ASST. COMMISSIONER OF INCOME TAX (CENTRAL CIRCLE)-6(1), MUMBAI, MUMBAI vs. PRIVA INFRACON, NAVI MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 6976/Mum/2025 (Assessment Year: 2018-19) ACIT Central Circle Priva Infracon, 6(1), Mumbai Shop 1203, Rupa Room no. 445, 4th Vs. Solitaire, Millenium Floor, BKC, Mumbai - Business Park, SO, 400 051 Thane, Maharashtra – 400 710. PAN/GIR No. AAQFG2127C (Applicant) (Respondent) Revenue by Shri R. A. Dhyani, Ld. DR Assessee by Shri Nishit Gandhi, Ld. AR Date of Hearing 27.04.2026 Date of Pronouncement 20.05.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal by the Revenue is directed against the order passed by the Commissioner of Income Tax (Appeals)-54, Mumbai [hereinafter referred to as “the CIT(A)”] under section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] dated 24.09.2025 for the Assessment Year 2018–19, arising out of the

2 ITA No. 6976/Mum/2025 Priva Infracon, assessment order passed by the Assessing Officer under section 143(3) read with section 147 of the Act dated 26.06.2024. Facts of the Case 2. The assessee is a firm engaged in the business of development and construction of industrial and commercial galas. The assessee had originally filed its return of income under section 139(1) on 25.07.2018 declaring total income at Rs. Nil/-. Subsequently, a search and seizure action under section 132 of the Act was conducted in the Middleman/Businessmen group on 23.09.2021, wherein the assessee was also covered. Consequent to the search, the case of the assessee was reopened and notice under section 148 was issued on 28.03.2024. In response, the assessee filed return of income on 09.04.2024 declaring total income at Rs. 1,91,29,780/-. Thereafter, statutory notices under section 143(2) and section 142(1) were issued and assessment was completed under section 143(3) read with section 147 on 26.06.2024 determining total income at Rs. 9,56,48,890/-. 3. During the course of search, incriminating material in the form of “on-money” sheets and WhatsApp chats was found and seized from the premises of the assessee group. The said material reflected unaccounted cash receipts from sale of commercial units in the project “GNP Arcadia”. Statements recorded under section 132(4) of Shri Kapil Talreja and Shri Girish Pawar confirmed that amounts reflected in column “N” represented cash receipts not recorded in the books of account and that such

3 ITA No. 6976/Mum/2025 Priva Infracon, receipts were utilized for business purposes including construction expenses. 4. Based on the seized material, the Assessing Officer noted that the assessee had undisclosed cash receipts of Rs. 9,56,48,881/- pertaining to the year under consideration. The assessee, in its return filed in response to notice under section 148, offered income at Rs. 1,91,29,780/- being 20% of such receipts and claimed that the balance 80% amounting to Rs. 7,65,19,104/- represented unaccounted expenditure incurred for earning such receipts. 5. In response to the show cause notice issued by the Assessing Officer, the assessee submitted that during the course of search, evidences of both unaccounted receipts as well as unaccounted expenditure were found. It was contended that statements recorded under section 132(4) clearly established that cash receipts were utilized for construction-related expenses and that such expenditure was not recorded in the regular books. The assessee further submitted that it had estimated net income at 20% after considering expenditure at 80% of gross receipts and that such estimation was reasonable in the real estate business where transactions are partly carried out in cash. It was also contended that due to the nature of unaccounted transactions, third-party evidences such as PAN and address could not be furnished.

