OORJITA BUILDERS AND DEVELOPERS PRIVATE LIMITED,HYDERABAD vs. DCIT, CENTRAL CIRCLE - 1(3), HYDERABAD

ITA 542/HYD/2026Status: DisposedITAT Hyderabad23 September 2026AY 2021-2235 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal addressed the issue of estimating profit on unaccounted business receipts. It noted that the AO considered loose sheets and Excel sheets containing details of unaccounted receipts and expenditure. The CIT(A) estimated profit at 15% on total unaccounted business receipts, relying on judicial precedents like Skanda Infra Projects India Private Limited and Sri Aditya Homes Private Limited. However, the Tribunal found that the profit rates adopted in these precedents varied, and the facts of those cases were different. The Supreme Court's decision in CST Vs. H.M. Esufali H.M. Abdulali was cited, emphasizing that estimation must be based on a scientific, reasonable, and non-arbitrary method. The Tribunal observed that neither the CIT(A) nor the assessee provided valid reasons for their respective profit estimations (15% by CIT(A) and 7% by assessee). While the assessee's book results (average profit rate of 6.90%) could not be the sole basis due to unaccounted transactions, the Tribunal considered the nature of the business and the incriminating material. Citing the ITAT Hyderabad Bench decision in Sri Aditya Homes Private Limited, where profit was estimated at 10% in an identical real estate development case, the Tribunal directed the AO to estimate profit at 10% on the total unaccounted business receipts for all assessment years. The order of the CIT(A) estimating profit at 15% was set aside. The appeals were partly allowed for statistical purposes.

What were the facts?

The assessee, Oorjita Builders and Developers Pvt. Ltd., engaged in real estate development, filed its return for AY 2016-17 on October 1, 2016. A search and seizure operation under Section 132 of the Income-tax Act, 1961, was conducted on January 18, 2023. Subsequently, a notice under Section 148 was issued on December 7, 2023. The assessee filed a revised return on May 22, 2024, declaring a higher total income, including additional income. The Assessing Officer (AO) issued notices under Sections 143(2) and 142(1). The appeals before the ITAT are against the orders of the Commissioner of Income Tax (Appeals) - 12, Hyderabad, dated January 31, 2026, for assessment years 2016-17 to 2023-24. The dispute involves additions made based on seized documents and statements.

What were the issues?

1. Whether the additions made by the AO and sustained by the CIT(A) based on seized Excel sheets and pendrive, which the assessee claims are mere estimates or third-party data and not books of account, are valid? (Question of law and fact, relating to the nature of seized material and its treatment as books of account). 2. Whether the additions made solely based on sworn statements recorded under Section 131, without providing an opportunity for cross-examination, violate principles of natural justice? (Question of law, relating to procedural fairness and natural justice). 3. Whether the inclusion of Rs. 11,27,52,000/- and Rs. 7,85,00,000/- in the turnover for AYs 2016-17 to 2023-24, which the assessee claims are accounting contra entries and not real income, is justified? (Question of law and fact, relating to the definition of turnover and double counting). 4. Whether the disallowance of Rs. 1,21,30,000/- and Rs. 2,00,00,000/- for AYs 2016-17 to 2023-24, alleged to be personal expenses or investments, is valid without cogent material, and whether these expenses were incurred wholly and exclusively for business purposes under Section 37(1)? (Question of law and fact, relating to business expenditure and disallowances). 5. Whether the estimation of profit margin at 15% on unaccounted business receipts by the CIT(A) is arbitrary and excessive, considering the project-specific nature of profit margins in real estate development and the assessee's declared profit margins in earlier years? (Question of law and fact, relating to estimation of income and profit margins). Assessee's Contentions: - The seized material does not represent real, unaccounted income but mere estimates or third-party data. - Additions based on sworn statements without cross-examination are invalid. - Certain amounts included in turnover are contra entries and do not represent real income. - Disallowed expenses were incurred for business purposes and should be allowed under Section 37(1). - The estimated profit margin of 15% is arbitrary and excessive; earlier years' declared profit margins are reasonable. - The AO failed to discharge the burden of proof. - The assessee had already offered additional business income of Rs. 12,66,301/- in the return filed under Section 148. - Additional grounds raised relate to the validity of reassessment proceedings, including the approval under Section 148B and sanction under Section 151. Revenue's Contentions: - The judgment does not explicitly record the revenue's contentions on all grounds. However, the AO's actions and the CIT(A)'s orders suggest the revenue's stance was to uphold the additions and disallowances made.

Which sections of the Income-tax Act were involved?

Section 132,Section 148,Section 143(2),Section 142(1),Section 131,Section 37(1),Section 148B,Section 151,Section 149(1)(b)(i),Section 149(1)(b)(iii),Section 250

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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad

PER BENCH : The captioned appeals filed by the assessee company are directed against the separate orders of the learned Commissioner of Income Tax (Appeals) - 12, Hyderabad, dated 31.01.2026, pertaining to the assessment years 2016-17 to 2023-

The order continues below.

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