SIX TWENTY REALTY PVT. LTD.,RAJKOT vs. DCIT, CC-1, RAJKOT, RAJKOT

आयकर अपीलीय अिधकरण, राजकोट Æयायपीठ, राजकोट।
IN THE INCOME TAX APPELLATE TRIBUNAL,
RAJKOT BENCH, RAJKOT

BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER
AND DR. DINESH MOHAN SINHA, JUDICIAL MEMBER

आयकर अपील सं/.ITA No. 785 to 787/RJT/2024
िनधाªरणवषª / Assessment Year: 2018-19 to 2020-21
(Hybrid Hearing)
Six Twenty Realty Pvt. Ltd.
D-405, Imperial Heights, 150 Ft Ring
Road, Rajkot
Rajkot-360005
Vs.
The DCIT, CC-1
Aaykar Bhawan, Amruta Estate, M G
Road, Rajkot
Rajkot-360001
Öथायीलेखासं/.जीआइआरसं/.PAN/GIR No.: AAVCS5160M
(अपीलाथê/Appellant)

(ÿÂयथê/Respondent)

आयकर अपील सं/.ITA No. 765/RJT/2024
िनधाªरणवषª / Assessment Year: 2019-20

The DCIT, CC-1
Aaykar Bhawan, Amruta Estate, M G
Road, Rajkot
Rajkot-360001
Vs.
Six Twenty Realty Pvt. Ltd.
D-405, Imperial Heights, 150 Ft Ring
Road, Rajkot
Rajkot-360005
Öथायीलेखासं/.जीआइआरसं/.PAN/GIR No.: AAVCS5160M
(अपीलाथê/Appellant)

(ÿÂयथê/Respondent)

िनधाªåरती कì ओर से/Assessee by : Shri Mehul Ranpura, Ld.AR
राजÖव कì ओर से/Revenue by : Shri Sanjay Punglia, Ld. CIT(DR)

सुनवाई कì तारीख/Date of Hearing : 16/01/2026

घोषणा कì तारीख/Date of Pronouncement : 11/03/2026

आदेश/ORDER
Per, Bench:

Captioned appeals filed by the Assessee and Revenue, pertaining to Assessment Years 2017-18 to 2022-23, are directed against the orders passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the ITA Nos. 785 to 787 & 765/Rjt/2024
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Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), which in turn arise out of separate assessment orders passed by the Assessing Officer, u/s 143(3) r.w.s. 147 of the Income Tax Act,
1961. 2.Since, the issues involved in all the appeals are common and identical, therefore, these appeals have been heard together and are being disposed of by this consolidated order.

(This is assessee's ground No. 2 in ITA No. 785/RJT/2024 for AY 2018-19, This is assessee's ground No. 2 in ITA No. 786/RJT/2024 for AY 2019-20, This is assessee's ground No. 2 in ITA No. 787/RJT/2024 for AY 2020-21)

(ii) The ld. CIT(A)erred on facts as also in law in estimating profit @ 22% on so called on money receipt on sale of flats at project Dream City. The addition made and retained is bad in law as also on facts therefore the same may kindly be deleted.

(This is assessee's ground No. 3 in ITA No. 785/RJT/2024 for AY 2018-19, This is assessee's ground No. 3 in ITA No. 786/RJT/2024 for AY 2019-20)

(This is also in revenue's ground no. 1 in ITA No. 765/RJT/2024 for AY 2019-20)

(iii) The Ld CIT (A) has erred in directing the AO to tax the unaccounted profit in the year in which sale deed is executed instead of the year in which the on-money has been ITA Nos. 785 to 787 & 765/Rjt/2024
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received, ignoring that the same is not in accordance with accounting principles as per
ICDS-3 applicable to Real Estate Developers and also not appreciating that the income on account of undisclosed on-money receipt was required to be assessed in the year of receipt.

(This is revenue's ground no. 2 in ITA No. 765/RJT/2024 for AY 2016-17)

Issue Involved:
5. The brief facts of the case are that a survey u/s 133A of the Act at the premises of the assessee M/s Six Twenty Realty Pvt Ltd located at Project Dream City, B/h
Aalap Green City, Raiya Road, Rajkot & Registered Office at D-405, Imperial
Heights, 150 feet Ring Road, Rajkot was carried out on 02.04.2019. During the course of survey, certain loose papers, register, digital data in the form of whatsapp chat/email containing excel sheets in the mail of accountant were found. Back up of computers and mobiles were taken. The loose papers file, register, printout of whatsapp chat, excel sheets of email, backup/mirror image taken of computers and mobiles found were inventoried as per Annexure A dated
02.04.2019 Sl. No. 1 to 7 and were impounded vide order u/s 133A(3)(ia) dated
03.04.2019. The copy of impounded documents had already been provided to the assessee during post survey inquiry by the Investigation wing. From the impounded documents/ data, various set of excel sheet were found from which generation of unaccounted cash is noticed primarily from receipt of on-money on sale of flats in the project 'Dream City' developed by the assessee-company.
Similarly documents evidencing unaccounted cash expenses have also been noted from the impounded documents. During the course of survey at the office premise of the assessee, data from computer where Shri Yagnesh D Jogi sit (who looks