4 ITA No. 6976/Mum/2025 Priva Infracon, 6. The Assessing Officer, however, was not satisfied with the explanation furnished by the assessee. It was observed that the assessee failed to provide any documentary evidence in support of the claim of expenditure of Rs. 7,65,19,104/- and even basic details such as nature of expenses and identity of parties were not furnished. The Assessing Officer held that mere general submissions could not substantiate the claim of deduction. Accordingly, the Assessing Officer rejected the claim of expenditure and added the entire amount of Rs. 7,65,19,104/- as unaccounted business income under section 28 of the Act, thereby assessing total income at Rs. 9,56,48,890/-. 7. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). The assessee challenged the addition made by the Assessing Officer and contended that only profit element embedded in unaccounted receipts can be brought to tax and not the entire receipts. It was further contended that the Assessing Officer erred in disallowing the claim of expenditure without appreciating that evidences of such expenditure were found during search and admitted in statements recorded under section 132(4). The assessee relied upon various judicial precedents and also pointed out that in its own case for other assessment years, net profit had been estimated at around 22% of such receipts. 8. The CIT(A), after considering the submissions and material on record, observed that there was no dispute regarding receipt of unaccounted cash from sale of commercial units. The only issue

5 ITA No. 6976/Mum/2025 Priva Infracon, was regarding allowability of unaccounted expenditure. The CIT(A) noted that the Assessing Officer had not categorically denied the existence of seized material indicating expenditure and therefore it could be inferred that such expenditure had been incurred. At the same time, the CIT(A) held that the quantum of expenditure required estimation. The CIT(A), following the orders passed in the assessee’s own case for A.Ys. 2019–20 and 2021–22 as well as the decision of the Co-ordinate Bench in group cases, estimated net profit at 22% of unaccounted receipts instead of 20% offered by the assessee. Accordingly, the CIT(A) directed that only 22% of the unaccounted receipts be treated as taxable income and granted partial relief to the assessee.

a) On the facts and in the circumstances of the case the Ld. CIT(A) erred in estimating the net profit @ 22% on unaccounted business receipts of Rs. 9,56,48,884/- by giving relief to the assessee of Rs. 7,46,06,130/- without appreciating the fact that the assessee has not submitted any documentary evidences that @78% of the expenses were incurred for the earning of such income and no evidence was submitted by the assessee regarding the claim of expenses. b) The Appellant crave, leave to add, alter, amend or modify any or all grounds of appeal on or before the date of hearing. 10. The Ld. Departmental Representative (DR), reiterated the facts and contended that the Ld. CIT(A) has erred in allowing relief to the assessee by estimating the net profit at 22% on unaccounted business receipts and thereby granting relief of Rs. 7,46,06,130/-.The Ld. DR submitted that the Ld. CIT(A) failed to

6 ITA No. 6976/Mum/2025 Priva Infracon, appreciate that the assessee had not furnished any documentary evidence in support of the claim of expenditure to the extent of 78% of the unaccounted receipts. It was argued that even basic details such as the nature of expenses, the identity of the parties to whom payments were allegedly made, and their PAN details were not provided by the assessee, and the claim was made merely on general and unsubstantiated assertions. 11. In view of the above, the Ld. DR submitted that the findings of the Ld. CIT(A) are not acceptable and that the Assessing Officer was justified in disallowing the entire claim of expenditure in the absence of supporting evidence. Accordingly, it was prayed that the order of the Assessing Officer be restored. 12. The Ld. Authorised Representative (AR), on the other hand, submitted that the assessee has already offered the on-money receipts to tax based on the documents seized during the course of search as well as the statement recorded under section 132(4). It was further submitted that, simultaneously, numerous documents evidencing expenditure incurred in relation to such receipts were also found during the course of search. It was contended that the total on-money receipts as per seized documents aggregated to Rs. 53.40 crore and the same has been duly offered to tax in the hands of various group entities. Correspondingly, the total expenditure recorded in the very same seized documents amounted to Rs. 43.18 crore (summary of the same placed on page 96 of the paper book), which is approximately 80% of the receipts. Therefore, the assessee has

