DCIT-CC-4(2), MUMBAI, MUMBAI vs. RUBBERWALA HOUSING AND INFRASTRUCTURE LIMITED, MUMBAI

4.2 Assailing the action of the lower authorities, the Ld. AR of the assessee contended that AY 2016-17 & AY 2018-19 in question, were unabated assessment years and therefore the impugned additions made in these AYs were unsustainable since it was not based on any incriminating material found in the course of search. The Ld. AR submitted that the seized material viz., Document ID marked A1, Page 50, contained the details of the actual unsecured loans which were taken by the entities of the Rubberwala Group and that each of the amount mentioned against each of the corresponding lender formed part of the regular books of accounts. He showed us that these loans were transacted through banking channels and that in no manner could one construe this document to be incriminating in nature. Taking us through the statement of Mr. Shaikh, he showed us that he had nowhere admitted to any wrong doing or surrendered any alleged bogus loans accomodated by the assessee. The Ld. AR pointed out that he had only expressed his inability to furnish the supporting details at that material time for the obvious reason, that he would have to refer to the books of accounts, collate data and thereafter provide the same in a proper and informed manner. According to the appellant, the mere & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd inability to provide documentary evidences at the time of search cannot be viewed as incriminating in nature so as to draw adverse inference in an unabated assessment. The Ld. AR relying upon the decision of the Hon‟ble Delhi High Court in the case of CIT vs Kabul Chawla (380 ITR 573), which has since been affirmed by the Hon‟ble Supreme Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd. (149 taxmann.com 399), urged that the additions/disallowances made u/s 68 and 69C of the Act in relation to unsecured loans made in the unabated AYs 2015-16 and 2018-19, in absence of incriminating material found in the course of search, deserves to be deleted.

4.3 With regard to the abated AY 2020-21 and AY 2021-22, the Ld. AR submitted that complete details of the four (4) lenders involved across these two AYs were furnished before the lower authorities. He showed us that each of these lenders were income tax assessees and took us through their details viz., loan confirmations, bank statements, financial statements etc. The Ld. AR pointed out that there was no prior cash deposits in these bank accounts which would raise suspicion regarding routing of unaccounted monies. Relying on the decision of the Hon‟ble Gujarat High Court in the case of PCIT vs Ambe Tradecorp Pvt. Ltd. (145 taxmann.com 27), the Ld. AR submitted that when the identities of the lenders had been proved and it was also shown that the loans were repaid subsequently, no addition was permissible u/s 68 of the Act. He thus urged that the additions made by the AO u/s 68 and 69C of the Act be deleted. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 4.4 Per contra, the Ld. CIT, DR, appearing for the Revenue, supported the order of the lower authorities. The Ld. DR has tacitly stated in the written submissions that the loose paper i.e. document ID marked „A1, Page 50‟, may not be said to be incriminating by itself but, the absolute reluctance and recalcitrance of Mr. Shaikh to explain the loan transactions inspite of being confronted with this document incriminated the assessee. The Ld. CIT, DR also referred to the AO‟s observations regarding certain whatsapp conversations where there was use of the term „cheque entry‟, which according to the AO denoted payments made by the assessee in cheque and received back in cash from the opposite party. The Ld. CIT, DR further pointed out that there was a history of additions made on account of bogus loans in the hands of the assessee and therefore all these facts and circumstances considered together incriminated the assessee. The Ld. CIT, DR has further argued that the ratio decidendi laid down by the Hon‟ble Supreme Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd. (supra) was not applicable in the assessee‟s case.

4.5 On merits, the Ld. CIT, DR has heavily relied on the findings of the AO, wherein the financials and creditworthiness of these lenders had been examined and it was found that these lenders exhibited characteristics attributable to entities providing accommodation entries. The Ld. CIT, DR argued that the Ld. CIT(A) had erred in deleting addition made u/s 68 of the Act in relation to certain lenders, only because they had complied with the notices issued u/s 133(6) of the Act. According to the Ld. CIT, DR, the Ld. CIT(A) had ignored & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd the specific doubts raised by the AO on the poor financials of these lenders and absence of other corroborative evidences such as lenders‟ business profile, collaterals offered, details of directors etc. The Ld. CIT, DR therefore urged that the entire addition made by the AO u/s 68 of the Act as well as the disallowance of interest u/s 69C of the Act ought to be upheld.

4.6 Heard both the parties. In light of the facts narrated in Para 2 above, it is noted that, on the date of search i.e. 17.03.2021, income tax assessments for AY 2016-17 and AY 2018-19 were unabated. The provisions of Section 153A of the Act, forming part Chapter XIV of the Act contain special provisions for completing assessments in case of search conducted u/s 132 of the Act or requisition made u/s 132A of the Act. These provisions can be invoked only in cases where the Income-tax Department has exercised its extra ordinary powers of conducting search and seizure operations after complying with stringent pre-conditions prescribed in Section 132 of the Act. We find that Section 153A itself creates the differentiation amongst specified six assessment years depending whether prior to search, the proceedings are abated or not. We note that, the relevant section itself clarifies that where an assessment was already completed against an assessee and any appeals or further proceedings are pending, then such appeals or other proceedings do not abate. We should therefore keep in mind that merely because an assessee is subjected to search u/s 132 of the Act, such action by itself does not give carte blanche to the Department to subject such an assessee to the rigors of the assessment & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd afresh for all the completed assessments. It is for this reason that the Parliament in its wisdom has categorically created two classes among the six years, (a) un-abated assessment and (b) abated assessments. Consequent to a search conducted u/s 132 of the Act, the AO is required to issue notices u/s 153A of the Act to assess the income of the assessee for six assessment years preceding the date of search. These six assessment years comprise of assessments which are not abated; and assessments which are pending on the date of search, and is treated to be abated. In case of abated assessments, the AO is free to frame the assessment in regular manner and determine the correct taxable income for the relevant year inter alia including the undisclosed income, having regard to the provisions of the Act. However, in relation to unabated assessments, which were not pending on the date of search, there is an embargo on the powers of the AO. In case of unabated assessments, the AO can re-assess the income only to the extent and with reference to any incriminating material which the Revenue has unearthed in the course of search. Considering these aspects the Hon'ble Delhi High Court in the case CIT vs Kabul Chawla (supra) held as under:-

“37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the Ld AOs as a fresh exercise.

The Ld AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The Ld AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".

Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Ld AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."

In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to complete assessment proceedings.

Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the Ld AO.

Completed assessments can be interfered with by the Ld AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."

4.7 We find that the decision of Hon'ble Delhi High Court has since been affirmed by the Hon‟ble Supreme Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd. (supra). In view of the foregoing, the settled law is clear that, in the case of unabated assessments of an & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd assessee, no addition is permissible in the order u/s 153A unless it is based on any tangible & cogent incriminating material found during the course of search.

4.8 In light of the above settled position of law, which has not been disputed by either of the parties, the limited question for our consideration is, whether the contents of the seized document A1, Page 50 read with the statement of Mr. Shaikh, referred to by the AO, was „incriminating‟ in nature or not. For the sake of convenience, the said seized material is reproduced below:

4.9 On perusal of this seized material, it is noted that it simply contains the names of lenders, corresponding names of borrower & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd entities belonging to Rubberwala Group and the amounts lent by them. On examination of the entries in the documents, it is noted that this was a tabulation of the unsecured loans availed by the assessee and its Group entities through banking channels and the same formed part of their books of accounts. There is no mention of any word such as „cash‟ or „cheque entry‟ on this document. The manner in which this tabulation has been made is prima facie noted to form part of the regular books of the assessee and its group entities, having no incriminating contents whatsoever. We further note that the Ld. CIT, DR in her written submissions, at Para 2.5, has observed that, the loose paper containing details of loan transactions may not be said to be incriminating by itself. We also note that the unsecured loans found mentioned against the name of the assessee in this sheet correlates with the loans appearing in the books of accounts of the assessee and therefore we find merit in the plea of the assessee that this document cannot be construed to be incriminating in nature. It is noted that somewhat similar facts and circumstances were involved in the case before this Tribunal at Guwahati in the case of ACIT vs Goldstone Cements Ltd. (ITA Nos. 126-131/Gau/2020) dated 10.12.2021. In this decided case, the AO had referred to a statement retrieved from the hard disk which contained the shareholding pattern of the assessee along with the details of shares issued to each of the share subscribers as an incriminating document and accordingly added the share capital by way of unexplained cash credit. This Tribunal after examining the meaning of the term „incriminating material‟, concluded that this & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd document was not incriminating as the shareholding pattern found mentioned therein was verifiable with the books of accounts. Hence, in absence of any incriminating material found in the course of search, this Tribunal deleted the addition made u/s 68 of the Act in the unabated AYs. The relevant findings of the Tribunal as taken note by us is as follows: “9.9 Heard both the parties. In light of the above settled position of law, which has not been disputed by either of the parties, the limited question for our consideration is, whether the contents of the seized document GCL-HD-1, referred to by the AO, was 'incriminating' in nature or not. Before we proceed to examine the contents of the seized document GCLHD-1, it is first relevant to understand as to the meaning of the expression "incriminating material" or evidence. There can be several forms of incriminating material or evidence. In order to constitute an incriminating material or evidence, it is necessary for the AO to establish that the information, document or material, whether tangible or intangible, is of such nature, which incriminates or militates against the person from whom it is found. Some common forms of incriminating material, inter alia, are for instance, where the search action u/s. 132 of the Act reveals information (oral or documentary) that the assets found from the possession of the assessee in form of land, building, jewellery, deposits or other valuable assets etc. do not corroborate with his returned income (which includes earlier AY's return also) and/or there is a material difference in the actual valuation of such assets and the value declared in the books of accounts. Further, incriminating evidence may also constitute of information, tangible or intangible, which suggests or leads to an inference & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd that the assessee is conducting transactions outside the regular books of account which are not disclosed to the Department. Incriminating material may also comprise of document or evidence found in search which demonstrates or proves that what is apparent is not real or what is real is not apparent. In other words, let us assume that an assessee has recorded transactions in his books or other documents maintained in the ordinary course of business, then it is discovered in the search from certain material or evidence which states the contrary. In such an event then, the discovered material or evidence can be held to be incriminating in nature, only when it is found to affect the veracity of the entries made in the books of the assessee and thus lead to the conclusion that the entries made regularly/maintained by the assessee do not represent true and correct state of affairs. Rather the evidence unearthed or found in the course of search would go on to show that the real transaction of the assessee was something different than what was recorded in the regular books and therefore the entries in the books did not represent true and correct state of affairs i.e. the assessee has undisclosed income/expense outside the books or that the assessee is conducting income earning activity outside the books of accounts or all the revenue earning activities are not disclosed to the tax authorities in the books regularly maintained or the returns filed with the authorities from time to time is not true etc. The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion but should be of such nature which would prima facie show that the real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. In some & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to transaction reflected in regular books or documents maintained in the ordinary course of business, then also in such an event the AO is not permitted to straightaway treat such material as 'incriminating' in nature unless the AO thereafter brings on record further corroborative material or evidence to transform his suspicion to belief and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs and rather that can be the starting point of inquiry to un- earth further material or evidence to transform his suspicion to belief and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document found in the course of search as incriminating in nature qua the assessee justifying the additions in unabated assessments. In other words, any and every seized material, which comes in AO's possession cannot be construed as 'incriminating material' straightaway. For instance, scribbling or rough notings found on loose papers cannot be straightaway classified as 'incriminating material' unless the AO establishes nexus or connect of such notings with unearthing of undisclosed income of the assessee. This nexus or connect has to be brought out in explicit terms with corroborative material or evidence which any prudent man properly instructed in law must be able to understand or correlate so as to justify the AO's inference of undisclosed income from such seized incriminating material. This exercise is therefore found to be essentially a question of fact.

….. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 9.14 We note that the Ld. CIT(A) had examined in detail the contents of the above document and concluded that this document was not an incriminating document and that the it was a shareholding pattern of the assessee which was duly verifiable from the books of accounts and other secretarial records filed by the assessee with ROC, prior to the date of search. For the sake of convenience, the relevant findings recorded by the Ld. CIT(A) in this regard, at Pages 145 to 147 of his order, is extracted below:

….

9.15 Having examined the contents of GCL-HD-1, we find ourselves in agreement with the above findings of the Ld. CIT(A) that this document was a share-holding pattern document prepared by way of secretarial compliance report, which as the assessee has shown, was filed along with the company‟s annual return in Form MGT-7 on 28-11-2017 with the Registrar of Companies and was therefore available in the public domain (much prior to the date of search). It is found to contain the details of the name of shareholders, their amount and percentage of shareholdings. In our considered view, this document was a regular business document having no incriminating content whatsoever. Nothing whatsoever has been brought on record by the Revenue to correlate or link as to how the contents of this statement led to unearthing of unexplained cash credit by the AO and therefore the aforesaid factual finding of the Ld. CIT(A) remains uncontroverted. Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) on this aspect and hold & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd that the seized document GCL-HD-1 did not constitute incriminating material or evidence.”

4.10 We note that the above findings has since been affirmed by the Hon‟ble Gauhati High Court which is reported in 156 taxmann.com 529, by observing as under: “11. The issue whether a document, which in these cases is the electronic device in the form of a hard drive extracted from the computer of the assessee during search conducted in the year 2017 constitutes incriminating material or not, would unquestionably require evaluation, assessment and appreciation of contents of such document which is an exercise of evaluation of evidentiary worth of the document. Thus, this Court has no doubt in its mind that the conclusions recorded on the nature of contents of the document by the competent forum, be it the Commissioner of Income-tax (Appeals) or the Income-tax Appellate Tribunal as to whether the same was incriminating or not, would definitely be findings of fact and hence, the proposed substantial question of law No. 2 in all these appeals, which is the primary ground for assailing the judgment passed by the Income- tax Appellate Tribunal and seeking admission of the appeals, cannot be considered to be a substantial question of law. The question so framed, pertains to examination and re-appreciation of contents of the document GCL-HD-1 for deciding its creditworthiness and to adjudicate whether the same constitutes incriminating material or otherwise. Such an exercise unquestionably tantamounts to re-appreciation of evidence and cannot constitute a substantial question of law and rather poses a simple issue of facts which too stand concluded against the ITA Nos.3448 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd revenue by 2(two) competent forums, i.e. the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal who after threadbare discussion and appreciation of the contents of GCL-HD-1, the projected incriminating material, have recorded concurrent findings of fact that the same does not constitute incriminating material so as to justify the re-opening of the assessment by virtue of Sections 153A of the Income-tax Act for the unabated/completed assessments.

ITA Nos.3448 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 4.11 Now we come to the reliance placed by the Revenue on the statement of Mr. Shaikh to justify the impugned addition. We have perused the contents of the statement of Mr. Shaikh and it is nobody‟s case that he had admitted to any wrong doing or had averred that the loans availed from these lenders represented his unaccounted monies. Reading of the statement shows that the Investigating Authorities had required Mr. Shaikh to provide several details of these lenders viz., their address, email ID, business profile, details of meetings held with them, collateral securities provided for obtaining loan, details of intermediaries who arranged the loan, details of board of directors of these lenders etc. On perusal of his reply, it is noted that he had answered some of the queries viz., that no intermediary was involved for availing the loan and therefore question of payment of commission did not arise. As far as other documentary evidences sought for were concerned, Mr. Shaikh had sought time to verify from his records and submit the details. We are unable to agree with the Ld. CIT, DR as to how this averment incriminated the assessee. The statement shows that the deponent had only expressed his inability at that material time to provide the data. This, according to us, cannot be treated as incriminating statement to draw adverse inference in an unabated assessment. The Ld. AR has rightly pointed out that the Investigating Authority had put forth these queries regarding several lending entities from whom loans were obtained across several years and understandably, the deponent was required to verify the past business & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd records of the group entities and consult with his office staff so as to provide appropriate reply to these questions. The Ld. AR also rightly contended that, it was not necessary that Mr. Shaikh would be aware of every aspect of the functioning of each of the group entities and he cannot be expected to provide the exact details of the group finances along with supportings spanning across several years on the same day when he was being questioned in the course of search. We thus find force in the Ld. AR‟s contention that Mr. Shaikh‟s answer seeking time to provide the relevant details cannot be viewed adversely. Moreover, it was shown to us, that, in the post search enquiries, the assessee had provided these details to the Investigating Authorities. Having regard to the foregoing and more so when the impugned statement itself did not contain any admission or surrender to any wrong doing, we do not countenance this plea of the Revenue that the said statement constituted incriminating material unearthed in the course of search.

