SAFAL ENGINEERS AND REALTIES LLP,AHMEDABAD vs. THE DY.CIT, CENTRAL CIRCLE-1(4), AHMEDABAD

4. The Ld. CIT(A) has erred in law and on facts in not considering the contention of the appellant that the Ld. AO for estimating the alleged , 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 3 of 33 on-money in the case of appellant has merely relied upon the summary of Seven different seized materials as reproduced by the Ld. CIT(A) in Para 5.3 on Page 78 of the appellant order to work out the average rate of Rs.10,504/- and to make extrapolation in respect of 23 units sold in "Seventy", which are dumb documents found from third party premises as well as without bringing on record any independent clinching evidences about charging of any on-money from the buyers in the form of statement of buyers accepting the payment of on-money as well as testifying the members whose affidavits have been filed during the course of assessment proceedings stating on oath that they have not paid on-money for the flat purchased by the member.

5. The Ld. CIT(A) has erred in law and on facts in observing that it is reasonable to estimate profit @ 17% on on-money computed by the Ld. AO without considering the actual cost of consideration as well as actual percentage of profit given by the appellant during the course of appellate proceedings. Those estimation of profit @ 17% without any basis cannot be said to be reasonable merely relying upon the seized loose papers recovered from third party premises and VineetKanodia, none of whose statements have been brought on record to suggest any acceptance of on-money.

6. The Ld.CIT(A) has erred in law and on facts by merely relying upon the seized loose papers recovered from third party premises being City Estate Management as well as Shri VineetKanodia, none of whose statements recorded during the course of search proceedings as well as post search have been brought on record admitting that notings in the loose papers are with regards to receipt of on-money and also granting the opportunity of cross examination of such departmental witness from whom such seized material has been recovered to justify the authenticity of the said notings/jottings.

7. That the Ld. CIT(A) has erred in law and on facts by disregarding the contention of the appellant of reasonable profit margin of 8% to 10% on the estimated on-money without any basis to estimate the profit at 17% merely relying on the seized loose papers being dumb document and without disregarding the correct working of cost of project and the profit shown in the books.

8. The Ld. CIT(A) has erred in law and on facts in not appreciating the fact that the Ld.AO has not brought on record the statement recorded of departmental witness Shri Divyang Vyas from whose premises the seized material is recovered during search whose notings have been relied upon to allege on-money and failed to grant the opportunity of cross examination Shri Divyant Vyas through the Ld.AO has relied , 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 4 of 33 upon his statement for estimatingthe addition in the case of appellant. The Ld. AO ought to have granted the opportunity of cross examination of Shri Divyant Vyas once the Ld.AO has relied upon his statement recorded u/s.132(4)/131 of the Act in view of the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise Kolkata II [2015] 62 taxmann.com 3(SC) and various other judicial pronouncements.

9. The Ld. CIT(A) as well as the Ld. AO failed to properly consider the written submissions made before them by the appellant as well as various judicial pronouncements relied upon by the appellant firm.

The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.

PRAYER

The appellant therefore respectfully prays that:

1. The direction given by the Ld. CIT(A) to the Ld. AO to compare the estimated fair market value of unit in project Seventy at Rs.7,000/- per sq.ft (other than the unit where appellant has charged higher rate) and the amount mentioned in registered sale deed (inclusive of AEC/AUDA & parking charges) and re-compute on-money in case of appellant for each unit sold during the year by adopting extrapolation theory may kindly be quashed.

2. The direction given by the Ld. CIT (A) to the Ld. AO to estimate profit @ 17% on on-money computed may kindly be quashed and the addition confirmed by the Ld. CIT(A) may kindly be deleted.”

4. The Revenue in its appeal no.1731/Ahd/2024 for the A.Y. 2022-23 has taken the following grounds: -

“1) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in directing to compute the sale consideration at Rs.7000/- per square feet and to estimate the profit arising on account of on-money received at 17% of the same ignoring the detailed reasoning given by the A.O."

, 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 5 of 33 2) The Revenue craves leave to add/alter/amend and/or substitute any or all of the grounds of appeal."

5. All the grounds taken by the assessee as well as the Revenue are inter- linked and pertain to addition of Rs.64,85,72,974/- made by the Assessing Officer on account of on-money receipts in the project named “Project Seventy” developed by the assessee. Before we adjudicate the grounds raised in this appeal, it will be relevant to recapitulate the facts of the case in brief.

Brief Facts of the Case:

6.1 The evidence seized in the course of search from various premises including that of the broker reflected receipt of on-money by B-Safal Group entity while selling the units of project Seventy. The Assessing Officer has referred to various seized documents in the assessment order on the basis of which he concluded that the assessee had received on-money on sale of units of project Seventy.

, 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 6 of 33 6.2 On the basis of different rates as appearing in different seized documents, the Assessing Officer worked out the average sale price of the units of project Seventy atRs.10,600/- per sq. ft. and the sale consideration was worked out on this basis. The AO had allowed set off of the cost of the project at Rs.2,26,38,40,959/- as per the books of accounts and the balance amount of Rs.64,85,72,974/- was treated as undisclosed business income on account of on- money receipts, which was added to the income of the assessee.

6.3. In first appeal, the Ld. CIT(A) reduced the average selling price of Rs.10,600/- as worked out by the Assessing Officer to Rs.7,000/- per sq. ft. Further, the Ld. CIT(A) also directed to estimate the profit at @ 17% on the on- money computed by applying the average selling price of Rs.7000/- per sq. ft., as directed by him.

6.4. Now, both the assessee and the revenue are in appeal before us aggrieved with the order of the Ld. CIT(A).

Submission of the assessee

7. Sh. Dhiren Shah, the Ld. AR of the assessee submitted that in the course of search of B-Safalgroup, no incriminating material was found to establish that the assessee had received any on-money on sale of units of project Seventy. He submitted that the estimation of on-money of Rs.64,85,72,974/- as done by the Assessing Officer was based on mere estimate and conjectures and without any cogent material and independent clinching evidence. He submitted that in the course of search, no evidence for date-wise receipt of on-money in cash was found. According to the Ld. AR, the jottings and notings found in the course of 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 7 of 33 search were not final prices but were mere quotations, subject to further negotiations, which could not have been taken as authentic to work out the sale rate. He further submitted that the data in the excel sheet were rough estimate and did not contain name of the buyer, date of transaction and any other details which could establish that the assessee had received any cash on sale of the units. Further that, none of the buyers had admitted having paid any cash as on- money to the assessee. The Ld. AR has taken us through the various seized documents as reproduced in the assessment order to buttress the above contention. He submitted that in the absence of any evidence for receipt of on- money by the assessee, no addition was called for at all. He submitted that the documents found in the search, which has been relied by the Assessing Officer, were dumb documents and no addition was called for on that basis. He further submitted that the Assessing Officer did not bring on record the statement of third parties from whose possession the documents were seized, neither the assessee was allowed any opportunity to cross-examine them. He contended that none of the seized documents relied by the Assessing Officer had entry of any on-money receipt by the assessee. According to the Ld. AR, considering the nature of evidences as found in the course of search, no addition was called for in respect of any on-money receipt. Therefore, the Ld. CIT(A) was not correct in directing to estimate the income @ 17% of the on-money, worked out by applying average selling rate of Rs.7,000/- per sq. ft. The Ld. AR relied upon the decision of Co-ordinate Bench of this Tribunal in the case of SKZ Developers LLP reported in 182 taxmann.com 296 (Ahmedabad Trib.). As an alternate argument, the Ld. AR submitted that the reasonable profit margin on the estimated on-money could be 8% to 10% only and, therefore, the Ld. CIT(A) was not correct in directing to estimate the profit @ 17% of the on- money.

, 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 8 of 33 Submission of the Revenue

8. Per contra, Shri R.P. Rastogi, Ld. CIT-DR strongly supported the order of the Assessing Officer. He explained that the Assessing Officer had discussed in detail the evidences found in the course of search as well as the circumstantial evidences in order to establish that the assessee had received on-money in sale of units of project Seventy. He submitted that the sale deeds of the said project were registered at a price lower than the cost of construction of the units, which could not have been possible as no prudent business-person will sell the units at a loss. Further, there was vast price difference in the sale price charged from various clients, the rationale for which was not explained. The Ld. CIT- DR submitted that even if no direct evidence of receipt of on-money was found in the course of search, the circumstantial evidence as discussed by the Assessing Officer certainly proved that the assessee had received certain consideration over and above the sale price as per the sale deed or as recorded in the books of account. The Ld. CIT-DR submitted that the Assessing Officer had worked out the average sale price, after taking into account the various evidences of the selling price of units as found in the course of search and the Ld. CIT(A) was not correct in reducing the average selling price of Rs.10,574/- as worked out by the Assessing Officer on a concrete basis, to Rs.7,000/- per sq. ft. He submitted that the Ld. CIT(A) had not given any working of sale price of Rs.7,000/- per sq. ft. as considered fair by him nor given any rationale in this respect. The Ld. CIT-DR also contested the direction of the Ld. CIT(A) to work out the income out of the on-money (derived by applying the selling price of Rs.7,000/- per sq. ft.), at the rate of 17% thereof only. He submitted that no evidence of any cash expense was found in the course of search. Therefore, the entire on-money , 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 9 of 33 receipt was required to be taxed and there was no basis for estimating the income @ 17% only of the on-money receipt.

Our findings

1. Loose paper was fond from the premises of Divyang Vyas Rs.8,500/- at T-21 in Annexure A-3 at Pg No.17

2. Chat of Shri Daksh Nayak with lamAbhi dated 20.01.2021 Rs.12,500/- 3 Chat of Shri Daksh Nayak with Broker Niraj Patel dated Rs.12,500/- 14.06.2021

7. Excel file namely “Seventy” as found and seized from City Rs.10,500/- Estate Office premise (T-10)

Average Rate Rs.10,574/-

10. We have gone through the seized documents relied upon by the Assessing Officer for working out the average selling price, which are reproduced in the assessment order. The loose paper found from the premises of DivyangVyas (at T-21 in Annexure A-3page no.17)is reproduced at page no.18 of the assessment order. The contention of the assessee is that this document was found from the premises of a third party and was only a quotation given by Divyang Vyas for negotiations and that the name of the purchaser is not appearing in this document. Apparently, this document is not an evidence of actual sale. According to the assessee, the Unit No B-203 and B-204 mentioned in this document were not sold till the date of search. Nevertheless, this document being a quotation for sale of the unit of project Seventy, certainly indicates the ongoing selling price of the units in the project. As per this document, the Unit No B-203 and B-204 was being negotiated for sale @ Rs.8,500/- (++) psf, with additional Rs.800/-towards Auda AMC charges. Considering the area of 5867 sq. ft. and applying the basic rate of Rs.8,500/-as mentioned in this document, the consideration works out to Rs.4,98,69,500/-. However, in the document it was mentioned that Dastavej would be done for Rs.3.60 Crores only. Thus, this evidence does establish the fact that the assessee was accepting on-money against sale of the units in the project Seventy as the documentation was to be done for Rs.3.60 Crores only as against sale consideration of 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 11 of 33 Rs.4,98,69,500/-. It is true that the basic rate of Rs.8,500/- as mentioned in this document cannot be taken as final, as the same might have been subject to further negotiations. Nevertheless, the fact that the assessee was receiving on- money towards sale of the units, stands corroborated by this document.

11.1 It is true that the rate quoted in the WhatsApp chat cannot be treated as conclusive. Nevertheless, the fact that the basic rate of Rs.12,500/- was quoted for twopent-house of the project Seventy has not been denied.Shri Daksh from whose mobile the chat datawas recovered, was not a third party but an employee of the accounts department of B-Safal corporate office, who was fully aware about the ongoing market rate of the property. It is true that the rate of Rs.12,500/-as quoted in the WhatsApp chat, might have been subject to 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 12 of 33 further negotiations, which is a common feature for such sales. Nevertheless, the fact that the ongoing market rate of the unit wasRs.12,500/- per sq. ft.(subject to negotiations) does gets established from this Whatsapp communication. Therefore, AO had rightly relied upon this document and considered this rate to work out the average sale rate.

12.1 We have considered the explanation of the assessee. If we accept the explanation of the assessee that the three rates of Rs.5,483/-, Rs.5,000/- and Rs.4,935/- were initial offers; then one of these rates should have been considered as the final price of the units. However, from the working at page no.15, it is found that the documented basic value for Flat No.803 of area 4384 sq. ft. was worked out to Rs.2,40,39,190/- and thus the basic rate was Rs.5,483/- , 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 13 of 33 per sq. ft. Similarly, for Flat No.903, the documented basic value of Rs.2,42,57,850/- for area of 4384 sq. ft. works out to Rs.5,533/- per sq. ft. If the three rates appearing on these seized documents were the different rates for negotiations, the transaction could never have been finalised at the highest of the three rates. Therefore, the stand of the AO that the handwritten figure of Rs.5,000/- appearing on these seized documents represented the rate of on-money consideration, cannot be brushed aside. The basic rate of the two flats was Rs.5,483/- per sq. ft. and Rs.5,583/- per sq. ft. respectively, which was too low considering the ongoing market rate and the other evidences as discussed earlier. Merely because the word “cash” was not mentioned in the loose paper against the figure of Rs.5,000/-, does not obliterate the evidentiary value of the document. The assessee has been unable to bring on record any evidence that the deed for sale of these properties was executed as per the lower negotiated rate of Rs.5,000/- per sq. ft. or Rs.4,935/- per sq. ft. In the absence of any such evidence, the explanation of the assessee cannot be accepted. As per the excel sheet found in the course of search (HD-12 Terminal Server), the estimated cost of super built up area of project Seventy was Rs.228,08,41,361/- which worked out to Rs.6,000/- (approx..) per square feet. Considering this fact, the assessee could never have sold or negotiated the sale of Flats 803 and 903 at a rate lower than its cost of construction. The Assessing Officer, therefore, had rightly considered the basic rate of the flats at Rs.5,483/- and Rs.5,533/- respectively and taken the handwritten figure of Rs.5,000/- per sq. ft. as the rate of on-money involved in these transactions and accordingly considered the total rate for working out the average sale price.

16. Project Seventy was one of the three high-end projects namely Privilon, ParijatEclat and Seventy developed by the group, located adjoining to each other at Iscon Circle, Ambli Bopal Road, Ahmedabad and having a common boundary wall. The Assessing Officer had relied on an excel file under the name “cost details privilon.xlsx” which contained per sq. ft. cost of Privilon. The Assessing Officer found that as per the computation sheet, the cost per sq. ft. worked out for the project was Rs.4,935/- per sq. ft. Similarly, another excel file under the name “Cost details Parijat.xlsx” was referred, as per which the cost of construction of Parijat was Rs.4,600/- per sq. ft. The Assessing Officer has also referred to the cost sheet of project Seventy seized from the office premises of B-Safal group in HD-12 Terminal Server, as per which the estimated cost of construction of project Seventy was Rs.228,08,41,361/- and by applying super built-up area at 381542 per sq. ft., the cost per sq. ft. worked out to Rs.5977.96 (approx. Rs.6,000/-) psf. On the basis of this evidence, the Assessing Officer had concluded that the sale price of the unit of Project Seventy could not have been at a value lower than Rs.6,000/- per sq. ft. i.e. cost of its construction. Since many of the sale deeds were executed at a value , 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 17 of 33 lower than the cost per sq. ft., the Assessing Officer had rightly concluded that the assessee has received on-money on sale of units of project Seventy on the basis of seized documents, whatsapp messages of the employee of the assessee. The Ld. CIT(A) had considered this aspect and given a finding that as per assessee’s own calculation the cost of construction was �4,516/- psf and the assessee had not explained the reason for selling certain units at a rate lower than the cost of construction. Of the three projects developed by the assessee adjacent to each other with common boundary wall, project Seventy was a high- end ultra-luxurious project which was different from other two projects cost wise as evident from whatsapp messages of the employee of the assessee. On the website this project is described as under:

Nothing else is Seventy Rising 70 meters into the sky, offering 70 stunning homes; Seventy is unlike anything the city has seen. This is Ahmedabad’s first ultra-luxurious project designed by renowned, award-winning international architects. Promising a lifestyle unparalleled. Two shimmering towers, between them, a lush oasis of greenery and reflective pools. At the pinnacle floats ‘The Cloud’: a luxurious escape in the air, bridging the sky in between. Every home is a villa in the sky, with double height ceilings and wall-to-wall, floor- to-ceiling windows. Elaborate modular kitchens with spacious prep islands and Corian countertops, spa-like bathrooms with walk-in rain showers, double vanities, and deep soaking tubs. Unmatched privacy, white glove service, uncompromised security, spa, business centre, garden and what not! Look up. This is Seventy. The assessee’s working of cost of construction of this project Seventy at Rs.4,516/- psf only, which was less than the cost of other two projects, was demeaning to the kind of project as described above. Considering the fact that the cost of construction of other two projects namely Privilion and Parijat was rupees Rs.4,935/- and Rs.4,600/- per square feet respectively, the cost of 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 18 of 33 construction of project Seventy worked out by the assessee at Rs. 4,516/- psf was certainly incorrect and was rightly rejected by the AO.

19. The Ld. CIT(A), after appreciating and discussing in detail the evidences found in the course of search, had observed in paragraph 7.2 of his order as under:

“7.2 On overall consideration of facts and details on record, it is observed that the rates mentioned in loose sheets and digital data as considered by the AO for computing on money received by the appellant are not supported by any concrete evidence. On perusal of loose sheets referred by the AO, it is observed that such sheets do not contain any narration, name of buyer or name of the appellant. The AO has not referred of any material evidence to show that the units have actually been sold at the rates mentioned in the loose sheets. The AO has merely compared the rates at which units are registered and observed that appellant has received on money without providing any direct evidence of receipt of cash. The AO has not brought on record any evidence to prove that the appellant has received cash or utilization of such cash received by the appellant. Without any of these details, the AO has assumed that the appellant has sold alleged units at rates mentioned in the excel sheets found during the course of search. It is observed that the AO has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized papers reveal the unaccounted on-money receipts of the appellant. The 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 20 of 33 computation of on-money receipt solely based upon such loose sheet and digital data cannot be upheld entirely as there is no conclusive proof that appellant has received on money as per noting made in such loose material. However, on same line, seized material referred by AO (though such rates may be subject to negotiation) indicates that appellant has received on money on sale of unit which is not recorded in books of account and this issue is discussed in subsequent paras.”(Emphasis supplied.)

“7.24 It is observed that all three projects being Privilon, ParijatEclat and Seventy are in located in the same vicinity adjoining each other at Iscon Circle, AmbliBopal Road, Ahmedabad and have a common boundary wall and were constructed during same period as have also been stated by the AO in the assessment order. It is further observed that project Seventy is an ultra- luxurious project, therefore, cost psf in case of Seventy project has to be on a higher side as compared to Privilon and ParijatEclate. It is observed that various loose paper found during the course of search as discussed herein above indicates that appellant has received on money on sale of units. The prices as referred by the AO are in range of Rs.8,500/- psf to Rs.12,500/- psf but such rates are not final rates but subject to negotiations as discussed herein above. It is observed that appellant has executed registered sale deed at substantially lower value than cost also suggest that appellant has received on money on sale of such units. Though page No 15 & 16 of Annexure A/1 found from Team T 7 from residential premises of Shri VineetKanodia for 803 and 903 contains various different rates of booking as well as striking off on various rate, it suggest that appellant has charged on money over and above amount mentioned in registered sale , 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 21 of 33 deed. In preceding paras, undersigned has already discussed as to why fair market value of unit as adopted by the AO cannot be accepted and why claim of appellant that it has not received any on money on sale of units cannot be accepted. Considering such facts, coupled with the findings reproduced herein above as well as facts that various units have different booking rates and there is no cash trail of receipt of on money, it is held that sale consideration of units in project Seventy shall be recomputed by the AO by charging a flat rate of Rs.7,000/- psf. The AO is required to compare estimated fair market value of unit at Rs.7,000/- psf (other than unit where appellant has charged higher rate) and amount mentioned in registered sale deed (inclusive of AEC/AUDA & parking charges) and re- compute on-money in case of appellant for each unit sold during the year.”(Emphasis supplied.)

, 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 22 of 33 22. The assessee has relied upon the decision of Co-ordinate Bench of this Tribunal in the case of SKZ Developers LLP (supra). In that case also the on- money was worked out by the AO on the basis of average sale rate as per seized documents; which was upheld by the Ld. CIT(A) with a direction to work out profit @ 17% by applying average sale rate of Rs.6,500/- per square feet. The Tribunal had held in that case that the documents relied upon by the AO were dumb documents and no corroborative evidence for receipt of any on-money was found in the course of search. Further, that the assumption of flat rate for all units without any corroborative evidence was not justified. With due regard to the order of the Tribunal, it is found that the nature of the evidences found in the course of search and the evidentiary value thereof was not discussed in detail in the order. On the other hand, we have discussed all the evidences and given a finding that the evidences are not dumb documents in respect of project Seventy. Further, even if no cash trail for receipt of on-money was found in the course of search, the assessee was duty bound to explain as to why many of the sale deeds were registered below the cost price. It is a trite law that corroborative and circumstantial evidences found in the course of the search are to be taken into account. In Indian Jurisprudence, even the criminal cases are decided on the basis of circumstantial evidences. Therefore, the circumstantial and corroborative evidence found in the course of the search could not have been ignored only for the reason that no direct evidence for receipt of on-money on sale of flats was found from the assessee. The concept of pre-ponderance of probabilities is applicable in fastening a civil liability and is an acceptable principle in Income-tax proceedings. ln case of Commissioner of lncome-tax vs. Durga prasad More (82 ITR 540) (SC),Hon’ble Supreme Court has held as follows:

"Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 23 of 33 evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact-finding authority is made conclusive by law." Further, in Sumati Dayal vs. Commissioner of Income-tax [1995] 9214 lTR 801) (SC), Hon’ble Supreme Court had held as under:

"Apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. "

23. Honourable Supreme Court has held in the case of Chuharmal vs. Commissioner of lncome-tax [1988] 38 Taxman 190 (SC) that the Income-tax authority is not fettered by the rules of evidence. The Assessing Officer can rely on the material before him, including the intangible circumstantial material in the form of preponderance of probabilities. The surrounding circumstances and the circumstantial evidences found in the course of search were, therefore, required to be looked into and couldn’t have been ignored merely for the reason that no direct evidence for receipt of on-money was found in the course of search. It is not a case that the relied upon documents and the materials analysed by the AO reflect a conclusion which is not possible. The conclusion of receipt of on-money made in the assessment order was a possible conclusion in the factual matrix and surrounding circumstances as discussed earlier and, therefore, we are inclined to hold that the preponderance of probabilities weighs against the assessee. In the assessment order, the AO has been able to correlate materials on record to justify an estimate which can be utilized to work out the escaped taxable income of the assessee for the purpose of assessment. And the Ld. CIT(A) has further refined the estimation in a rational way, which can’t be faulted.

, 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 24 of 33 24. Hon’ble Supreme Court in the case of Udhavdas Kewalram v. Commissioner of Income-tax (66 ITR 462) (SC), has held that the Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act and it is invested with authority to determine finally all questions of fact. That the Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assesseeand the Commissioner in the light of the evidence and the relevant law. The Tribunal is duty-bound to consider all the grounds, the evidence pro and con, the contentions of the parties before it and all other material brought to its notice in a judicial spirit. Further, in the case of Esthuri Aswathiah v. Commissioner of Income-tax(66 ITR 478) (SC) Hon’ble Supreme Court has held that the Tribunal in hearing an appeal is under a duty to decide all questions of fact and law raised in the appeal before it and for that purpose it must consider whether on the materials relied upon by the assessee, his plea is made out. Conclusive proof of the claim is not predicated: the Tribunal may act upon probabilities, and presumptions may supply gaps in the evidence which may not, on account of delay or the nature of the transactions or for other reasons, be supplied from independent sources. That between the claims of the public revenue and of the taxpayers, the Tribunal must maintain a judicial balance. Where the evidence is based upon a number of facts and circumstances as discussed in the assessment order, whether the explanation is sound or not, must be determined not by considering the weight to be attached to each single fact in isolation but by assessing the cumulative effect of all the facts in their setting as a whole. The assessee's contention that no evidence for receipt of on-money was found from him in the course of search was to be tested in the light of other circumstantial evidences/corroborative evidence including seized material, as already discussed earlier. No weight could be given to a simple denial of the 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 25 of 33 assessee vis-à-vis the evidences suggesting the receipt of on-money in the sale transactions. The case laws referred by the ld. A.R. as follows:

5. Commissioner of Income Tax v. Maulikkumar K. Shah High Court of Gujarat 307 ITR 0137 (Gujarat)

6 Amar Natvarlal Shah V. Assistant Commissioner of Income-tax ITAT Ahmedabad [1997] 60 ITD 560-(AHD.)

15. Fort Projects (P) Ltd. v. Deputy Commissioner Income-tax of ITAT Kolkata [2013] 29 taxmann.com 84 (Kolkata - Trib.)

17. Yogesh Kirchand Shah v. Assisstant Commisioner of Income Tax Gujarat High Court [2014] 45 taxmann.com 19 18 DCIT, Central Circle 1(1), Ahmedabad v. M/S Oriental Prospecting Co. ITAT Ahmedabad IT(SS)A No. 77/Ahd/2018

All these case laws are on the basis of its own set of facts and the present assessee’s case is factually different as mentioned hereinabove.

25. We have carefully considered all material facts and examined the evidences found in the course of search. We, after careful analysis of materials on record, have already upheld earlier the finding regarding receipt of on-money by the assessee in respect of sale transactions of units of project Seventy. As regards, the quantum of on-money received by the assessee, the complete evidences are not available and considering the nature of transactions no such 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 28 of 33 evidence can be obtained from an independent source. The AO had worked out the on-money quantum on the basis of average sale price of Rs. 10,574/- psf, which was not based on final rates for transactions. On the other hand, the Ld. CIT(A) had applied cost plus 15% margin to work out the on-money amount. The contention of the assessee is that the average rate was worked out by the AO on the basis of the rates appearing in seized documents, which were not final rates but were subject to further negotiations. The Ld. CIT(A) has worked out the average rate which is about 33% lower than the average rate applied by the AO, which is found to be quite reasonable as the final price couldn’t have been negotiated below this limit. In order to maintain a judicial balance between the claims of the public revenue and the assessee, we upheld the estimation of on-money on the basis of average rate of Rs.7,000/- as adopted by the Ld. CIT(A). Accordingly, the grounds taken by the assessee as well as by the Revenue in this respect, are dismissed.

Estimation of Profit:

26. The next grievance of the assessee is against adopting the rate of 17% for estimating the profit on the on-money computed on the basis of the direction of the Ld. CIT(A). According to the assessee, the profit rate of 17% was much higher and the reasonable profit margin on the estimated on-money could be 8% to 10% only. On the other hand, the contention of the Revenue is that the entire on-money should have been subject to tax. The Ld. CIT(A) has given the following reason for estimating the profit at the rate of 17% on the on-money computed by adopting the average rate of Rs.7,000/- per sq. ft. as directed by him.

“7.27 It is observed that while passing the assessment order, AO has observed that as per Audited P& L of the assessee for F.Y. 2020-21, assessee has incurred cost of Rs 226,38,40,959/- on this project as on 31.03.2021. As explained in Para 4.7 of this order, the assessee has 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 29 of 33 budgeted cost of Rs.228,08,41,361/- for Seventy project, which is similar to the cost of Rs.226,38,40,959/- incurred by the assessee on Seventy project till 31.03.2021 the FY in which first sale of unit was recorded by the assessee after completion of project. On this basis, AO has denied the benefit of estimation of gross profit in case of appellant. It is observed that loose material found during the course of search representing budgeted cost of project seventy nowhere state that such cost includes cost if any incurred in cash. During the course of search, Page No 37 was found and seized from the premises of Shri Vineet Kanodia highlighting the cash expenses, which is as follows:

