DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(4), AHMEDABAD, AHMEDABAD vs. SAFAL ENGINEERS AND REALTIES LLP, AHMEDABAD

ITA 1731/AHD/2024Status: DisposedITAT Ahmedabad13 March 2026AY 2022-2332 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the entire on-money receipt cannot be considered as income; only the profit embedded therein is taxable, as per the decisions in PCIT vs. Anupam Organiser and DCIT vs. Panna Corporation (Guj). The CIT(A) had rightly held that only the profit embedded in the on-money receipt could be taxed and estimated profit at 17%. However, considering the nature of the project as ultra-luxurious and referring to various judicial pronouncements including Jay Builder v. Assistant Commissioner of Income-tax, [2013] 33 taxmann.com 62 (Gujarat) where 15% was upheld, the Tribunal deemed it appropriate to estimate the profit income out of the on-money received at the rate of 15%. Accordingly, the AO was directed to re-compute the business income by applying a profit rate of 15% on the on-money computed as per the CIT(A)'s directions. The assessee's ground was partly allowed, and the Revenue's ground was dismissed. The decision for A.Y. 2022-23 was applied mutatis mutandis to A.Y. 2021-22.

What were the facts?

The assessee, Safal Engineers and Realties LLP, and the Revenue are in appeal before the Income Tax Appellate Tribunal (ITAT) against the order of the CIT(A)-II, Ahmedabad, dated 02.08.2024. The appeals pertain to Assessment Years (A.Y.) 2021-22 and 2022-23, arising from proceedings under Section 143(3) of the Income Tax Act, 1961. The core dispute revolves around an addition of Rs. 64,85,72,974/- made by the Assessing Officer (AO) on account of alleged on-money receipts in the assessee's project named 'Project Seventy'. The assessee contends that the CIT(A) erred in partly allowing the appeal and in estimating on-money and profit thereon. The Revenue, conversely, argues that the CIT(A) erred in directing the computation of sale consideration at Rs. 7000/- psf and estimating profit at 17% on on-money, ignoring the AO's reasoning.

What were the issues?

1. Whether the CIT(A) erred in law and on facts in partly allowing the assessee's appeal, instead of fully allowing it, concerning the addition made for alleged on-money receipts in 'Project Seventy' under Section 143(3) of the Act? 2. Whether the CIT(A) erred in law and on facts in estimating a flat rate of Rs. 7000/- psf for the 'Seventy' project, disregarding neighboring sales instances submitted by the assessee, and in estimating on-money for all units sold in the project based on loose papers without corroboration? 3. Whether the CIT(A) erred in law and on facts in estimating profit at 17% on the computed on-money, without considering the actual cost of consideration and profit percentage disclosed by the assessee, and by relying on seized loose papers from third parties without cross-examination opportunities, as per the principles laid down in Andaman Timber Industries vs. Commissioner of Central Excise Kolkata II [2015] 62 taxmann.com 3(SC)? Assessee's Contentions: - The CIT(A) should have fully allowed the appeal. - The estimation of Rs. 7000/- psf is arbitrary and ignores comparable sales. - Seized loose papers are 'dumb documents' without corroboration, and affidavits stating no on-money was paid should be considered. - The AO's reliance on a summary of seized materials and extrapolation for 23 units is flawed. - The 17% profit estimation is baseless; a reasonable profit margin of 8-10% should be considered. - Opportunity for cross-examination of departmental witnesses (e.g., Shri Divyang Vyas) was denied. Revenue's Contentions: - The CIT(A) erred in directing the computation of sale consideration at Rs. 7000/- psf and estimating profit at 17% on on-money, disregarding the AO's detailed reasoning.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD

Before: SHRI SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Dhiren Shah & Ms. Nupur Shah, ARs
For Respondent: Shri R.P. Rastogi, CIT-DR
Hearing: 25.02.2026Pronounced: 13.03.2026

PER BENCH:

These four appeals are filed by the Assessee and the Revenue against the common order of the CIT(A)-11, Ahmedabad (in short “the

The order continues below.

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