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after the accounting work of the assessee company) print out of a zip file
"Yagnesh.Zip" has been taken from his mail and the same has been inventoried as Annexure-A4. There are some excel sheets which contain therein details such as Flat No., Booking details (booking date and name of the booking persons), Flat
Price and payment received against the sale/booking of flats of Dream City in cash and cheque and payment due cash or Cheque. Two set of these sheets are Impounded and inventoried at page no. 20 to 39 of Annexure-A4 and Page no 40
to 53 of Annexure A4. On comparison, it has been noticed that detail / transactions recorded on these sheets are more or less same, however, the transactions recorded on page 20 to 39 are more updated and contain details of cash on-money receipts of Rs. 18,45,07,562/- that has been received from different buyers against sale/ booking of respective flat. While explaining the nature of the transactions recorded on these sheet Shri Yagnesh Jogi, in reply to question no. 8 of his statement recorded u/s 131(1A) of the Act has explained lucidly that these sheet contain detail such as flat no, name of the buyers/ booking persons and details of cash / cheque received and to be received against sale /booking of respective unit.
He further explained that sheets inventoried as page 20-39 are more updated and having more amount. Beside the above, during the survey proceedings various loose papers were found and inventoried in Annexure-A5. Page no. 43 to 55 of this annexure is also contains detail of amount cash and cheque amount received from purchasers for respective unit of project Dream City. The quantum of on- money as per this excel sheet is comes at Rs. 18,63,65,880/-. Further various other excel sheets containing details like flat number, purchaser name, sale price, amount received in cash, amount received through cheque and amount to be received through cheque /cash etc were found from computers, email of the employees of working in office of the assessee company. These excel sheets have been prepared on different dates. Fitures noted in various other excel sheet has been compared with the above excel sheet impounded as page 43 to 55. Meaning thereby this excel sheet (43 to 55) is taken as base for working of on-money

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received. Person-wise, flat wise comparison has been made and it is found that on-money of Rs.2,19,17,174/- has been received in addition to that received as per the above excel sheet. Hence, the figure of on-money receipts as per excel sheet comes at Rs.20,82,82,983/- (Rs. 18,63,65,880/- + Rs.2, 19,17,174/-). Here it is pertinent to mention that the above excel sheet contains the details of amount that has been received up to 31.12.2018. However, from the impounded documents/ digital data, it has been noticed that the company has also received pending amount of cash on-money against the sale of flats during January 2019
to March 2019. While analyzing the whatsapp chat between Shri Paresh Gor and Ashutosh Ganatara, Chirag Lakhani & Atul Ganatara (printout of the same impounded as Annexure A/1), it is seen that cash amount of Rs. 12,68,000/- has been received from purchaser during this period (Jan to March 19). The detail of the same is as under;

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documents was shown to Shri Ashutosh Ganatara. From his statement recorded, it can be seen that Shri Ashutosh Ganatara (the nephew of one of the director Shri
Atul Ganatara and also authorized signatory of assessee company), while explaining the above pages has not only confirmed that amount mentioned in column "Received cash" in the above excel sheet is the cash on-money received on sale of respective flat but also confirmed that this cash on-money amount received for the project Dream City has not been recorded in regular books of accounts of the developer assessee company. Explanation for pages Annexure-
A4

He it is noteworthy to mention that Shri Ashutosh Gantara who is the nephew of one of the director Shri Atul Ganatara, is one of the authorized signatory for the company. A resolution has been passed by the company in this regard and authorized Shri Ashutosh Ganatara to sign on behalf of the company on all the documents, papers, affidavit, declaration, undertaking relating to purchase / sale of land / building etc. constructed at "Dream City" and also authorized him to ITA Nos. 785 to 787 & 765/Rjt/2024
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submit any documents with Government authorities/semi Government
Authorities. Considering all the above facts, a notice u/s 142(1) of the Act was issued and explanation/clarification has been sought from the assessee. In response, vide letter dated: 05.02.2024, the assessee has taken various contentions. The contentions raised by the assessee have been perused carefully and it is seen that these are similar to those has been raised during assessment proceedings for AY 2018-19 & AY 2020-21. These contentions were duly disposed off and detailed discussion have been made in respective assessment order and as such the contentions/ objections raised against proposed addition have been found not acceptable hence, disbelieved. In view of the above discussion, vide notice dated: 20.03.2024 the assessee has been requested to show cause as to why should addition of Rs. 5,25,97,941/- (being unaccounted profit for unit/flat sold during the year) not be made to its taxable income. The assessee submitted following reply to the aforementioned show cause notice in its response dated 26.03.2024 :-
"In connection with the above, we submit as under:
1. At the outset, we vehemently object the workgn of unaccounted profit calculated at Rs.4514/- per Square Meter. We deny the allegation made in the regarding alleged generation of unaccounted receipts, application of such alleged unaccounted receipts into alleged unaccounted expenses and purchase of land and alleged movement of unaccounted cash. Therefore, additions proposed in the show-cause notice is strongly objected.
2. The alleged on-money receipts was worked out by taking the basis of certain excel sheets stated to have been recovered from the personal e-mail inbox of an employee Mr.
Yagnesh Jogi, we reiterate that the company has not received any on-money from customers, but as stated earlier from time and again the impugned excel sheet/record/maintained by Mr. Ashutosh Ganatra and his subordinate staff. Further, it was given to understand that Mr. Ashutosh Ganatra was used to collect additional funds from customer / investor / broker for various purpose such as reimbursement of additional cost incurred in flat, purchase of stamp paper for registration, payment of legal fees and registration fees to advocate etc. Therefore, noting in the Excel Sheets recovered is not attributable to any unaccounted receipts (on-money) received by the assessee company against booking/ sale of flat and hence, addition proposed on this count is strongly objected.
3. So far as reliance placed on the statements recorded from Mr. Ashutosh Ganatra and his subordinate staff, it is reiterated that such statements were recorded behind the back

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of promoters / directors of the company and hence, the averments made in such statement is not binding to the assessee company. Not only that, both the promoters /
directors of the assessee company had in their duly sworn and notarized affidavit denied the averments in the statement recorded from Mr. Ashutosh Ganatra and also denied the acceptance of alleged unaccounted receipts (on-money). Therefore, assessment proposed to be finalized by taking the statement of third party and brushing aside the affidavits of promoters/directors is totally unjustified.
4. On the other side, allegation of application of unaccounted receipts is also on the basis of so-called data stated to have been recovered from the e-mail / WhatsApp conversations of employees and loose papers recovered from the premises of third party, which is strongly objected. As regard the allegation of unaccounted payment for purchase of land, it is reiterated that such allegation is made on the basis of certain loose papers recovered from the premises of third party, i.e., M/s. Bhanu RMC which is neither a seller/broker of such land nor a party to transaction and also, such loose paper did not contain any reference to person, date, signature etc. Further, unaccounted payment for land estimated on the basis of certain working in excel sheet recovered from the email inbox of Mr. Yagnesh Jogi is also arbitrary since such working does not reflect the on-money payment made to sellers of land.
5. In view of the above and in view of our detailed submission, we strongly object the proposal to make addition of alleged unaccounted income on estimated basis.
6. It is submitted that there are various discrepancies in interpretation of content of impounded documents and arithmetical accuracy in impounded documents. However, none of such discrepancy / issue raised by the assessee has satisfactory been addressed in the show-cause notice and on the contrary, it is alleged that the correctness and completeness of the books of account of assessee is doubtful. This allegation is totally unjustified where each and every receipts / payment evidenced from the land purchase deed, registered sale deed of flats, legal contract with the contractor etc. is accounted for in the audited books of account and such accounts is adopted by the promoters in their Annual General Meeting.
7. The assessee company would like to submit that its books of account are audited under the Companies Act, 2013 and u/s. 44AB of the Income-tax Act, 1961 and the auditor has not pointed out any material defects or discrepancies in the book results.
Further, allegation put forth in the show-cause notice is only on the basis of conjectures
& surmises, which cannot be basis for rejection of book results, which has already been accepted by Shareholders in the Annual General Meeting. Therefore, proposal to reject book results is strongly objected.
8. It is also submitted that the assessee in its books of account has declared the average
GP of 20.21%, which is much above the acceptable range and already accepted by revenue in other similar cases. This is because of the fact the registry value in respect of sale of flats to customers is made at much higher value than the prescribed valuation
(Fair Market Value) adopted by State Government for levy of stamp duty. Therefore, books of account of the assessee company shows correct and complete result and as such, proposal to reject such book results on the basis of certain documents / data stated to have been recovered from the personal gadgets & domain of third party/employees is strongly objected.
9. Without prejudice to the above and without admitting anything, it is also submitted that the action of estimating unaccounted receipts on the basis statement recorded from ITA Nos. 785 to 787 & 765/Rjt/2024
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Mr. Mihir Joshi is totally unjustified in as much as that sales rate of flat stated in his statement is unreal and incorrect. It is also submitted that Mr. Mihir Joshi was no authority to decide sales rate for the assessee company and hence, his statement should not be considered as conclusive.
10. It is also seen that Mr. Mihir Joshi in his statement submitted that he is looking after the sales department and once customer is convinced then he refers such customer to Mr. Ashutosh Ganatra and Mr. Ashutosh Ganatra explains the customer regarding final price, GST, document price etc. Therefore, it is clear that Mr. Mihir Joshi had only acted as a conduit between the prospected customer and Mr. Ashutosh Ganatra, whereas, final negotiation with customer took place with Mr. Ashutosh Ganatra only.
11. Further, as submitted above and in earlier replies, it is given to understand that Mr.
Ashutosh Ganatra was used to quote the price of flat to customer inclusive of stamp duty, registration fees, legal expense and other cost towards additional civil & interior work required by any customer. Therefore, sales rate mentioned in any of the impounded excel sheet / loose paper includes the actual consideration received / receivable by assessee company as per registered sale deed as well as amount received / receivable by Mr. Ashutosh Ganatra for the reasons mentioned as above.
12. In view of the above, estimated sales rate mentioned by Mr. Mihir Joshi in his statement cannot be treated as actual sales of the assessee company and hence, estimation of on-money on this ground is strongly objected.
13. Furthermore, it is also observed that alleged sales price of flat taken from the statement recorded of Mr. Mihir Joshi is in contradiction with the sales price reflected in the impounded documents / data itself. For instance, your good self has relied on the excel sheets impounded at page nos. 43 to 55 of Annexure A-5 for allegation of on- money receipt, but alleged sales price of flat mentioned in such impounded documents does not match with the alleged sales price as per statement of Mr. Mihri Joshi.
Following are some of the instances/samples of such deviation:

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 Hon'ble High Court of Gujarat in the case of N.R. Paper & Board Ltd. v. Dy. CIT
[1998] 234 ITR 733 had held that the evidence found and the material available should be the basis for computing the undisclosed income. It was observed by the ITA Nos. 785 to 787 & 765/Rjt/2024
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Bench that to hold that even without any evidence or material the Assessing Officer would be empowered to estimate the income was fraught with dangerous consequences. The Assessing Officer cannot presume that there must be some other material or evidence which has not been found during the search and the assessee must have derived the undisclosed income therefrom.

 In the case of Dolphin Builders Pvt. Ltd 356 ITR 420, Hon'ble High Court of Madhya Pradesh held that making addition merely on the basis of seized documents without cogent evidence that excess amount mentioned in seized document was actually passed on to the assessee was not sustainable where books of account of assessee were duly audited.

