BABITA AGARWAL,JAIPUR vs. ACIT, CC-2, JAIPUR

This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), Jaipur -4 [hereinafter referred to as "the CIT(A)"] dated 27.01.2026 for the Assessment Year 2023-24, arising out of the assessment order dated 06.03.2025 passed by the Assessing Officer (hereinafter referred to as "the AO") under section 143(3) of the Act.

The grounds of appeal raised by the assessee before us in the memorandum of appeal in Form No. 36 read as under:

Briefly stated, the facts of the case are that a search and seizure action under section 132 of the Act was carried out on the members of the Kotahwala Group on 03.08.2022, of which the assessee is one of the members. During the search, action was also carried out at the business and residential premises connected with the group to which the assessee belongs. The assessee filed her return of income for the year under consideration on 26.07.2023, declaring a total income of Rs 12,41,470and the assessment was taken up for scrutiny.

During the course of the search, certain loose documents were found and seized from the residential premises of Shri Abhishek Vijayvargiya. On the basis of these documents, the AO held that the assessee had received on- money aggregating to Rs 1,71,51,000 on the sale of flats in the project 'Royal Palm' at Durgapura, Jaipur, which the assessee had developed jointly with Smt. Rekha Bangad. The said figure was arrived at by taking the party-wise and flat-wise receipts of Rs 1,61,51,000 and adding a further sum of Rs 10,00,000 noted in a seized diary. The AO estimated the net profit at 15 percent of the on-money receipts and made an addition of Rs 25,72,650 as income from unaccounted business. The AO did not make any separate addition in respect of the unaccounted cash expenditure of Rs 39,17,495, as the same was treated as having been met out of the on-money receipts. The AO completed the assessment under section 143(3) of the Act on at a total income of Rs 38,14,120.

Aggrieved by the assessment order, the assessee carried the matter in appeal before the CIT(A). The CIT(A) held that the seized documents could not be treated as dumb or vague documents, as they contained the flat numbers, the names of the buyers, the dates, the amounts and the mode of receipt in cash. The CIT(A) further held that a similar pattern of on-money was found in the other projects of the same group, in which the key persons of the group had accepted the receipt of on-money and had offered profit at the rate of 15 percent. The CIT(A) took the view that, the assessee being the developer of the project, the presumption under section 132(4A) and section 292C of the Act operated against her and had not been rebutted. The CIT(A) also held that the benefit of telescoping had already been granted, as no separate addition of Rs 39,17,495 had been made. On these findings, the CIT(A) upheld the addition of Rs 25,72,650 and dismissed the appeal. The assessee is now in appeal before us.

The learned Authorised Representative of the assessee (hereinafter referred to as “AR”) assailed the order of the CIT(A). His submissions were threefold. First, he submitted that the addition rests solely on loose sheets seized from the premises of a third party, namely Shri Abhishek Vijayvargiya, and not from the assessee. The seized papers do not bear the name of the assessee or the name of the project, and no corroborative evidence such as a cash trail, or the statement of any buyer, was brought on record to link the papers to the assessee. Such loose sheets are in the nature of dumb documents and cannot form the basis of an addition. Secondly, he submitted that the quantification of Rs 1,71,51,000 is inflated, as the same jotting of Rs 5,00,000 has been counted twice and a sum of Rs 10,00,000 has already been assessed in the hands of Shri Raj Agarwal in another project. He further submitted that several entries pertain to bookings that were cancelled or to flats that were ultimately sold and registered in the names of other buyers. Thirdly, and without prejudice, he submitted that only the profit element embedded in the on-money can be brought to tax, and that the net profit rate of 15 percent is excessive and ought to be restricted to 8 percent, taking guidance from section 44AD of the Act.

In support of these submissions, the learned Authorised Representative placed reliance on the following decisions, copies of which were filed before us. On the proposition that no addition can be made on the basis of loose sheets found from a third party without corroboration, he relied on the decision of the Hon'ble High Court of Karnataka in Deputy Commissioner of Income Tax v. Sunil Kumar Sharma [2024] 159 taxmann.com 179, against which the Special Leave Petition of the Revenue has been dismissed by the Hon'ble Supreme Court in [2025] 180 taxmann.com 293. He also relied on the decision of the jurisdictional Hon'ble High Court of Rajasthan

The learned Departmental Representative (hereinafter referred to as “DR”), on the other hand, supported the orders of the authorities below. It was submitted that the seized documents are specific and contain the flat numbers, the dates, the amounts and the mode of receipt in cash. It was further submitted that the assessee is the developer of the project and had herself offered profit at the rate of 15 percent during the assessment, and that the benefit of telescoping had already been granted. It was, therefore, submitted that no interference is called for.

We have heard the rival submissions and perused the material on record.

Ground No. 1 challenges the validity of the assessment order on the ground that it is against the principle of natural justice. This ground is general in nature. It was not pressed before the CIT(A), where it was expressly stated to be general in nature, and no argument was advanced before us in its support. Ground No. 1 is accordingly dismissed.

Ground Nos. 2 to 5 relate to the addition of Rs 25,72,650 made on account of on-money and are taken up together.

The first question is whether any addition at all can be sustained on the basis of the seized material. It is well settled that loose sheets, which do not form part of the regular books of account and which are recovered from the

The Special Leave Petition filed by the Revenue against the aforesaid decision has been dismissed by the Hon'ble Supreme Court with the following observations:

The jurisdictional Hon'ble High Court of Rajasthan in Esspal International (P.) Ltd. (supra), while dealing with an addition founded on the statement of a third party, has held that even without retraction, an admission by the assessee cannot be said to be a conclusive piece of evidence. The admission of the assessee in absence of any corroborative evidence to strengthen the case of the revenue cannot be made the basis for any addition.

We are in respectful agreement with the principle laid down in the above decisions. The principle, however, has to be applied to the facts of each case. In the cases before the Hon'ble Courts, the material was not connected to the assessee and there was no admission or supporting circumstance. The facts before us are different. The assessee is admittedly

As regards the quantification of Rs 1,71,51,000, the assessee has raised the plea of double counting of Rs 5,00,000 and of a sum of Rs 10,00,000 said to have been assessed in the hands of Shri Raj Agarwal, and has also pleaded cancellation of certain bookings. These pleas were raised before the CIT(A) as well. The assessee, however, has not placed on record the cancellation deeds, the proof of refund or the confirmation of the buyers to substantiate these pleas, nor has the assessment record of Shri Raj Agarwal been produced to establish the alleged double assessment. In the absence of such evidence, the pleas remain in the nature of bare assertions, and we are unable to disturb the quantum of on-money adopted by the AO. Ground Nos. 2 and 3 are accordingly rejected.

This brings us to the real grievance of the assessee, which is the rate of net profit applied on the on-money. It is a settled principle that, where the

Similarly, the coordinate bench in Greenfield Reality (P.) Ltd. v. ACIT (supra), in a case of on-money in a real estate project, has held as under:

Respectfully following the above decisions, and having regard to the nature of the assessee's business and to the absence of any material to justify a higher rate, we are of the considered view that a net profit rate of 8 percent would meet the ends of justice. We accordingly direct the AO to apply a net profit rate of 8 percent on the on-money of Rs 1,71,51,000. The addition thus stands reduced from Rs 25,72,650 to Rs 13,72,080, and the assessee gets a relief of Rs 12,00,570. Ground No. 4 is partly allowed.

As regards the plea of telescoping raised in Ground No. 5, we find that the AO has not made any separate addition of Rs 39,17,495 towards unaccounted expenditure, having accepted that the same was met out of the on-money receipts. The benefit of telescoping has therefore already been allowed to the assessee, and no further benefit is called for. Ground No. 5 is partly allowed to the extent of the relief granted above.

Ground No. 6 challenges the initiation of penalty proceedings under section 271AAB(1A)(b) of the Act. The challenge is to the mere initiation of the penalty. The initiation of penalty is not appealable at this stage, and the assessee is at liberty to raise all her contentions in the course of the penalty proceedings, if and when a penalty order is passed. Ground No. 6 is premature and is accordingly dismissed.

Ground No. 7 is general in nature and does not require any separate adjudication.

In the result, the appeal filed by the assessee is partly allowed.