7 ITA No. 6976/Mum/2025 Priva Infracon, consistently offered income at 20% of such receipts, representing the profit element embedded therein. 13. The Ld. AR emphasised that it is an undisputed fact that documents pertaining to unaccounted expenditure were found during the course of search and that even the Assessing Officer has not disputed the existence of such documents (as per para 2.2. of order of Assessing Officer. Accordingly, it was submitted that once the receipts are accepted as income based on seized material, the corresponding expenditure reflected in the same material cannot be ignored and must be allowed while determining the taxable income. 14. The Ld. AR further invited our attention to the relevant portion of the assessment order wherein the statement of Shri Girish Pawar recorded under section 132(4) was reproduced by the Assessing Officer, particularly the reply to Question Nos. 31 and 44.Referring thereto, the Ld. AR submitted that the partner of the assessee firm has categorically admitted that in the construction business, cash is received on sale of industrial and commercial galas which is not recorded in the books of account and that such cash receipts are utilized for construction-related payments. It was further pointed out that in reply to Question No. 44, it has been clearly stated that such unaccounted cash transactions are not recorded in the books and are spent in projects or investments as and when received. Placing reliance on the above statement, the Ld. AR submitted that there is a direct and unequivocal admission that the on-money receipts are

8 ITA No. 6976/Mum/2025 Priva Infracon, intrinsically linked with corresponding unaccounted expenditure incurred for the purpose of business. Therefore, once the Assessing Officer has accepted the receipt of on-money based on the very same statement and seized material, it is not open to him to disregard the corresponding expenditure which is also evidenced from the same material and admitted in the same statement. The Ld. AR further submitted that the Assessing Officer himself has recorded in the assessment order that seized papers reveal incurring of expenditure such as brokerage, steel purchase, tiles purchase, contractor payments, salary and administrative expenses. It was thus contended that the existence of expenditure is not in dispute and only the quantification is a matter of estimation. 15. It was further submitted that in the cases of other assessees belonging to the same group and covered under the same search, the Hon’ble Co-ordinate Bench has accepted estimation of profit at 22% of on-money receipts. It was specifically pointed out that in the case of the sister concern, Ganadhish GNP (ITA No. 3966,3965,3980,4485,4481/Mum/2024), the Co-ordinate Bench has accepted estimation of GP at 22% and similarly, in the assessee’s own case for other assessment years, the Ld. CIT(A) has accepted such estimation, which has attained finality. 16. The Ld. AR also contended that the Assessing Officer erred in partially accepting the seized documents to the extent of receipts while rejecting the same insofar as expenditure is concerned. Such an approach, it was argued, is contrary to

9 ITA No. 6976/Mum/2025 Priva Infracon, settled legal principles. Reliance was placed on the judgment in Glass Lines Equipments Co. Ltd. (253 ITR 454) to submit that seized material must be considered as a whole and not in a piecemeal manner. It was further argued that the Assessing Officer was not justified in taxing the entire on-money receipts as income, as the settled position of law is that only the profit element embedded in such receipts can be brought to tax. In this regard, reliance was placed on the decision of the Hon’ble Delhi High Court in Indeo Airways Pvt. Ltd. (26 taxmann.com 244) for the proposition that where receipts recorded in seized documents are accepted, the corresponding expenditure recorded therein is also to be accepted without insisting on further corroboration. Further reliance was placed on the judgment of the Hon’ble Bombay High Court in CIT vs. Hariram Bhambhani (ITA 313 of 2013) wherein it was held that only the profit attributable to unaccounted sales can be taxed and not the entire sales consideration. Reliance was also placed on CIT vs. President Industries (124 Taxman 654) in support of the same proposition. 17. In view of the above submissions, the Ld. AR contended that the estimation of profit at 22% of on-money receipts, as upheld by the Ld. CIT(A), is reasonable, consistent with judicial precedents as well as past history of the assessee group, and therefore the order of the Ld. CIT(A) deserves to be upheld. 18. We have carefully considered the rival submissions, perused the orders of the lower authorities and the material placed on

