 crore in compensation for alternative accommodations, a unique expense in redevelopment projects not applicable to M/s Ajmera Realty.

(ii) Partial Data Consideration: The AO relied on an incomplete chart of sales details and concluded that sales were understated by comparing the ready reckoner rate as on the date of agreement which was different than the date on which the bookings were made. The appellant has filed a chart comparing the ready reckoner rate on the date of booking with the sales consideration and demonstrated that in all cases the sale value is more than the ready reckoner rate.

(iii) Cash Transactions: The AO’s claim regarding unrecorded cash transactions is unfounded, as these transactions were declared under the Income Declaration Scheme (IDS) 2016. Taxes were paid, and the cash was deposited in the bank and accounted for in the books. Under the IDS scheme, no adverse inference can be drawn on declared income.

(iv) Section 145(3) Misapplication: The AO’s rejection of the books under Section 145(3) is unjustified. This section pertains to incorrect computation or non-disclosure as per computation standards, not to alleged non-compliance with accounting standards.

The submissions so filed by the assessee were considered and after 6. calling for the remand report from the Assessing Officer, the ld. CIT(A) held that the rejection of books of accounts u/s. 145(3) is not warranted and further, regarding the estimation of profit at 15% of turnover, it was held that the same is neither substantiated by reliable evidence nor consistent with the facts of the case and the entire addition of Rs. 4,28,76,440/- was deleted. As against the said order and the findings of the ld. CIT(A), the Revenue is in appeal before us.

During the course of hearing, the ld. DR submitted that the ld. CIT(A) 7. has erred in deleting the addition made by the Assessing Officer by rejecting the books of accounts u/s. 145(3) of the Act, despite the presence of significant discrepancies in revenue recognition, unaccounted cash transactions and related party transactions. It was further submitted that the survey action was conducted at the assessee’s premises and basis the survey statement and corroborative evidence found in the course of survey, it revealed that the assessee has suppressed income and there were unaccounted cash transactions and which have been clearly ignored by the ld. CIT(A). It was further submitted that the ld. CIT(A) has erred in deleting the addition for undervaluation of sales u/s. 43CA of the Act, despite the fact that multiple flats were sold below the ready reckoner value particularly to related parties indicating possible receipt of unaccounted cash consideration. It was further submitted that the ld. CIT(A) has erred in reducing the estimated profit rate from 15% to amount declared by the assessee without considering industry benchmarks and comparable cases despite the Assessing Officer reasonable estimation based on prevailing real estate sector, profit margins.

In his submissions, the learned AR supported the findings of the ld. 8. CIT(A). It was submitted that the Assessing Officer has rejected the books of accounts for the reason that the assessee has disclosed low gross profit margins as compared to M/s. Ajmera Realty and Infra Limited. In this regard, it was submitted that the Assessing Officer has wrongly compared gross profit of the assessee with that of M/s. Ajmera Realty Infra Limited, as the said company has a net worth more than 100 times that of the assessee and the assessee carries out redevelopment project, wherein the assessee has huge rental cost, whereas the comparable company has more open land in its possession and is not in the redevelopment project and therefore, the said company cannot be taken as a comparable company for the purposes of estimation of net profit by the Assessing Officer and which has rightly been appreciated by the ld. CIT(A). It was further submitted that another reason for rejection of books of accounts was the cash transactions undertaken by the assessee. In this regard, it was submitted that the assessee in A.Y. 2017-18 offered cash income from sale of parking under IDS-2016 and further, cash expenses of Rs. 17.50 lakhs was already explained has been incurred from the said cash income and apart from that, there is no evidence found of any cash receipt or expenses and therefore, no adverse inference can be drawn and again the ld. CIT(A) has rightly appreciated the same. Another reason for rejection of books of accounts was the assessee not following the accounting standard. It was submitted that the Assessing Officer has not pointed out the accounting standard which has not been followed by the assessee. It was submitted that the assessee is following project completion method of accounting which is a well- recognized and valid method of accounting and in any case, u/s. 145, non- compliance of accounting standard does not lead to rejection of books of accounts. Another reason for rejection of books of accounts was sale of flats below ready reckoner rates to relatives and earning cash income. It was submitted that the flats were sold above the ready reckoner rates prevailing at a time of booking of the flat and even in the remand report, the AO did not controvert the said fact. It was accordingly submitted that no specific defect has been pointed out in the books of accounts so maintained by the assessee and which are duly audited and the same has been rightly appreciated by the ld. CIT(A) and the action of the AO in rejection of books of accounts has rightly been set aside by the ld. CIT(A). It was accordingly submitted that the findings of the ld. CIT(A) be upheld and the contention so raised on behalf of the revenue be deleted.

Regarding ground no. 2, it was submitted that this ground of appeal 9. does not arise from the order of the Assessing Officer as the Assessing Officer has not made any addition on the basis of the survey statement and the Revenue cannot be allowed to improve the case of the Assessing Officer. Without prejudice, it was submitted that the survey had taken place on 09.11.2017 well before the end of the year and from the survey statement recorded on 09.11.2017 and 10.11.2017, it can be observed that the assessee was not put any query about any incriminating material except with respect to cash payment to one of the contractors amounting to Rs. 17.5 lakh. It was submitted that the nature and source of such cash expenses was also explained in the statement, wherein the assessee has offered cash income of Rs. 1.17 crores under IDS-2006 and said payment was out of the said income offered under the IDS. It was submitted that the declaration of Rs. 3.18 crore made before close of the financial year and before finalization of accounts and without incriminating or corroborative evidence is at best an estimate and the statement in any case, recorded under 133A has no evidential value especially where the same is not supported by any incriminating material. Further, regarding ground no. 3, it was submitted that this ground does not arise from the assessment order as the Assessing Officer has not made any addition u/s. 43CA of the Act. It was accordingly submitted that the order and the findings of the ld. CIT(A) be confirmed and the appeal of the revenue be dismissed.

We have heard the rival contentions and perused the material 10. available on record. We find that the genesis of this case starts from the survey action at the premises of the assessee firm on 09.11.2017, wherein the survey team found that the assessee is involved in work of redevelopment project known as Excel Plaza at Ghatkopar East and has shown a closing work-in-progress in respect of building no. 7, known as Excel Plaza, at Rs. 39,74,09,746/-. It was further observed during the course of survey proceedings that all the office spaces and shops have been sold, and sale deeds have been executed with the Sub-Registrar, and in spite of that, no income has been offered for taxation in any of the preceding assessment years by the assessee firm. The statement of the one of the partners of the assessee firm, Shri Virendra Vora, was recorded u/s. 131(1), wherein he was asked to justify the claim of work-in-progress despite the project being completely sold out, as well as the reasons for not offering the income in the prior assessment years. In response to one of the questions, Shri Virendra Vora stated that due to undue delay in completion of the project, the firm incurred huge rent burden and overheads, and profit margin was very less and in spite of the fact that the construction work was almost completed, the occupation certificate is still to be applied as minor work are still pending, and the land title is also in question, as MHADA has not signed the lease deed. Further, it was stated that the assessee firm has paid tax on the income declared under IDS 2016 of Rs. 1.17 crore. Further, it was submitted that since the entire project is sold and sale deed are also executed with Sub-Registrar, he offers Rs. 3.18 crore as income and will pay tax accordingly. Thereafter, another statement was recorded of Shri Virendra Vora on 10.11.2017 u/s. 131, wherein he reiterated the offer of Rs. 3.18 crores made in the course of survey proceedings. Thereafter, a letter was filed dated 13.11.2017, wherein it was submitted that the assessee is offering 8% of the gross revenues as profit, which comes to Rs. 3.18 crores, and out of which it has already declared Rs. 1.17 crore under Income Declaration Scheme 2016, and balance of Rs. 2.01 crores will be offered for taxation in the current financial year, A.Y. 2018-19. Therefore, referring to the statement recorded during the course of survey and post-survey proceedings, and the profits so disclosed in the return of income, the Assessing officer found that as against the figure of Rs. 3.18 crores admitted during the survey proceedings and post-survey proceedings, the assessee firm has failed to comply with the declaration, and has only disclosed a profit of Rs. 1.41 crore, and the assessee was asked to justify the said position. Thereafter, the assessee filed its submissions, which were considered, but not found acceptable to the Assessing Officer and it was held that the assessee is not justified in deviating from the disclosure of Rs. 3.18 crores made in the survey proceedings and thereafter, the Assessing Officer proceeded to examine whether the profit of 8% of the total turnover required enhancement or not and thereafter, as we have noted (supra) in para no. 6.1, the Assessing Officer referring to certain discrepancies in terms of impounded documents found during the course of survey, and lack of explanation and reflection thereof in the books of accounts, the mismatch between the opening stock of Rs. 39,56,17,932/- and the sales of Rs. 38,00,59,338/- reported by the assessee, and the sales recorded at a price lower than the ready reckoner value for payment of the stamp duty, and the transactions with certain related parties at a price lower than the sale made to other parties, and further referring to certain cash transactions and related documents impounded during the course of survey proceedings, proceeded and rejected the books of accounts of the assessee company and a show cause was issued as to why profit should not be estimated on the basis of comparable cases and the incriminating records available on record and thereafter, relying on a case of M/s. Ajmera Realty and Infra Limited, the Assessing Officer observed that it would be fair and justifiable in estimating net profit at the rate of 15% and on the declared turnover of Rs. 38,00,59,338/-, net profit at the rate of 15% was determined at Rs. 5,70,08,900/- and after giving credit of the income declared in the return of income amounting to Rs. 1,41,32,460/-, an amount of Rs. 4,28,76,440/- was brought to tax.

On appeal, the ld. CIT(A) has set-aside the action of the AO in terms 11. of rejection of the books of accounts and estimation of profits @ 15%. The relevant findings of the ld CIT(A) are contained at para nos. 5.5.3, 5.5.4, 6.4.3, and 6.4.4 of the impugned order which reads as under:

“5.5.3 Upon careful consideration of the submissions made by the appellant and the reasons for the rejection of books as stated by the AO, the following points are worth noting: (i) Gross Profit Comparison: The AO has raised concerns about the low Gross Profit (GP) declared by the appellant, comparing it with the GP of another real estate entity, M/s Ajmera Realty & Infra India Ltd. However, this comparison is flawed. M/s Ajmera Realty operates on a much larger scale and is not involved in redevelopment projects, unlike the appellant. The appellant has only undertaken a redevelopment project as against M/s Ajmera Realty which is a well known real estate developer. The scale and nature of operations are distinctly different, and thus the comparison between the two entities is not valid. The appellant has also pointed out that it has paid Rs.6,73,87,582/- on account of rent to the existing tenants of the society, an expense which is unique to redevelopment project and in case this expense is omitted the GP of the appellant comes to 24.25% which is much higher than the average GP rate of M/s Ajmera Realty. In view of the above, AO’s comparison of GPs is not a fair basis for rejecting the books of accounts. (ii) Partial Data Consideration: The AO has referred to a partial chart of sales details wherein a comparison has been made between the sale value and the ready reckoner rate as on the date of agreement. This has led to a conclusion that the sales price of the flats was understated. However, the appellant has filed a complete chart that includes details of stamp duty valuations on the booking date and its comparison with the ready reckoner rate, which should have been considered under Section 43CA of the Act and the appellant has been able to demonstrate that none of the flat has been sold at a value less than the ready reckoner rate. The AO has not made any comment on this aspect even in her remand report. The failure to consider the full set of sales data and the relevant stamp duty valuation is a significant oversight, which undermines the AO’s conclusions that flats have been sold at less than the ready reckoner value. (iii) Cash Transactions and IDS Declaration: The AO has raised an issue regarding cash receipts, alleging that the firm has not recorded these transactions in its books. However, the appellant has clarified that these cash receipts were duly declared under the Income Declaration Scheme (IDS) of 2016. The relevant cash was deposited in the bank and appropriately accounted for in the books. Once income is declared under the IDS and tax is paid, no further adverse inference can be drawn with respect to such income. Upon perusal of the assessment order (page no 19-23) wherein the AO has reproduced the cash receipts, it is seen that these transactions pertain to the FY 2014-15 and 2015-16 and would be fair to hold that the disclosure made under IDS on account of cash sales includes these transactions. Thus, the contention of the AO that cash sales have not been recorded in the books of accounts fails in view of the fact that the IDS disclosure has been duly incorporated into the books of accounts. The appellant has complied with the provisions of the IDS and the cash receipts relied upon by the AO pertain to the period prior to the IDS declaration, and thus the assertion of the AO that cash transactions are unrecorded is incorrect. (iv) Misapplication of Section 145(3): The rejection of books under Section 145(3) by the AO is based on the incorrect premise that the books were not maintained in accordance with accounting standards. However, Section 145(3) applies when the income is not computed as per the prescribed computation and disclosure standards, not for failure to adhere to accounting standards. Therefore, the AO’s reliance on accounting standards to justify the rejection of books is not consistent with the provisions of Section 145(3). Even otherwise the concept of revenue recognition takes into account the uncertainties associated with recognizing the revenue. Recognition of revenue requires that revenue is measurable and that at the time of sale or the rendering of the service it would not be unreasonable to expect ultimate collection. Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc., revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognise revenue only when it is reasonably certain that the ultimate collection will be made. Where there is no uncertainty as to ultimate collection, revenue is recognized at the time of sale or rendering of service even though payments are made by instalments. When the uncertainty relating to collectability arises subsequent to the time of sale or the rendering of the service, it is more appropriate to make a separate provision to reflect the uncertainty rather than to adjust the amount of revenue originally recorded. An essential criterion for the recognition of revenue is that the consideration receivable for the sale of goods, the rendering of services or from the use by others of enterprise resources is reasonably determinable. When such consideration is not determinable within reasonable limits, the recognition of revenue is postponed. When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognised. It is to be noted that in the instant case the project comprises of redevelopment of an existing building which is fraught with several challenges in terms of statutory approvals, building clearances, consent of the existing tenants and the issue of occupation certificate. In the instant case the appellant has stated even on the date of survey that the occupation certificate for the project has not been issued and therefore in my considered view there is no anomaly in the practise of the appellant to finally recognise revenue on the completion of the project. The rejection of books based on the non-compliance with accounting standards is therefore not a valid reason in this case. 5.5.4 After considering the submissions made by the appellant and the reasoning provided by the AO, it is clear that the rejection of the books of accounts under Section 145(3) was not warranted in this case. The AO’s reasons for rejecting the books, including the comparison of Gross Profit with an unrelated entity, reliance on incomplete sales data, and incorrect interpretation of cash transactions, do not hold merit. Additionally, the rejection of books based on non-compliance with accounting standards is not supported by the provisions of Section 145(3). In light of the above, I hold that the rejection of the books of accounts by the AO was not proper. This ground of appeal is allowed.” 6.4.3 With regard to the action of the AO in rejecting the books of accounts and estimating the income on the basis of the GP of M/s Ajmera Realty & Infra Ltd, I have already held that the same is not proper as the two entities are not comparable. Further with respect to the finding of the AO that the declaration in VIDS was not on account of this project, I am not in agreement with the same in view of the fact that the only project of the appellant was redevelopment of the building for which income has been returned in the instant year. In view of the same, there can be no other occasion or project to declare income under VIDS. Thus, the action of the AO in holding that the VIDS declaration is not related to the project is not supported by facts. The findings of the AO regarding cash sale and sale of flats at lower value than the ready reckoner rate has already been considered and decided in ground no 1.

6.4.4 While statement given U/s 131 have their evidentiary value and cannot be brushed aside, it is also relevant to note that the acceptability of the same depends upon facts of the case and in several cases the statements will have to be supported by corroborative evidence if disputed later. The instant case is not that of an entry operator or similar other issue wherein the circumstantial evidence and the statements are the subject matter of fact finding, but in the instant case the issue is that of recognition of revenue and resultant income on the completion of a redevelopment project. The appellant has argued that in the case of redevelopment, not only free of cost area is to be given to the existing tenant, the tenants will also have to be paid compensation and rent for the period during which they are required to stay in the alternative accommodation which will increase the cost of the project substantially specially when the project is delayed which has happened in the case of appellant. The aspect of effect of revenue recognition on uncertainty associated with the projects has also been discussed by me in ground no 1 above and since the instant case is that of a redevelopment project having its own set of challenges, it is difficult for the Partner to estimate and declare the exact income before the end of the Financial year when the accounts where not ready and hence no addition can be made only based on such statement as it is impossible for any assessee to accurately estimate the income much before the end of the Financial year. It is evident that the AO’s reliance on the survey statement, recorded before the financial year’s end and based on an estimated income, was improper and unsupported by corroborative evidence. Judicial precedents affirm that additions cannot be made solely on the basis of survey statements. The Appellant’s audited accounts, prepared after the financial year’s end, remain unchallenged in terms of specific errors. The addition of Rs.4,28,76,440/-, estimated at 15% of turnover, is neither substantiated by reliable evidence nor consistent with the facts or law. In view of the above, the addition made by the AO is deleted. These grounds of appeal are allowed.”

