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

ITA 560/RJT/2024Status: DisposedITAT Rajkot11 March 2026AY 2021-2226 pages
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What did the Tribunal hold?

The Tribunal held 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. This is based on the assessee consistently following the revenue recognition method on the execution of sale deeds, which was accepted by the Assessing Officer and supported by judicial precedents. The Tribunal referred to the judgments of the Hon'ble Gujarat High Court in CIT vs. Shivalik Buildwell Pvt Ltd., the Hon'ble ITAT Ahmedabad in M/s D R. Construction Vs. Income Tax Officer, and the Hon'ble Supreme Court in CIT vs. Happy Home Corporation. Consequently, the Tribunal dismissed the ground raised by the Revenue regarding the year of taxation. The Tribunal also dismissed the grounds raised by the Revenue concerning the year of taxation, specifically referring to its own previous decision in the assessee's own case. The appeals filed by the assessee were partly allowed, and all appeals filed by the Revenue were dismissed.

What were the facts?

The assessee, M/s R K Dreamland, is a firm engaged in building completion. The Revenue is the DCIT, CC-1. The assessment years under consideration are 2016-17 to 2021-22. The appeals arise from assessment orders passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, and subsequent orders passed by the NFAC/CIT(Appeals) under section 250. A search and survey action was conducted on August 24, 2021, in the case of leading real estate builders in Rajkot, including the RK Group, which is headed by Shri Sarvanand Sadhuram Sonwani. During the search at the premises of Shri Girish Vanjani, an accountant for the RK Group, pen drives and hard discs were recovered containing accounting files, including unaccounted transactions, maintained in software known as MIRACLE. The data indicated the group was involved in taking and giving 'on-money'/unaccounted cash.

What were the issues?

1. Whether the proceedings initiated under section 147 of the Income Tax Act, 1961, are invalid, and consequently, the assessment finalized thereon deserves to be quashed. The assessee contends that the notice issued under section 148 was invalid, rendering the section 147 proceedings and the final assessment invalid. The Revenue's stance on this specific ground is not explicitly recorded, but their appeal implies disagreement with any quashing of proceedings. 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 alternatively, reduced. The assessee argues that the addition is bad in law and fact and should be deleted, or at least reduced as the estimated profit rate is too high. 3. Whether the unaccounted profit should be taxed in the year of sale deed execution or the year of 'on-money' receipt. The Revenue contends that the CIT(A) erred in directing the AO to tax the unaccounted profit in the year of sale deed execution, arguing it's contrary to accounting principles as per ICDS-3 for Real Estate Developers and that income should be assessed in the year of receipt. The assessee, implicitly, supports taxation in the year of sale deed execution.

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

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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 fil

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