 Hon'ble ITAT, Pune Bench in the case of Raviraj Kothai vs. DCIT in ITA No.
1755/PN2013 held that -
14. In the facts and circumstances of the case and documents on record we hold that the addition in respect of on-money received in respect of Shop No. 129 i.e., the shop in respect of which the document was seize during survey is upheld. Whereas, in the absence of any material to show that on-money was received in respect of other shops sold or booked during the financial year 2006-07, the addition on account of on-money is not sustainable. The principle of extrapolation of 'on-money' on the other shops sold/booked during the period relevant to assessment year under appeal is rejected in the absence of any material on record.

 In the case of D. N. Kamani HUF (70 ITD 77) Hon'ble ITAT Patna Bench held that documents regarding receipt of on-money by assesses having been found in respect of sale of flats to one party, addition could not be made in respect of all the parties to whom assessee sold flats merely on the basis of presumption.

 In the case of Fort Projects Pvt. Ltd (63 DTR 145) Hon'ble ITAT Kolkata Bench held that AO was not justified in extrapolating few notings in a seized diary to balance flats in three projects given that no incriminating evidence pertaining thereto was found in the course of search.

 Hon'ble ITAT Jaipur Bench in case of ACIT V. M.M. Sales Agencies (2006) 153
Taxman 13held that the income cannot be estimated for the period for which no information is available on the basis of the seized record.

 Hon'ble High Court of Delhi in case of CIT v. H.C. Chandna (P.) Ltd. [2007] 163
Taxman 654 (Delhi) upheld the finding of the tribunal that no income can be estimated on the basis of the evidences found for a particular period.

 Hon'ble ITAT Ahmedabad in case of Savaliya Developers Pvt. Ltd V. DCIT in ITA
No. 401/Ahd/2014 & 3188/Ahd/2015 vide order 30.06.2019held as under in context to extrapolation:
"Besides, estimated cash receipts on-money of sale of all flats merely on the basis of statement of two purchasers without any tangible corroboration clearly falls in the realm of conjunctures and surmises. It is obvious that driven

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by misplaced suspicion, the AO has presumed the presence of on-money in respect of each of the residential flat sold. The action of the AO is a mere ipse dixit which is not objectively justifiable by some inculpatory evidence. It is only elementary to say that estimation of unaccounted money cannot be made only on the basis of contemplation. The order of the AO in making additions of Rs.3.28 Crores is thus clearly arbitrary and unsustainable in law. It is well settled that the Revenue authorities cannot base its findings on suspicions, conjunctures or surmises nor should it act on no evidence at all or on vague considerations partly on evidence and partly on suspicion, conjunctures or surmises. The Revenue could not demonstrate any material except unsupported statements of two persons. Such unverified statements without an y proof towards its assertions are not a good evidence and do not raise any estoppel against the assessee. Therefore, the addition made by the AO is in the realm of speculation without any basis whatsoever. Hence, we decline to interfere with the order of the CIT(A) in so far as appeal of the Revenue is concerned.

 Hon'ble High Court of Gujarat in the case of Jay Builder v. ACIT (2013) 215
Taxman 50 (Gujarat)

 Hon'ble Gujarat High Court in the case of DCIT V. Panna Corporation 74 DTR
89held that it has been consistently held by this court and some other courts have been following the principle that even upon detection of on-money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. If that were the legal position,

 what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation.

 Hon'ble ITAT, Ahmedabad Bench in the case of Abhishek Corporation v. DCIT
[1999] 63 TTJ 651 (Ahd.), wherein, it was held that where it was found that assessee had been charging on money /premium in respect of booking of flats, the entire receipts on account of on money /premium charged by the assessee on booking of flats would not be the undisclosed income of the assessee for the block period, but only net profit rate could be applied on unaccounted sales/receipts for the purpose of making the addition.

 Hon'ble ITAT Surat bench in the case of ACIT v. Mansi Reality Pvt. Ltd. in ITA No.
540/AHD/2016wherein net profit of on-money receipts was adopted by the Ld.
CIT(A) was upheld by the tribunal by holding that in the case of on-money receipts, only profit embedded therein is to be taxed.

 Hon'ble ITAT, Indore Bench in the case of Pumarth Infrastructure Pvt. Ltd. vs. ACIT in IT(SS) No. 175 to 177/Ind/2017

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 Hon'ble ITAT, Mumbai Bench in the case of ACIT vs. Shankar Developers in ITA
No. 6235 & 6236/Mum/2012
13. We notice that the assessing officer has determined the on-money receipts as per the disclosure made by the assessee before the Settlement Commission.
There is no dispute that the Settlement Commission has agreed with the contentions of the assessee that the entire amount of on-money receipts cannot be considered as income of the assessee. Accordingly the Settlement
Commission has estimated the income from on-money receipts @ 17% in assessment year 2005-06. Since the assessing officer has estimated the on- money receipts as per the disclosure made before Settlement Commission, we are of the view that the learned Commissioner (Appeals) was justified in estimating the income from the on-money receipts @ 17% for this year also by following the order passed by the Settlement Commission. Accordingly we confirm the order passed by learned Commissioner (Appeals).

 Hon'ble ITA, Mumbai Bench 'A' in the case of DCIT vs. Adarsh Industrial Estate
Pvt. Ltd. (2021) 190 ITD 878
13. Following the above decisions, we are inclined to held that the Ld. CIT(A) is not correct in not following the order of settlement commission wherein a rate of 12% has been applied on the on money to assess income embedded therein. Accordingly, we modify the finding of Ld. CIT(A) and direct the AO to assess the on money @ 12% as per the system of accounting followed by the assessee as has been decided by us in ground No. 1. 14. In the result, the appeal of the assessee is allowed.