Firstly, regarding the comparable case of M/s. Ajmera Realty and Infra 12. India Limited, the ld. CIT(A) has stated that the said entity operates on a much larger scale, and not involved in any of the redevelopment projects, unlike the assessee, and which has only undertaken a sole redevelopment project. Further, there are certain transactions by way of payment of rent to the existing tenants, which is unique to a redevelopment project, and where the adjustment to that expense is done, the gross profit of the assessee would rise to 24.25%, much higher than the average GP rate of M/s Ajmera Realty and therefore, the very basis of referring to M/s. Ajmera Realty as a comparable case was rejected. Further, the ld. CIT(A) has referred to the findings of the Assessing Officer, wherein he has talked about the undervaluation in the sales recorded by the assessee by referring to the sales recorded in the books of accounts and the ready reckoner rate and referring to the details submitted by the assessee, the ld. CIT(A) has returned a finding that the ready reckoner value of the stamp duty has to be seen as on the booking date, rather than on the date of the agreement and which is a significant oversight, which undermines the AO's conclusions that the flats have been sold at less than the ready reckoner value. Regarding cash transactions and IDS declaration, the ld. CIT(A) has referred to the cash transactions, which pertains to F.Y. 2014-15 and 2015-16, and it was held by him that it would be fair to hold that the disclosure made under the IDS on account of cash sales including these transactions and therefore, the findings of the AO regarding the cash transactions not recorded in the books of accounts were held not factually correct. Further, regarding the method of accounting followed by the assessee, the ld. CIT(A) has stated that the project comprises of redevelopment of an existing building is fraught with several challenges in terms of statutory approvals, building clearances, consent of the existing tenants, and the issue of occupation certificate and even on date of the survey, the occupation certificate was not issued, and therefore, where the assessee is recognizing revenue on the completion of the project, the said basis of accounting and revenue recognition cannot be rejected, devoid of the business reality of the assessee firm and therefore, taking into consideration all these factors, the ld. CIT(A) has held that the AO's reasons for rejecting the books do not hold any merit, and the action of the AO in terms of invocation of provisions of section 145(3) was set aside. We find that each of the allegations of the AO have been duly examined by the ld CIT(A) and during the course of hearing, the said findings of the ld.

CIT(A) remain unrebutted before us. Therefore, in absence of any contrary material brought on record which has escaped the attention of the ld CIT(A) and which has a material bearing on the matter under consideration, we do not find any infirmity in the findings of the ld. CIT(A), wherein he has set aside the action of the AO in terms of rejection of the books of accounts.

Further, regarding the action of the AO in holding that the IDS 13. declaration is not related to the project was also set aside by the ld. CIT(A). It is a matter of record that the assessee was only executing a single redevelopment project all these years and the declaration under IDS was on account of cash receipts on sale of parking slots and therefore, the ld. CIT(A) has rightly set aside the findings of the AO in terms of non-grant of credit in respect of the declaration made under the IDS.

Further, we find that the ld. CIT(A) has rightly held that the mere 14. reliance on the survey statement without any corroborative evidence would not justify any addition in the hands of the assessee. Therefore, in the entirety of the facts and circumstances of the case, we do not find any infirmity in the order and findings of the ld. CIT(A), the same are hereby confirmed and the grounds of appeal so taken by the Revenue are dismissed.

In the result, the appeal filed by the Revenue is dismissed. 15.

Order pronounced in terms of Proviso to Rule 34(4) of Income Tax (Appellate Tribunal) Rules,1963 on 24.07.2026.

Sd/- Sd/- SANDEEP SINGH KARHAIL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 24.07.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai