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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI ANIKESH BANERJEE, HONBLE
ORDER \nPER NARENDRA KUMAR BILLAIYA, AM:\n2\nThe captioned appeals by the assessee are preferred against\nthe order of the ld. CIT(A), Pune – 11 [hereinafter “the ld. CIT(A)"],\npertaining to AY 2013-14 to 2019-20.\n2. The captioned appeals have common grounds with identical set\nof facts. Therefore, they were heard together and are disposed off by\nthis common order for the sake of convenience and brevity.\n3. The assessee has challenged the legality of the impugned\nassessment order. The assessee has also challenged the addition on\naccount of estimation of profit on on-money and addition on account of\nlow peak balance.\n4.\nRepresentatives of both the sides were heard at length. Case\nrecords carefully perused.\n5. Briefly stated, the facts of the case are that search and seizure\naction were carried out on 12/01/2021 on the business as well as\nresidential premises of M/s. Span Group, including the assessee.\n6. M/s. Span Group is a leading builder and developer of Mira\nRoad/Bhayander in District- Thane, engaged in the business of\nconstruction and sale of residential and commercial buildings in and\naround Mira Road/Bhayandar. Pursuant to the search action, statutory\nnotices were issued and served upon the assessee.\n7. On perusal of the seized material found from the premises of Mr.\nAnil Morarka, and on analyzing several notings relating to the on-\nmoney receipts and certain cash expenses were found. The AO was of\nthe firm belief that the notings found in case of the assessee are notings\nfor its business transactions and are of both income and expenditure.\nThe AO was of the firm belief that it is in the fitness of the case to\ndetermine the embedded profit out of these transactions rather than\naddition of receipt and expenses. The AO was of the opinion that\ngenerally the profit in the real estate business varies between 10%-15%\nin the normal parlance. The AO accordingly estimated the business\nprofit @15% and made the impugned addition in all the captioned\n assessment years.\n8.\nProceeding further, the AO noticed that the assessee has taken\nseveral loans from the dummy company and such loans are merely\naccommodation loans taken in lieu of cash payments. Referring to\nsearch and seizure proceedings in the case of Shri Uttamchand S. Jain,\nthe AO came to know that Shri Uttamchand S. Jain, is also found to be\nengaged in the import of diamonds which is made on behalf of the real\nimporters and provides accommodation entries of bogus purchases and\nbogus unsecured loans to various beneficiaries.\n8.
1. As the embedded profit in the on-money has been taken @15%,\nthe AO formed a belief that cash paid on accommodation loan is taken\nas an outflow in cash flow and accordingly prepared the following\nchart:-\nGujarat Enterprise\nEntity wise Cash Flow\nAY\nTransaction\nAmount\nTransaction\n% \nMinimum Peak Balance\nClosing Balance\nInflow\nOutflow\n2013-14\nOn Money\n10.00.000\n15%\n1,50,000\n-6,04,040\n2013-14\nAccommodation\n7,54,040\n100%\n7,54,040\n-6,04.040\n2014-15\nOn Money\n1,53,00.000\n15%\n22,95,000\n2014-15\nAccommodation\n15,91,874\n100%\n15,91,874\n99.086\n2015-16\nOn Money\n1,58,00.000\n15%\n23,70,000\n2015-16\nAccommodation\n16,422\n100%\n16,422\n24,52,664\n2016-17\nOn Money\n1,15,00,000\n15%\n17,25,000\n41,77,664\n2017-18\nOn Money\n95,00,000\n15%\n14,25,000\n56,02,664\n2018-19\nOn Money\n1,78,00,000\n15%\n26,70,000\n82,72,664\n2019-20\nOn Money\n5,50,00,000\n15%\n82,50,000\n1,65,22,664\n2020-21\nOn Money\n3,05,00,000\n15%\n45,75,000\n2,10,97,664\n2021-22\nOn Money\n9,47,73,360\n15%\n1,42,16,004\n3,53,13,668\n8.
Basis above, the addition on account of loan peak balance was\nmade in the impugned Assessment Years.\n9. We have given a thoughtful consideration to the orders of the\nauthorities below. The entire quarrel revolves around the estimation of\nprofit as the AO has not made any other addition on account of alleged\non-money receipts found during the course of search and seizure. It is\ntrue that in this line of business, the embedded profit hovers around\n10%-15%, though the presumptive taxation under Section 44AD of the\nAct is @ 8%. We are of the considered view that 15% profit is on the\nhigher side whereas 8% profit is on presumptive taxation where the\nassessee is not required to maintain any books of accounts and his\nturnover is less than the threshold limit provided in the Section.\n10. To settle the prolonged litigation, we are of the considered\nopinion that profit of 11.5% should meet the ends of justice. Therefore,\nwe direct the AO to restrict the addition to the extent of 11.5% on the\nalleged on-money receipts.\n11. Insofar as, the addition on account of loan peak balance made on\nthe basis of the cash-flow extracted elsewhere is concerned, we are of\nthe considered view that the basis of the entire addition is the allegation\nthat the assessee is a beneficiary of accommodation entries. The entire\nadditions are based upon the search action taken in the premises of a\nthird party i.e., Shri Uttamchand S. Jain, which means that no\nincriminating material was found from the premises of the assessee\nwhich means that the ratio laid down by the Hon'ble Supreme Court in\nthe case of Abhisar Buildwell P. Ltd. 454 ITR 212 (SC), squarely applies.\n11.
1. On identical set of facts, the Co-ordinate Bench in the case of\nGroup concern Gujarat Land Developers vs. DCIT in ITA No.\n267/Mum/2025; AY 2014-15, order dated 04/04/2025, has held as under:-\n\"9.\nThe entire quarrel revolves around whether the impugned addition is based\nupon any incriminating material found at the time of search. The case of the revenue\nis that the on-money received by various entities accepted by Mr. Anil Morarka is in\nitself incriminating and the accommodation entry in the form of loans recorded in\nthe books of account is nothing but outcome of on-money received by the group.\n10.\nWe have carefully considered this contention of the revenue but do not find\nany force inasmuch as no addition has been made in respect of alleged on-money\nreceived by the assessee. In our understanding of the facts, the entire addition is based\nupon surmises and conjectures. The alleged unsecured loan is duly recorded in\nbooks of accounts maintained by the assessee which has not been rejected by the AO.\nTherefore, in our considered opinion, the entries found to be recorded in the regular\nbooks of accounts cannot form incriminating material.\n10. Since the impugned assessment year falls under the category of unabated\n assessment year, therefore, the ratio laid down by Hon'ble Supreme Court in the case\nof Abhisar Buildwell Pvt. Ltd. [454 ITR 212], squarely applies. The relevant findings\nof the Hon'ble Supreme Court read as under:-\n11.\n“9.
That prior to insertion of Section 153A in the statute, the relevant provision\nfor block assessment was under section 158BA of the Act, 1961. The erstwhile\nscheme of block assessment under section 158BA envisaged assessment of\n'undisclosed income' for two reasons, firstly that there were two parallel\nassessments envisaged under the erstwhile regime, i.e., (i) block assessment under\nsection 158BA to 'undisclosed income' and (i) regular assessment in accordance\nwith the provisions of the Act to make assessment qua income other than undisclosed\nincome. Secondly, that the 'undisclosed income' was chargeable to tax at a special\nrate of 60% under section 113 whereas income other than 'undisclosed income' was\nrequired to be assessed under regular assessment procedure and was taxable at\nnormal rate. Therefore, section 153A came to be inserted and brought on the statute.\nUnder Section 153A regime, the intention of the legislation was to do away with the\nscheme of two parallel assessments and tax the 'undisclosed' income too at the\nnormal rate of tax as against any special rate. Thus, after introduction of Section\n153A and in case of search, there shall be block assessment for six years. Search\nassessments/block assessments under section 153A are triggered by conducting of a\nvalid search under section 132 of the Act, 1961. The very purpose of search, which\nis a prerequisite/ trigger for invoking the provisions of sections 153A/ 153C is\ndetection of undisclosed income by undertaking extraordinary power of search and\nseizure, i.e., the income which cannot be detected in ordinary course of regular\nassessment.\nThus, the foundation for making search assessments under sections 153A/153C can\nbe said to be the existence of incriminating material showing undisclosed income\ndetected as a result of search.”\nThe Hon'ble Supreme Court has approved the interpretations given by the\nHon'ble Delhi High Court in the case of Kabul Chawla (380 ITR 573)(Delhi) and by\nthe Hon'ble Gujarat High Court in the case of Saumya Constructions (387 ITR\n529)(Guj.). The relevant observations made by the Hon'ble Supreme are extracted\nbelow:-\n“7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very\nissue and on interpretation of section 153A of the Act, 1961, has summarised the legal\nposition as under:\nSummary of the legal position\n38. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the\nlight of the law explained in the aforementioned decisions, the legal position that emerges is\nas under:\ni. Once a search takes place under section 132 of the Act, notice under section\n153A(1) will have to be mandatorily issued to the person searched requiring him to\nfile returns for six AYs immediately preceding the previous year relevant to the AY\nin which the search takes place.\ni. Assessments and reassessments pending on the date of the search shall abate. The\ntotal income for such AYs will have to be computed by the AOs as a fresh exercise.\nii. The AO will exercise normal assessment powers in respect of the six years\nprevious to the relevant AY in which the search takes place. The AO has the power\nto assess and reassess the 'total income' of the aforementioned six years in separate\nassessment orders for each of the six years. In other words, there will be only one\nassessment order in respect of each of the six AYs \"in which both the disclosed and\nthe undisclosed income would be brought to tax\".\niv. Although Section 153 A does not say that additions should be strictly made on\nthe basis of evidence found in the course of the search, or other post-search material\nor information available with the AO which can be related to the evidence found, it\ndoes not mean that the assessment \"can be arbitrary or made without any relevance\nor nexus with the seized material. Obviously an assessment has to be made under\nthis Section only on the basis of seized material.\nv. In absence of any incriminating material, the completed assessment can be\nreiterated and the abated assessment or reassessment can be made. The word 'assess'\nin Section 153 A is relatable to abated proceedings (i.e., those pending on the date\nof search) and the word\n'reassess' to completed assessment proceedings.\nvi. Insofar as pending assessments are concerned, the jurisdiction to make the\noriginal assessment and the assessment under section 153A merges into one. Only\none assessment shall be made separately for each AY on the basis of the findings of\nthe search and any other material existing or brought on the record of the AO\nvii. Completed assessments can be interfered with by the AO while making\nthe assessment under section 153 A only on the basis of some incriminating\nmaterial unearthed during the course of search or requisition of documents\nor undisclosed income or property discovered disclosed or made known tn\nthe course of original assessment.\"\n7.2 Thereafter in the case of Saumya Construction (supra), the Oujarat High Court, while\nreferring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after\nconsidering the entire scheme of block assessment under section 153A of the Act, 1961, had\nheld that in case of completed assessment/unabated assessment, in absence of any\nincriminating material, no additional can be made by the AO and the AO has no Jurisdiction\nto re-open the completed assessment. In paragraphs 15 & 16, it is held as under:-\n\"15.On a plain reading of section 153A of the Act, it is evident that the trigger point\nfor exercise of powers there under is a search under section 132 or a requisition\nunder section 132A of the Act. Once a search or requisition is made, a mandate is\ncast upon the Assessing Officer to issue notice under section 153A of the Act to the\nperson requiring him to furnish the return of income in respect of each assessment\nyear falling within six assessment years immediately preceding the assessment year\nrelevant to the previous year in which such search is conducted or requisition is\nmade and assess or reassess the same. Since the assessment under section 153A of\nthe Act is linked with search and requisition under sections 132 and 132A of the\nAct, it is evident that the object of the section is to bring to tax the undisclosed\nincome which is found during the course of or pursuant to the search or requisition.\nHowever, instead of the earlier regime of block assessment whereby; it was only the\nundisclosed income of the block period that was assessed, section 153A of the Act\nseeks to assess the total income for the assessment year, which is clear from the first\nproviso thereto which provides that the Assessing Officer shall assess or reassess the\ntotal income in respect of each assessment year, falling within such six assessment\nyears. The second proviso makes the intention of the Legislature clear as the same\nprovides that assessment or reassessment, if any, relating to the six assessment\nyears referred to in the sub-section pending on the date of initiation of search under\nsection 132 or requisition under section 132A, as the case may be, shall abate. Sub-\nsection (2) of section 153A of the Act provides that if any proceeding or any order\nof assessment or reassessment made under sub-section (1) is annulled in appeal or\nany other legal provision, then the assessment or reassessment relating to any\n assessment year which had abated under the second proviso would stand revived.