ASST. CIT-CC-6(1), MUMBAI, BKC MUMBAI vs. GANADHISH GNP, MUMBAI

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ITA 4485/MUM/2024Status: DisposedITAT Mumbai17 March 2025AY 2019-2025 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that only the profit embedded in unaccounted receipts can be taxed, not the entire amount. It upheld the CIT(A)'s estimation of net profit at 26% on unaccounted business receipts, considering various High Court judgments.

What were the facts?

During a search, "on-money" sheets were found indicating unaccounted cash receipts from property sales. The assessee offered these receipts and claimed expenses, proposing a net income of 20%. The Assessing Officer disallowed all expenses, treating the entire amount as income.

What were the issues?

Whether the entire unaccounted business receipts should be taxed or only the profit element. Whether expenses incurred on unaccounted receipts are deductible.

Which sections of the Income-tax Act were involved?

Section 132,Section 69C

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, MUMBAI BENCH G, MUMBAI

Before: SHRI AMARJIT SINGH, HONBLE & SHRI RAJ KUMAR CHAUHAN, HONBLE

For Appellant: Shri Nishit Gandhi & Aadnya Bhandari
For Respondent: Dr. Kishor Dhule, CIT/DR
Hearing: 18.12.2024Pronounced: 17.03.2025

Heard together (5 matters)

ITA No. 3966/Mum/2024
ITA No. 3965/Mum/2024
ITA No. 3980/Mum/2024
ITA No. 4485/Mum/2024
ITA No. 4481/Mum/2024

Read from the judgment's own cause title. This page is filed under one of them.

method of recognizing the revenue in the books of account. Neither the AO nor the CIT(A) has carried out any exercise to determine the net profit and total turnover on the basis of material on record for arriving at a reasonable profit embedded in the unaccounted transaction of on-money found in the case of the assessee. Since the assessee has not offered any income for the A.Y. 2018-19 and 2019-20 and they have offered only income on the proportionate completion of the project from the A.Y. 2020-21 to 2022-23 as referred above in this order and average net profit percentage offered is 18.33% (13% + 29% + 13%).

9.

The assessee has offered average net income from construction business in the audited books of accounts for the period A.Y. 2018-19 to 2022-23 at 18.33%. The action of the AO to treat the whole on money receipt of Rs. 13,65,13,712/- as part of net profit would result in abnormal net profit as about 70% on the sale amount of Rs. 32,97,59,363/- after adding the on money result of Rs. 13,65,13,712/- to the net profit of Rs. 9,33,89,589/- already declared as per the books of account. We further noticed infirmities in the consolidated income computed by the ld. CIT(A). Since the assessee was following the project completion method but for the A.Y. 2020-21 no sale/revenue was mentioned against the net incme / net profit of Rs. 1,31,95,081/- which was shown for the A.Y. 2020-21 for the purpose of arriving consolidated income of all the years at the average net profit of 26% because the ld. CIT(A) at page no 20 of the order has considered the net profit for the A.Y. 2020-21 @ 13%. Therefore, we consider that the profit embedded in the on-money transaction is reasonable to estimate @ 22%. Therefore, we estimate the net profit @ 22% of accounted receipt of Rs. 3,79,07,014/- instead of 26% estimated by the ld. CIT(A). Accordingly, the appeal of the assessee is partly allowed and appeal filed by the Revenue is dismissed.

(A.Y. 2020-21) (Assessee Appeal)

10.

Since on similar issue and identical fact vide we have partly allowed the appeal of the assessee by estimating the net profit @ 22% on unaccounted business receipt. Therefore, applying the findings of the same mutatis mutandis the net income of the assessee from unaccounted business is also estimated @ 22%. Therefore, the appeal of the assessee is partly allowed. (A.Y. 2021-22) (Assessee Appeal) 11. Since on similar issue and identical fact vide we have partly allowed the appeal of the assessee by estimating the net profit @ 22% on unaccounted business receipt. Therefore, applying the findings of the same mutatis mutandis the net income of the assessee from unaccounted business is also estimated @ 22%. Therefore, the appeal of the assessee is partly allowed. (A.Y. 2021-22) (Revenue Appeal) 12. Since this appeal of the Revenue is based on identical issue on similar fact to the for A.Y. 2019-20 as adjudicated (supra) in this order by which the appeal of the Revenue is dismissed applying the findings of the same mutatis mutandis this appeal of the Revenue is also dismissed.

13.

In the result, all the appeals filed by the assessee are partly allowed and all the appeals filed by the Revenue are dismissed.

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