M/S S. B. DEVELOPERS,MUMBAI vs. DCIT, CC-6(2), MUMBAI

9. Considered the rival submissions and perused the material on record. We find that identical issue has been decided by the Tribunal in assessee’s own Group company viz., Sai Ashray Developers Pvt. Ltd. v/s DCIT, ITA no.2967/Mum./2019, etc., order dated 11th June 2017, vide which the issue for our consideration is squarely covered in favour of the assessee and against the Revenue. For the sake of clarity, the operating para of the issue decided by the Co–ordinate Bench cited supra, is reproduced below:–

“13. Considered the rival submissions and material on record. We noted that in these appeals the issue of on money received by the assessee is proved beyond doubt from the records found during search proceedings and subsequent acceptance by the key personal of the Ahuja group. The issue before us is only consideration of the above said on money to be taxed under section 68 of the Act or Based on the findings of the learned CIT(A) that receipt of on money has to be taxed only on net income and estimated net income @25% of the gross on money received. We notice from the submissions of the learned Counsel for the assessee that the above said issues are already considered by the Co–ordinate Bench in Tulip Land And Developers (supra) and Bhalchandra Trading P. Ltd. (supra) and decided the issue in favour of the assessee in the appeal filed by the assessee and dismissed the issues raised by the Revenue. For the sake of clarity, it is reproduced below: Bhalchandra Trading Pvt. Ltd. v/s DCIT ITA no.2977–2978/Mum./2019 Order dated 25.05.2021 “7.1. We have heard ld. DR and perused the materials available on record. We find that the ld. AO had proceeded to make an addition u/s.68 of the Act towards on-money received by the assessee for sale of flats. It was also submitted by the assessee before the ld. AO that there were certain unaccounted business expenses made by the assessee out of the on-money received and hence, only profit element thereon could be added and not the entire on-money receipts. We find that 9 M/s. S.B. Developers the ld. AO ignoring the entire contentions of the assessee proceeded to tax the net on-money received of Rs.2,20,00,000/- in the A.Y.2014-15 by applying the provisions of Section 68 as unexplained cash credit. The ld. AO also observed that assessee has not provided the party-wise details of on-money receipt. The details of on-money received and on-money reversal for various assessment years are tabulated as under:- Year On Money Received On Money Reverse Net On Money 2009-10 5,70,67,250/- 22,50,000/- 5,48,17,250/- 2010-11 2,52,54,500/- 4,81,50,000/- (2,28,95,500)/- 2011-12 Nil 1,21,17,250/- (1,21,17,250)/- 2014-15 3,35,00,000/- 1,15,00,000/- 2,20,00,000/- 2015-16 38,80,000/- 65,00,000/- (26,20,000)/- TOTAL 11,97,01,750/- 8,05,17,250/- 3,91,84,500 7.2. We find that the assessee’s group concerns also had offered 12% of on- money receipts as its income before the Hon’ble Income Tax Settlement Commission. The ld. CIT(A) categorically admitted in his order that the said receipt represents on-money received on sale of flats from which certain expenses were also incurred by the assessee and hence, only the profit element thereof could be brought to tax and not the entire on-money receipts. We find that the ld. CIT(A) accordingly estimated the profit element to be at 25% and restricted the addition to Rs.55 lakhs as against Rs.2,20,00,000 made by the ld. AO. Against this finding of the ld. CIT(A), the revenue is not in appeal before us. 7.3. It is not in dispute that assessee had indeed received on-money for sale of flats to the tune of Rs.2,20,00,000/- during the year under consideration. It is not in dispute that the assessee had incurred certain business expenses out of such on-money which are kept outside the books of accounts. Hence, it will be just and fair that only the profit element embedded on any such undisclosed transaction could be brought to tax on an estimated basis. The assessee had already pleaded that on-money transactions were offered by the assessee’s group concerns @12% of on-money receipts before the Hon’ble Income Tax Settlement Commission and the same has been accepted by the Settlement Commission. Hence, the data and information was indeed available with the ld. CIT(A) to have some rational basis to make profit estimation in the hands of the assessee herein by following 12% thereof from the order of Hon’ble Income Tax Settlement Commission. Accordingly, we direct the ld. AO to add only 12% of on- money receipts as undisclosed income of the assessee for the year under consideration. Accordingly, the ground No.1 & 2 raised by the assessee is partly allowed.

“8. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that the assessee is found to have received on money from the buyer of flats/properties on the basis of documents which have 10 M/s. S.B. Developers been found during the course of search and the on money received by the assessee in two years A.Y. 2014-15 & 2015-16 of Rs.32,50,000/- and Rs.1,50,00,000/- respectively. However, we find that in the assessment the AO has added Rs.2,15,00,000/- which is a typographical error and correct amount is Rs.1,50,00,000/-. We have also cross verified this from the order of settlement commission and submissions before the Ld. CIT(A) who has partly allowed the appeal of the assessee by sustaining the addition equal to 25% of the on money received by the assessee. The Ld. A.R. has argued before the Bench that since in the sister concerns cases on money has been brought to tax @ 12% by the settlement commission, therefore the same rate should be applied to assess the on money in the hands of the assessee also. We find the arguments of the assessee quite convincing and cogent and are inclined to set aside the order of Ld. CIT(A) on this issue and direct the AO to assess the same by applying 12% on Rs.1,50,00,000/- and that too in the year when the regular income of the assessee is assessed to tax as per theregular method of accounting. In deciding so we find support from the decision of the ACIT vs. ISA Enterprises (supra) wherein it has been held that income has to be assessed on the basis of method of accounting followed by the assessee. The operative part is reproduced as under: “7. We have heard the rival submissions and perused the relevant materials on record. We give the reasons for our decision in the succeeding paragraphs. Having gone through the return of income filed by ISAE for the AY 2008- 09 to AY 2014-15, we find that it is following the project completion method. It filed its return of income for the AY 2014-15 on 04.04.2015 declaring total income of Rs.4,45,00,710/-. The above income has been accepted without any variation by ACIT-20(1), Mumbai in the assessment dated 28.12.2016 completed u/s 143(3) of the Act. Now it would be apposite to discuss the cited two decisions. In the case of M/s Jalaram Jagruti Development Pvt. Ltd. (supra), the issue before the Hon'ble Bombay High Court was the following: "Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal in law, was right in holding that receipts of Rs.3,46,250/- recorded in the documents seized during the course of search were reflected in the books of accounts and could be taxed only in the year in which the project was completed?" The Hon'ble High Court held that: "The finding of fact recorded by the Tribunal is that the receipts in question had direct nexus with the project of the assessee and that the said cash receipts have been offered to tax in the AY 2008-09, since the assessee was following the project completion method. Once the cash in 11 M/s. S.B. Developers question has already been assessed to tax, the question of taxing the same assessment year in question AY 2005-06 does not arise."

7.1 In M/s M/s Guruprerana Enterprises (supra) the following questions of law were raised before the Hon'ble Bombay High Court: a) "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the addition holding that the assessee has not actually received any cash receipts and the declaration made by the partner of the firm was towards total sale receipts and not towards income for the year? b) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the addition holding that the project completion method was applicable on account receipts of Rs.5 crores even though the assessee had not accounted the receipts in the regular books of accounts? c) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the addition of Rs.5 crores itself had failed to follow the norms of accounting standard regarding disclosure of receipts as per the AS-7 and as per section 145 of the I.T. Act, 1961?" The Hon'ble High Court held as under: "Counsel for the parties state that the income which is disputed in the present proceedings has been offered to tax on the basis of the project completion method during the assessment year 2009-10 and the same has been accepted by the revenue. In these circumstances, we see no reason to entertain the proposed question of law as the entire exercise would be academic. In the above view, the questions (a) to (c) as proposed cannot be entertained."

12 M/s. S.B. Developers

With regard to Revenue’s appeal, the issue is already considered in the above paras.