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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 20,60,12,943/- for undisclosed cash receipts, or 'On Money', allegedly received by the assessee from the sale of flats (Nos. 601 and 602) in Mona Greens Project to Sh. S.K. Mittal. The Assessing Officer had made the addition based on the buyer's statement and a tax evasion petition, alleging the assessee did not record the cash receipts in its books of account.
Held
The Tribunal upheld the CIT(A)'s decision, confirming the deletion of the addition. It noted that the AO failed to prove 'On Money' receipts, the assessee followed the percentage of completion method, and the project was incomplete, meaning no addition could be made. The Tribunal also referenced prior judgments, stating that additions based on mere extrapolation without relevant material are unsustainable.
Key Issues
Whether the CIT(A) was legally justified in deleting the addition for undisclosed cash receipts from the sale of flats, given the absence of concrete proof of 'On Money' payments and the assessee's use of the percentage of completion method for an incomplete project.
Sections Cited
section 143(3), section 147, section 144, section 145(3)
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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI M. BALAGANESH
This Revenue’s appeal for assessment year 2015-16, arises against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”] Delhi’s-6 DIN and order no. ITBA/APL/M/250/2019- 20/1019594118(1) dated 30.10.2019 involving proceedings under section 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Case called twice. None appears at the assessee’s behest. We accordingly proceeded ex-parte against the assessee.
The Revenue pleads the following substantive grounds in the instant appeal:
1. 1. Whether on the facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 20,60,12,943/- on account of undisclosed cash receipts against sale of flats in Mona Greens Project by ignoring the fact that the assessee company has received On Money from sale of Flat Nos. 601 and 602 to Sh. S.K. Mittal.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 20,60,12,943/-on account of undisclosed cash receipts against sale of flats in Mona Greens Project by ignoring the specific admittance of payment of On Money by Sh. S.K. Mittal against purchase of Flat Nos. 601 and 602? 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 20,60,12,943/- on account of undisclosed cash receipts against sale of flats in Mona Greens Project by ignoring the fact that the assessee company has not recorded On Money received from sale of Flat Nos. 601 and 602 to Sh. S.K. Mittal in its books of accounts? 4. Whether on the facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition Rs. 20,60,12,943/- on account of undisclosed cash receipts against sale of flats in Mona Greens Project by holding that the AO has not proved that On Money was received by the assessee company from sale of Flat Nos. 601 and 602 to Shri S.K.Mittal by ignoring the fact of specific admittance of payment of On Money by the purchaser of the flat which was not recorded in regular books of accounts?
Learned CIT(DR), Ms. Jaya Choudhary invites our attention to the CIT(A)’s detailed discussion reversing the assessment findings adding the alleged undisclosed business receipts of Rs.20,60,12,943/- in assessee’s hands as under: “5.3.1 The AO, after analysis of the information and on the basis of the statement of Shri Setia which was recorded on oath and concluded that the assessee company was involved in the practice of receiving cash over and above actual price of the flat which was not disclosed in the books of account and the said part of the revenue was not recognized in its P&L Account. The income of the assessee was held to be understated and was increased by Rs. 20,60,12,943/-, being 50% of the total receipts, as undisclosed cash receipts. The appellant has submitted that the dispute between it and the complainant Shri S.K. Mittal is about the payment made against the booking of the flats Nos: 601 & 602 where the appellant has claimed that a sum of Rs. 17, 00, 000/-only has been paid by cheque and the outstanding receivable balance was Rs. 83,00,956/- 199,50,000 17,00,000+ 50,949 (S.Tax)] and that as per the complainant is that he has paid Rs. 67,00,000/- (Rs. 17,00,000 by cheque and Rs. 50,00,000/-in cash). It has further been submitted that the dispute between the two parties was only in respect of payment made/received and not in respect of sales consideration. It has also been submitted that the assessee has correctly recorded sales consideration in its books of account and its profit and loss account and has computed the revenue to be recognized under percentage of completion method and, therefore, there was no suppression/understatement of sales/revenue and no escapement of income. It has also been submitted that in the assessment proceedings for AY 2014-15 which were under progress during the period of examination of the complaint, the AO had held that the assessee was receiving 2/3nd amount of sales consideration by cheque and 1/3rd amount in cash which is allegedly not recorded in the books of account and addition towards suppression of sales consideration equivalent to 50% amount of sales consideration recorded in the books of account was made. It has further been submitted that the entire addition has been deleted by the Id. CIT(A)-28 for AY 2014-15. It has further been submitted that no such addition has been made in AY 2016-17. It is further been submitted that the assessee has correctly recorded the sales consideration its books of account and in its profit and loss account and has computed the revenue to be recognized under percentage of completion method. It has also been submitted that in the complaint it has never been alleged that the consideration for both of the flats was 3 | P a g e Rs. 1,49,50,000/- out of which Rs. 99,50,000/- was intended to be recorded in the books of account and Rs. 50,00,000/- (allegedly paid in cash) was not intended to be recorded in the books of account. 5.3.2 I have considered the assessment order and the submissions of the appellant. I have also perused the assessment order in appellant's own case for AY 2014-15 and the order of the Id. CIT(A)-28 in appellant's own case for AY 2014-15. It is noted from the said assessment order that on the basis of the complaint made, for AY 2014-15 also the AO had held that the assessee was involved in the practice of receiving cash over and above the actual price of the flat which was not disclosed in the books of account and the said part of revenue is not recognise in its profit and loss account. The income of the assessee was increased by 50% which was the undisclosed cash portion not shown by the assessee in its return of income. 5.3.3 In the year under consideration also a similar line has been adopted by the AO. From the perusal of the details furnished which include email written by the complainant to the appellant (pages 115 & 116 of the paper book) and legal notice given by the complainant to the appellant (pages 117 to 124 of the paper book) it is apparent that the issue is not regarding the sales consideration but appears to be in respect of payment made/received. The entire premise of the addition made by the AO is based on the complaint made wherein it has been stated that the appellant sought payment in cash. However, it is apparent from the documents submitted that the contention of the complainant was not that the amount of Rs. 50,00,00/- was sought over and above the total consideration for both the flats. 5.3.4 It is also noted that the appellant has given details of bouquets of Mona Green project as on 31/03/2015 (pages 141 and 142 of the paper book) as per which the aggregate cost is Rs. 443,000,983/- as against which an amount of Rs. 291,131,276/-has been received. The AO has not been able to controvert the claim of the appellant that even if cash payments have been received from the complainant, the same have not been recorded in the books of account. Further, revenue has to be recognized for the year under consideration on the basis of percentage of completion method and in this regard also no adverse inference has been given by the AO. In fact, the AO has not pointed out any infirmity in the revenue disclosed by the appellant but on the basis of the complaint made by Shri S.K. Mittal, it has been presumed that the appellant is in practice of receiving at least 50% of payment of flat in cash. As was also observed by the Id. CIT(A)-28 while deciding the appeal for AY 2014-15, it is not proved in this year also that the complainant has paid the amount over and above of total sale consideration in respect of flats no. 601 & 602 of the project Mona Greens. Further, the appellant is following the percentage of 4 | P a g e completion method to recognise the revenue, therefore, taking into consideration this fact also, no addition can be made in the year under consideration as the project is not complete. While deciding the matter for AY 2014-15, regarding the 50% addition on account of cash receipt, the ld. CIT(A)-28 held as under: "5. ... Moreover, as per appellant, even if it is presumed that the unaccounted cash money is received in respect of flat No. 601 & 602 in the project Mona Greens, the income is non- taxable in the year under consideration, even in respect of that project also as to recognise the revenue, percentage of completion method has been adopted and during the year, said project was not complete, therefore, income out of these two flats cannot be made taxable during the year. It is also wrongly presumed by AO that all the cash money received by appellant in the project Mona City is unaccounted and out of the books of account. The appellant has given a chart wherein from different clients, it has received the cash payments which have been shown in the books of account also. As per it, total cash considerations of Rs. 1,99,10,590/- against the booking/sales of plots in Mona City Project has been received which is been duly recorded in its books of account. The AO could not controvert the claim of the appellant that even if it is presumed that the appellant has received the cash payments from Shri Mittal in cash and not recorded in the books of account, still revenue has to be recognised for the year under consideration at Rs. 287,36,071/- only under the percentage of completion method as already disclosed by appellant. In view of the above, it is clear that the transactions of cash payments allegedly made by Shri S.K. Mittal, neither pertain to the appellant's project Mona City nor relate to the year under consideration. It is also not proved that the complainant has paid the amount over and above of total sale consideration in respect of flats no. 601 & 602 of the project Mona Greens. Further, the appellant is following the percentage of completion method to recognise the revenue, therefore, taking into consideration this fact also, no addition can be made in the year under consideration as the project is not complete. In view of this, I hold that the AO has wrongly applied the rate of 50% allegedly received in cash out of the books of account in respect of total receipts of the appellant's project Mona city which is liable to be deleted. 1, therefore delete the addition of Rs. 1,43,68,036/- made by AO and allowed the grounds taken by the appellant. 5.3.5 It is also noteworthy that the AO has not invoked section 145(3) which can be invoked if the AO is of the opinion that the accounts were 5 | P a g e not correct incomplete and the AO may proceeded to reject the books of account and thereafter make best judgement assessment of the income in the manner laid down under section 144. 5.3.6 In view of the discussion above and in view of the fact that there is no evidence to show that the complainant has paid the amount over and above of total sale consideration in respect of flats no. 601 & 602 of the project Mona Greens and the fact that the appellant is following the percentage of completion method to recognize revenue, no addition can be made on account of by holding that 50% of the payment is on account of undisclosed cash. The addition made is, therefore, deleted. Grounds of appeal Nos. 4 to 8 are allowed.”
5. Ms. Jaya Choudhary, CIT(DR) submits that the Assessing Officer has rightly added the said undisclosed business receipts in assessee’s case going by the statement of one of the buyer(s) Sh. S.K. Mittal, who had also filed a tax evasion petition. She further takes us to page 4 in assessment order wherein the learned Assessing Officer had recorded the assessee’s director statement, who admitted to have received cash sum on or before 1st June, 2015. Her case is that once the Assessing Officer had made the impugned addition as per the overwhelming supportive material and statement(s), the same ought to have been upheld in the lower appellate proceedings.
6. Faced with this situation, we find from the perusal of the case file that the CIT(A)’s above extracted detailed discussion has relied upon in his earlier order for the preceding assessment year 2014-
6 | P a g e 15 deleting identical addition of alleged cash receipts, which appears to have attained finality as no material to the contrary had come from the department side before us.
Coupled with this, we quote PCIT Vs. Pushkar Construction, (2023) 154 taxmann.com 22 (Gujarat) and S. Moorthy Vs. Joint Commissioner of Commercial Taxes (2014) 43 taxmann.com 384 to conclude that such an addition based on mere extrapolation than supported by any relevant material is not liable to be sustained.
We therefore see no reason to interfere with the learned CIT(A)’s findings deleting the impugned addition in very terms. Ordered accordingly.