10 ITA No. 6976/Mum/2025 Priva Infracon, record. At the outset, we note that there is no dispute on facts that (i) unaccounted receipts in the nature of “on-money” from sale of commercial units were found during the course of search, (ii) the same were accepted by the Assessing Officer as business receipts taxable under section 28 of the Act, and (iii) seized material as well as statement recorded under section 132(4) clearly evidences that such receipts were utilized for incurring business expenditure. The Assessing Officer, however, has brought the entire receipts to tax by disallowing the claim of expenditure solely on the ground that the assessee failed to furnish supporting evidences such as identity and PAN of the payees. 19. The Ld. CIT(A), after detailed appreciation of facts, has recorded a categorical finding that numerous evidences of unaccounted expenditure were found during the course of search and that the statement of the partner clearly establishes that the cash receipts were utilized for business purposes. The Ld. CIT(A) has further noted that the Assessing Officer has not given any cogent reason for rejecting the estimation of net income offered by the assessee and has merely proceeded on the basis of absence of third-party evidences. In these circumstances, the Ld. CIT(A) has estimated the profit at 22% of such receipts following judicial precedents as well as consistent view taken in group cases. 20. We find ourselves in agreement with the aforesaid approach of the Ld. CIT(A). It is a settled legal position that in cases of unaccounted receipts, what is liable to be taxed is only the profit

11 ITA No. 6976/Mum/2025 Priva Infracon, element embedded in such receipts and not the entire gross receipts. The Hon’ble Gujarat High Court in the case of CIT vs. President Industries has held in clear terms as under:

“The amount of sales by itself cannot represent the income of the assessee… It is the realisation of excess over the cost incurred that only forms part of the profit… unless there is a finding that the investment… has also not been disclosed, the entire sum of undisclosed sales proceeds cannot be treated as income.” (para 3) 21. Similarly, the Hon’ble Gujarat High Court in DCIT vs. Panna Corporation has reiterated this consistent principle that upon detection of on-money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves.

“…having once drawn the presumption that the contents of the documents… were true, the revenue could not… require the assessee to produce materials in support of the expenditure entries… Such an inconsistent approach… appears to have been founded only on suspicion that they were not genuine. However, suspicion cannot replace proof.” (para 16) 23. In the present case, the Assessing Officer has accepted the seized material to the extent of receipts but has rejected the corresponding expenditure reflected in the same material and admitted in the statement recorded under section 132(4). Such

12 ITA No. 6976/Mum/2025 Priva Infracon, an approach, in our considered view, is legally untenable. The Hon’ble Gujarat High Court in Glass Lines Equipments Co. Ltd. has held that a document must be read as a whole and it is not permissible to accept one part and ignore the rest: “…it is well-settled canon of interpretation that a document has to be read as a whole; it is not permissible to accept a part and ignore the rest of the document.”(para 9) 24. Applying the aforesaid principles to the facts of the present case, we find that once the Revenue has relied upon the seized documents and statement under section 132(4) to tax the “on- money” receipts, it is not open to it to disregard the corresponding expenditure evidenced therein merely for want of formal documentation. The nature of unaccounted transactions is such that third-party evidences are ordinarily not maintained, and therefore reasonable estimation of profit is the only legally sustainable method. 26. We further note that the estimation of profit at 22% by the Ld. CIT(A) is not arbitrary but is based on (i) evidences of expenditure found during search, (ii) admission of the assessee in statement under section 132(4), and (iii) consistent view taken in group cases including the decision of the Co-ordinate Bench in the case of sister concern Ganadhish GNP, wherein similar estimation has been upheld. 27. In view of the foregoing discussion and respectfully following the binding judicial precedents, we hold that the Ld. CIT(A) has adopted a reasonable and legally sustainable approach in

13 ITA No. 6976/Mum/2025 Priva Infracon, estimating the profit element embedded in unaccounted receipts at 22%. We find no infirmity in the order of the Ld. CIT(A) warranting interference. Accordingly, the grounds raised by the Revenue are dismissed and the order of the Ld. CIT(A) is upheld.

Order pronounced in the open court on 20.05.2026.

Sd/- Sd/- (KAVITHA RAJAGOPAL) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 20/05/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. संबंधधत आयकर आयुक्त / The CIT(A) 3. आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai