DCIT, CENTRAL CIRCLE-1, RAJKOT, RAJKOT vs. SIX TWENTY REALTY PRIVATE LIMITED, RAJKOT

ITA 765/RJT/2024Status: DisposedITAT Rajkot11 March 2026AY 2019-2028 pages
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What did the Tribunal hold?

The Tribunal held that the proceedings initiated under Section 147 were not invalid. Regarding the estimation of profit on 'on-money' receipts, the Tribunal, following the judgments of the Hon'ble Supreme Court in CIT vs. Happy Home Corporation and the Hon'ble Gujarat High Court in Shivalik Buildwell Pvt Ltd, and the ITAT Ahmedabad in M/s D R. Construction, ruled that unaccounted profit estimated on 'on-money' receipts is taxable in the year the sale deed is executed or when significant risks and rewards are transferred to the buyer. The assessee consistently followed the revenue recognition method on the execution of sale deeds. Therefore, only the 'on-money' receipt computed in the present case would be taxable in the year of sale deed execution, not the year of receipt. 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 appeals filed by the assessee were partly allowed, and the appeals filed by the Revenue were dismissed.

What were the facts?

The assessee, Six Twenty Realty Pvt. Ltd., is engaged in the business of developing residential projects. A survey under Section 133A of the Income Tax Act, 1961, was conducted on April 2, 2019, at the assessee's premises, revealing unaccounted cash receipts and payments, primarily from 'on-money' received on the sale of flats in the 'Dream City' project. This led to the reopening of the assessment under Section 148A. The Assessing Officer passed an order under Section 148A(d) on March 30, 2023, and issued a notice under Section 148. The assessee filed a revised return on April 1, 2023, reporting the same income as the original return. The assessment orders were passed under Section 143(3) read with Section 147. The appeals before the ITAT arise from orders passed by the NFAC/CIT(Appeals) under Section 250.

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: The proceedings are invalid and the assessment should be quashed, relying on facts and law.) 2. Whether the estimation of profit at 22% on 'on-money' receipts from the sale of flats in the 'Dream City' project is legally and factually bad and deserves to be deleted? (Assessee's contention: The addition made and retained is bad in law and fact and should be deleted.) 3. Whether the CIT(A) erred in directing the AO to tax unaccounted profit in the year of sale deed execution instead of the year of 'on-money' receipt, contrary to accounting principles (ICDS-3) and the year of receipt? (Revenue's contention: The income should be assessed in the year of receipt, not sale deed execution, as per ICDS-3 and accounting principles.)

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 148A,Section 133A,Section 250,Section 142(1),Section 139,Section 151,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 filed by the Ass

The order continues below.

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