EVIE REAL ESTATE PRIVATE LIMITED,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4(1), MUMBAI, MUMBAI
What did the Tribunal hold?
The Tribunal held that gross receipts cannot be equated with income, and only the profit element of alleged unaccounted receipts is taxable. It also ruled that related unaccounted cash expenditure linked to these receipts would lead to double taxation if added separately. Sub-contracting expenses were deemed genuine after reviewing documentary evidence.
What were the facts?
The assessee, Evie Real Estate Private Limited, faced appeals from both the assessee and the revenue concerning various assessment years. The core issues revolved around alleged on-money receipts, unaccounted cash expenditure, and disallowance of sub-contracting expenses arising from a common search action.
What were the issues?
The key issues were the taxability of alleged on-money receipts and unaccounted cash expenditure, the genuineness of sub-contracting expenses, and the applicability of Section 43CA and Section 69A.
Which sections of the Income-tax Act were involved?
Section 147,Section 143(3),Section 37,Section 43CA,Section 69A,Section 28
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘E’ BENCH
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
Heard together (3 matters)
Read from the judgment's own cause title. This page is filed under one of them.
आदेश / O R D E R PER BENCH: These cross appeals, being ITA No. 346/Mum/2026, 347/Mum/2026, 349/Mum/2026 and 350/Mum/2026 filed by the assessee, and ITA No. 706/Mum/2026, 995/Mum/2026 and 996/Mum/2026 filed by the Revenue, arise out of the respective orders passed in relation to
3 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. assessments framed under section 147of the Income Tax Act, 1961, for Assessment Years 2019-20, 2020-21 & 2021-22 & under section 143(3) of the Act, for 2023-24 to 2024-25, as affirmed or modified by the learned Commissioner of Income Tax (Appeals), CIT(A)-52, Mumbai. Since, the issues involved in these appeals are overlapping, the facts are broadly common, the arguments advanced by both sides substantially traverse the same terrain, and the impugned additions arise out of a common search action and post-search inquiries, all these appeals were heard together and are being disposed of by way of this consolidated order for the sake of convenience, consistency and judicial economy. For the purpose of adjudication, we first take up the appeal for Assessment Year 2023-24, being the year in which the controversy relating to on-money receipts, alleged unaccounted cash expenditure and sub-contracting disallowance has arisen in its most elaborate form.
Assessee’s appeal for Assessment Year 2023-24 in ITA No. 349/Mum/2026. The grounds raised by the assessee for that year read as under:
“1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in restricting the addition made by the Learned Assessing Officer to the extent of Rs.2,08,34,700/ (i.e. being 15 percent of Rs.13,88,98,000/-)as profit earned on alleged on money
4 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. received on sale of flat, without considering the facts and circumstances of the case. 2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in not appreciating the fact that the appellant has not taken on money on sale of flats and simply made the addition by relying on blue colour diary seized from cabin of Smt. Lucy Roychoudhary without any independent corroborating evidence to support these entries.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in restricting the disallowance made by the Learned Assessing Officer to the extent of Rs.2,57,371/- (being 5% of Rs.51,47,419/-) u/s.37 of the Income Tax Act, 1961 by treating genuine sub-contracting expenses incurred on M/s Senghani Creators Pvt Ltd as alleged bogus expenses, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in reducing the amount to the extent of Rs.40,32,224/- (Being 5% of Rs.8,06,44,470/-) from WIP of the appellant by treating genuine sub-contracting expenses incurred on M/s Senghani Creators Pvt Ltd as alleged bogus expenses, without considering the facts and circumstances of the case.
5 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 5. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in restricting the addition made by the Learned Assessing Officer to the extent of Rs.4,41,171/-(i.e. being 15 percent of Rs.29,41,143/-) as profit earned on alleged cash receipt on sale of scraps, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in not appreciating the fact that the appellant has not received any cash receipt on sale of scraps and simply made the addition by relying on the statement of Shri Mr. Vijay BhaskarMadne, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) and the Learned Assessing Officer erred in making additions on the basis of uncorroborated statements which were later retracted, without considering the facts & circumstances of the case and position of law.
The appellant craves leave to add, amend, alter or delete the said ground of appeal.”
The Revenue, being aggrieved by the partial relief granted by the learned CIT(A), has also filed its cross appeal
6 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. ITA No. 995/Mum/2026 in relation to Assessment Year 2023-24 and has raised the following grounds:
“1. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) erred in restricting the addition on account of unaccounted on-money receipts from Rs.13,88,98,000 to only 15 percent thereof, despite having categorically held that the assessee was engaged in systematic receipt of on-money and that such receipts stood conclusively proved on the basis of incriminating material seized during search and sworn statement recorded under section 132(4) o the Act.
On the facts and circumstances of the case and in law, whether the Ld. CIT(A) failed to appreciate that the on-money receipts constituted undisclosed and unaccounted business receipts, received in cash outside the books of account, and that in the absence of any evidence brought on record by the assessee to demonstrate corresponding expenditure incurred out of such receipts, the entire amount was liable to be taxed as a business income under section 28.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 1,83,00,000 made under section 37(1) of the income-tax Act, 1961 in respect of professional fees paid to Ms Last Mile Enterprises Ltd., despite the Assessing Officer having brought on record material establishing that the expenditure was not incurred wholly and exclusively for business purposes.
7 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 4. On the facts and circumstances of the case and in law, whether the Ld.CIT(A) erred in discarding the statement recorded, under section 132(4) of Shri SachinBattalwar solely on the ground of retraction, without appreciating that the retraction was highly belated and unsupported by any contemporaneous evidence of coercion or duress.
On the facts and circumstances of the case and in law, whether the Id. CIT(A) erred in deleting the consequential reduction of Rs. 28,67,00,000 from Work-in-Progress, without appreciating that once the underlying expenditure is found to be non-genuine, capitalization thereof also cannot be allowed.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,60,68,801 made under section 43CA of the Income-tax Act, 1961, despite the fact that the agreement value of flats sold during the year was lower than the stamp duly value.
On the facts and circumstances of the case and in law, whether the Ld., CIT(A) erred in holding that section 43CA is not applicable merely because the project was under construction and the assessee followed the Project Completion Method, without appreciating that section 43CA is a Specific deeming provision independent of the method of accounting followed by the assessee.
On the facts and in the circumstances of the case and in law, the L.d. CIT(A) erred in restricting the addition on account of unaccounted cash received from sale of scrap to 15 percent of Rs. 29,41,143 instead of confirming the entire addition
8 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. made by the Assessing Officer under section 69A of the Income-tax Act, 1961.
On the facts and in the circumstances of the case and in law, the L.d. CIT(A) failed to appreciate that once unexplained cash is found and admitted by the assessee, and the same is not recorded in the books of account, the whole amount is deemed to be income under section 69A, and there is no scope for estimating only the profit element.
On the facts and in the circumstances of the case. and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,25,02,040 made by the Assessing Officer under section 690 of the Income-tax Act, 1961, despite having held that the appellants had incurred unaccounted cash expenditure on liaisoning or speed money.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in accepting the plea of telescoping of unexplained expenditure against estimated on-money income, without establishing any direct nexus OR one-to-one linkage between the specific cash receipts taxed and the specific cash expenditure Incurred.
Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is justified in allowing benefit of 85 percent of notional expenditure (out of total on-money received) even whom assessee could not provide any evidence that it had incurred 85 percent of expenditure against the on-money received.
9 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 13. Whether on the facts and circumstances of the ease and in law, the Ld. CIT(A) is justified in allowing benefit of 85 percent of notional expenditure (out of total on-money received) in the circumstance that if at all any expenditure is Incurred from on- money, it was incurred in cash (as on-money is cash receipt) and section 40A(3) of the Income Tax Act, 1961 get clearly attracted in case of cash expenditure.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing benefit of 85 percent of notional expenditure (Out of on-money received) by relying on the findings of Ekta Housing Pvt. Ltd (ITA No. 1732 Mum 2019 AΥ 2013-14) even when fact of Ekta Housing Pvt. Ltd are different as cash expenditure as found in that case and assessee had clearly established one to one linkage between on money, received and cash expenditure, which is not in the instant case.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing telescoping and granting deduction of notional expenditure al 85 percent of the on-money receipts, despite the fact that only cash expenditure of aggregating of Rs. 1,25,02,040 was found during the course of search and separately added under section 69C, and therefore deduction ought to have been restricted solely to the said cash expenditure of Rs: 1,25,02,040.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing notional expenditure of 85 percent of the on-money after acknowledging systematic, collection of on-money on sale of flats and commercial units,
10 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. without correspondingly bringing to tax the notional on-money relating to the remaining flats and commercial units sold during the year under consideration, when the principle of consistency and balance in the reasoning required that notional income also be taken into account.” 3. The brief facts, as borne out from the record, are that the assessee is a domestic company engaged in the business of development and construction of residential and commercial real estate projects in Mumbai. For the year under consideration, it filed its return of income under section 139(1) on 30.10.2023 declaring loss of Rs.4,03,44,086/-. A search and seizure action under section 132 was carried out in the case of the Runwal Group on 06.10.2023, wherein the assessee, being one of the constituent entities of the said group, also came within the sweep of the search proceedings. Consequent to the search and the information said to have emerged therefrom, the return filed by the assessee was selected for complete scrutiny. Notice under section 143(2) was issued on 09.03.2024 and was duly served. Thereafter, notices under section142(1)along with detailed questionnaires were issued calling for the relevant particulars, explanations and supporting evidence. In response thereto, the assessee furnished details and explanations from time to time.
