R K DREAMLAND,RAJKOT vs. DCIT, CC-1, RAJKOT, RAJKOT

ITA 557/RJT/2024Status: DisposedITAT Rajkot11 March 2026AY 2018-1926 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the proceedings initiated under Section 147 were not invalid, dismissing the Assessee's ground regarding the validity of the notice under Section 148. Regarding the addition of 'on-money' receipt, the Tribunal, respectfully following its own previous decisions and judgments of the Hon'ble Supreme Court in CIT vs. Happy Home Corporation and the Gujarat High Court in Shivalik Buildwell Pvt Ltd, held that unaccounted profit estimated on 'on-money' receipt is taxable in the year the sale deed is executed or significant risk and rewards are transferred to the buyer. As the assessee consistently followed the revenue recognition method on sale deed execution, only the 'on-money' receipt computed would be taxable in the year of sale deed execution, not the year of receipt. Consequently, the ground raised by the Revenue regarding the timing of taxation was dismissed. The Tribunal did not explicitly address the quantum of addition or the profit rate estimation in detail, but the reasoning implies that the addition should align with the year of sale deed execution.

What were the facts?

The appeals by the Assessee (M/s R K Dreamland) and the Revenue (DCIT, CC-1) pertain to Assessment Years 2016-17 to 2021-22. They challenge orders passed by the NFAC/CIT(A) under Section 250 of the Income Tax Act, 1961, which arose from assessment orders under Section 143(3) r.w.s. 147. The assessee is a firm engaged in building completion. A search and survey action on August 24, 2021, at various premises of real estate builders in Rajkot, including the RK Group headed by Shri Sarvanand Sadhuram Sonwani, uncovered systematic maintenance of 'on-money'/unaccounted cash transactions in 'Miracle' files. Pen drives and hard discs recovered from the premises of the group's accountant, Shri Girish Vanjani, contained key accounting files detailing unaccounted transactions.

What were the issues?

1. Whether the proceedings initiated under Section 147 of the Income Tax Act, 1961, are invalid and the assessment finalized thereon deserves to be quashed, as argued by the Assessee, who contended that the notice issued under Section 148 was invalid. The Revenue did not record specific arguments on this issue. 2. Whether the addition of Rs.83,02,640/- by estimating profit at 16% of 'on-money' receipt is bad in law and facts, and should be deleted or reduced, as argued by the Assessee. The Assessee alternatively argued for a reduction in the estimated profit rate. The Revenue, in its grounds, sought to retain the addition, implying disagreement with any deletion or reduction. 3. Whether the unaccounted profit should be taxed in the year of sale deed execution or the year of 'on-money' receipt, as argued by the Revenue, which contended that the CIT(A) erred in directing taxation in the year of sale deed execution, contrary to accounting principles (ICDS-3) and the year of receipt. The Assessee argued for taxation in the year of sale deed execution, aligning with accounting principles and consistent practice.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 250,Section 131,Section 132,Section 133A,Section 5,Section 145

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(9)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

For Respondent: Shri Sanjay Punglia, Ld. CIT(DR)
Hearing: 16/01/2026Pronounced: 11/03/2026

Per, Bench:

Captioned

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 →