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the on-money income on the flats sold during the year is estimated as under after invoking the provisions of section 145(3) of the Act and added to the returned business income as under –

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10. Now, we shall adjudicate, summarised and concise grounds of appeal, one by one, as follows:

(This is assessee's ground No. 2 in ITA No. 785/RJT/2024 for AY 2018-19, This is assessee's ground No. 2 in ITA No. 786/RJT/2024 for AY 2019-20, This is assessee's ground No. 2 in ITA No. 787/RJT/2024 for AY 2020-21)

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and provides deemed satisfaction for three assessment years prior to the date of search, and even on this ground, the assessing officer has validly issued notice under section 148 of the Act. Hence, there is no defect in the reassessment proceedings, therefore, we dismiss the ground raised by the assessee and confirm the findings of the learned
CIT(A).”

(This is assessee's ground No. 3 in ITA No. 785/RJT/2024 for AY 2018-19, This is assessee's ground No. 3 in ITA No. 786/RJT/2024 for AY 2019-20)

(This is also in revenue's ground no. 1 in ITA No. 765/RJT/2024 for AY 2019-20)

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16. We note that “On-money” receipts are undisclosed receipts, and only the profit element embedded in such receipts can be taxed, not the entire “on-money”
amount. However, the rate of profit is always a matter of estimation and must depend on following factors, such as, nature of project, location, type of construction, cost structure, evidence of expenses and past profit margins. We note that in R.K. Group cases, expenses and cost in every project is higher side, due to locational disadvantage, and the profit element is below 10%, as per the past audited profit and loss accounts and evidences available in search and seizure proceedings. It is settled position of law and we also note that Courts and Tribunals have emphasized that the profit rate must have a reasonable basis in each case, and cannot be arbitrarily fixed. Since “on-money” receipts represent undisclosed sales, only the profit element embedded therein can be taxed; however, the rate of profit estimation depends on the facts of each case. We have examined the seized material and past records and noted that in RK group cases, under consideration, the past profit margin as per audited books of accounts and as per seized material is 7% (average) only, this is because, due to location of the project and moreover, the cost and expenses are more than other similar projects.
In these circumstances, we find that profit element embedded in commercial projects and housing projects should be estimated by applying the uniform rate of 10% on “on-money”. Therefore, considering the mandatory judgement of the juri ictional Hon’ble Gujarat High Court, in the case of Ms. Jay Kesar Bhavani
Developers Pvt. Ltd(Supra) and considering the peculiar facts of the assessee’s case, narrated above, we are of the view that profit estimation on, “on money” at the rate of, 10% is fair and reasonable.

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of Coordinate Bench of ITAT Rajkot. The findings of the Co-ordinate Bench of ITAT Rajkot is reproduced below:
“14. In this summarised and concise ground, the plea of the assessee is that estimated profit at the rate of 16% on the so called “on money” is on higher side, considering the judgement of the juri ictional High Court of Gujarat. However, plea of the revenue is that addition made by the assessing officer at the rate of @ 35% should be sustained.
Learned Counsel for the assessee submitted that judgements of Hon`ble juri ictional
High Court of Gujarat, in respect of addition on “on-money”, should be followed. The Hon`ble juri ictional High Court of Gujarat in the following cases held that profit element embedded in the “on-money” should be added in the hands of the assessee and not the entire “on-money”, and estimated addition on “on money” should be at the rate of 6% or at the rate of 8%, may be made, depending upon the facts and circumstances of the case. The relevant judgements of the Hon`ble juri ictional High
Court of Gujarat and Hob`ble ITAT Ahmedabad, are reproduced below:
(i). 2020 (4) TMI 844ITAT AHMEDABAD GREENFIELD REALITY P. LTD. VERSUS
ACIT, CENT. CIR. 1 (2) AHMEDABAD AND DOIT, CENT. CIR. 1 (2) AHMEDABAD,
VERSUS GREENFIELD REALITY P. LTD.
“Estimation of Income on-money received by the assessee on booking of flats and shops in "VesuProject"Income offered by the assessee at 8% of the alleged gross receipts source of payment of cash for purchase of the land-HELD THAT:- On an analysis of the record, it would reveal that during the course of search not only details of on-money received by the assessee on booking of flats and shops in "Vesu Project" was found, but details of certain expenditure, which are not recorded in the books were also found.
This included cash payment for purchase of land.CIT(A) has rightly observed that the gross on-money noticed on the seized paper cannot be considered as income of the assessee. There are certain expenditures which were not recorded in the books. Those expenditure must have been made from this on-money.After going through the well- reasoned order of the Id.CIT(A), and in the light of judgment of Hon'ble juri ictiona'
High Court in the case of Panna Corporation [2014 (11) TMI 797 GUJARAT HIGH
COURTI as well as Koshor Mohanlal Telwala [1998 (9) TMI 106-ITAT AHMEDABAD-
AI we are of the view that only element of income embedded in the on-money received by the assessee for booking of flats/shops in "Vesu Project" is required to be assessed in its hand in all these years.Element of income involved in this on-money assessee is showing income at 8%, AND CIT(A) is estimating it at 20% HELD THAT:- CIT(A) has also not mentioned any attending circumstances for harbouring a belief that 20% could have been earned from this activity. Thus after taking guidance from the judgment of Kishor Mohanlal Telwala [1998 (9) TMI 106-ITAT AHMEDABAD-Al we deem it proper that the assessee has rightly disclosed the profit element embedded in the gross profit at 8%. Accordingly, we allow the ground of appeal raised by the assessee, and hold that profit which has been directed to be adopted by the Ld.CIT(A) at 20% of the alleged turnover should be taken at 8%.
(ii)Tax appeal No.267 of 2022 dated 07.07.2022 M/S. JAY KESAR BHAVANI
DEVELOPERS PVT. LTD.( Guj-HC)
“Rejection of books of accounts u/s 145(3) On money receipt estimation of income addition on account of entire construction receipts as alleged unrecorded receipts -

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HELD THAT: CIT (A) was not justified in confirming the addition of entire on-money receipts amounting to 4,72,02,368. Therefore, only estimated net profit is required to be taxed. We find that the assessee has shown net profit at 4.55.% for the assessment year under consideration and 4.59% for A.Y. 2010-11. Further, the Hon'ble High Court in the case of CIT V. Abhishek Corporation [1998 (8) TIMI 110 ITAT AHMEDABAD-C) has upheld the net profit at 1.31% as declared by the assessee in that case. The net profit rate disclosed at 4,55% during the assessment year under consideration by the assessee in books of accounts and considering the facts that the project undertaken by the assessee comes under deduction of section 801B(10) hence, there may not be any intention to disclose the lower rate of profit. Considering these facts, and taking into account net profit in construction business, it would be reasonable to estimate 6% of net profit on total on-money.
(iii)The Commissioner of Income Tax vs. Shri Hariram Bhambhani INCOME TAX
APPEAL NO.313 OF 2013 (BOM)(HC):
"In any view of the matter, the CIT(A) and Tribunal have come to the concurrent finding that the purchases have been recorded and only some of the sales are unaccounted. Thus, in the above view, both the authorities held that it is not the entire sales consideration which is to be brought to tax but only the profit attributable on the total unrecorded sales consideration which alone can be subject to income tax. The view taken by the authorities is a reasonable and a possible view. Thus, no substantial question of law arises for our consideration.”
(iv) The ACIT Central Circle - 3, Jaipur Vs Shri Nawal Kishore Soni : ITA No. 1256,
1257, & 1258/JP/2019 [ITAT] [Jaipur]:
"23.4 It is settled law that not only from the illegal business but also the unaccounted transaction of purchase and sale only profit/ income on sales could be assessed as undisclosed income and could be subjected to tax. Case laws to the point are as under: 1. Dr. T.A. Quereshi (157 taxmann.com 514) (Supreme
Court) 2. Piara Singh (124 ITR 40) (Supreme Court) 3. S.C. Kothari (82 ITR
794 (Supreme Court) 23.5 The assessee admitted such profit at Rs. 45,00,000/- and disclosed that on said transactions income in PMGKY, 2016 and paid due tax thereon. The copy of certificate issued by PCIT is placed on record. Thus when that transactions are of unrecorded purchase and sale of gold, which Ld.
assessing officer also admits in assessment order, then simply that name &
address of purchasers are not provided the entire amount of sale cannot in law be treated as undisclosed income, only profit earned from said transactions which has been admitted by assessee at Rs. 45,00,000/- can only be assessed to tax more so when the assessee has disclosed in PMGKY the said undisclosed income of Rs.45,00,000/- and paid tax in accordance with scheme and received certificate there for from Pr. Commissioner of Income Tax, hence the same disclosed income cannot be included as income is assessment as per Section 199-l of PMKGY. However Ld. A.O. has allowed credit of amount of disclosed income in PMKGY from total income as so the addition on this account is restricted to Rs.45,00,000/- and balance is deleted. The assessee thus gets relief of Rs.3,02,00,000-45,00,000 = Rs. 2,57,00,000/-."
(v) Greenfield Reality P. Ltd IT(SS) A No. 320,321 and 322/Ahd/2018 & 329/Ahd/2018:

ITA Nos. 785 to 787 & 765/Rjt/2024
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"16. We have duly considered rival submissions and gone through the record carefully. On an analysis of the record, it would reveal that during the course of search not only details of on-money received by the assessee on booking of flats and shops in "Vesu Project" was found, but details of certain expenditure, which are not recorded in the books were also found. This included cash payment for purchase of land. Therefore, the Ld.CIT(A) has rightly observed that the gross on-money noticed on the seized paper cannot be considered as income of the assessee. There are certain expenditures which were not recorded in the books.
Those expenditure must have been made from this on-money. Therefore, after going through the well-reasoned order of the Ld.CIT(A), IT(SS)A No.289
Ahd/2018 (7 Others) Greenfield Reality P. Ld. Vs. DCIT and in the light of judgment of Hon'ble juri ictional High Court in the case of Panna
Corporation (supra) as well as Koshor Mohanlal Telwala (supra), we are of the view that only element of income embedded in the on-money received by the assessee for booking of flats/shops in "Vesu Project" is required to be assessed in its hand in all these years.
17. Next question arose, what is the element of income involved in this on- money. On one hand, the assessee is showing income at 8%, on the other hand, the ld. CIT(A) is estimating it at 20%. It is pertinent to observe that section 144
of the Income Tax Act provides discretion in the assessing officer to pass best judgment when an assessee failed to appear before him, and to submit requisite details. In other words, it provides power in the assessing officer to estimate an income of the assessee. We deem it appropriate to take note the relevant part of this section. It reads as under:.
"24. We have considered rival submissions and gone through the record carefully. There is no dispute that during the course of search certain material/loose papers were found exhibiting the fact that the assessee has received cash, over and above, the amounts stated in the booking register. This cash was not accounted for in the books. It has been treated as on-money for sale of flats/shops. Simultaneously certain loose papers were found disclosing the fact that the expenditure were incurred in cash and accounted in the books.
The Ld.CIT(A) made an analysis of this, and then held that the moment assessee's income is being assessed at 8% of the gross on-money, then the remaining amount 92% could take care of unexplained expenditure. It can be explained by a simple, viz. an assessee has received Rs.100/- in cash for sale of flat. Out of that, element of income embedded in this Rs. 100/-has been determined by us at Rs.8/-. Remaining Rs.92/- must have been incurred by the assessee for developing that flat. Thus, in other words, the expenditure whose details were found being incurred in cash could be construed as coming out of these Rs.92/-. Thus, there cannot be any separate addition of unexplained expenditure. The Ld.CIT(A) has rightly deleted the addition."
15. We note that the assessee is in appeal before us and praying the Bench that estimated addition is very higher side and it should be reduced, at a reasonable level.
However, learned DR for the revenue submitted that addition made by the assessing officer may be confirmed. We note that the estimation of income is based on facts and will vary from business to business and year to year, depending on the business conditions. We note that ld.CIT(A) has estimated the profit on the “on-money” at the rate of 16% but the ld.CIT(A) has failed to bring on record any comparable case in ITA Nos. 785 to 787 & 765/Rjt/2024
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support of his estimation that too @ 16% and in some cases 8% and 12% etc. No doubt estimate of the profit can be resorted to in these types of cases but the estimate and that too at a particular percentage or fraction of percentage which ld CIT(A) has adopted has to be based on sound reasoning in comparison with the past results as well as comparable cases. Without this the estimation so made cannot be said to be valid estimation. The juri ictional Hon’ble High Court of Gujarat, in case of estimation of profit element on, “on-money” has taken the view that estimation of profit in these type of cases of “on-money” had been held between range of 6% to 8%.
16. We note that the average profit of the assessee as per audited books of accounts is 7%, therefore, profit estimation done by the learned CIT(A) at the rate of 16% on the “on-money” is higher side. Considering the nature of business and voluminous ‘on- money’ and taking into account, the fact that there is expenditure made by the assessee to develop the project out of the “on-money”, therefore, profit margin in this type of business normally is 10% on “on-money”. We proceed to work out the estimation of profit keeping in mind the following facts:
(i)The estimate is not opened up to be framed in an arbitrary manner.
(ii) The estimate by rule of thumb is absolutely infirm.
(iii)The estimation of rate of profit return must necessarily vary with the nature of the business.
(iv)There cannot be any uniform yardstick.
(v)An assessment to be best of judgement can only be based on the material available on record and past records and considering the totality of the facts.
(vi) Only real income and neither notional income nor astronomical income, can be taxed under the I.T. Act, 1961. Accordingly, we note that estimation the profit element on ‘on-money’ at the rate of 10%, should be fair, keeping in mind the principle laid down by Hon'ble Supreme Court in the case of H. M. Esufali Abdulali that the method to be adopted must be which is approximately nearer to the truth.
17. Considering the facts and circumstances, narrated above, we find that the estimation done by the assessing officer, and re-estimated addition, sustained by the Ld.
CIT(A) @ 16% is very higher side. Therefore, we are of the view that the estimated addition on “on-money” should be @ 10%, which will take care of inconsistency in the undisclosed income of the assessee. Therefore, the assessing officer, is directed to make the addition in the hands of assessee, at the rate of 10%, on “on-money”. Hence, we allow above appeals of these assessee partly and dismiss all the appeals of the revenue.”
18. Therefore, respectfully following the binding judgement of the Co-ordinate
Bench of ITAT Rajkot in assessee’s own case (Supra), we direct the assessing officer to tax “on-money” at the rate of 10%, therefore, we partly allow the following appeals of the assessee:

ITA Nos. 785 to 787 & 765/Rjt/2024
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(i)
Ground No. 3 in ITA No. 785/RJT/2024 for AY 2018-19
(ii)
Ground No. 3 in ITA No. 786/RJT/2024 for AY 2019-20

Whereas following appeals of the revenue, are dismissed:

(i)
Ground no. 1 in ITA No. 765/RJT/2024 for AY 2019-20

(This is revenue's ground no. 2 in ITA No. 765/RJT/2024 for AY 2016-17)

