THE ASSTT. COMMISSIONER OF INCOMETAX, CENTRAL CIRCLE-1(2), , AHMEDABAD vs. SANKALP VENTURE LLP, AHMEDABAD

2.1. Accordingly, assessee was called upon to show cause as to why the amount being unaccounted receipts should not be treated as undisclosed income u/s.68 of the Act and the amount being unaccounted payments incurred in cash should not be treated as unaccounted expenditure u/s.69C of the Act.

2.2. Assessee furnished a detailed reply to the SCN wherein, the assessee claimed that as regards receipts pertaining to real estate business, even from the noting in the seized material, it is clear that such expenses have been incurred for the purpose of business. Therefore, the entire receipts and entire payments cannot be subject to additions. Rather, only profit element (approx. 8 to 10%) may be applied to the receipts. Only the real income can be taxed in the hands of the assessee.

2.3. The Ld AO was not satisfied with the reply furnished by the assessee. Consequently, assessments were framed under sections 153A and 143[3] of the Act for the Asst. Years 2013-14 to 2019-20 I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 5 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. whereby the amount of on-money received on various units is Rs.10,74,39,000/-(A). The corresponding agreement values of the said units is Rs.8,08,01,000/-(B). Therefore, based on evidence seized during the course of search and statement of key employee, the average on-money stands at 132.96% to the Agreement Value (A/B X 100). Accordingly, extrapolation of On-Money received by the assessee for A.Y.2013-14 and 2018-19 is worked out as under:

Assessment Total Agreement Extrapolated Year Value (B) on-money (A) AY 2013-14 Rs.1,62,01,000 Rs.2,14,73,000 AY 2014-15 Rs.2,03,00,000 Rs.2,63,83,000 AY 2015-16 Rs.1,92,00,000 Rs.3,14,61,000 AY 2016-17 Rs.99,00,000 Rs.56,61,000 AY 2017-18 Rs.72,00,000 Rs.83,61,000 AY 2018-19 Rs.80,00,000 Rs.1,41,00,000 Total Rs.8,08,01,000 Rs.10,74,39,000 2.4. Similarly the additions made by the AO on account of Unaccounted On-money receipts and Unaccounted expenses are summarized as follows:

Particulars AY 18-19 AY 19-20 Total On-money receipts - Rs.1,46,00,000 Rs.1,46,00,000 Misc. receipts Rs.1,20,000 Rs.22,000 Rs.1,42,000 Total unaccounted Rs.1,20,000 Rs.1,46,22,000 Rs.1,47,42,000 receipts (A) Unaccounted expenses - Rs.22,69,72,000 Rs.22,69,72,000 Addition u/s 69C i - Rs.1,87,210 Rs.1,87,210 Total unaccounted - Rs.22,71,59,210 Rs.22,71,59,210 payments (B)

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2.5. Accordingly, entire unaccounted receipts and entire unaccounted payments, appearing in the seized material, were added as income of the respective assessment years and demanded taxes thereon.

Real income Extrapolated Total @ 14% of Asst. Unaccounted on-money unaccounted unaccounted Years receipts receipts receipts receipts (A) (B) (C = A + B) [C * 14%]

2013-14 -- Rs.2,16,73,000 Rs.2,16,73,000 Rs.30,34,220 2014-15 -- Rs.2,63,83,000 Rs.2,63,83,000 Rs.36,93,620 20 15-16 -- Rs.3,14,61,000 Rs.3,14,61,000 Rs.44,04,540 2016-17 -- Rs.56,61,000 Rs.56,61,000 Rs.7,92,540 2017-18 -- Rs.83,61,000 Rs.83,61,000 Rs.11,70,540 2018-19 Rs.1,20,000 Rs.1,41,00,000 Rs.142,20,000 Rs.19,90,800 2019-20 Rs.1,46,22,000 -- Rs.1,46,22,000 Rs.20,47,080 2023-24 -- Rs.16,29,70,269 -- Rs.2,28,15,838 Total Rs.1,47,42,000 Rs.27,06,09,269 Rs.28,53,51,269 Rs.3,99,49,178 3.1. The relevant observations of the Ld. CIT(A) in confirming the real income at 14% of the unaccounted receipts at Rs. 3,99,49,178/- as follows:

“… 7.12. From the facts of the case, it has been observed that the appellant has received unaccounted receipts from its Real Estate business and has also incurred expenditure against the same. In examining any transaction I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 7 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. and situation as compared to the facts of the case of the appellant, it is a settled position of the law, that the taxes have to be levied on the. REAL INCOME and no taxes can be levied in arbitrary manner" Further in the assessment order the AO has estimated the extrapolated-on money with respect to project Sankalp sapphire at Rs.12,23,81,000/-. The appellant in its submission has mentioned that the appellant had also initiated a Project Sankalp Graee-3, Shilaj, Ahmedabad and a noting of on money receipt for unit No. A-604 for Rs.{ 1,00,000/- has also been found which has been mistakenly stated to be included in on money receipts of its sister concern i.e. G:inger Properties Private Limited and as project receipts of 'Sankalp Grace-2-D-Block considering the said noting and to buy peace of mind and to avoid protracted litigation, the appellant has suo-moto extrapolated the on money receipts from the real estate project Sankalp Grace-3 also, the relevant submission of the same reads as under: 1. At this juncture, in order to buy mental peace of mind and to avoid protracted litigation the working of estimated On-money from the project Sankalp Grace 3 is also extrapolated and summarized as under: A) Summary of Agreement values/sales effected in the project: A.Y. Area (SBA) (Sq.ft.) Agreement Value 2023-24 1,48,154.79 72,39,28,000 Average Rate per Sq. Ft. 4,886 or say 4,900 B) Summary of Agreement values extrapolated in the project: From the perusal of the above chart, the average selling price as per books is Rs.4,900, the same is assumed @ Rs,6,000 per Sq.Ft. on Super Buit-up Area which is very much excess and considering the prevalent Market referred as on date in the said area i.e. Shilaj. Accordingly, the estimated On-money income from the said project Sankalp Grace-3 is calculated and summarized as under: A.Y. Area (SBA) Estimated extrapolated (Sq.ft.) On-money @ Rs. 1100 (6000 -4900) per Sq. ft. 2023-24 1,48,154.79 16,29,70,269 Total 1,48,154.79 16,29,70,269 I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 8 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors.

Note: The BU permission for the said project has been received on 29/06/2022. (refer page no. 5 to 8 of this submission). 7.13. As per the settled provisions of the law, the request of the appellant that the alleged on money needs to be brought to tax as per the method of accounting regularly followed by the appellant is well valid and accepted principle under the law. Further, what has been referred to as amounts received by the appellant being unaccounted in nature and same is referred to as unaccounted receipts, the same then partakes the character of Business Income me and accordingly the same should be brought to tax as per the method of accounting as regularly employed. Further once the said amounts are sought to be brought to tax, there cannot be two accounting methods to bring to tax the amounts arising from the same set of transactions, i.e. one accounted and one unaccounted. It is a long- settled issue that entries in books of accounts are not conclusive for taxation purposes. Reliance is duly placed in the decision of Apex court Kedarnath Jute Mfq. Co. Ltd, v. Commissioner of Income-tax (82 ITR 363): "Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the mistaken of its right nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. The assessee who was maintaining Accounts on the mercantile system was fully justified in claiming deduction of the amount of sales tax which it was liable under the law to pay during the relevant accounting year. The liability remained intact even after the assessee had taken appeals to higher authorities or courts which failed. The appeal was consequently allowed and the judgement of the High Court was set aside." … … ... 7.15 Having considered the various discrepancies found noted in the impounded papers and in absence of the reconciliation of various expenses with the books of account it could not be said that either the AO was fully correct while making the additions or the appellant was fully correct in explaining the reasons of deletion of the additions. However, the appellant has derived the unaccounted income towards sale of its Real Estate Units which have been utilized for payment towards various expenses. So, there were unaccounted income as well as unaccounted expenses and unaccounted income have to be telescoped against the unaccounted expenses to determine the real income of the appellant. Ongoing through the working of various alternatives of Real income, it has been noticed that the profit ratio of the appellant as per its regular I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 9 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. books of accounts stands in the range of 2% to 4%. However, it is also a fact that the appellant has made certain unaccounted expenses and unaccounted sale proceeds also which could not be denied. So, considering the unaccounted transactions and to pluck the leakage of revenue the books of accounts are rejected invoking the provisions of section 145 of the I.T. Act. 7.16 As per the various workings and alternatives submitted by the appellant, it is observed that the profit % stands in the range of 2% to 4%. However, looking to the nature of business, the location and type of project and various discrepancies found during the search proceedings and it is a settled issue that in case of unrecorded sales, the profit margin remains higher than the recorded sates, the average profit is adopted at 14% for all the years under consideration. 7.18 Further, keeping in view of above discussion, relief is granted for the balance amount of the disallowance/additions made on unaccounted expenditures of Rs.13,71,59,2101- (Rs.1,87,210/- + Rs.13,69,72,000/-) for A.Y. 2019-20. 7.19 Considering above facts, the AO is directed to tax undisclosed income as per tabular chart herein above on year-to-year basis and also relief would be provided accordingly. 7.20 In view of above discussion and factual matrix of the case, the A.O. is directed to consider the amount of addition of Rs.30,34,220/- in place of Rs.2,16,73,000/- (addition made in the assessment order) while giving appeal effect of this order. Thus, the grounds of appeal no. 2.2.1 & 3 are partly allowed.

1. The learned CIT(A) has erred in law and on facts of the case in confirming the assessment order u/s 153A of the Act which is passed in violations of provisions of the Act and against the scheme of assessment related to search cases.

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2. The learned CIT(A) has erred in law and on facts of the case in confirming the additions made by learned Assessing Officer without any incriminating material found during the search.

3. The learned CIT(A) has erred in law and on facts of the case in confirming an addition of Rs. 3,46,50,000/- by estimating profit margin at the rate of 14%. In the facts and circumstances of the case, such estimation is highly excessive and does not reflect the real income earned by the appellant.

4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty under various sections of the Act. 6. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

4.1. The Grounds of Appeal raised by the Assessee in [Asst. year 2019-20] are as follows:

2. The learned CIT(A) has erred in law and on facts of the case in confirming the additions made by learned Assessing Officer without any incriminating material found during the search.

3. The learned CIT(A) has erred in law and on facts of the case in rejecting the books of accounts of the appellant u/s 145 of the Act.

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4. The learned CIT(A) has erred in law and on facts of the case in confirming an addition of Rs. 20,47,080/- by estimating profit margin at the rate of 14%. In the facts and circumstances of the case, such estimation is highly excessive and does not reflect the real income earned by the appellant.

5. The learned CIT(A) has erred in law and on facts of case in directing to confirm the addition on account of alleged on-money for AY 2023-24. He further erred in applying rate of 14% on gross receipts to compute net income which is highly excessive and not commensurate with the real income.

6. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. A.O in initiating penalty under various sections of the Act. 8. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

1 In the facts and on the circumstances of the case, the Ld CIT(A) has erred in law in restricting the addition to 30,34,220/- out of the total addition of Rs. 2,16,73,000/- made on account of estimated on money receipt and unaccounted income without appreciating the facts that assessee was involved in charging on-money on booking of sale of units in project sapphaire. 2. In the facts and on the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.

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3. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O be restored to the above extent.

5.1. The Grounds of Appeal raised by the Revenue in [A.Y. 2019-20] are as follows:

1 In the facts and on the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition made on account of negative cash balance of Rs 6,08,952/-without considering the findings of the AO. 2 In the facts and on the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition made on account of cash found during the search of Rs. 5,58,350/- without considering the findings of the AO 3 In the facts and on the circumstances of the case, the Ld. CIT(A) has erred in law in restricting the addition to Rs. 20,47,080/- out of the total addition of Rs. 1,46,22,000/- made on account of estimated on money receipt and unaccounted income without appreciating the facts that assessee was involved in charging on-money on booking of sale of units in project Grace-II.

4. In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition made on account of unexplained expenses, of Rs. 22,71,59,210/- (Rs. 22,69,72,000/- Rs. 1,87,210/-) without appreciating the facts that assessee failed to establish that the cash expenditure was laid cut wholly and exclusively for the purpose of business.

5. In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in holding that the income of the assessee is taxed under the head "income from business", whereas not appreciating the fact that the income earned & expenses incurred in cash being unaccounted and unexplained, addition was made u/s. 69A and 69C of the Act thereby attracting provisions of section 115BBE of the Act.

6. In the facts and on the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.

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7 It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.

A. Whether Ld AO was justified in making separate additions in respect of “unaccounted receipts” as well as “unaccounted expenses” in relation to the “business activities” carried on by the assessee ?

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OR B. Whether Ld CIT(A) was justified in restricting the impugned additions made by AO to the extent of “real income” earned in relation to the unaccounted “business activities” carried on by the assessee by adopting reasonable Gross Profit rate and applying the same to the total unaccounted receipts reflected in the seized material ? 6.1. Ld Senior Counsel Sri. Thusar Hemani thus submitted that it is well settled legal proposition that entire unaccounted receipts cannot be added. Rather, only the profit element embedded therein can be added in the hands of the assessee. Reliance is placed on following decisions for the said legal proposition:

* Sankalp Recreation P. Ltd. vs. ACIT – IT(SS)A 65/Ahd/2022; * Ginger Properties Pvt. Ltd. vs. ACIT – IT(SS)A 45/Ahd/2023; * CIT vs. President Industries – (2002) 258 ITR 654 (Guj.); * CIT vs. Balchand Ajit Kumar – (2003) 263 ITR 610 (MP); * CIT v. Gurubachhan Singh – (2008) 302 ITR 63 (Guj); * Man Mohan Sadani vs. CIT – (2008) 304 ITR 52 (MP); * CIT v. Samir Synthetics Mill – (2010) 326 ITR 410 (Guj); * DCIT v. Panna Corporation – Tax Appeal 323 of 2000 (Guj); * Chetan C. Patel v. ACIT – IT(SS)A 522/Ahd/2011 and others; * CIT v. Jay Builders – (2013) 33 taxmann.com 62 (Guj); * Greenfield Reality P. Ltd.– IT(SS)A 289/Ahd/2018 & others; 6.2. The next logical step is to determine the quantum of income element embedded in such “unaccounted receipts”. Considering the actual profit ratio as per the books of accounts as well as actual unaccounted transactions and in order to pluck the leakage in Revenue, Ld CIT(A) estimated Real estate business profit at 14% to determine real income, which is substantially on higher side. Therefore, in the interest of justice, some reasonable rate of profit may be decided. Further it is well settled that only real income has I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 15 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. to be taxed in the hands of the assessee. Reliance is placed on Godhra Electricity Co. Ltd.-vs-CIT (1997) 225 ITR 746 (SC). Further it is well settled principle of law that AO is duty bound to give relief to an assessee wherever due, even if it has not been claimed by the assessee. Reliance is placed on decision in the case of S. R. Koshti Vs- CIT (2005) 276 ITR 165 (Guj).

6.3. Thus Ld Senior Counsel pleaded that the methodology adopted by Ld CIT(A) is not absolutely scientific and leaves room for arbitrariness. It is further submitted that the very same seized materials contain noting of ‘unaccounted receipts’ and ‘unaccounted payments’. Such receipts as well as payments are relating to the business of the assessee and hence, as a natural corollary, such unaccounted expenses would have been incurred out of unaccounted receipts. Accordingly, AO was not justified in denying set-off of such unaccounted expenses against unaccounted income. It is well settled that seized material has to be read in its entirety. Pick and choose theory cannot be adopted while interpreting seized material. Reliance is placed on following decisions:

* Navjivan Oil Mills vs. CIT – (2002) 252 ITR 417 (Guj); * Glass Line Equipments Co. vs CIT – 253 ITR 454 (Guj); * Mehta Parikh & Co. v. CIT – (1956) 30 ITR 181 (SC); * Kantilal & Bros. vs. ACIT – (1995) 52 ITD 412 (Pune); * Chander Mohan Mehta v ACIT – (1999) ITD 245 (Pune); * Biren V. Savla vs. ACIT – (2006) 155 Taxman 270 (Mum); * Madhav Corpn. vs ACIT– (2017) 85 taxmann.com 238 (Ahd); * DCIT v Kankakia Hospitality P Ltd. – (2019) 179 ITD 1 (Mum); I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 16 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors.

6.4. In view of the above, Ld Senior Counsel submitted that Ld CIT(A) has taken utmost care while determining the income based on seized material. Consequently, balance additions have been rightly deleted. Hence, revenue’s appeals deserve to be dismissed and assessee’s appeals be allowed with real estate business be estimated at some reasonable rate of profit. However, he has NOT PRESSED Ground No. 1 & 2 namely assessment made u/s.153A of the Act.

7. Per Contra Ld CIT-DR Shri Durga Dutt and Sr DR Shri B.P. Srivastava appearing for the Revenue submitted that the assessee was involved in substantial unaccounted cash transactions, which were discovered only due to the search and seizure operations. The assessee had not provided any satisfactory explanation for the unaccounted receipts and expenses which led to the invocation of Sections 68 (unexplained credits) and 69C (unexplained expenditure) of the Act. Further the Ld DRs stated that there are violations of provisions of the Act and the assessee has not provided the details of expenses which will determine whether they are incurred wholly and exclusively for the purpose of business; whether they are of capital or revenue nature and therefore, such expenses incurred in violation of the provisions of the Act cannot be allowed as a deduction under Section 37(1) of the Act. Further the assessee failed to demonstrate any nexus between the unaccounted receipts and expenses. In the above circumstances the Ld CIT(A) erred in making ad-hoc estimation of the net profit rate at 14% and charging to tax under provision I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 17 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. instead u/s.115BBE of the Act, therefore requested to sustain the additions made by the A.O.

8.1. It is well established mechanism to calculate profit is provided under sections 28 to 40 of the Act and when the books of accounts are rejected, invoking section 145, the estimation has to be resorted to. Various judicial precedents including the judgements of Hon’ble Gujarat High Court in case of DCIT Vs. Panna Corporation in Tax Appeal No.323 of 2000 which has followed series of judgements rendered by Jurisdictional High Court in the case CIT -Vs-President Industries Ltd (2002) 258 ITR 654; CIT -Vs- Gurubachhan Singh [2208] 302 ITR 63; CIT -Vs- Samir Synthetics Mill [2010] 326 ITR 410, etc. wherein it was held that even upon detection of unaccounted cash receipt or on-money receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves by observing as follows:

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"...

10. As pointed out by the counsel for the respondent, this Court in the case of Commissioner of Income Tax v. President Industries, reported in (2002) 258 ITR 654 had taken a similar view. In the said case, during the course of survey conducted on the premises of the assessee, from the excise records found, an inference was drawn by the Assessing Officer that sales accounting to Rs.29 lakhs and odd had not been disclosed in the books of account. The Assessing Officer made addition of the entire sum of the said undisclosed sales as income of the assessee for the assessment year 1994-95. Such addition was confirmed by the Commissioner (Appeals). The Tribunal, however, held that the entire sales could not have been added as income of the assessee, but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales. Such decision was carried in appeal by the revenue before the High Court. The High Court rejected the appeal, observing that unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed, such addition could not be sustained. It was observed that in absence of such findings of fact, the question whether the entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The High Court rejected the appeal holding that no question of law which requires to be referred arises.

11. In the case of Commissioner of Income Tax v. Gurubachhan Singh J. Juneja, reported in (2008) 302 ITR 63 (Guj.), once again a somewhat similar issue came up before this Court. In the said case, the assessee was engaged in the business of trading of tyres. Search proceedings were carried out at the residential and business premises of the assessee. On the basis of loose sheets which were seized during such search operation, the Assessing Officer held that sales to the extent of Rs.10.85 lakhs was not found in the books of account. Such amount was included in the total income of the assessee. The Commissioner (Appeals) gave substantial relief to the assessee and reduced the income on the basis of gross profit I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 19 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. rate. The Tribunal confirmed the order of the Commissioner (Appeals). On further appeal before the High Court by the revenue, the High Court refused to refer any question holding that in absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the alleged undisclosed sales, the finding of the Tribunal that only the gross profit on the said amount can be brought to tax does not call for any interference.

12. Counsel also relied on the decision in the case of Commissioner of Income Tax v. Samir Synthetics Mill, reported in (2010) 326 ITR 410, wherein the High Court confirmed the view of the Tribunal accepting only the profit of unaccounted sale for the purpose of collecting tax.