11 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 4. In the course of assessment, the Assessing Officer made various additions on account of alleged on-money receipts, alleged unaccounted cash expenditure and disallowance of sub-contracting expenses claimed through Senghani Creators Pvt. Ltd. The additions on account of on-money receipts were made in relation to sale of certain flats and shops, while separate additions under section 69C were made on the allegation that certain cash expenditure had been incurred outside the books. Further, a part of the sub-contracting expenditure capitalized to Work-in-Progress was also treated as non-genuine and was accordingly reduced from the WIP. The detailed tabulation of such additions as per the assessment order is part of the original record and shall form part of this order at the appropriate place.
In so far as the additions relating to alleged on-money receipts are concerned, the Assessing Officer, on the strength of certain statements recorded during the course of search, loose papers, diary entries, and digital communications including WhatsApp and Signal chats retrieved from mobile devices of certain employees or connected persons, came to the conclusion that the group was following a systematic practice of receiving part of the sale consideration in cash over and above the value disclosed in the registered or proposed sale documentation. On the basis of such material, hetreatedasumofRs.13,88,98,000/-as on-money receipts in
12 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. relation to certain flat transactions. The Assessing Officer proceeded to tax the entire amounts as undisclosed business income of the assessee under section 28 of the Act, holding that once the receipt of on-money stood established from the seized material and statements, the entire gross receipt itself represented taxable income.
The assessee carried the matter in appeal and vehemently assailed the additions. Before the learned CIT(A), it was contended that the additions had been made essentially on the basis of statements recorded during search from certain employees and connected persons, but such statements, according to the assessee, had subsequently been retracted by way of sworn affidavits and could not, in law, be treated as conclusive evidence in the absence of independent corroboration. It was further urged that no customer confirmation, no direct cash trail, no bank withdrawal pattern, no seized receipt, no contemporaneous acknowledgement from purchasers, and no documentary material directly linking the assessee with actual receipt of on-money had been brought on record. According to the assessee, the entire exercise of the Assessing Officer rested more on inference and presumption than on legally sustainable material. It was also submitted that no cash whatsoever was found from the assessee during the course of search, which, according to the assessee, weakened the
13 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. department’s allegation that actual unaccounted sale consideration had been received and retained by it.
The learned CIT(A), after examining the assessment order, the statements, the seized material and the submissions of the assessee, did not fully accept the assessee’s plea for total deletion. The appellate authority observed that the statements recorded during the search and the accompanying documents did indicate the existence of a pattern or practice within the group of receiving part of the consideration in cash in some real estate transactions. The learned CIT(A), therefore, held that the possibility of on-money receipts in such transactions could not be brushed aside altogether. At the same time, however, the learned CIT(A) also recorded a finding that even where on-money receipts are presumed or found in a real estate project, the entire gross amount of such receipts cannot ipso facto be assessed as income, for the simple reason that such receipts are business receipts and not pure profit; embedded therein is only the profit element, since corresponding project-related outgoings, cash expenses, approvals, facilitation payments and other unrecorded business expenditures may also have been met from such receipts. Proceeding on that premise, and relying upon judicial precedents rendered in the context of real
14 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. estate transactions involving unaccounted receipts, the learned CIT(A) directed the Assessing Officer to restrict the addition to 15% of the alleged on-money receipts and to delete the balance.
Thus, while the learned CIT(A) did not accept the assessee’s contention that the additions deserved outright deletion, he substantially modified the assessment by holding that only the estimated profit element embedded in the alleged unaccounted receipts could be brought to tax. This resulted in a substantial reduction of the additions made by the Assessing Officer. The assessee, however, remains aggrieved to the extent even 15% has been sustained, whereas the Revenue is aggrieved by the deletion of the remaining 85% and insists that the gross receipts should have been taxed in full.
The next limb of controversy pertains to the additions made on account of alleged unaccounted cash expenditure under section 69C. During the course of assessment, the Assessing Officer alleged that certain cash payments relating to the projects of the assessee, such as liaisoning expenses, brokerage payments and other cash outgoings, had been incurred outside the books of account. This allegation was founded upon
15 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. certain statements recorded during search, certain screenshots, mobile phone images and entries found in a seized register. On the basis of such material, the Assessing Officer treated the said expenditure as unexplained expenditure within the meaning of section 69C and made separate additions on that score.
Before the learned CIT(A), the assessee challenged these additions as well. The principal contention was that the additions had again been made merely on the basis of statements and stray entries, without any supporting material such as vouchers, confirmations, cash books, payment acknowledgements, identifiable recipients or cash flow evidence that would conclusively establish that such expenses had in fact been incurred by the assessee. It was further argued that even assuming, without admitting, that some unaccounted expenditure had been incurred, the source thereof stood embedded in the same on-money receipts which the department itself had alleged and partly taxed. Therefore, according to the assessee, once the alleged on-money receipts were brought to tax as undisclosed business receipts, the corresponding expenditure incurred out of the same stream of funds could not again be taxed separately under section 69C, for that would amount to taxing the same income twice over
16 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. under different labels. In support, reliance was placed upon the principle against double addition and on the judgments including CIT v. JawanmalGemaji Gandhi and CIT v. Golani Brothers.
The learned CIT(A), upon examining this aspect, held that section 69C would indeed be attracted where expenditure is found to have been incurred and the assessee fails to satisfactorily explain the source thereof. He accordingly did not accept the broad contention that the addition under section 69C was wholly untenable. However, he accepted, in principle, the assessee’s argument that where both alleged on-money receipts and alleged cash outgoings arise from the same unaccounted business stream, then to the extent the unaccounted expenditure can reasonably be said to have been met out of such receipts, separate taxation thereof would result in duplication. The learned CIT(A), therefore, allowed telescoping / adjustment of the unaccounted expenditure against the on-money receipts already brought to tax, and thereby deleted or restricted the independent addition under section 69C to avoid double taxation of the same underlying fund flow. In other words, while the existence of certain cash expenditure was not fully discarded, the appellate authority accepted that such expenditure could not be
17 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. taxed de hors the alleged receipts from which it was sourced.
Thus, before us, the controversy in Ground Nos. 1 and 2 of the assessee’s appeal Nos. 1,2,4,9 to 16 of the Revenue’s appeal revolves around the true nature, taxability and quantification of the alleged on-money receipts and the consequential treatment of alleged unaccounted cash expenditure. Since these issues are intricately interwoven and arise out of a common factual foundation, they are taken up together for adjudication.
The learned counsel for the assessee, reiterating the submissions advanced before the lower authorities, assailed the sustenance of even 15% of the alleged receipts. He submitted that no direct and clinching evidence had been brought on record to show that the assessee had in fact received on-money from any identified customer. According to him, there was neither any customer confirmation nor any cash trail nor any bank withdrawal evidence nor any seized receipt directly evidencing receipt by the assessee. He further submitted that the statements of certain persons on which reliance had been placed stood retracted, and in any event, no addition could be founded solely on such statements absent independent corroboration. He also emphasised
18 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. that no unaccounted cash was found from the assessee during search. Without prejudice, he submitted that even if an estimate were to be made, the rate of 15% adopted by the learned CIT(A) was on the higher side, particularly having regard to the nature of the assessee’s project, namely a mid-segment housing project at Kanjurmarg catering to middle-class purchasers and not a high-end premium development with large margins. He therefore submitted that, at the highest, a lower estimation in the vicinity of 5% or 8% ought to be adopted.
Per contra, the learned CIT-DR strongly supported the assessment order and submitted that once the existence of on-money transactions is evidenced by seized documents, digital records and statements recorded under section 132(4), the entire gross receipt becomes liable to tax, and the learned CIT(A) erred in reducing the addition merely to the profit element. He submitted that there was no material brought by the assessee to show that 85% of such receipts had in fact been expended for project purposes. According to him, the assessee cannot seek a notional deduction of expenditure without demonstrating actual incurrence thereof. He further submitted that if, according to the assessee, such expenditure had been incurred in cash,
19 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. then the same would itself attract the rigour of section 40A(3), and in any event no deduction could be granted on pure assumption. On the issue of telescoping, it was his contention that on-money receipts and unaccounted expenditure constitute separate heads of undisclosed income, and unless clear nexus is established, the benefit of set-off cannot be allowed. He also submitted that the decisions relied upon by the learned CIT(A), including Ekta Housing Pvt. Ltd., were distinguishable on facts and could not mechanically be applied.
We have heard the rival submissions and perused the material placed on record. The concept of “on- money” in the real estate sector is not unknown to tax jurisprudence. It generally refers to an unaccounted component of sale consideration received in cash over and above the recorded agreement value. Such matters ordinarily surface during search and survey actions through diaries, loose sheets, parallel records, digital chats and statements of persons managing the affairs of the builder or project. But even where the existence of such receipts is inferred or established, an equally important question arises as to what, in law, is taxable: whether the entire receipt or only the income element embedded therein. That issue is no longer res integra. The consistent thread running through judicial
20 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. pronouncements is that such on-money represents unaccounted business receipts or suppressed sale consideration and not income per se in its entirety. Embedded in such receipts is a margin, and against such receipts there may stand corresponding unaccounted business outgoings. Therefore, unless the case is such where the whole receipt can be demonstrably shown to be pure income without any outgoing component, the normal rule is that only the profit element should be brought to tax on some rational and reasonable basis.
We may first advert to the reasoning extracted in the order itself from the decision of the Ahmedabad Bench in JCIT v. Narayan Land Estate, wherein the Tribunal lucidly explained that when seized or impounded documents disclose not merely receipt of on- money but also indicate the reality of unaccounted project-related expenditure, then a holistic approach is warranted, and the gross on-money cannot be taxed in entirety. The Tribunal further recognised, taking judicial notice of ground realities of the real estate sector, that cash is often collected and cash is also deployed for various approval-related and project-related purposes. Therefore, a reasonable profit estimate on such receipts, rather than taxation of the gross amount, is what
21 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. accords with both commercial realism and tax jurisprudence. The relevant observation, as noted in the draft, is reproduced hereunder:
8.5 The decisions of the jurisdictional ITAT and High Court are binding on the Commissioner (Appeals). However, the appellant in its submission has not given the working of profit on such on-money and has not given the justification as to how the profit of 15% (as mentioned in the submission during the appeal proceedings) is adequate and fair. No doubt, one approach is that where the seized/impounded document bear the testimony of on-money being charged and collected and the same pages or similar group pages also contain entries related to unaccounted expenses on in relation to the projects under taken and in such a case, such expenses are to be necessary allowed for the holistic interpretation of the documents seized/impounded. The other approach is to take cognizance of the market/realty sector that while it is the practice of the real estate market that whereas cash (over and above the consideration in cheque) are collected from the customers, the developers have to incur various unaccounted expenses also in relation to procurement of land and approval of the projects by various authorities & etc and therefore, there is rational/ justification in charging/bringing to tax only an estimated profit on on-money/premium amount collected from the customers instead of adding the gross amount of on-money/premium to the total income.”
22 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd.
The above principle is also fortified by the long line CIT v. President of authorities beginning with Industries (258 ITR 654) (Guj.), wherein it was held that the entire undisclosed sale proceeds cannot be regarded as income. Similar principle has found favour in decisions of the Hon’ble Bombay High Court and various benches of the Tribunal in the context of real estate transactions. In Guruprerna Enterprises, following the ratio of Abhishek Corporation v. DCIT, it was held that even where seized documents establish receipt of on-money or premium, the entire receipts cannot be assessed as undisclosed income; only net profit rate can be applied on the unaccounted receipts. The legal position that thus emerges is that on-money receipts are in the nature of suppressed business receipts or sale price, and what is chargeable to tax is only the profit component embedded therein and not the whole receipt as such.
Equally instructive is the decision in ITO v. Anand Builders, where the Tribunal held that only 8% of the unaccounted on-money receipts could be brought to tax, and not the entire gross receipts, for the reason that against such unaccounted receipts there would ordinarily be corresponding unaccounted payments and
23 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. only the residual income that remains in the hands of the assessee can be taxed. The said view, as noted in the draft order, ultimately found affirmation when the challenge by the department did not succeed. Likewise, in HemaHaresh Mehta v. DCIT, Mumbai Tribunal held that a reasonable profit embedded in total unaccounted gross receipts deserves to be brought to tax and 8% was considered an appropriate estimate in the facts of that case, with the clear observation that once profit is estimated, all associated expenditure stands deemed to have been allowed.
Reference may also be made to Kishor Mohanlal Telwala, where the Tribunal regarded 8% as a fair and reasonable figure by drawing guidance from section 44AD, albeit not directly applying the provision. True it is, the present assessee’s turnover may be far beyond the threshold of presumptive taxation and section 44AD may not directly apply. Yet, such statutory benchmarks can often provide a broad indicator for arriving at a fair estimate where direct quantification is impossible and only an approximation on rational basis is called for. What is important is that estimation must rest neither on conjecture nor on punitive instinct, but on a fair appreciation of the nature of trade, scale of activity, and margins ordinarily available.
24 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd.
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 receipts should be estimated. On an overall consideration of the nature of the assessee’s business, the location and character of the project, the judicial precedents placed before us, and the broad commercial realities of the real estate sector, we are of the considered view that estimation at 15% as sustained by the learned CIT(A) is on the higher side and does not appear to rest on any specific comparative or empirical basis. A more reasonable estimate, in our view, would be 8% of the alleged on-money receipts.
25 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. In addition to the above, similar findings have been given by coordinates benches of the Mumbai Tribunal in assessee’s sister concern case i.e M/s Horizon Projects Private Limited for AY’s 2022-23 to 2024-25 (ITA No: ITA No.7786/Mum/2025 to 7788/Mum/2025) and M/s Runwal Enterprises Limited for AYs 2020-21 to 2024-25 (ITA No: 8931/Mum/2025 to 8935/Mum/2025)
Thus, in order to maintain judicial consistency, we accordingly direct that the additions on account of on- money receipts in respect of sale of flats and be restricted to 8% of the amounts considered by the Assessing Officer.
Furthermore, Once we hold that only the profit element at 8% is liable to be taxed on the alleged on- money receipts, the Revenue’s grievance against the telescoping / set-off allowed by the learned CIT(A) in respect of alleged unaccounted cash expenditure loses much of its force. In matters of this nature, where both the alleged receipts and alleged expenditure form part of the same undisclosed business circuit, separate taxation of gross receipts and again of the corresponding cash outgoings would indeed result in duplication, unless the department is able to establish
26 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. that the expenditure arose from an altogether independent source. No such separate source has been demonstrated before us. On the contrary, the very case of the department is that the assessee was generating cash through on-money and utilising the same in project-linked unaccounted dealings. In such a factual setting, telescoping is not a concession but a necessary corollary of coherent taxation. Therefore, we see no infirmity in the principle adopted by the learned CIT(A) in allowing adjustment of such expenditure against the on-money stream. Once profit on the gross receipts is estimated, separate addition of the corresponding expenditure cannot ordinarily survive.
Consequently, the grounds raised by the assessee challenging sustenance of 15% addition on alleged on- money receipts are partly allowed to the extent indicated above, and the corresponding grounds of the Revenue seeking full taxation of such receipts are dismissed. We hold that the additions on account of alleged on-money receipts in A.Y. 2024-25 shall stand restricted to 8% of the respective amounts considered by the Assessing Officer, and no separate addition on account of alleged unexplained cash expenditure shall survive beyond what is embedded in such estimated profit.
27 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 23. Ground Nos. 3 and 4 raised by the assessee for Assessment Year 2023-24. The facts in this regard are that during the search action, material was found in relation to M/s Senghani Creators Pvt. Ltd. and statements of certain key persons of that concern were recorded. It emerged from such statements that invoices were allegedly prepared on the basis of rough workings received from sub-contractors, the same were then printed on letterheads, and the rough worksheets were thereafter destroyed. It was also noticed that in spot verification of some entities connected with the said concern, certain parties were not found to be existing at the addresses mentioned. Based on these findings arising from the search in the case of Senghani Creators Pvt. Ltd., the Assessing Officer formed an opinion that the sub-contracting expenditure booked by the assessee through the said party was bogus or at least not fully verifiable, and therefore liable to be disallowed.
In appeal, the assessee’s stand was that the entire disallowance rested on third-party search findings and no direct evidence had been brought on record to establish that the transactions between the assessee and Senghani Creators Pvt. Ltd. were sham or bogus. It was specifically pointed out that the assessee had placed on record extensive documentary evidence in
28 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. support of the work executed and payments made, including work orders, invoices, quantity summaries, measurement sheets, reconciliation statements, challans, quality certificates, labour compliance certificates, ledger accounts, payment certificates and bank statements showing that payments were made through normal banking channels. It was submitted that preparation of final invoices based on rough workings is not an unusual commercial practice and the absence or destruction of rough workings by itself cannot render the final bills fictitious. It was also urged that irregularities, if any, in the affairs of a contractor or some of its downstream sub-contractors cannot automatically justify an adverse inference against the assessee unless there is direct material connecting the assessee’s own payments with bogus billing or accommodation entries.
The learned CIT(A), while noticing that the Assessing Officer had not brought direct material to conclusively establish that the assessee’s expenditure through Senghani Creators Pvt. Ltd. was wholly non- genuine, nevertheless observed that certain irregularities in the affairs of that concern could not be ignored altogether. Proceeding on that basis, and by drawing support from a decision of the Mumbai
29 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. Tribunal in another case, head opted what he considered to be a balanced course and restricted the disallowance to 5% of the sub-contracting expenditure, directing corresponding reduction in Work-in-Progress to that extent.
Before us, the learned counsel for the assessee elaborated that the payments made to Senghani Creators Pvt. Ltd. were not even claimed as revenue expenditure in the Profit and Loss Account, but had been capitalised to Work-in-Progress as part of project cost, to be recognized in later years depending upon the method of accounting. He explained that Senghani Creators Pvt. Ltd. was a contractor undertaking construction works for builders and the actual execution of works stood substantiated by technical and documentary material. The assessee, according to him, had discharged its burden fully by furnishing all relevant project and payment documents. It was further submitted that section 132(4A), or any presumption akin thereto, is confined to the searched person from whose possession incriminating material is found, and such presumption cannot automatically be extended to the assessee, which is a separate entity, especially when no incriminating material was found in the course of
30 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. search from the possession or control of the assessee qua these transactions.
On the other hand, the learned Departmental Representative submitted that the search findings in the case of Senghani Creators Pvt. Ltd., the statements recorded, and the spot verification clearly showed that the sub-contracting chain was dubious and included non-existent entities. According to him, the assessee had not fully discharged the onus of establishing the genuineness of the expenditure merely by producing invoices and bank statements, because the very substratum of the transaction was under serious cloud. He accordingly supported the reasoning of the Assessing Officer and submitted that the learned CIT(A)erred in restricting the disallowance to 5%.
The issue shall now be dealt with comprehensively in the following segment, proceeding from this juncture in the same style and structural framework, thereby ensuring that every part of the original order is duly considered and that the complete reasoning is set out in a logical, coherent, and uninterrupted manner.
We have carefully considered the rival submissions, perused the assessment order, the appellate order and
31 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. the entire material brought on record. In so far as the issue relating to sub-contracting expenditure booked through M/s Senghani Creators Pvt. Ltd. is concerned, what emerges on a close scrutiny of the record is that the Assessing Officer has proceeded substantially on the basis of search findings in the case of the said third party, coupled with certain statements of persons connected with that concern and the spot verification of some of its alleged downstream sub-contractors. It is true that such material may legitimately give rise to a degree of suspicion about the internal affairs of Senghani Creators Pvt. Ltd. and the manner in which it sourced or documented a part of its subcontracting chain. However, suspicion, howsoever strong, cannot be permitted to substitute legal proof, particularly when the disallowance is sought to be made in the hands of a different assessee which has placed on record extensive primary evidence in support of the transaction. The law does not countenance a mechanical transference of adverse inference from the case of a searched third party to the case of the assessee without an independent nexus being established between the two at the level of the impugned claim.
What is important, and what in our opinion strikes at the very root of the addition, is that the assessee
32 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. before the Assessing Officer as well as before the learned CIT(A), and again before us, has placed on record a detailed set of documentary evidences to substantiate the genuineness of the work executed and the payments made. These include quality certificates, health and safety compliance certificates, labour compliance certificates, abstract sheets certifying quantity and amount, copies of bills and invoices, work orders, challans, reconciliation statements of materials issued to the contractor, quantity summary sheets, payment break-up sheets, measurement sheets showing percentage of work done, ledger accounts of Senghani Creators Pvt. Ltd. in the assessee’s books, copies of bank statements reflecting the payments, and payment certificates. These are not stray or superficial documents. They are documents that ordinarily accompany the execution and accounting of real estate construction contracts. Once such documentation is placed on record, the initial burden lying on the assessee stands sufficiently discharged. The burden thereafter shifts to the department to demonstrate, by some cogent material, that these documents are either fabricated, inflated, fictitious, or otherwise do not represent genuine business transactions. That crucial link is conspicuously absent in the present case.
33 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 31. The Assessing Officer has not pointed out any specific discrepancy in the invoices, any mismatch in the quantities certified, any falsity in the work orders, any inconsistency in the measurement books, any inflation discernible from the payment records, or any evidence to show that the amounts paid through banking channels had returned to the assessee in cash or by any circuitous means. There is equally nofinding that the work said to have been executed was in fact not executed, or that the project progress, civil work and construction activities did not correspond with the expenditure capitalised by the assessee. The entire edifice of the addition rests on generalized findings in the case of Senghani Creators Pvt. Ltd. and on the assumption that because some of its alleged sub- contractors were found to be non-existent, therefore every transaction routed through it must necessarily be bogus. Such a broad-brush approach, in our considered view, cannot be sustained in tax adjudication where each addition must rest on a clear factual foundation and a legally tenable inference.
The learned CIT(A), while partly accepting the assessee’s case, nevertheless chose to sustain a disallowance of 5% by observing that certain irregularities in the affairs of Senghani Creators Pvt.
34 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. Ltd. could not be ignored altogether and by placing reliance on a decision of the Mumbai Tribunal in the case of Middle Earth Enterprises. However, as rightly pointed out before us, the learned CIT(A) has not undertaken any meaningful comparison of the facts of the present case with the facts of the case relied upon. He has not demonstrated as to how the nature of evidence, the degree of infirmity, the type of contract, the supporting documentation, or the surrounding circumstances were so similar as to justify an ad hoc estimate on parity. More importantly, even as per his own narration, the decision referred to by him had sustained a different percentage. Therefore, the adoption of 5% in the present case appears to be more of an approximation in terrorem than an estimate founded upon any discernible factual or legal yardstick. A quasi- judicial estimate cannot be a matter of impressionistic compromise; it must proceed from some rational basis emerging from the record.
We are also persuaded by the submission advanced on behalf of the assessee that the presumption available under section 132(4A), or the corresponding principle underlying search presumptions, is essentially confined to the person from whose possession or control the books, documents or assets are found. Such a
35 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. presumption cannot, without more, be extended against a third party assessee whose own records are otherwise maintained in the regular course and whose claim is supported by primary evidentiary material. Here, no incriminating document was found from the possession of the assessee to show that the payments made to Senghani Creators Pvt. Ltd. were accommodation entries or fictitious charges. In such circumstances, the attempt to draw an automatic adverse inference against the assessee on the strength of third-party search material alone is clearly misplaced, unless supported by some additional corroborative evidence directly connecting the assessee with the alleged bogus arrangement. No such direct evidence has been shown to us.
Another significant feature that cannot be overlooked is that all the impugned payments were made through normal banking channels. It is, of course, true that mere banking payments do not conclusively establish genuineness if the surrounding circumstances show the transaction to be sham. But equally, where banking payments are supported by work orders, invoices, quantity records, measurement sheets and project documentation, and where no defect is pointed out in such material, then the fact that payment was
36 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. made through banking channels assumes considerable evidentiary significance. In the present case, there is no allegation that the assessee had received back the money in cash or that the banking trail was part of any accommodation-entry racket directly involving the assessee. In the absence of such material, to penalize the assessee for possible irregularities in the conduct of a contractor or its own sub-vendors would be wholly unjustified.
We may also note that the assessee’s case throughout has been that the expenditure in question was not even debited off to the Profit and Loss Account as a revenue item in the year under consideration, but had been capitalised as part of Work-in-Progress in respect of the project. Thus, strictly speaking, what the Assessing Officer has done is to reduce a part of the project cost on the assumption that the underlying contract expenditure lacked genuineness. Such a conclusion, when it leads to a distortion of the project cost itself, demands even greater care and a stronger evidentiary basis, because the effect of reducing Work- in-Progress is not confined merely to the current year but has the potential to ripple through later years in the eventual recognition of project income. Any such
37 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. adjustment, therefore, cannot be sustained on surmise or on collateral suspicion.
Looking at the matter from any angle, we are unable to find any cogent justification for sustaining even the ad hoc disallowance of 5%. The assessee has, in our considered opinion, satisfactorily discharged the onus cast upon it bylaw. The department, on the other hand, has not rebutted the assessee’s evidence by establishing any specific falsity, inflation, non-execution of work, or accommodation entry mechanism qua the assessee. It would therefore be wholly unfair to visit the assessee with adverse tax consequences merely because the contractor, or some persons in its chain, may have maintained their affairs in an irregular or questionable manner. The law certainly permits the Revenue to proceed against the erring contractor or the actual beneficiaries of such irregularities, but it does not permit disallowance in the hands of a bona fide contracting party unless its own claim is shown to be false or non-genuine.
Further similar observations have by the cordinate bench of Mumbai Tribunal in the case of assessee’s sister i.e M/s Horizon Projects Private Limited (Supra) wherein a detailed finding has been
38 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. given by the Hon’ble Bench pertaining to transaction undertaken with Senghani Creators Pvt. Ltd. After verifying the papers on record, the ITAT deleted the entire addition by setting aside the order of the CIT(A).
Since the facts in the instant case is identical to that undertaken by the assessee’s sister concern with M/s Horizon Projects Private Limited, we set aside the order of the learned CIT(A) on this issue and direct the Assessing Officer to delete the entire disallowance made in respect of sub-contracting expenditure booked through M/s Senghani Creators Pvt. Ltd. Consequently, Ground Nos. 3 and 4 raised by the assessee for Assessment Year 2023-24 are allowed.
We now come to Ground No. 5 & 6 of the assessee’s appeal for Assessment Year 2023-24 and ground no. 8 of the revenue appeal, which pertains to addition of Rs. 29,41,143/- on account of alleged cash receipts from sale of scrap, which the learned CIT(A) has restricted to 15% of the said amount. The Assessing Officer had made the addition under section 69A on the footing that for the period 21.03.2022 to 18.04.2022 the assessee had received cash of Rs. 29,41,143/- on account of sale of scrap to Alpha Enterprises, as
39 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. allegedly stated by Shri Vijay BhaskarMadne in answer to Question No. 26 of his statement recorded under section 132(4), and that such cash receipt had not been offered in the return of income for the relevant year.
Before the learned CIT(A), the assessee contended that the addition under section 69A was misconceived because the amount, assuming it represented scrap sale receipts, was in the nature of business receipts and could not be treated as unexplained money under section 69A. It was further submitted that even otherwise the chart found in possession of the employee did not clearly demarcate the amount attributable to the relevant assessment year, and that as per the policy of the group, scrap income was accounted for at the time of raising final bills or project accounting, and therefore no income had accrued in the year in the manner assumed by the Assessing Officer.
The learned CIT(A), while accepting the broad contention that the amount could not be brought to tax under section 69A because of its evident business character, nevertheless held that the receipt was relatable to the business of the assessee and therefore some income element should be brought to tax. Taking note of the fact that the period reflected in the seized
40 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. material stretched from 21.03.2022 to 18.04.2022 and that the project itself was still ongoing, the learned CIT(A) restricted the addition to 15% of the total amount.
Before us, the learned counsel for the assessee reiterated that the entire addition deserved deletion, firstly because it rested merely on the statement of an employee and not on any clear incriminating material directly establishing accrual of taxable income in the year, and secondly because even the chart found did not specify how much of the amount pertained to the relevant year. The learned Departmental Representative, on the other hand, supported the order of the Assessing Officer and submitted that once the employee had categorically admitted that the receipts were not recorded in the books, the entire amount deserved to be taxed.
We have considered the rival contentions. In our view, the learned CIT(A) was right in holding that the impugned receipt, assuming it represents unaccounted scrap sale proceeds, could not be brought to tax under section 69A, for the plain reason that the nature of the receipt itself shows it to be connected with the business operations of the assessee. Once the nature and source
41 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. of the receipt are identifiable as business-related, the deeming fiction of section 69A, which applies to unexplained money not satisfactorily explained, loses its force. However, that does not ipso facto mean that the whole amount must either be taxed in full or deleted in entirety. The question then becomes one of proper quantification and year-wise attribution. The material on record, as noted by the authorities below, shows that the receipt pertains to a period spreading across more than one point in time and also to a project still under execution. In such a factual setting, the learned CIT(A) adopted an estimation approach and sustained 15% of the amount.
However, having regard to our reasoning already recorded in respect of on-money and other allied unaccounted business receipts, and particularly the principle that what is to be taxed is the income component embedded in such unaccounted business receipts and not the gross receipt as such, we are of the considered view that the same approach ought to be consistently applied here as well. Since the receipt is a business receipt in character, and not unexplained money in the abstract, only the profit element embedded therein can be taxed. Following the same line of reasoning adopted by us in the context of on-money
42 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. receipts, and in the absence of any distinguishing factual basis warranting a higher estimate, we hold that the addition on account of scrap sale receipts should also be restricted to 8% of Rs. 29,41,143/-. Indistinguishable findings have been given by the cordinate bench of Mumbai Tribunal in the case of assessee’s sister i.e M/s Horizon Projects Private Limited (Supra). Thus, following the aforesaid decision of assessee’s related entity, we hold that the assessee gets partial relief over and above what has been granted by the learned CIT(A).
Ground No. 5 & 6 of the assessee’s appeal for Assessment Year 2023-24 and ground no. 8 of the revenue appeal are partly allowed in the aforesaid terms. Ground No. 7 & 8 of Assessee’s appeal, being general and argumentative in nature, stands disposed of accordingly.
We now come to Ground No. 6 & 7 of the Revenue’s appeal for A.Y. 2023-24, whereby the Revenue has challenged the deletion by the learned CIT(A) of the addition made by the Assessing Officer under section 43CA of the Act. The grievance of the Revenue is that the learned CIT(A) erred in holding that section 43CA was not attracted merely because
43 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. the project was under construction and no registered sale deed or possession had been completed during the year, despite the fact that agreements to sell had been executed and consideration had been received.
The facts relevant for this issue are that during the course of assessment the Assessing Officer noticed that the agreement value in respect of a residential flat sold by the assessee was allegedly lower than the stamp duty value adopted by the registering authority. He therefore invoked section 43CA and substituted the stamp duty value as the deemed sale consideration, leading to an addition of Rs. 1,60,68,801/-, being the difference between the stamp duty value as adopted by him and the declared agreement value.
In appeal, the assessee submitted before the learned CIT(A) that the provisions of section 43CA were not applicable in the facts of the present case because the project was still under construction and no registered conveyance or completed transfer had taken place during the relevant year. It was further submitted that the assessee was following the Project Completion Method of accounting and no revenue in respect of the project had been recognized during the year.
44 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd.
The learned CIT(A), after examining the agreement copy, Index II and the factual matrix, found merit in the assessee’s contentions. He held that section43CA contemplates transfer of land or building or both held as stock-in-trade, and in the present case what existed during the year was only an agreement to sell in the context of an ongoing under-construction project, where the assessee was following Project Completion Method. The learned CIT(A) also specifically noted that the Assessing Officer had inadvertently adopted a wrong stamp duty value and that even on merits the declared consideration was not lower in the manner assumed by the Assessing Officer. The relevant finding of the learned CIT(A), as noted in the draft order, reads as under:
“12.5 For the applicability of section 43CA, the law clearly requires a “transfer” of land or building or both, held as stock-in-trade, where the consideration received or accruing is less than the stamp duty valuation. In the absence of such a transfer, the provisions of section 43CA are not attracted. There is no evidence on record of receipt of the full sale consideration or execution of registered sale documents during the year. Hence, it cannot be said
45 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. that income has accrued or arisen on account of any such transfer in this period.
12.6 In support of this view, reliance is placed on the decisions of the Hon’ble ITAT, Mumbai in Shree Laxmi Estate Pvt. Ltd. vs. ITO [2019] 108 taxmann.com 195 and Goodwill Constructions vs. DCIT (ITA No. 3233/Mum/2022), wherein it has been held that when the property in question is still under construction and the agreement only grants booking rights or rights in the future property, there is no transfer of land or building. Therefore, section 43CA is not attracted unless the property per se is transferred through a registered sale deed document or possession is handed over as per section 53A of the Transfer of Property Act. The Hon’ble ITAT in the case of the Shree Laxmi Estate Pvt. Ltd. vs. ITO [2019] 108 taxmann.com 195 at para number 5.7.1 has elaborately dealt the said issue relying on various judgements of multiple tribunals and judicial authorities.
12.7 The facts in the present case are squarely covered by these rulings. Therefore, the taxability of the differential amount between stamp duty value and agreement value will arise only on the date of actual transfer of assets. In light of the above factual
46 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. and legal position, it is held that no taxable event has occurred during the relevant assessment year, and consequently, the provisions of section 43CA of the IT Act are not applicable. Therefore, the addition of Rs. 1,60,68,804/- made u/s 43CA of the Act by the Assessing Officer is hereby deleted. However, the AO is free to make addition u/s 43CA in the year in which the sale agreement has been entered into with the respective parties provided that the stamp duty value is higher than the final sale agreement value (i.e. date of actual transfer of assets). Hence, this ground of appeal stands allowed.”
Before us, the learned counsel for the assessee reiterated that there was no infirmity in the appellate order and that both on legal principle and on factual computation the addition under section 43CA had rightly been dealt with by the Ld CIT(A). However, he fairly conceded that the adiitoncan not be deleted in totality but taxable in the year when the assets actually transferred and income recognized for the same by the assessee. The learned Departmental Representative, on the other hand, submitted that once rights in property were created through agreements to sell and consideration was received or
47 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. accrued, section 43CA was attracted and registration or handing over of possession was not decisive.
We have given our thoughtful consideration to the rival submissions and have carefully perused the material available on record. It is observed that the learned CIT(A) has rightly appreciated certain factual aspects of the matter. Firstly, the Assessing Officer had proceeded on an incorrect stamp duty valuation, whereas the actual stamp duty value emerging from the registered agreement was different. Secondly, it is an undisputed fact that the appellant's project was under construction during the relevant previous year and that the appellant has consistently followed the Project Completion Method of accounting, under which the revenue from the project is recognized only upon its completion.
However, we are unable to concur with the ultimate conclusion arrived at by the learned CIT(A) that no adjustment under section 43CA of the Act was warranted. A perusal of the material on record clearly demonstrates that the stamp duty value of the subject properties exceeded the agreement value and, therefore, the provisions of section 43CA are attracted. Nevertheless, considering the method of
48 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. accounting followed by the assessee, the consequential adjustment under section 43CA cannot be brought to tax in the year under consideration, since the corresponding revenue from the sale of the flats has not yet been recognized. Such adjustment would necessarily have to be made in the year in which the income from the sale of the concerned flats is offered to tax in accordance with the method of accounting regularly followed by the appellant.As per provisions of section 43CA the sake consideration will replaced by the stamp duty valuation in can of any deviation on lower side, hence in the case under consideration the assessee should adopt the stamp duty value in case of these units in the year when sales of these units offered to tax.Accordingly, while setting aside the finding of the learned CIT(A) to the above extent, we direct the Assessing Officer to give effect to the provisions of section 43CA in the year in which the revenue from the sale of the captioned flats is recognized and offered to tax.
Ground Nos. 6 and 7 raised by the Revenue are, therefore, treated as allowed for statistical purposes.
49 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 53. We now come to Ground No. 3 & 5 of the Revenue’s appeal for A.Y. 2023-24, whereby the Revenue has challenged deleting the disallowance of Rs. 1,83,00,000 made under section 37(1) of the income-tax Act, 1961 in respect of professional fees paid to Ms Last Mile Enterprises and further deleting the consequential reduction of Rs. 28,67,00,000 from Work-in-Progress.
The facts relevant for this issue are that during the course of assessment the Assessing Officer noticed that the that Last Mile Enterprises Limited (formerly Trans Financial Resources Ltd.), based in Ahmedabad, had sales only with Runwal Group companies during FY 2022-23, with no corresponding expenses or payments recorded and no significant prior transactions. Although registered as a “stock broker” under GST, its Annual Report for FY 2022-23 described it as engaged in construction activities; however, no stock, derivative, or construction-related transactions, nor any inward or outward supplies, were reflected in the GST e-way bill data for the said year.
Further, during the assessment proceeding the AO has held that the assessee company failed to
50 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. explain why the corresponding income was not offered by Last Mile Enterprises Ltd. or why such a substantial contract was awarded to an entity with no prior experience or record of providing similar services. The AO has also observed that as per the engagement letter, M/s LMEL was to receive a transaction fee of 2.5% - 3% of the capital raised for the Runwal Group. Hence the Ld.AO disallowed the same u/s 37 of the Act by treating the same as expense not incurred for business purpose by relying on the statement of Shri SachinBattalwar. Further, since 6% of the total expenses debited to WIP has been recognized to profit & loss account during the year under consideration, the Ld.AO has added an amount of Rs.1,83,00,000/- to the total income of the assessee company and reduced the balance amount from WIP.
During the course of appellate proceeding,the appellant submitted the company had availed professional services worth Rs.30.5 crore (excluding GST) from M/s Last Mile Enterprises Ltd. (LMEL) during the relevant year for raising capital / funds and submitted extensive documentation—including tax invoices, bank statements, ledger entries, and a service agreement—to prove the genuineness of the
51 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. transaction. The Ld.CIT after examining the details/documents submitted by the appellant held as under:
“11.6 I have carefully considered the submissions and the paperbook submitted by the appellant. It is observed that the Assessing Officer has disallowed Rs.1,83,00,000/- u/s 37(1) of the Income-tax Act, 1961, by treating a portion of professional service payments made to M/s Last Mile Enterprises Ltd. (LMEL) as non-genuine. Further, a corresponding downward adjustment of Rs.28,67,00,000/- has also been made in the Work-in-Progress (WIP), based on the same premise. 11.7 As noted that during the year, the appellant had availed professional and consultancy services from LMEL and paid an amount of Rs.30,50,00,000 (excluding GST) as against the capital raised for the company. To substantiate the same, the appellant furnished various documents including: Service agreements with LMEL, Tax invoices, Ledger accounts of LMEL, Bank statements showing payments through regular banking channels.
11.8 Upon examination of the agreement, it is evident that the company was obligated to pay fees at the rate
52 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. of 2.5% or 3% of the capital raised in consideration for financial advisory services rendered. During the appellate proceedings, the appellant also referred to the audited financial statements, specifically Note 19, which records that the appellant had obtained a borrowing from the Housing Development and Finance Corporation during the relevant financial year. Additionally, on perusal of the assessment order (page 63), it can be seen that the assessee company has also deducted TDS and deposited in time. Further, all the payments have been routed through banking channel.
11.9 Thus, considering the comprehensive documentary evidence submitted by the appellant, along with the fact that the company successfully raised fresh capital through the assistance of M/s Last Mile Enterprises Ltd. (LMEL), the Assessing Officer’s conclusion that the transaction was non- genuine is devoid of merit and not supported by the facts on record. Further, the appellant has categorically denied any cash receipts in lieu of professional fees paid to M/s LMEL. The AO has neither confronted these transactions with any of material to M/s LMEL nor issued any notices / summons to LMEL to substantiate non-genuineness of transaction undertaken between M/s LMEL and appellant. Further during the course of search no incriminating documents were found or seized, which
53 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. can suggest that the appellant has received cash in lieu of professional fees paid to LMEL.
11.10 Although, it has been claimed in the assessment order that the transactions with LMEL are non-genuine transactions, but again statement of Shri SachinBattalwar was neither confronted to M/s LMEL, nor any seized document indicated cash transactions with M/s LMEL. Therefore, in my view the merely statement of the employee without any supporting evidence cannot be considered as “Credible Evidence”, unless the same has been corroborated with any other evidence. Thus, it hampered the primary and fundamental requirement of natural justice.
11.11 It is worthwhile to mention here that during the course of search proceedings at the Runwal group, no credible evidence has been found and seized. The AO has made addition solely based on a statement by Mr. SachinBattalwar (employee of the appellant group) without substantiating it with any other corroborating evidence or third-party investigation. Thus, the veracity and reliability of the statement of MrSachinBattalwar was not checked or tested and thus losses its evidentiary value. Therefore, in such scenario no addition is warranted in the case of appellant.”
The Ld.CIT further relied on various judicial pronouncement wherein it was held that that addition
54 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. can’t be made merely on the basis of statement of employee, unless such material or statement is corroborated by independent evidence linking such material to the assessee. The same are as under:
• KailashbenManharlalChokshi vs. CIT 174 taxman 466 (Gujarat), • Mumbai Tribunal in the case of Skylark Build vs ACIT (97 taxmann.com 682) • HIGH COURT OF DELHI in the case of Commissioner of Income-tax v. Harjeev Aggarwal [2016] 70 taxmann.com 95 (Delhi) • Hon’ble Madras High Court in case of CIT Vs. Smt. S. JayalakshmiAmmal [(2016) 74 taxmann.com 35 (Madras)]
Before us, the learned counsel for the assessee reiterated that there was no infirmity in the appellate order and that both on legal principle and on facts the addition had rightly been deleted. The professional fee was paid for raising loan from HDFC Ltd. Which is evident from the audited books of accounts. The said entity has also offered income ion the respective years. The learned Departmental
55 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. Representative, on the other hand, relied upon the findings of the AO.
We have heard the rival submissions and perused the material available on record. The issue for our consideration is whether the learned CIT(A) was justified in deleting the disallowance of ₹1,83,00,000/- made under section 37(1) of the Act and the consequential reduction of Work-in-Progress amounting to ₹28,67,00,000/-.
It is an undisputed fact that the assessee had availed professional and financial advisory services from M/s Last Mile Enterprises Ltd. (LMEL) for raising capital/funds during the relevant previous year. The assessee has placed on record the service agreement, tax invoices, ledger accounts, bank statements evidencing payment through normal banking channels, and details of tax deducted at source. The agreement clearly stipulates the professional fee payable as a percentage of the funds raised. The audited financial statements also substantiate that the assessee had raised borrowings during the year, thereby establishing the commercial nexus between the services availed and the payments made. Further the party i.e LMEL has also offered the
56 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. income to tax. The Assessing Officer has not disputed the existence of these documents nor brought any material on record to demonstrate that the documents were fabricated or that the services were never rendered.
We find that the entire disallowance has been founded primarily on the statement of an employee of the assessee group, namely Shri SachinBattalwar. However, except for the said statement, no corroborative material has been brought on record to establish that the payments made to LMEL were sham or that the assessee had received back any amount in cash. Admittedly, no incriminating document was found or seized during the course of search indicating any cash movement or accommodation arrangement involving LMEL. Further, no enquiry was conducted from LMEL, nor were any notices or summons issued to verify the genuineness of the services rendered or to confront the allegations forming the basis of the addition. In the absence of any independent investigation or corroborative evidence, the statement of an employee, by itself, cannot constitute sufficient evidence to sustain the impugned addition.
57 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 62. The learned CIT(A), after appreciating the documentary evidence and the factual matrix, has rightly held that the Assessing Officer failed to discharge the burden cast upon him to establish that the impugned expenditure was either bogus or not incurred wholly and exclusively for the purposes of business. The findings recorded by the learned CIT(A) are based on proper appreciation of the evidence and have not been controverted by the Revenue by bringing any contrary material on record. We also find merit in the reliance placed by the learned CIT(A) on the judicial precedents holding that an addition cannot be sustained merely on the basis of an uncorroborated statement without any supporting evidence.
In view of the foregoing discussion, we find no infirmity in the well-reasoned order of the learned CIT(A) deleting the disallowance of ₹1,83,00,000/- under section 37(1) of the Act and the consequential adjustment of ₹28,67,00,000/- to the Work-in- Progress. Accordingly, the findings of the learned CIT(A) are upheld and the grounds raised by the Revenue are dismissed.
Ground No. 3 & 5 raised by the Revenue is dismissed.
58 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd.
In the result, the Assessee’s appeal for Assessment year 2023-24 is hereby allowed.
Revenue’s appeal for Assessment Year 2023-24 is also partly allowed.
AY 2024-25
The grounds of appeal raised by the assessee in ITA No. 350/Mum/2026 for Assessment Year 2024-25 read as under:
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in restricting the addition made by the Learned Assessing Officer to the extent of Rs.1,81,45,200/ (i.e. being 15 percent of Rs.12,09,68,000/-)as profit earned on alleged on money received on sale of flat, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in not appreciating the fact that the appellant has not taken on money on sale of flats and simply made the addition by relying on blue colour diary seized from cabin of Smt. Lucy Roychoudhary without any independent corroborating
59 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. evidence to support these entries.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in restricting the disallowance made by the Learned Assessing Officer to the extent of Rs.27,69,510/- (being 5% of Rs.5,53,90,207/-) u/s.37 of the Income Tax Act, 1961 by treating genuine sub-contracting expenses incurred on M/s Senghani Creators Pvt Ltd as alleged bogus expenses, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in reducing the amount to the extent of Rs.1,87,81,058/- (Being 5% of Rs.37,56,21,168/-) from WIP of the appellant by treating genuine sub-contracting expenses incurred on M/s Senghani Creators Pvt Ltd as alleged bogus expenses, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) and the Learned Assessing Officer erred in making additions on the basis of uncorroborated statements which were later retracted, without considering the facts & circumstances of the case and position of law.
The appellant craves leave to add, amend, alter or delete the said ground of appeal.
60 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. The Revenue, being aggrieved by the partial relief granted by the learned CIT(A), has also filed its cross appeal in relation to Assessment Year 2024-25 and has raised the following grounds:
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition under section 69A of the Income-tax Act, 1961, despite having held that the appellant had incurred unaccounted cash expenditure.
The Ld. CIT(A) failed to appreciate that the assessee did not discharge the statutory onus of explaining the source of the unrecorded expenditure, and that section 69C squarely applies once such unexplained expenditure is established.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing benefit of 85 percent of notional expenditure (out of total on-money received) even when assessee could not provide any evidence that it had incurred 85 percent of expenditure against the On-Money received.
Whether on the facts and circumstances of the ease and in Jaw, the Ld. CIT(A) is justified in allowing benefit of 85 percent of notional exponditure (out of total on-money received) in the circumstance that if at all any expenditure is incurred from on-money, it was incurred in cash (as on money is cash receipt) and section 40A(3) of the Income Tax Act, 1961 get clearly
61 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. attracted in case of cash expenditure. Whether on the facts and circumstances of the case and and in law, the Ld. CIT(A) is justified in, allowing benefit of 85 percent of notional expenditure (Out of on-money received) by relying on the findings of Ekta. Housing Pvt. Ltd (ITA No. 1732 Mum 2019 AY 2013-14) even when fact of Ekta Housing Pvt. Ltd are different as cash expenditure as found in that case and assessee had clearly established one to one linkage between on-money received and cash expenditure, which is not in the instant case.
Whether on the facts and circumtstances of the case and in law, the Ld. CIT(A) is justified in allowing telescoping and granting deduction of notional expenditure at 85 percent of the on-money receipts, despite the fact that only cash expenditure of aggregating of Rs. 90,95,230 was found during the course of search and separately added under section 690, and therofore deduction ought to have been restricted solely to the said cash expenditure of Rs. 90,95,230.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing notional expenditure of 85 percent of the on-money after acknowledging systematic, collection of on- money on sale of flats and commercial units, without correspondingly bringing to tax the notional on-money relating to the remaining flats and commercial units sold during the year under consideration, when the
62 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. principle of consistency and balance in the reasoning required that notional income also be taken into account.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in giving benefit of telescoping effect of Rs. 90,95,230 of cash expenditure from the on-money received, in the circumstances, when Ld. CIT(A) has already given benefit of 85 percent of notional expenditure and thus, allowing further benefit of Rs. 90,95,230 will reduce the taxable profit to much lower than 15 percent of on- money received and thus, contradicts the findings of CIT(A) itself.
On the facts and circumstances of the case and in law, whether the Ld. CIT(A) erred in restricting the addition on account of unaccounted on-money receipts from Rs. 12,09,68000 to only 15 percent thereof, despite having categorically held that the assessee was engaged in systematic receipt of on-money and (that such receipts stood conclusively proved on the basis of incriminating material seized during search and sworn statements recorded under section 132(4) of the Act.
On the facts and circumstances of the case and in law, whether the Ld. CIT(A) erred in restricting the disallowance of subcontracting expenses incurred on Senghaní Creators Pvt. Ltd. to 5 percent, despite the Assessing Officer having conclusively established that
63 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. the said expenses were not genuine and were rightly disallowed in full under section 37 of the Income-tax Act, 1961 and reduced from the Work-in-progress.
On the facts and circumstances of the case and in law, whether the Ld. CIT(A) failed to appreciate that the on-money receipts constituted undisclosed and unaccounted business receipts, received in cash outside the books of account, and that in the absence of any evidence brought on record by the assessee to demonstrate corresponding expenditure incurred out of such receipts, the entire amount was liable to be taxed as business income under section 28.
Ground Nos. 1 and 2 of the assessee’s appeal and Ground Nos. 1 to 8 and 10of revenue’s appeal for Assessment Year 2024-25 pertain to addition on account of alleged on-money receipts. Since this issue is materially identical to the one considered by us while adjudicating Ground Nos. 1 & 2 of the assessee’s appeal and the corresponding grounds 1,2,4,9 to 16 of the Revenue for Assessment Year 2023-24, and since the factual basis, nature of material, and controversy regarding taxation of the gross receipt versus the profit element remain the same, our reasoning and conclusion recorded therein shall apply mutatis mutandis to this year also. Accordingly, following our decision for Assessment Year 2023-24, we hold that not the entire alleged on-
64 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. money receipt, but only the profit element embedded therein can be brought to tax, and such profit is directed to be estimated at 8% of the alleged receipt instead of 15% as sustained by the learned CIT(A). Thus, Ground Nos. 1 and 2 of the assessee’s appeal and Ground Nos. 1 to 8 and 10 for Assessment Year 2024-25 are partly allowed in the same terms.
Ground Nos. 3 and 4 of the assessee’s appeal and ground no.9 of the Revenue’s appeal for Assessment Year 2024-25 relate to the disallowance in respect of transactions with Senghani Creators Pvt. Ltd. and corresponding reduction from Work-in- Progress. Since this issue is squarely covered by our findings recorded while adjudicating Ground Nos. 3 and 4 of the assessee’s appeal for Assessment Year 2023-24, where we have held that the entire disallowance is unsustainable on facts as well as in law, the same view shall govern the present year as well. Consequently, these grounds of the assessee are allowed, and the Assessing Officer is directed to delete the disallowance and restore the corresponding amount in Work-in-Progress.
65 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 66. Ground No. 5 & 6 of the Assessee’s appeal being general and argumentative in nature, stands disposed of accordingly.
In the result, the appeal of the assessee for Assessment Year 2024-25 is partly allowed in the manner indicated above, whereas the appeal of the Revenue for the said year is dismissed.
AY 2021-22
We now take up the assessee’s appeal for Assessment Year 2021-22, being ITA No. 347/Mum/2026. The grounds raised by the assessee read as under:
On the facts and circumstances of the case as well as in law, the Learned CIT(A) and the Learned Assessing Officer erred in reopening the case u/s.147 of the Income Tax Act, 1961, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in restricting the addition made by the Learned Assessing Officer to the extent of Rs.7,50,000/-(i.e. being 15 percent of Rs.50,00,000/-) as profit earned on alleged on money
66 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. received on sale of flat, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well 3. as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in not appreciating the fact that the appellant has not taken on money on sale of flats and simply made the addition by relying on blue colour diary seized from cabin of Smt. Lucy Roychoudhary without any independent corroborating evidence to support these entries.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) and the Learned Assessing Officer erred in making additions on the basis of uncorroborated statements which were later retracted, without considering the facts & circumstances of the case and position of law
The appellant craves leave to add, amend, alter or delete the said ground of appeal.”
At the outset, it is noted from the record that the learned Authorised Representative, during the course of hearing, did not press Ground No. 1 relating to the challenge to reopening under section 147. Accordingly, the same is dismissed as not pressed.
In so far as Ground Nos. 2 and 3 regarding the issue of on-money receipts is concerned, we have,
67 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. after an exhaustive analysis of facts and judicial precedents, reiterated the well-settled principle that gross receipts cannot be equated with income, and that in cases of alleged unaccounted receipts in real estate transactions, only the profit element embedded therein is liable to be taxed. Applying this principle, and taking into account the nature of the assessee’s project and judicial guidance available, we have held that estimation at 8% of the alleged on-money receipts would meet the ends of justice, in substitution of the 15% adopted by the learned CIT(A).
In the result, the assessee’s appeal for Assessment Year 2021-22 is partly allowed.
AY 2020-21
We now take up the assessee’s appeal for Assessment Year 2020-21, being ITA No. 346/Mum/2026. The grounds raised by the assessee read as under:
On the facts and circumstances of the case as well as in law, the Learned CIT(A) and the Learned
68 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. Assessing Officer erred in reopening the case u/s.147 of the Income Tax Act, 1961, without considering the facts and circumstances of the case.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in restricting the addition made by the Learned Assessing Officer to the extent of Rs.19,20,000/ (i.e. being 15 percent of Rs.1,28,00,000/-)as profit earned on alleged on money received on sale of flat, without considering the facts and circumstances of the case..
On the facts and circumstances of the case as well as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in not appreciating the fact that the appellant has not taken on money on sale of flats and simply made the addition by relying on blue colour diary seized from cabin of Smt. Lucy Roychoudhary without any independent corroborating evidence to support these entries.
On the facts and circumstances of the case as well as in law, the Learned CIT(A) and the Learned Assessing Officer erred in making additions on the basis of uncorroborated statements which were later retracted, without considering the facts & circumstances of the case and position of law.
The appellant craves leave to add, amend, alter or delete the said ground of appeal.”
69 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. 73. At the outset, it is noted from the record that the learned Authorised Representative, during the course of hearing, did not press Ground No. 1 relating to the challenge to reopening under section 147. Accordingly, the same is dismissed as not pressed.
In so far as Ground Nos. 2 and 3 regarding the issue of on-money receipts is concerned, we have, after an exhaustive analysis of facts and judicial precedents, reiterated the well-settled principle that gross receipts cannot be equated with income, and that in cases of alleged unaccounted receipts in real estate transactions, only the profit element embedded therein is liable to be taxed. Applying this principle, and taking into account the nature of the assessee’s project and judicial guidance available, we have held that estimation at 8% of the alleged on-money receipts would meet the ends of justice, in substitution of the 15% adopted by the learned CIT(A).
In the result, the assessee’s appeal for Assessment Year 2020-21 is partly allowed.
AY 2019-20
70 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd.
We now take up the revenues appeal for Assessment Year 2019-20, being ITA No. 706/Mum/2026. The grounds raised by the revenue read as under: 1. “On the facts and circumstances of the case and in law, whether the Ld. CIT(A) has erred in disregarding the statement recorded under section 132(4) of the Act, which has statutory evidentiary F value, and in accepting the belated retraction without critically examining its credibility and timing.”
On the facts and circumstances of the case and in law, whether the Ld. CIT(A) has wrongly held that the provisions of section 69A are not applicable to the facts of the case, adopting an unduly narrow interpretation and ignoring the substance of the transaction, which clearly indicated unexplained money in the hands of the assessee
On the facts and circumstances of the case and in law, whether the Ld. CIT(A) has erred in placing undue emphasis on the absence of third-party verification, while overlooking that the primary onus to establish the genuineness and business expediency of the transaction rested on the assessee
The assessee craves to leave to add, to amend and OR to alter any of the grounds of appeal
On the facts and circumstances of the case and in
71 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. law, whether the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 23,60,00,000 made under section 69A of the Income-tax Act, 1961, without appreciating the surrounding circumstances establishing the non-genuineness of the transaction with M.s. Last Mile Enterprises Limited.
On the facts and circumstances of the case and in law, whether the Ld. CIT(A) has failed to appreciate that the advance of Rs. 23,60,00,000 to an entity with no commensurate business activity, without charging any interest OR compensation and without any commercial rationale, constituted a colourable device, justifying the addition made.”
In so far as Ground Nos. 1, 2, 3, 5 & 6 are pertaining to advance given to Last Mile Enterprises Limited which has been added u/s 69A of the Act, we have, after an exhaustive analysis of facts and judicial precedents, reiterated in AY 2023-24 (ground no 3 & 5) where the transaction was payment of professional fees have held that the said transaction is genuine in nature and have sustained the findings of the CIT(A). In the instant appeal, the only difference is here that in the said year, advances have been paid by the appellant to LMEL. The CIT(A) observed that the appellant had duly substantiated the advance made to LMEL by furnishing bank
72 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. statements evidencing that the payments were made entirely through banking channels and were duly recorded in its books of account. The CIT(A) noted that the Assessing Officer had neither conducted any independent enquiry with LMEL nor issued any notice or summons to verify the genuineness of the transaction. More importantly, no incriminating document, seized material, cash trail or other corroborative evidence was found during the course of search or subsequent investigation to establish that the appellant had received any unaccounted cash in lieu of the advances made to LMEL. Furthermore, the Ld.AR of the assessee has stated that the entire advance is through bank and duly recorded in the books of account which was subsequently returned back to the appellant. Thus, once the amount is recorded in the books, no advantage claimed by the assessee and ultimately returned back, there is no question of making an addition u/s 69A of the Act.
Considering our decision given for AY 2023-24 (supra), we the findings of the learned CIT(A) are upheld and the grounds raised by the Revenue are dismissed.
Appeal of the Revenue is dismissed.
73 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd.
Before parting, it would be apposite to encapsulate the broad contours of the adjudication across all the years under consideration, as the issues involved emanate from a common search action and revolve around recurring themes of alleged on-money receipts, alleged unaccounted cash expenditure, disallowance of subcontracting expenses, and applicability of deeming provisions.
In so far as the issue of on-money receipts is concerned, we have, after an exhaustive analysis of facts and judicial precedents, reiterated the well- settled principle that gross receipts cannot be equated with income, and that in cases of alleged unaccounted receipts in real estate transactions, only the profit element embedded therein is liable to be taxed. Applying this principle, and taking into account the nature of the assessee’s project and judicial guidance available, we have held that estimation at 8% of the alleged on-money receipts would meet the ends of justice, in substitution of the 15% adopted by the learned CIT(A).
In respect of the alleged unaccounted cash expenditure, we have upheld the fundamental
74 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. proposition that where such expenditure is intrinsically linked to the same stream of unaccounted receipts, separate addition thereof would result in impermissible double taxation, and therefore, telescoping or set-off is a logical and necessary consequence of taxing the profit element of such receipts. Once the profit is estimated, all related expenditures are deemed to have been allowed, and no independent addition survives.
On the issue of sub-contracting expenses routed through Senghani Creators Pvt. Ltd., we have examined the matter threadbare and have come to a firm conclusion that the assessee has discharged its evidentiary burden by placing on record exhaustive documentary proof, and that no specific defect, falsity or inflation has been demonstrated by the Assessing Officer. We have held that adverse inference based solely on third-party search findings, without direct nexus, is legally unsustainable, and accordingly, the entire disallowance sustained by the learned CIT(A) has been directed to be deleted across all years.
On the issue of addition under section 43CA, we have set aside the findings of the CIT(A) and directed the issued to AO to give effect to the provisions of
75 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd. section 43CA in the year in which the revenue from the sale of the captioned flats is recognized and offered to tax.
On the issue of scrap sale receipts, we have held that such receipts are business receipts in nature and cannot be taxed under section 69A, and that only the income component embedded therein is liable to be taxed, which we have consistently estimated at 8%, in line with our findings on on-money receipts.
Thus, adopting a consistent, coherent and legally sustainable approach across all the years, we have harmonized the treatment of unaccounted receipts and related expenditures, ensuring that only real income is brought to tax, and that no part of the same stream of income is subjected to multiple taxation under different provisions.
In the result:
Assessee’s appeals ITA No. 346/Mum/2026, 347/Mum/2026, 349/Mum/2026 and 350/Mum/2026 filed by the assessee are partly allowed
76 ITA No. 346, 347, 349, 350, 706, 995, 996/Mum/2026 Evie Real Estate Pvt. Ltd.
Revenue’s appeals for ITA 706/Mum/2026 and 996/Mum/2026 are dismissed and ITA No. 995/Mum/2026 is partly allowed.
Order pronounced on 14th July, 2026.
Sd/- Sd/- (GIRISH AGRAWAL) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 14/07/2026 Kunal Kr., P.S.
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//
BY ORDER,
(Asstt. Registrar) ITAT, Mumbai
More judgments on Section 147
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- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
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- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
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