These loose paper suggest that appellant has incurred certain expenditure in cash. It is observed that when AO has considered average sale value at Rs.10,600/- per sq. feet against cost of construction of Rs.6,000/-, gross profit is computed by him is around 43% which is substantially on higher side. When assessee builder is receiving on money on sale of various units, it is bound to incur various expenditure towards construction in cash and considering binding decisions referred supra, it is reasonable to estimate profit on on-money receipts in the case of appellant. The appellant has relied upon various decisions of the Hon'ble Jurisdictional High Court of Gujarat as well as the Hon'ble Ahmedabad ITAT wherein profit on such unaccounted receipts has been estimated in range of 6% to 10% However, there are various decisions of Jurisdictional High court and Ahmedabad ITAT wherein they have estimated higher profit ratio. Considering the facts of appellant’s case, it is reasonable to estimate profit @17% on on-money computed by the AO as per observation made in preceding paras. Thus, AO is directed to re-compute business income in case of appellant as stated supra. Thus, the grounds of appeal no.1 to 17 are partly allowed.”

27. The Ld. CIT(A) has referred to the seized documents which recorded details of cash expenses. In the business of real estate, many expenses are incurred in cash and it is for that reason that part of the sale consideration is 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 30 of 33 received in cash as on-money. As per the finding recorded by the AO the assessee had sold many of the units below the cost price of Rs.6,000/- psf, still it had disclosed profit in its P&L account. This also confirms the fact that certain expenses must have been incurred in cash and were not accounted for in the books of accounts. Therefore, the entire on-money could not have been considered as income of the assessee. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Anupam Organiser (Tax Appeal No.168 of 2020) dated 10.09.2020 has held that not the entire receipt of on-money but only profit embedded therein can be added. Similarly, in the case of DCIT vs. Panna Corporation – Tax Appeal 323 of 2000 (Guj) the Hon’ble jurisdictional High Court had held as under:

15. It can, thus, be seen that consistently, this Court and some other Courts have been following the principle that even 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. If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation. 28. It is thus a well settled legal proposition that the entire unaccounted on- money receipts cannot considered as income. Rather, only the profit element embedded therein can be added in the hands of the assessee. The Ld. CIT(A) had, therefore, rightly held that only profit embedded in the on-money receipt could have been taxed. Accordingly, he has estimated the profit at the rate of 17% on the on-money. The profit ratio of unaccounted transactions is usually higher than the profit as disclosed on accounted transactions. In the case of Sankalp INN decided by the Co-ordinate Bench of this Tribunal in IT(SS)A No.45 to 48/Ahd/2022 and others, dated 31.01.2025, profit rate of 13% was upheld in respect of on-money receipts. However, the profit margin involved in the first ultra-luxurious project of the city has to be higher than the normal , 1700/Ahd/2024 & & 1731/Ahd/2024 (Assessment Years: 2021-22 & 2022-23) Safal Engineers & Realties LLP vs. DCIT Page 31 of 33 trend. In the case of Jay Builder v. Assistant Commissioner of Income- tax, [2013] 33 taxmann.com 62 (Gujarat) Hon’ble Gujarat High Court had upheld the addition at rate of 15 per cent of on money received by assessee. We, therefore, deem it appropriate to estimate the profit income out of the on-money received by assessee at the rate of 15%. Accordingly, the AO is directed to work out the profit out of the on-money receipt, as computed in the manner as per direction of Ld. CIT(A), by applying profit rate of 15% thereon. The ground taken by the assessee in this regard is partly allowed while the ground of the Revenue is dismissed.

&1730/Ahd/2024 : A.Y. 2021-22 30. The grounds taken by the assessee and the Revenue in the A.Y. 2021-22 are identical to the grounds as raised in for the A.Y. 2022-23. Therefore, the decision as taken by us in and for the A.Y. 2022-23 is applicable mutatis mutandis to these two appeals for A.Y.2021-22. Accordingly, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.

Order pronounced in the open Court on this 13th March, 2026.