14. We may recall that the Tribunal, in the impugned judgement, relied on its previous judgement in case of Kishor Mohanlal Telwala. The said judgement of the Tribunal was apparently carried in appeal by the revenue. The High Court by a speaking order dated 24.4.2000, dismissed the appeal holding that no question of law was involved. Significantly, in case or Kishor Mohanlal Telwala, the assessee was engaged in the business of construction. In his case, unaccounted receipt of Rs.1.47 crores was detected. In this background, the Division Bench confirmed the view of the Tribunal and did not accept the contention of the revenue that as no accounts had been maintained to substantiate the expenditure incurred by the assessee, the entire amount received by the respondent should be treated as income. The Court concluded that the Tribunal was justified in considering that the respondent assessee ought to have spent reasonable amount for the purpose of receiving such gross receipt.

15. It can, thus, be seen that consistently, 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 I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 20 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation.

16. In view of the legal position that not the entire receipts, but the profit element embedded in such receipts can be brought to tax, in our view, no interference is called for in the decision of the Tribunal accepting such element of profit at Rs.26 lakhs out of total undisclosed receipt of Rs.62 lakhs. In other words, we accept the legal proposition, the Tribunal accepting of total undisclosed receipt of Rs.62 lakhs, would not give rise to any question of law."

8.2. Thus, the primary issue under consideration is whether the entire unaccounted receipts should be taxed as income or whether only the profit element embedded in these receipts should be considered. The assessee has relied on the Gujarat High Court’s judgement in President Industries (cited supra), wherein it was held that the entire amount of unaccounted sales cannot be treated as income. In that case, the Hon’ble Court have ruled that only the net profit element should be taxed, as the sales represent receipts from which the cost of goods sold must be deducted.

8.3. It is undisputed fact that the seized materials contain noting of both unaccounted receipts and unaccounted payments and they are relating to the real estate business of the assessee. It cannot be denied that such unaccounted expenses would have been incurred out of unaccounted receipts. It is well settled principle of law that seized material has to be read in its entirety. Accordingly, Ld AO was not justified in denying set-off of such unaccounted expenses against unaccounted income. Further the methodology adopted by Ld CIT(A) is not absolutely scientific and leaves room for arbitrariness.

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8.4. It is well settled principle of law by the Jurisdictional High Court in the case of Navjivan Oil Mills -Vs- CIT reported in (2002) 252 ITR 417 (Guj) that seized material has to be read and accepted as a whole and it is not permissible to Pick and Choose theory or make further estimates therefrom unless and until there is cogent material in support of undertaking such an exercise.

8.5. The Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd. -Vs- CIT reported in [1997] 225 ITR 746 held that only real income has to be taxed in the hands of the assessee by observing as follows:

".....

8.6. Following the above judicial precedents and considering the actual profit ratio as per the books of accounts at 12.98% as well I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 22 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. as profit ratio on actual unaccounted transactions at 6.75%. Therefore in the interest of justice, we deem it to estimate 13% as the reasonable profit margin considering the facts and figures in the present case. Thus the Jurisdictional Assessing Officer is directed to adopt 13% profit margin on real estate business in the place of 14% as determined by the Ld CIT[A]. In the result the Ground Nos. 3 to 6 raised by the assessee are partly allowed and the Ground Nos. 1 to 3 raised by the Revenue are hereby dismissed. The remaining ground nos.7 to 9 raised by the assessee are consequential or general in nature which does not require any adjudication and are dismissed.

9. In the result, the appeal filed by the Assessee in IT[SS]A No.47/Ahd/2023 is partly allowed and the appeal filed by the Revenue IT[SS]A No.76/Ahd/2023 is hereby dismissed.

IT(SS)A Nos.48 to 52/Ahd/2023 & filed by the Assessee and IT(SS)A Nos. 77 to 80/Ahd/2023 & filed by the Revenue relating to the Asst Years 2014-15 to 2019-20.

SANKALP VENTURE LLP - IT(SS)A No.53/Ahd/2023 & filed by the Assessee and IT(SS)A No. 69/ Ahd/2023 & Revenue relating to the Asst Years 2018-19 to 2019-20.

Sr. Particulars AY 2018-19 AY 2019-20 No. A Unaccounted cash receipts Rs.53,30,880 Rs. 14,08,92,894

B Extrapolation of Rs. 1,82,40,088 Rs. 15, 16,20,114 unaccounted receipts Total unaccounted receipts 2,35,70,968 Rs.29,25,13,008 (A + B) C Unaccounted cash expenses Rs.2,21,400 Rs. 1,23,20,062

D Bogus Rs.4,07,474 Rs.99,07,001 expenses Total unaccounted / Rs. 6,28,874 Rs. 2,22,27,063 bogus expenses (C +D)

13. Aggrieved against the additions, the assesse filed appeals before Ld. CIT(A) who has estimated the business income at 14% as follows:

I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 24 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors.

AY Estimated on- Inflated expenses Total on-money Real income money as per AO as per AO receipts @ 14% A B C D = B + C E AY 2018-19 Rs.2,35,70,968 Rs.4,07,474 Rs.2,39,78,442 Rs.33, 56,982 AY 2019-20 Rs.29,25,13,008 Rs.99,07,001 Rs.30,24,20,009 Rs.4,23,38,801 Total Rs.31,60,83,976 Rs.1,03, 14,475 Rs.32,63,98,4'51 Rs.4,56,95,783

14. The Grounds of Appeal raised by the Assessee/Sankalp Venture LLP in IT(SS)A No. 53/Ahd/2023 [A.Y. 2018-19] are as follows:

1. The learned CIT(A) has erred in law and on facts of the case in confirming the assessment order u/s 153A of the Act which is passed in violations of provisions of the Act and against the scheme of assessment related to search cases.

2. The learned CIT(A) has erred in law and on facts of the case in confirming the additions made by learned Assessing Officer without any incriminating material found during the search.

3. The learned CIT(A) has erred in law and on facts of the case in rejecting the books of accounts of the appellant u/s. 145 of the Act. 4. The learned CIT(A) has erred in law and on facts of the case in confirming an addition of Rs. 33,56,982/- by estimating profit margin at the rate of 14%. In the facts and circumstances of the case, such estimation is highly excessive and does not reflect the real income earned by the appellant. 5. The learned CIT(A) erred in law and on facts of the case in considering the amount of expenses of Rs. 4,07,474/- as on-money received and calculating 14% profit on the same. Such amount represents the genuine expenses incurred by the appellant which are duly accounted in the books of accounts of the appellant.

I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 25 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors.

6. Alternatively and without prejudice, the expenses of Rs. 4,07,474/- shall be telescoped against the on-money of Rs. 2,35,70,968/- estimated by the learned AO and no separate addition for the same is called for.

8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty under various sections of the Act. 9. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

14.1. The Grounds of Appeal raised by the Revenue in the case of Sankalp Venture LLP in IT(SS)A No. 69/Ahd/2023 [A.Y. 2018-19] are as follows:

1. In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in restricting the addition to Rs. 33,56,982/- out of total addition of Rs 2.35.70.968/-(1.82.40.088/- 53,30.880/-) made on account of estimated on money receipt and unaccounted income without appreciating the facts that assessee was involved in charging on-money on booking of sale of units in project Sankalp Iconic Tower. 2 In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition made on account of unexplained expenditure of Rs. 2,21,400/-us. 69C of the IT Act without appreciating the facts that assessee was failed to establish that the unaccounted cash receipts were utilized for Incuming unaccounted cash expenditure. 3 In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the addition made on account Bogus expenses u/s. 37(1) of the Act of Rs.4,07,474/- without appreciating the facts that assessee was I.T.(SS)A No. 47 to 52/Ahd/2023 and Ors. A.Ys. 2013-14 to 2018-19 Page No 26 Sankalp Organizers Pvt. Ltd. Vs. ACIT & Ors. failed to established that the cash expenditure was laid out wholly and exclusively for the purpose of business. 4 In the facts and on the circumstances of the case, the Ld.CIT(A) has erred in law in holding that the income of the assessee is taxed under the head "Income from business, whereas not appreciating the fact that the income earned & expenses incurred in cash being unaccounted and unexplained, addition was made u/s. 69A and 69C of the Act thereby attracting the provision of section 115BBE of the Act 5 In the facts and on the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.

6. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the AO be restored to the above extent.

15. There is no change in the facts of the case except the disallowance made in the figures by the Ld. Assessing Officer for the Asst. Years 2018-19 & 2019-20 in the above appeals with that of the orders passed in the Sankalp Organizers Pvt. Ltd. Therefore respectfully following the decision rendered in Sankalp Organizers Pvt. Ltd. in IT(SS)A No. 47/Ahd/2023 from Paragraph Nos. 8 to 8.6 will be squarely applicable to the facts of the present case.