4.12 With regard to the whatsapp conversations referred to by the Ld. CIT, DR, it is noted that no incriminating conversations whatsoever were placed before us. Upon query from the Bench, the Revenue was unable to show to us any such whatsapp chats which incriminated the assessee qua the unsecured loans obtained from the lenders in question. Instead, we find that the Ld. CIT, DR had baldly relied on the observations made by the AO at Para 6.2.2 of the assessment order. Having perused the same, it is noted that the AO has not cited the & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd exact conversations or the contents of the chat but has simply observed that there were few whatsapp chats between one, Mr. Ahmed and Mr. Shaikh where the word „cheque-entry‟ was used and Mr. Ahmed had purportedly stated that this denoted payment in cheque which was returned in cash. It is however not the AO‟s case that, these whatsapp chats related to the unsecured loans obtained from these lending entities. Instead, the AO is noted to have referred to the same, which was in completely different business dealings, to deduce that these unsecured loans would also be in the nature of accommodation entries obtained in lieu of cash. According to us, such an inference based on surmises and presumptions was far-fetched and untenable. We are in agreement with the Ld. AR that these presumptive observations made by the AO cannot be construed as an incriminating or tangible material which would suggest that the unsecured loans were in the nature of unexplained cash credits.

4.13 We now come to the Ld. DR‟s reliance on the past history of litigation of the assessee group on this issue of unsecured loans to justify addition/s in unabated assessments. The Ld. AR, in this regard, has pointed out to us that, the addition/s made by the AOs in the earlier AYs on account of unsecured loans u/s 68 of the Act has since been deleted by this Tribunal and the relevant appellate order of the concerned group entity has been placed at Pages 319 to 335 of Paper Book. Be that as it may, according to us, this cannot be regarded as an & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd incriminating material found in the course of search and hence this particular contention of the Revenue is also rejected.

4.14 For the reasons set out in the preceding paragraphs and the judicial precedents discussed above, we are therefore of the considered view that there was no incriminating material found in the course of search on the basis of which additions u/s 68 and 69C of the Act could have been legally made in the unabated AYs 2016-17 and 2018-19. We accordingly direct the AO to delete the impugned addition/s made u/s 68 & 69C of the Act in the unabated AY 2016-17 & AY 2018-19.

4.15 Now, we come to the additions made u/s 68 & 69C of the Act in the abated AYs 2020-21 and 2021-22. It is noted that the unsecured loans in question in these AYs were received from four (4) lenders, viz. M/s Favien Exports Pvt. Ltd, M/s HDK International Pvt. Ltd, M/s Akshit Trade Link Pvt Ltd & M/s Mars Export. Before the lower authorities, the assessee had furnished confirmation letters, financial statements, Income-tax Acknowledgement and bank statements of these lenders. Since the lenders did not attend the summons u/s 131 of the Act, the AO doubted the genuineness of these loans. The AO after analyzing their financials primarily doubted their creditworthiness to advance the loans and held that the traits of these lenders were that of shell entities and therefore added the same u/s 68 of the Act. The AO further disallowed the interest paid on these loans u/s 69C of the Act. On appeal, the Ld. CIT(A) is noted to have held that the loan obtained & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd from three (3) lenders, namely, M/s Favien Exports Pvt. Ltd, M/s Akshit Trade Link Pvt Ltd & M/s Mars Export, were genuine and hence deleted the same. With regard to the remaining one (1) lender, M/s HDK International Pvt. Ltd, the Ld. CIT(A) followed the same line of reasoning as given by the AO and confirmed the same. Aggrieved by the order of Ld. CIT(A), both the assessee and the AO are in appeal before us.

4.16 Heard both the parties. Before we advert to the facts of the case, it is necessary to recapitulate the provisions of Section 68 of the Act, which read as under:

"Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :

Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10."

4.17 Bare reading of the provision makes it abundantly clear that any company, in which public is not substantially interested, is required to substantiate only the first source of receipt in relation to advance/loan/deposit and nothing more. The additional burden laid down in the proviso to Section 68 of the Act only applied to 'share application monies'. In the case at hand therefore, the proviso to Section 68 is not applicable. Under the extant provisions of Section 68 of the Act [as it stood in AYs 2020-21 & 2021-22], the burden cast on the assessee is only to substantiate the source of receipt of the loan/deposit. Hence, in our considered view, the onus cast upon the assessee is only to establish three things necessary to obviate attracting Section 68 of the Act which are, (i) identity of the creditor; (ii) their creditworthiness and (iii) Genuineness of the transaction. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 4.18 In view of the above position of law, let us now examine the facts of the case. From the assessment order, it is noted that, the AO had doubted the respective sources of these creditors and therefore held that their creditworthiness remained unsubstantiated. The AO upon his own analysis of the financials of these lenders had noted that some of them had reported meagre income which did not commensurate with the loans advanced and it therefore raised doubts on their creditworthiness. According to us however only because some of these lenders did not derive sufficient profits during the year cannot be the sole determinative factor to doubt their creditworthiness. It is noted that, each of the lenders have demonstrated that the loans were advanced by them at commercial rates of interest, either out of their own funds or borrowings made by them in their respective capacities. On these facts, in our considered view therefore, nothing much turns on the fact that some of these lenders had reported meagre income in the relevant year.

4.19 The Ld. AR further showed us that, even on facts, the above averment was not factually tenable. Having examined the records, it is noted that the assessee has placed on record the PAN details and Income-tax Acknowledgment of these lenders viz., M/s Favien Exports Pvt. Ltd, M/s HDK International Pvt. Ltd, M/s Akshit Trade Link Pvt Ltd & M/s Mars Export. Out of the four (4) lenders, three (3) lenders are noted to be bodies corporate and each of them are noted to be registered under the Companies Act, 1956 and have valid CIN and & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd are also active companies as on date. These companies are noted to be regular income-tax filers as well. In respect of M/s HDK International Pvt Ltd, it is noted that the said lender had sufficient own funds of Rs.2.3 crores to justify the loan of Rs.1 crore. Also, the said lender is noted to have declared income of Rs.67.04 lacs, Rs.58.13 lacs and Rs.25 lacs in AYs 2015-16, 2016-17 and 2018-19 respectively. With regard to other two bodies corporate viz., M/s Favien Exports Pvt. Ltd & M/s Akshit Trade Link Pvt Ltd, it is noted that these lenders were engaged in the business of money lending. These lenders would borrow monies and then advance the same on interest. From the financials of these lenders, it is noted that both these bodies corporate had raised significant borrowings, out of which they had advanced loans to the assessee. These loans are noted to be forming part of the books of accounts and the interest income derived from the assessee was inter alia offered to tax as well. The remaining lender, M/s Mars Export is noted to be a partnership firm and a regular income-tax assessee. It is noted that the said entity has been declaring taxable income consistently in the range of Rs. 5.5 Lacs to Rs.9 Lacs across AYs 2016-17 to 2020-21. The loans obtained from all these entities are noted to be have been transacted through banking channels. The loans are found to carry commercial rates of interest. The assessee has provided the said interest in its books and deducted TDS thereon as well. The interest income has been accounted for by the lenders and the same is noted to form part of the returns of income filed by them. It is also noted that these loans were also subsequently repaid along with ITA Nos.3448 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd interest to these lenders. The assessee is noted to have placed on record the loan confirmations obtained from these lenders as well. All these documents which were filed by the assessee before the lower authorities have not been found to be incorrect or faulty at any stage.

4.20 Having regard to the above, it is noted that the source of the loans had been established in as much as the identity of the lenders, their creditworthiness and genuineness of the transaction was substantiated by the assessee as per the requirement of law. Moreover, in our considered view, if the AO suspected their financial ability to advance these loans, then the correct course of action was to proceed against the creditors rather than the assessee because the assessee has discharged the burden as required by law [Section 68 of the Act] and the assessee cannot be expected to do more than what the law prescribed. For this, we rely on the decision of the Hon'ble jurisdictional Bombay High Court rendered in the case of Gaurav Triyugi Singh v. ITO [2020] 121 taxmann.com 86/423 ITR 531. In the decided case the assessee had received unsecured loans from two individuals, whose details were submitted before the AO. The AO however doubted the creditworthiness of the individuals and took a view that the assessee had not established genuineness of the loan. On appeal, the Hon'ble High Court deleted the addition by observing as under:

"13. Section 68 of the Act has received considerable attention of the courts. It has been held that it is necessary for an assessee to & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd prove prima facie the transaction which results in a cash credit in his books of account. Such proof would include proof of identity of the creditor, capacity of such creditor to advance the money and lastly, genuineness of the transaction. Thus, in order to establish receipt of credit in cash, as per requirement of section68, the assessee has to explain or satisfy three conditions, namely : (i) identity of the creditor; (ii) genuineness of the transaction; and (iii) credit-worthiness of the creditor.

4.21 We also rely on the judgment of the Hon'ble Delhi High Court in the case of CIT v. Shiv Dhooti Pearls & Investment Ltd. [2015] 64 taxmann.com 329/[2016] 237 Taxman 104. In the decided case, the assessee had received unsecured loans in the year in question. In the course of assessment, the AO requisitioned the details of the loans received by the assessee. From the details furnished by the assessee, it was observed that few loan creditors had returned loss and their source of advancing loans were other bodies corporate who had also returned miniscule taxable income in their income-tax returns. The AO therefore doubted the creditworthiness of the lenders. The AO accordingly made addition u/s 68 of the Act. On appeal the High Court held that the onus of the assessee is 'to the extent of his proving the & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd source through which he has received the cash credit.' The High Court held that the AO has ample 'freedom' to make inquiry 'not only into the source of the creditor, but also of its sub-creditors'; but the assessee has indeed discharged its onus of proving the creditworthiness and genuineness of the lender by furnishing the documents & details which it was required to maintain in the normal course and under law and therefore the addition made u/s 68 was deleted by the High Court.

4.22 The decision of the Hon'ble Calcutta High Court in the case of CIT v. Dataware (P.) Ltd. [GA No. 2856 of 2011, dated 21-9-2011] is also found to be relevant in the given facts of the present case. In the decided case also, the Court had deleted similar addition made u/s 68 with reference to unsecured loan creditors. The relevant extracts of the decision is reproduced below:

In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established.

4.23 Another reasoning given by the Revenue to doubt the genuineness of these loans was that, the assessee had not provided the details of collaterals offered for obtaining these loans, details of directors, business profile of the lenders etc. To this, the Ld. AR has pointed out that the loans in question were admittedly unsecured and therefore the question of placing collaterals did not arise. Further, he showed that the business profile & details of directors were verifiable from the financial statements and also available in public domain and thus according to him, this averment of the Revenue was also factually misplaced. We are also in agreement with the Ld. AR that, on the overall facts as already discussed in preceding paragraphs, these aspects pointed out by the Revenue were irrelevant in as much as the same could not be viewed adversely to justify the addition/s made u/s 68 of the Act.

4.24 Before us, the Ld. CIT, DR had also placed emphasis on the AO‟s findings that some of the lenders did not attend the enquiries made by him. In this regard, the Ld. AR has pointed out to us that, the nature of relationship between the assessee and the lender is that of debtor-creditor which is limited to advancement of loan, payment of interest and thereafter refund of the loan. It was not a case where any & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd share subscription monies were raised which may lead to an inference that the assessee would have a continued relationship or link with the shareholder / share subscriber. He also submitted that, the assessee also cannot be expected to enforce compliance from these creditors, particularly when the loans had been refunded along with interest. The Ld. AR explained that it was purely a case of two unrelated persons who conducted a finance/money-lending transaction and thus under the given circumstances therefore, the loan received by the assessee cannot be doubted on the ground that the AO was unable to make enquiries from these creditors, particularly when the loans had already been refunded. Having regard to the foregoing contentions and the fact that the requisite documentary evidences in relation to the loan creditors which the assessee was required to maintain had already been furnished before the AO, the alleged non-compliance of notices by the lenders cannot be decisive to justify the impugned addition. For this, we rely on the decision of the Hon'ble Supreme Court in the case of CIT vs Orissa Corporation (P) Ltd (159 ITR 78) wherein the facts of the case was that "the assessee, with regard to loans taken produced before the Income- tax Officer letters of confirmation, the discharged Hundis and particulars of the different creditors general index numbers were with the Income-tax Department. Attempts bad been made to bring those creditors therefore the Income-tax Officer by issue of notices under Section 131 of the Act, but the said notices were returned with the endorsement 'left'. The Income-tax Officer, therefore, treated the entire amount of R. 1,50,000 as unproved cash credit and ITA Nos.3448 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd added the same to the income of the assessee". On these facts, the Hon'ble Apex Court is noted to have held as follows:

In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.

4.25 We also gainfully refer to the decision of the Hon'ble Gujarat High Court in the case of CIT v. Apex Therm Packaging (P.) Ltd. [2014] 42 taxmann.com 473/222 Taxman 125 (Mag.). In the decided case also, in the course of assessment proceedings, the assessee had furnished complete details of loan creditors along with their PAN, financial statements, loan confirmations, bank statements etc. The AO however added the entire loan received u/s 68 of the Act. On appeal, the CIT(A) allowed the assesses appeal which was also confirmed by & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd ITAT. On appeal by the Department u/s 260A, the High Court observed that when full particulars, inclusive of the confirmation with name, address, PAN, IT returns, balance sheet & profit and loss account in respect of all the lenders were furnished and that it has been found that the loans were received through cheques then the AO was not justified in making addition u/s 68 of the Act. Accordingly the High Court dismissed the appeal of the Department.

4.26 In the above decision the Hon‟ble High Court is noted to have referred to its earlier decision in the case of Dy. CIT v. Rohini Builders (256 ITR 360), wherein the Court has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word "may" in section 68. Relevant observations at pages 369 and 370 of this report are reproduced hereunder:-

Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non- compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69.

4.27 Further, as noted above, these loans had been repaid, and, therefore, the allegation of the AO that assessee was a beneficiary of the loan cannot be sustained on these facts and is liable to be deleted. We gainfully refer to the judgment of the Hon'ble Gujarat High Court in the case of PCIT vs. Ambe Tradecorp (P.) Ltd (supra) where it has been held as follows: & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd "The Tribunal rightly recorded in para 29 of the judgment. "Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries being carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT(A)."

Financial RIM (From RHIL (From Total Year Project Platinum) “2002 to Unaccounted 1.1.2020-1) Receipts 2014-15 - Rs.43,02,29,085 Rs.43,02,29,085 2015-16 - Rs.28,03,31,931 Rs.28,03,31,931 2016-17 Rs.8,01,44,460 Rs.26,00,38,798 Rs.34,01,83,258 2017-18 Rs.72,55,56,161 Rs.11,39,20,502 Rs.83,94,76,663 2018-19 Rs.33,69,40,975 Rs.14,34,893 Rs.33,83,75,868 2019-20 Rs.18,56,00,345 - Rs.18,56,00,345 2020-21 Rs.18,56,69,086 - Rs.18,56,69,086 Total Rs.1,51,39,11,026 Rs.1,08,59,55,209 Rs.2,59,98,66,236 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 5.2 The details contained in the above Table is noted to have been accepted by Mr. Shaikh and he had accordingly offered 8% of the aggregate undisclosed proceeds by way of unaccounted profit derived by the assessee from the projects undertaken by it. On the basis of this disclosure, the assessee is noted to have accordingly filed the returns of income u/s 153A of the Act, wherein it has admitted and offered the aforesaid unaccounted profit to tax.

5.3 The AO, in the course of assessment, is noted to have disputed the plea of Mr. Shaikh that the Group had incurred expenses out of such cash on-monies received and therefore only the profit element embedded in these unaccounted receipts was to be taxed. The AO noted that apart from providing general explanations, Mr. Shaikh did not provide specifics of the expenses incurred in cash nor was he able to provide any documentary evidences to back the same. The AO was of the view that the basis of disclosure @ 8% was based merely on assumptions and was thus unreliable. The AO further observed that, Mr. Shaikh was also required to give context and details of the expenses found noted in the excel sheets, but he did not elaborate on the same and also did not provide the specific details of the persons to whom such expenses were paid in cash. According to AO, the assessee also did not explain as to why were these expenses incurred outside the books of accounts. Referring to the provisions of Section 37 of the Act, the AO observed that the assessee was required to substantiate that the expenses found noted in this excel sheet was incurred in the & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd course and for the purposes of business, but the assessee had not discharged this onus viz., no documentary evidence were filed by the assessee. According to AO, the Investigating authorities had proved beyond doubt that the assessee was in receipt of unaccounted cash from sale of flats and thus the onus was on the assessee to prove the claim regarding expenses. The AO rejected the explanation furnished by the assessee to be an after-thought. Alternatively, the AO further observed that, even if it is presumed that the assessee had incurred the expenses but still the said cash expenses were not allowable in light of Section 40A(3) of the Act.

5.4 Being aggrieved by the above order of the AO, the assessee preferred an appeal before the Ld. CIT(A) who held that profit element embedded in these on-monies ought to have been taxed by the AO. The Ld. CIT(A) however restricted the quantum of addition viz., the profit element embedded in the on-monies, to 12.5% of the receipts across the years. Aggrieved by this order of the Ld. CIT(A), both assessee and Revenue are in appeal before us.

5.5 Supporting the order of the AO, the Ld. DR appearing for the Revenue contended that the AO had succinctly examined the incriminating excel sheet found in the pen drive and had rightly added the entire on-monies as unaccounted income of the assessee. The Ld. DR reiterated the AO‟s findings that the assessee was unable to submit any evidence to prove that the expenses were actually incurred by it. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd He further stated that the Ld. CIT(A) had omitted to examine the applicability of Section 37(1) & 40A(3) of the Act which were cited by the AO. The Ld. DR argued that nature of certain expenses were impermissible payments in law and therefore not allowable under Explanation to Section 37(1) of the Act. According to Ld. DR, the expenses found mentioned in the excel sheet pertained to several projects including that of the assessee and therefore its set off should not have been allowed only against the assessee‟s Platinum Mall project. The Ld. DR also sought to distinguish the case laws relied upon by the assessee wherein it was held that not the entire on-monies but only profit element embedded therein ought to be taxed. Instead, the Ld. DR placed reliance on the decision of Hon‟ble Bombay High Court in the case of Harish Textile Enggs Ltd Vs DCIT (63 taxmann.com 66).

5.6 Per contra, the Ld. AR argued that the Ld. CIT(A) in principle had rightly held that only the profit element embedded in on-monies ought to be taxed and not the entire value of receipts. Taking us through the excel sheet notings, the Ld. AR showed that, it was unmistakably evident that it contained noting of expenses, date of expenses, name of reference persons, amount of expenditure etc. He thus contended that it would be wholly improper to accept part notings on this excel sheet to be true and assess the on-monies receipts but reject the notings regarding the expenses incurred in relation to these projects. The Ld. AR further argued that the fact that these expenses & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd were found noted on the same excel sheet clearly evidences that they related to the business viz., real estate projects. The Ld. AR submitted that the contentions of the Revenue that the assessee had failed to explain the allowability of these expenses was misplaced because the unaccounted expenses by its very nature is not evidenced by supporting material or details and it is wholly illogical to demand evidences for the same. For this, the Ld. AR relied on the decision of this Tribunal in the case of Prime Developers Vs DCIT (ITA NO. 175/Mum/2010) which has since been upheld by Hon‟ble Bombay High Court. The Ld. AR has also placed on record a compilation of decisions wherein it has been held that only the profit element embedded in on-money receipts ought to be taxed.

5.7 We have heard both the parties and perused the material placed before us. At the outset, it is noted that there is no dispute between the parties that the assessee had received on-monies on sale of units at its Platinum Mall and its various Projects. Even the quantum of on-money receipts quantified by the AO have not been disputed by both the parties, which as noted by Ld. CIT(A) is as follows :-

Assessment Year Total Unaccounted Income (in Rs.) 2015-16 43,02,29,085 2016-17 28,03,31,931 2017-18 34,01,83,258 2018-19 83,94,76,663 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 2019-20 33,83,75,868 2020-21 18,56,00,345 2021-22 18,56,69,086 Total 2,59,98,66,236 5.8 The limited issue for our consideration is whether the entire value of these receipts have to be brought to tax or only the profit element embedded therein has to be taxed. From the facts placed before us, it is noted that the assessee is engaged in the business of development of real estate. In the course of search, electronic data was found, more particularly excel sheets which inter alia contained details of on-monies received on sale of flats. Having perused these excel sheet on sample basis, it is noted that the same sheet also contained notings of expenses. From the statement of Mr. Shaikh, it is gathered that even the Investigating authorities tacitly acknowledged that there were notings of cash expenses incurred by the assessee in this excel sheet by putting up the following questions to Mr. Shaikh.

Q.47. Please refer to your response to the question above. It is seen from the various sheets which have been named at Q. No. 43, that there are names of various parties with whom payment and receipt transactions have been undertaken by you. Therefore, your claim that you don't have the details of the names is not correct. Many of the names are mentioned as aliases and in abbreviated forms. In view of this, please go through the said excel sheets and clarify the complete names of the various parties involved. Ans: Sir, the names mentioned in the sheet are the names of various persons who gives us the payments on behalf of someone & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd and also the names of the persons to whom we made the payments on behalf of someone and therefore I am unable to recollect the transactions as the name in the sheets have no direct relations with the actual transactions. Further as the transactions were in cash therefore the proper details of the same was not maintained by us and that's why details are not available with us.

5.9 It is further noted that Mr. Shaikh had further averred that in both his statements recorded in course of the search as well as in post search enquiries that the exact profit from the working in these excel sheets was not possible and therefore he had estimated the profit from on-monies @ 8% and offered the same to tax. The relevant questions and answers taken note of by us are as follows :-

“Q.10. During the course of search proceedings of group companies, the statement u/s 132(4) of the Income Tax Act, 1961 was taken on 17.03.2021 at 1402, Ameena Heights, Dr. A Nair Road, Agripada, Mumbai 400 011and in answer to the Q.47 to 54 you stated that "Ma'am I will have to look into the Books of Accounts and cash flows of my various entities and only then I will be able to comment on the pen drive in question and the statement of Mr. Imran Ansari". Till today you have not filed any explanation for the questions asked during the course of search proceedings, in these circumstances why amount of Rs. 151,39,11,026/- should not be considered as the unaccounted income of M/s Rubberwala Housing Infrastructure Limited, from the sale of shops at Platinum Project undertaken by the company. Please comments. Ans. Sir, I have already elaborated the circumstances under which I was not been able to file my replies on the questions asked by you during the course of search proceedings. Now I am in receipt of the copy of the statements along with the seized documents and after verification of the documents it is submitted that we have received cash towards the shops and also make various expenditures in cash towards the project out of the said & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd cash receipts. I am submitting herewith the cash receipts and payments details for the following years. Financial Total Amount Year Received 2014-15 - 2015-16 - 2016-17 8,01,44,460 2017-18 72,55,56,161 2018-19 33,69,40,975 2019-20 18,56,00,345 2020-21 18,56,69,086 Grand 1,51,39,11,026 Total On the plain reading of the seized material as provided by you it is evident that we have made various expenditures towards the platinum project out of the cash received towards the shops in the project. As the data is voluminous and exact profit working from the seized data cannot be derived therefore exact details of profit or loss toward the cash transactions recorded in the seized material cannot be ascertained. Further as far as my knowledge is concerned, I have not earned anything out of the total receipts in cash as income because unaccounted cash received from the various business activity are paid towards the expenses of the projects of the group. To settle the dispute, avoid further litigations and assuming that no penalty will be levied on M/s Rubberwala Housing and infrastructure Ltd for disclosure of additional income. I am offering an amount equitant to 8% of total unaccounted receipts as additional income of the respective company. Total cash received towards the Platinum project are as under and the income @ 8% on unaccounted receipts is offered as additional income for M/s Rubberwala Housing and infrastructure Ltd Financial Year Total Unaccounted Receipts Additional Income @8% of Receipts 2014-15 - - 2015-16 - - 2016-17 8,01,44,460 64,11,557 2017-18 72,55,56,161 5,80,44,493 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 2018-19 33,69,40,975 2,69,55,278 2019-20 18,56,00,345 1,48,48028 2020-21 18,56,69,086 1,48,53,527 Grand Total 1,51,39,11,026 12,11,12,882 ……. Q.43. During the course of post search proceedings, you have been provided the soft copy of the excel sheet named as "2002 to 1.1.2020-1 which is retrieved from the 16GB SanDisk pen drive on which white paper pasted found during the course of Search Action u/s 132 in your laptop bag of your bedroom at Flat No. 1402, Ameena Heights, Agripada, Mumbai 400011. Please explain the content of the excel sheets? Ans. Sir, I have gone through the excel sheet as provided by you and in the given excel sheet the seven columns starting from column A to column G. The column wise details is as under:

Column Explanation A This column of the excel sheet with the heading as „Date‟ i.e. the column contain the date of transaction. B This column of the excel sheet with the heading 'Particulars' i.e. the said column contain the details of short Name of party. C This column of the excel sheet with the heading 'Vch Type' i.e. the column contain the type of the voucher. Further the same includes voucher of Receipt, payments etc. D This column of the excel sheet with the heading 'Description' i.e. the said column the nature of transactions. E This column contains the amount of receipts. F This column contains the amount of payment. G This column of the excel sheet with the heading 'Company' i.e. the said column contain the details of Name of Project, location or nature of the receipt and payment etc. In this sheet unaccounted cash income and expenditure related to various projects are noted. This is the consolidated income and expenditure sheet for Rubberwala Group entities. All receipts in respect of the projects are noted in the sheet at the receipt side. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd Further the receipts are noted in the name of various persons (L.e. employees/associates/partners of Rubberwala group) from whom the cash was received, because the cash was collected from the customers by various employees of the group and after that the same was received by the respective senior persons and after aggregating the said cash was handed over to me and the same was noted in the sheet as aggregated basis. Therefore, each entry of the individual sheets (ie. Platinum mall project and Fuego project excel sheets) recovered during the course of search may not be reconciled individually but on overall basis the receipts noted in the "2002 to 1.1.2020 -1" are more than the individual sheets found during the course of search. The said received cash are duly expensed out for the projects and the same fact can easily be verified from the sheet provided by you. In the said excel sheet received cash is duly paid towards the expenditure of the projects running by the group. There are various expenses of the projects like relocation of the tenant, payment towards vacating of the land, material procurement expenses, Labour payments and various other approval related expenses etc. are noted and was made out of the cash receipt from the project and the same are verifiable from the said sheet therefore it is beyond doubt that the group earned all the unaccounted cash as income. As the data are voluminous and it is not possible to derive the exact profit working from the excel sheets and therefore to settle the dispute, avoid further litigations and assuming that no penalty will be levied on the group for disclosure of additional income I am offering an amount equitant to 8% of total unaccounted receipts as additional income of the respective company. As the data noted in the excel sheet entity wise bifurcation are not possible and therefore the project wise income will be offered as per the respective seized material in the respective company/firm and income over and above the individual sheet noting will be offered as additional income in M/s Rubberwala Housing and Infrastructure limited as the company are flagship company of group and major work are done in the same company. The year wise bifurcation of income as per the excel sheet "2002 to 1.1.2020-1" is as under: Financ Total & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd ial Amount Year Received 2014- 44,16,10,28 15 5 2015- 29,92,61,29 16 1 2016- 36,76,35,75 17 8 2017- 86,57,76,66 18 3 2018- 43,59,49,36 19 8 2019- - 20 2020- - 21 Grand 2,41,02,33,3 Total 65 The above total receipts are including the income offered in various companies/firms as replied in previous questions, and the details of the same are as follows: Financial Total Amount Amount Additional 8% of the Year Received as separately Unaccounted unaccounted per “2002 to considered receipt to be Income/Recei 1.1.2020-1” while replying considered pt the above while offering questions income @8% in RHIL 2014-15 44,16,10,285 1,13,81,200 43,02,29,085 33,44,18,327 2015-16 29,92,61,291 1,89,29,360 28,03,31,931 2,24,26,554 2016-17 36,76,35,758 10,75,96,960 26,00,38,798 2,08,03,104 2017-18 86,57,76,663 75,18,56,161 11,39,20,502 91,13,640 2018-19 43,59,49,368 43,45,14,475 14,34,893 1,14,791 2019-20 - 2,54,88,013 - - 2020-21 - 18,56,69,086 - - Grand 2,41,02,33,365 1,74,54,35,255 1,08,59,55,209 8,68,76,417 Total And therefore, I am offering to tax the assessee wise year wise unaccounted income as additional income as under: & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 1. Rubberwala Housing & Infrastructure Limited (RHIL)- Project Platinum Mall (PAN: AACCR7449B)

Financial RHIL (From RHIL (From Total Additional Year Platinum “2002 to Unaccounted Income @8% Project) 1.1.2020-1”) Receipt of the total unaccounted Receipt 2014-15 - 43,02,29,085 43,02,29,085 3,44,18,327 2015-16 - 28,03,31,931 28,03,31,931 2,24,26,554 2016-17 8,01,44,460 26,00,38,798 34,01,83,258 2,72,14,661 2017-18 72,55,56,161 11,39,20,502 83,94,76,663 6,71,58,133 2018-19 33,69,40,975 14,34,893 33,83,75,868 2,70,70,069 2019-20 18,56,00,345 - 18,56,00,345 1,48,48,028 2020-21 18,56,69,086 - 18,56,69,086 1,48,53,527 Grand Total 1,51,39,11,026 1,08,59,55,209 2,59,98,66,236 20,79,89,299

2. Hilton Infrastructure Project Fuego (PAN: AAFFH3675R) Financial Year Total Additional Unaccounted Income @8% Receipt of the total unaccounted Receipt 2014-15 63,65,000 5,09,200 2015-16 1,89,29,360 15,14,349 2016-17 1,80,00,000 14,40,000 2017-18 - - 2018-19 8,00,73,500 64,05,880 2019-20 3,96,50,000 31,72,000 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 2020-21 - - Grand Total 16,30,17,860 1,30,41,429

5.11 The Revenue has however contended that, the expenses found noted on this excel sheet were not shown by the assessee to have been incurred for business purposes. The Ld. AR, on the other hand, brought to our notice that, Mr. Shaikh in his answers had inter alia explained the nature and purpose of expenses which included payments for vacation of land, relocation of tenants, certain material procurement, labour payments etc. which were intrinsic to the said project. The Ld. AR invited our attention to the terms used in the excel sheet viz., ‘Building Gate Work’, ‘Zaheer Plumber for excavation labour payment’, ‘Tenant Shifting A/c Chunu’, ‘Manoj Material Purchase’, ‘Labour Salary March 18’ etc. Having examined the contents of the excel sheet in light of the answers given by Mr. Shaikh in his statement, we find merit in the assessee‟s case that the notings of the expenses found on this excel sheet indeed related to the business i.e. real estate project. We also agree with the Ld. AR that, the fact that these expenses were noted corresponding to on-monies receipts further lends credence to the assessee‟s contention that these notings were pertaining to the business of real estate.

ITA Nos.3448 & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 5.12 Now we come to reliance placed by the Revenue in this regard on the decision of Hon‟ble Bombay High Court in the case of Harish Textile Engrs. Ltd. Vs DCIT (supra) to dispute the allowability of expenses found noted on these excel sheets. Having perused the said judgment, we find the same to be factually distinguishable. In the decided case, the seized papers were found to indicate only notings of payments which was claimed as deduction u/s 37(1) of the Act by the assessee. On a factual analysis, it was also found that the said seized documents only indicated seeking of funds and/or reimbursement of funds which by itself was held to be insufficient to establish that the money has been actually expended. The said notings were found to be bereft of any details whatsoever which would suggest that it had been incurred for business purposes. On the contrary, in the facts before us, it is noted that the same excel sheet contained notings of both receipts and expenses. Having regard to this material fact, according to us, there is no discretion available either with the Department or the assessee to rely upon a part of the document favourable to it and plead for rejection of the other part which is not favourable to it, or in respect of which no supporting material is found. In general, the contents of the document seized have to be accepted as true irrespective of whether it is favourable to assessee or Department and the seized/impounded document has to be read as a whole. Gainful reference in this regard may be made to the decision of Hon‟ble Delhi High Court in the case of CIT Vs D D Gears Ltd (211 Taxman 8) which is found to be relevant in the given facts of the present case. In & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd the decided case also, expenses were found to have been noted on the same document where receipts were recorded. In these circumstances, it was held that expenses, which are recorded in the very same seized material, should be reduced while computing undisclosed income. The Hon‟ble High Court accordingly held that, while computing undisclosed income on the basis of such seized material, no part thereof can be ignored or no entry stated in such material can also be ignored, if it do not suite the convenience of the Assessing Officer. The material is to be considered as a whole and not selectively.

5.13 Also, the notings found mentioned in the excel sheet clearly suggest that the expenses have already been incurred. Moreover, it cannot be a matter of an argument in the given facts of the present case that, the amount of receipts/ sales by itself would represent the income of the assessee. For this, we gainfully rely on the following findings rendered by the Hon‟ble Gujarat High Court in the case of CIT Vs President Industries (258 ITR 654).

3. Having perused the assessment order made by the Assessing Officer, the order made by the Commissioner (Appeals) and the Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under section 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question, whether entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any material has been referred to about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales.

5.14 Furthermore, if Revenue‟s plea is acceded to and the notings of expenses are discarded due to insufficiency of documentary evidences to support it, then likewise corresponding notings of on-monies would also have to be treated as unreliable. In our considered view however such an inference in the context of estimation of undisclosed income in the given facts of the present case, would be illogical. For the aforesaid reasons, the decision of Harish Textile Engrs. Ltd. Vs DCIT (supra) relied upon by Revenue is found to be of no assistance.

5.15 The next argument of the Revenue is that, even if these notings are found to be expenses incurred towards business but because the names of the payees along with documentary evidences for such expenses have not been provided, the benefit for the same should not be given. In this regard, we find that, on same set of facts, similar contention was raised by the Revenue before this Tribunal in the case of M/s Prime Developers Vs ACIT (supra) viz., the set-off / benefit & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd of expenses against on-monies should not be allowed as the assessee was unable to substantiate the incurrence of expenses with evidences. This Tribunal is noted to have rejected this plea of the Revenue and upheld the assessee‟s plea for estimation of profit element embedded in on-monies by observing as under:-

“42. Scope of Reasonable Expenditure: Assessee needs to expend in order to earn income/profit and it is basic and universal principle in any business. This principle applies to both accounted and unaccounted profits. In a case of unaccounted profits, due to its very nature of unaccounting, normally, the parties do not maintain evidences and therefore, evidencing such unaccounted evidences is impossibility. Probably, for this reason, the courts have taken conscious view that it is for the assessing authority to quantify reasonable expenditure considering the facts of the case and industry. Legally speaking, the judgments are uniform in asserting that entire sale proceeds should not be added as income. Honble High court of Ahmadabad ruled in the case of Panna Corporation that the " assessee ought to have spent reasonable amount for the purpose of receiving such gross profit' (para 14 of Tax Appeal No 325 of 2000 dt. 16.6.2012). Further, Hon'ble High Court OF Madya Pradesh held in the case of President Industries 258 ITR 654 that ' entire sale proceeds of the assessee should not be added in his income'. Further, from the judgment in case of Panna Corporation (supra), it is settled proposition that there is no need for the assessee to demonstrate the genuineness of the claim of unaccounted expenditure in the cases of this kind. The underlined logic is that the unaccounted expenditure is always unevidenced and never maintained. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd Therefore, transferring onus on to the assessee in matters of this kind is not approved. Ex consequenti, it is for the AO allow necessarily reasonable deduction towards such unaccounted expenditure without demanding evidences, considering the nature of industry and also evidences relating to extents of net profits earned by the assessee. Considering the above legal position on the matter, we are of the clear-cut opinion, the AO's conclusions on this issue are certainly erroneous. In principle, we uphold the views of the CIT(A) in this regard. Therefore, relevant grounds raised in the revenue's appeals are dismissed.”

5.16 It was brought to our notice that the above findings of this Tribunal have been affirmed by the Hon‟ble Bombay High Court in their decision rendered in of 2013. Following the binding ratio decidendi, this particular argument of the Revenue is hereby rejected.

5.17 The alternate contention of the Revenue that, the cash expenses were still not allowable u/s 40A(3) of the Act is also found to be untenable. For this, we find that the Ld. AR has rightly relied on the following findings of this Tribunal at Pune in the case of Dhanvarsha Builders & Developers (P.) Ltd. Vs DCIT (102 ITD 375) which were as follows:-

The argument of the learned DR in this matter may also be considered here. His case was that the expenditure has to be proved by the assessee. We are unable to agree with this & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd submission if the impugned seized material is to be considered for the purpose of computation of the undisclosed income. The learned DR had pointed out that the Assessing Officer had verified some of the cash receipts from the customers. It appears that no opportunity of cross examination has been given by the Assessing Officer to the assessee in this behalf. Therefore, the evidence gathered by him in respect of receipt of „on money‟ is only a tentative evidence on which no firm conclusion can be drawn. If the learned DR‟s arguments regarding expenditure were to be accepted, then, the figures of cash receipts mentioned in the seized paper will also have to be ignored. Such course of action will be against the tenor of the evidence seized in the course of search operation, more particularly, when the evidence gives clear picture of the undisclosed income of the assessee. The other argument of the learned counsel was that provisions of section 40A(3) should be applied in respect of expenditure. It may be pointed out that we are on the issue of computation of income of the assessee de hors the books of account and on the basis of seized material. In such computation, provisions of section 40A(3) are not applicable because this is not the case of the assessee or the revenue that the computation of undisclosed income is on an exact basis as per seized documents and the books of account. The result of the aforesaid discussion is that the undisclosed income is to be quantified at Rs. 14.74 lakhs.

(emphasis supplied)

& Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 5.18 We find that similar view has been expressed by this Tribunal in the case of Western India Bakers (P.) Ltd. Vs DCIT (87 ITD 607) wherein also it was held that the limits under Section 40A(3) of the Act cannot be applied while estimating undisclosed income. The relevant findings of this Tribunal as taken note of by us are as follows :-

28. Coming now to the last issue that whether disallowance under section 40A(3) was possible in the facts of the present case, we have noted that the assessment was made on the basis of undisclosed investment. Where the basis is undisclosed investment, one cannot apply the prescription of section 40A(3) of the Act. In the case of CIT v. Aloo Supply Co. [1980] 121 ITR 680 (Ori.), the Hon‟ble High Court has held that if an assessee makes payments at different times during the day and he has no idea that he has to pay to the same person on more than one occasion, he cannot be subjected to the statutory provision contained in section 40A(3) of the Act, unless any one payment is above the prescribed limit. The statutory limit under section 40A(3) of the Act applies to payment made to a party at a time and not to the aggregate of the payments made to a party in the course of the day as recorded in the cash book. In the present case there is no finding that the assessee did make any payment exceeding the prescribed statutory limit contained in section 40A(3) of the Act. As such, it cannot be said that the assessee violated the provision under section 40A(3) of the Act. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 29. In the case of Hynoup Food & Oil Industries (P.) Ltd. v. Asstt. CIT [1994] 48 ITD 202 (Ahd.), it was held that if an overall estimate of income has been made, there would not be any scope for applying the prescription of section 40A(3) of the Act.When a provision of law is to be applied, it is to be seen that all the circumstances alliunde to the application of such provision did exist. If it is not possible to find out that how the violation of the provision was done, addition cannot be made on the basis of inference and surmises. In the present case it is not known that at what point of time and how assessee violated the provisions of section 40A(3) of the Act. As such, no addition on this count is warranted. We decide this issue in favour of the assessee and against the revenue.

5.19 Overall therefore, we thus find that the electronic material seized in the course of search did support the assessee‟s case that, it had incurred expenses out of the on-monies received from sale of units. In light of the foregoing, we find merit in the assessee‟s plea that, the entire value of on-monies receipts could not be taxed but only the profit element embedded therein was to be taxed in its hands, in the facts and circumstances of this case. On this aspect, it is noted that in the case of ITO Vs. Anand Builders, this Tribunal in similar circumstances had held that, 8% of the unaccounted on-money could be taxed in place of the entire unaccounted on-money receipts since there is always the unaccounted payments. The above decision of this Tribunal is noted to have been upheld by the Hon‟ble Gujarat High Court and the SLP filed against the judgment before the Supreme & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd Court was also dismissed and reported in 265 ITR 37. The relevant findings of Hon‟ble Apex Court is noted to be as follows:

Dismissed the special leave petition filed by the Department against the judgment dated January 21, 2002 of the Gujarat High Court in of 2002 whereby the High Court dismissed the Department's appeal on the ground that no substantial question of law arose. The question of law raised in the appeal before the High Court was whether the Appellate Tribunal's finding while directing the Assessing Officer to tax only 8 per cent of the unaccounted on money receipt instead of fully taxing it, in the absence of any evidence of expenditure, could not be stated to be perverse.

5.20 We further find that a similar view had been taken by the Hon‟ble High Court of Gujarat in the case of PCIT, Surat Vs. Anupam Organiser (2020) (9) TMI 973. In its said order the Hon‟ble High Court relying on its earlier order passed in the case of DCIT vs Panna Corporation (74 DTR 89), had observed, that the Tribunal was justified in considering that the assessee ought to have spent reasonable amount for the purpose of receiving the amount of on- monies and thus, what could be brought to tax was the profit embedded in such receipts and not the entire receipts. Similar view is noted to have been expressed by the Hon‟ble High Court of Gujarat in the case of CIT Vs. Abhishek Corporation (158 CTR 374). & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 5.21 We further noted that another coordinate Bench of this Tribunal at Mumbai in the case of ACIT Vs. Guruprena Enterprises (ITA Nos. 255 to 257, 544 & 545/Mum/2010 and 4836/Mum/2009) had observed as under:

Even though it is established from seized documents that assessee was receiving premium/on-money on booking of flats belonging to third parties, entire receipts of on-money/premium cannot be treated as undisclosed income of assessee; only net profit rate can be applied on unaccounted sales/receipts for making addition.

5.22 We note that the above decision has since been affirmed by the Hon‟ble Bombay High Court in of 2011. Also, relying on the aforesaid judicial pronouncements, this Tribunal at Mumbai in the case of Sumer Builders Vs. Dy. CIT, Central Circle-5(3), Mumbai, ITA No. 4915/Mum/2016; dated 09.01.2021 had observed as under:

Further, admittedly the on-money is merely receipts of sale proceeds as noted by the Assessing Officer in his order at Page No. 3 and what could be taxed is only income and not receipts. We further note that in various judgments relied on above it has been categorically held that on-money receipts are in the nature of sale price and not income per se. In the case of CIT vs. President Industries [258 ITR 654 (Guj)] it has been held that the entire sum of undisclosed sale proceeds cannot be treated as & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd income. Similar view has been taken by the Hon‟ble Bombay High Court in the case of CIT vs. Hariram Bhambhani in ITXA No. 313 of 2013. Further in the case of Guruprerna Enterprises (supra) relying on Abhishek Corporation vs. DCIT [63 TTJ (Ahd) 651] it has been held as under :- …. The other judgments relied on by the assessee also support its case. The ld. D.R has not brought on record any contrary judgments. We, therefore, agree with the consistent view expressed in these judgments that on-money receipts are in the nature of undisclosed receipts and not income per-se and therefore only profit element embedded therein are liable to be taxed and not the entire on-money receipts.

5.23 Gainful reference is also made to the following findings recorded by another coordinate Bench in the case of Ekta Housing Pvt Ltd in dated 24.05.2021 wherein on similar issue regarding taxability of on-monies, it was held as under:-

In the case before us, in the backdrop of the fact admitted by the A.O while framing the assessment that the incriminating documents seized in the course of the search proceedings contained records of cash transactions, both receipts and expenses, which were not accounted for in the regular books of accounts of the assessee, and that the unaccounted transactions w.r.t cash expenses incurred by the assesseeout of the unaccounted sales receipts i.e on-money receipts had surfaced in the course of the search proceedings, we are of the considered & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd view that no infirmity arises from the order of the CIT(A) who drawing support from the judicial pronouncements that were relied upon by the assesseee before him, had concluded, that the addition as regards the on-money received by the assessee was to be made to the extent of the income element embedded in such receipts and the entire amount of on-money could not have been added in the hands of the assessee. We, thus, agreeing with the consistent view taken in the aforesaid judicial pronouncements, therein respectfully follow the same, and thus, finding no infirmity in the view taken by the CIT(A), uphold the same.

5.24 For the reasons discussed in the foregoing and following the decisions (supra), we accordingly hold that only the profit element embedded in the on-monies ought to be assessed to tax and that on the given facts, the addition of entire value of on-monies was unwarranted.

5.25 Now we come to the issue of estimating the profits of the assessee. The Ld. CIT(A) is noted to have estimated the profit at 12.5% of the on-monies. We however note that no rational basis or logic has been provided by the Ld. CIT(A) for arriving at such a rate. On the other hand, the Ld. AR brought to our notice that, the Hon‟ble Supreme Court in the case of ITO Vs Anand Builders (supra) had upheld the Tribunal‟s action of estimating profit percentage @ 8% of on-monies. The Ld. AR pointed out that the aforesaid assessee was also in the same line of business as that of the assessee i.e. real estate. Further, this Tribunal in the cases of M/s Platinum Properties Vs DCIT (ITA No.2600/Mum/2012) and Dhanlaxmi Builders Vs DCIT & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd (ITA No. 504/Mum/2009) had held 8% to be appropriate profit percentage to estimate profit embedded in on-monies received on sale of units/flats. Following the same, we hold that the assessee‟s offer of 8% of the on-monies receipts in the returns of income filed u/s 153A of the Act was fair and reasonable. Hence, no further addition on the impugned issue was permissible and therefore we direct the AO to delete the addition/s made on account of on-monies, over and above the assessee‟s offer of 8%. Hence, the grounds taken by the Revenue in this regard is dismissed and that of the assessee stands allowed.

6.2 Heard both the parties. Before adverting to the facts of the case, we first take note of the principle of telescoping which has since been judicially approved by the Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. Vs CIT (123 ITR 457). In the decided case, it was held that where the assessee offers any income on ad hoc basis, then such income is commonly described as intangible addition; but it is very much a part of assessee's real income as disclosed in his account books and has the same concrete existence. The Hon'ble Court held that the secret profits or undisclosed income of an assessee earned in the same or an earlier assessment year may constitute a secret fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. The intangible additions were held to be available to the assessee as the regular book profits could be. The Apex Court thus held when the unexplained cash deficits and the cash credits can be reasonably attributed to a pre- existing fund of concealed profits or by reference to concealed income earned in that very year then no addition is warranted on account of such cash deficits or cash credits. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd 6.3 Similar view was expressed by Hon'ble Madras High Court in the case of CIT v. K. S. M Guruswamy Nadar and Sons, [1984] 149 ITR 127. In the decided case, it was held that when there are two separate additions viz., one on account of suppression of profit and another on account of cash credit, then it is open to the assessee to explain that, the suppressed profits had been brought in as cash credits and has to be telescoped into the other.

6.4 Gainful reference may also be made to the decision of the Hon'ble jurisdictional Bombay High Court in the case of CIT vs J.J. Gandhi (39 CTR 127). In this judgment also, the Hon'ble High Court had approved the theory of telescoping and held that it could be applied in cases where additions in relation to unexplained money/investment are sought to be made in the hands of the assessee. The Hon'ble Court explained that if an addition towards undisclosed income was made and the AO also seeks to make certain addition in relation to unexplained investment then, it can be treated by the assessee that the unexplained investment is sourced out of the undisclosed income already taxed.

6.5 Having regard to this settled legal position, we now revert to the facts of the case. It is not in dispute that, the assessee had declared additional income of Rs.20.79 crores by way of profits embedded in on-monies in the returns of income filed u/s 153A of the Act for AYs 2015-16 to 2021-22. Such additional income represented the intangible & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd addition / secret profit, which applying the judicially approved principle of telescoping, could be set off against any unexplained money/investment found by the Revenue. According to us therefore, the Ld. CIT(A) had rightly observed that the profits from on-monies was inter alia represented by way of unexplained cash of Rs.4,54,13,432/- found in the course of search and therefore the latter sum cannot be considered again for the purposes of taxation as it would amount to double taxation. We thus uphold the Ld. CIT(A)'s action of allowing the telescoping benefit and set-off of the amount of intangible profits aggregating of Rs.20.79 crores towards the cash found of Rs.4,54,13,432/-. Accordingly, this ground of the Revenue stands dismissed.

Order pronounced in the open court on this 07/06/2024.

Sd/- Sd/- (B R BASKARAN) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; ददनांक Dated : 07/06/2024. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. दवभागीय प्रदतदनदध, आयकर अपीलीय अदधकरण, मुंबई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. & Others/Mum/2023 A.Y. 2015-16 to 2021-22 Rubberwala Housing & Infrastructure Ltd