\nThe proviso thereto says, that such revival shall cease to have effect if such order of\nannulment is set aside. Thus, any proceeding of assessment or reassessment falling\nwithin the, six assessment years prior to the search or requisition stands abated and\nthe total income of the assessee is required to be determined under section 153A, of\nthe Act. Similarly, sub-section (2) provides for revival of any assessment or\nreassessment which stood abated, if any proceeding or any order of assessment or\nreassessment made under section 153A of, the Act is annulled in appeal or any other\nproceeding.\n16. Section 153A bears the heading 'Assessment in case of search or requisition".\nIt is well settled as held by the Supreme Court in a catena of decisions that the\nheading of the, section can be regarded as a key to the interpretation of the operative\nportion of, the section and if there is no ambiguity in the language or if it is plain\nand clear, then the heading used in the section strengthens that meaning From the\nheading of section 153, the intention of the Legislature is clear, viz, to provide for\nassessment in case of search and requisition. When, the very purpose of the\nprovision is to make assessment in case of search or requisition, it goes without\nsaying that the assessment has to have relation to the search or requisition. In other\nwords, the assessment, should be connected with something found during the search\nor requisition, viz., incriminating material which reveals undisclosed income Thus,\nwhile in view of the mandate of sub-section (1) of section 153A of the Act, in every\ncase where there is a search or requisition, the Assessing Officer is obliged to issue\nnotice to such person to furnish returns of income for the six years preceding the\n assessment year relevant to the previous year in which the search is conducted or\nrequisition is made, any addition or disallowance can be made only on the basis of\nmaterial collected during the search or requisition. In case no incriminating\nmaterial is found, as held by the Rajasthan High Court in the case of Jai Steel (India)\nv. Asst. CIT (supra)**, the earlier assessment would have to be reiterated. In case\nwhere pending assessments have abated, the Assessing Officer can pass assessment\norders for each of the six years determining the total income of the assessee which\nwould include income declared in the returns, if any, famished by the assessee as\nwell as undisclosed income, if any, unearthed during the search or requisition. In\ncase where a pending reassessment under section 147 of the Act has abated, needless\nto state that the scope and ambit of the assessment would include any order which\nthe Assessing Officer could have passed under section 147 of the Act as well as\nunder section 153A of the Act.\"\n8. For the reasons stated hereinbelow, we are in complete agreement with the view taken by\nthe Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in\nthe case of Saumya Construction (supra), taking the view that no addition can be made in\nrespect of completed assessment in absence of any incriminating material.\n12. From the above discussion, it is clear that the completed assessments i.e.,\nunabated assessments can be interfered with only on the basis of some incriminating\nmaterial unearthed during the course of search or requisition of documents or\nundisclosed income or property discovered in the course of search which were not\nproduced or not already disclosed or made known in the course of original\nassessment.\n13.\nConsidering the aforementioned decisions, we have no hesitation to hold that\nthe impugned addition is devoid of any incriminating material and, therefore, the\nassessment must fail. We accordingly direct the AO to delete the impugned addition.\nSince other grounds have not been pressed, the same are dismissed as not pressed.\"\n12. Finding parity of facts, respectfully following the decision of the\nCo-ordinate Bench (supra), we direct the AO to delete the additions\nmade on account of loan peak balance in the captioned appeals.\n13. All other grounds relating to the challenge of the validity of the\nassessment, are not pressed and are dismissed as not pressed.\n14. In the result, captioned appeals are partly allowed.\nOrder pronounced in the Court on 20th May, 2025 at Mumbai.\nSd/-\n(ANIKESH BANERJEE)\nJUDICIAL MEMBER\nSd/-\n(NARENDRA KUMAR BILLAIYA)\nACCOUNTANT MEMBER\nMumbai, Dated 20/05/2025\n*SC SPS\n10\nआदेश की प्रतिलिपि अग्रेषित/