ITA Nos. 785 to 787 & 765/Rjt/2024
Six Twenty Realty Pvt. Ltd.
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22. On the other hand, learned Counsel for the assessee submitted that assessee has been following the accrual basis of accounting and percentage of completion method.
Therefore, revenue should be recognised in the year in which the transaction got materialised, that is, in assessee`s case, when the document is registered and executed, then only the revenue is recognised, with certainty. Hence, learned CIT(A) has rightly directed the assessing officer to recognise the revenue in the year in which the transaction/sale of flat is registered.
23. We have considered the submissions of both the parties, and we note that ICDS-
3 refers to Income Computation and Disclosure Standard–III, issued by the Central
Board of Direct Taxes under section 145(2) of the Income-tax Act, 1961. It deals with computation of income from construction contracts for tax purposes. It is largely based on the earlier Accounting Standard AS-7 but contains important differences relevant for income tax computation. We note that ICDS–III applies to construction contracts of contractors, however, assessee under consideration is not a contractor, but he is a contractee. A person who undertakes contract to do a job/work for others, is contractor. However, assessee under consideration is not a contractor but a contractee, who gets the work done from contractor and assessee pays the amount to the contractors for services rendered by them to it ( assessee), therefore, ICDS-III is not applicable to the assessee under consideration. Hence, we are of the view that ICDS-
III applies to Contractors (not contractees). Fundamental Accounting Principle, as per
ICDS-III is the Percentage of Completion Method (POCM). The Percentage of Completion Method is mandatory method under ICDS-III. Under ICDS-III the Revenue from variations, claims and incentives shall be recognised only when there is reasonable certainty of its ultimate collection.
24. We note that even if the addition on account of estimated profit on alleged “on- money” cash receipts is made, the same should be made in the year of actual sale when the conveyance deed is executed in the favour of buyer when the significant risk and rewards are transferred. It is observed that the assessee has consistently followed revenue recognition method whereby sale is offered to tax when registered sale deed of particular unit is executed, that is, date on which significant risk and reward has been transferred to buyer. This method of accounting has been followed consistently by assessee on year to year basis and assessing officer has not disturbed such methodology. This method of accounting of recognizing revenue has been accepted by Hon'ble Gujarat High court in the case of Shivalik Buildwell Pvt Ltd. [2013] 40
taxmann.com 219 wherein it is held as under:
"Section 5 of the Income-tax Act, 1961 Income Accrual of [Booking amount received by builder] - Assessee was a builder and developer - He received certain amount as advance from different parties Assessing Officer added said amount to assessee's taxable income Tribunal set aside addition made by Assessing Officer holding that assessee being a developer of project, profit in its case would arise only on transfer of title of property and, therefore, receipt of any advance or booking amount could not be treated as trading receipt of year under consideration Whether on facts, impugned order passed by Tribunal deleting addition was to be upheld - Held, yes [Para 4] [In favour of assessee]"
25. On identical facts, it is relevant to refer to the Decision of Hon'ble ITAT
Ahmedabad in the case of M/s D R. Construction Vs. Income Tax Officer in ITA no.
2735/Ahd/2010, wherein Hon'ble ITAT has held as under:-

ITA Nos. 785 to 787 & 765/Rjt/2024
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"Unaccounted expenditure-receipt of 'on money' in the present case assessee is dealing in several immovable property ie, flats and shops which he has constructed. A single flat is a capital asset for the purchaser but for the assessee all the flats together constitute stock-in- trade. HELD THAT:-it is undisputed position that out of this on money assessee has incurred various expenditure/investment. Therefore, 'on money' as such and as a whole cannot be taxed over and above the income accruing on the basis of entries recorded in the books of account on the basis of decision held in E.D, Sassoon & Co. Ltd. & Ors. vs. CIT
(1954 (5) TMI 2 SUPREME COURT we hold that advance money received either by way of cheque or by way of cash will partake the character of taxable income when registered sale deed of the flats is executed in subsequent years. As a result, the sum of 10 crores will not taxable in Asst. Year 2008-09. The appeal of assessee is accordingly allowed.”
26. On the similar facts, the learned CIT(A) relied on the judgement of the Hon'ble
Supreme Court. The Hon'ble Supreme Court upheld the order passed by the Hon'ble
[2018] 94 taxmann.com 292 wherein it was held as under:
"Section 145 of the Income-tax Act, 1961 Method of accounting (Project completion method) - Assessee was engaged in construction business -
It was subjected to a survey action which was conducted on business.
premises - During course of survey, statement of one partner of firm was recorded in which, he admitted of firm having received a sum of Rs.26.05
crores not disclosed in books of account-While doing so, he further stated that same would be subject to registration of sale deeds When assessment was undertaken, assessee contended that firm was following project completion method of accounting and income would be offered to tax as and when final sale deeds were registered Assessee firm thus offered only a sum of Rs.1 crore during year under consideration
Assessing Officer rejected assessee's stand and added entire amount of Rs.26.05 crores as income of assessee during current year Tribunal accepted assessee's contention that since firm was following project completion method for offering income to tax, same would be subjected to tax upon completion of sale, though amount may have been received earlier from buyer Revenue filed instant appeal on ground that in his statement, partner of firm had disclosed entire amount as income of relevant year - Whether in view of fact that while agreeing that sum of Rs. 26.05 crores was undisclosed income of assessee for relevant current year, said partner of firm added a clarification that same would be subject to execution of sale deeds, there was no error in impugned order of Tribunal and, thus, same was to be upheld-Held, yes [Para 5] [in favour of assessee]”
27. In the light of the above judgement of the Hon’ble Supreme Court, in the case of Happy Home Corporation (supra), and Hon’ble juri ictional High Court of Gujarat in the case of Shivalik Buildwell Pvt Ltd(supra) and decision of Ahmedabad Tribunal, in the case of M/s D R. Construction, we find that unaccounted profit estimated on ‘on- money’ receipt is required to be taxed in the year in which sale deed is executed by ITA Nos. 785 to 787 & 765/Rjt/2024
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assessee or significant risk and rewards is transferred to buyer. As in case in hand, the assessee has been following revenue recognition method on execution of sale deed, only on-money receipt as computed in present case would be taxable in the year in which sale deed is executed and not when ‘on-money’ was received. Besides, we find that ICDS-III is not applicable to the assessee under consideration, therefore, we dismiss the ground raised by the revenue.”

Order pronounced in the open court on 11-03-2026. (Dr. Arjun Lal Saini)

(Dr. Dinesh Mohan Sinha)
लेखा सदÖय/Accountant Member

Æयाियक सदÖय/Judicial Member
राजकोट /Rajkot
िदनांक/Date: 11/03/2026
आदेश कì ÿितिलिप अúेिषत/ Copy of the order forwarded to :
 अपीलाथê/ The Assessee
 ÿÂयथê/ The Respondent
 आयकर आयुĉ/ CIT
 आयकर आयुĉ(अपील)/ The CIT(A)
 िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, राजकोट/ DR, ITAT, RAJKOT
 गाडª फाईल/ Guard File
By order/आदेश से,

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