RK DREAMLAND,RAJKOT vs. ACIT, CC-1, RAJKOT, RAJKOT

ITA 556/RJT/2024Status: DisposedITAT Rajkot11 March 2026AY 2017-1826 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the proceedings initiated under section 147 of the Income Tax Act, 1961, were not invalid. Regarding the addition of Rs. 83,02,640/-, the Tribunal found that the unaccounted profit estimated on 'on-money' receipt is required to be taxed in the year in which the sale deed is executed or significant risk and rewards are transferred to the buyer. The assessee consistently followed the revenue recognition method on the execution of the sale deed. Therefore, only the 'on-money' receipt, as computed, would be taxable in the year of sale deed execution, not when the 'on-money' was received. The Tribunal also noted that ICDS-III is not applicable to the assessee. Consequently, the ground raised by the revenue regarding the year of taxation was dismissed. The Tribunal dismissed the grounds raised by the revenue concerning the taxation of unaccounted profit in the year of sale deed execution, respectfully following its own prior decision in the assessee's own case.

What were the facts?

The assessee, M/s R K Dreamland, is a firm engaged in building completion. The appeals before the ITAT Rajkot Bench concern Assessment Years 2016-17 to 2021-22. The proceedings originated from assessment orders passed by the Assessing Officer under section 143(3) read with section 147 of the Income Tax Act, 1961, which were then challenged before the National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals). The core of the dispute revolves around the validity of reassessment proceedings initiated under section 147 and the taxation of 'on-money' receipts. A search action on 24.08.2021 uncovered systematic maintenance of unaccounted transactions in 'Miracle' files, indicating the practice of receiving and giving 'on-money'.

What were the issues?

1. Whether the proceedings initiated under section 147 of the Income Tax Act, 1961, are invalid, rendering the assessment finalized thereon liable to be quashed? (Assessee's contention: Yes, the proceedings are invalid. Revenue's contention: Not recorded). 2. Whether the addition of Rs. 83,02,640/- by estimating profit at 16% of 'on-money' receipt is bad in law and fact, and thus liable for deletion or reduction? (Assessee's contention: Yes, it is bad in law and fact and should be deleted or reduced. Revenue's contention: Not recorded). 3. Whether the unaccounted profit on 'on-money' receipt should be taxed in the year of sale deed execution or in the year of receipt, considering accounting principles and ICDS-3? (Revenue's contention: It should be taxed in the year of sale deed execution, not receipt, as per accounting principles and ICDS-3. Assessee's contention: It should be taxed in the year of receipt, as per accounting principles and ICDS-3).

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 250,Section 131,Section 5,Section 145

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(7)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT

Before: DR. ARJUN LAL SAINI & DR. DINESH MOHAN SINHA

Hearing: 16/01/2026Pronounced: 11/03/2026

Per, Bench: Captioned appeals file

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →