ENLARGE BUILDCON LLP,RAJKOT vs. DCIT, CC-1,RAJKOT, RAJKOT

ITA Nos.623-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP ( This is assessee's ground No. 3 & 4 in for AY 2020-21, Ground no. 2 & 3 in for AY 2021-22 and AY 2022-23). ( This is also revenue's ground no. 1 in for AY 2020-21 and Ground No.1 in for AY 2022-23.) (iii) The Ld CIT(A) has erred in directing, the AO, to tax the unaccounted profit, in the year in which sale deed is executed instead of the year in which the on-money has been received, ignoring that the same is not in accordance with Accounting principles as per ICDS-3 applicable to Real Estate Developers and also not appreciating that the income on account of undisclosed on-money receipt was required to be assessed in the year of receipt. (This is, revenue's ground no. 2 in for AY 2020-21 and Ground No.2 in for AY 2021-22) (iv) On the facts and in the circumstances of the case and in law the Ld CIT(A) has erred in deleting the addition of Rs. 14,17,55,871/- made on account of unaccounted expenses u/s 69C r.w.s 115BBE of the Income Tax Act.

(This is revenue's ground no. 3 in for AY 2020-2 and Ground No.3 in for AY 2021-22)

It is seen in most of the ledgers from the seized Miracle file that they contain some Bank transactions which are found recorded on the regular books and some Cash transactions which are normally not recorded on the regular books of the respective Group member. This manner of recording the transactions highlights a fact that one part (mostly in Bank) of every deal was being reported on the regular books and the other part (mostly in cash) of the deal was not being reported on the regular books.

Thus, some transactions from the Miracle files were accounted for whereas some were not accounted for in the regular books of the respective group member who owns the transaction.

Fact 2 The data entered in the Miracle software is in coded form -

1) In the Miracle files mentioned at Sr. no. 2 & 3 above, the entries have been backdated by 10 years i.e. 01-04-2019 is entered as 01-04-2009, and 2) In all the three Miracle files, the amounts have been divided by 100 i.e. Rs. 2,50,000/- is entered as 2500.00/-

Fact 3 The names of the ledgers of different projects, persons have been written in coded form. It is seen that mostly the names of the projects for which any particular transaction is recorded on the seized file were mentioned with the initials.

For example-(1) R K Residency is mentioned as RKR, (2) R K Prime is mentioned as RKP, (3) The City Centre is mentioned as TCC, (4) R K Supreme is mentioned as SPM etc.

Details of unaccounted transactions pertaining to project "RK Supreme" developed by the assessee -firm, M/s Enlarge Buildcon LLP have been recovered from the material seized during the search operation, and assessing officer noticed the following: (i) Unaccounted receipts of Rs. 27,77,15,770/- against sale of units of the project and repayments of Rs. 2,13,03,760/- on account of cancellation or excess receipts as culled out from the seized Miracle data.

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP (ii) Unaccounted expense/investment of Rs. 64,74,57,778/- made in the purchase of land for the project as culled out from the seized Miracle data. (iii) Unaccounted expenses of Rs. 4,09,01,052/- incurred for the project as culled out from the seized Miracle data, (iv) Unaccounted payments of Rs. 1,45,00,000/- made to the contractor as per one excel sheet named "Bharatbhai-SPM" seized from the office premise of the R K Group.

The assessing officer observed that details regarding unaccounted part of the aforementioned transactions pertaining to the assessee have been gathered from the seized material during the search operation, a notice under section 148 of the Act has been issued on 16-11-2022 to the assessee after following due procedure as per the Act and with prior approval of the specified authority as per section 151 of the Act. In response to the notice issued under section 148, the assessee has filed an Income tax return on 16-12-2022 declaring loss of Rs. 12,308/-. Subsequently, a notice u/s 143(2) of the Income-tax Act has been issued and served on 27-12-2022 on the e-filing portal of the Assessee. Subsequently, notices u/s 142(1) have been issued from time to time seeking primary as well as further details from the assessee for carrying out the assessment. In view of natural justice, the objections raised by the assessee against initiation of proceedings u/s 148 of the Act have been disposed of and the images of original seized material pertaining to the assessee have been supplied and discussed in the notices issued u/s 142(1) of the Act.

(i)Unaccounted payments for acquisition of the land for the project R K Supreme Assessing officer noticed that perusal of the seized MIRACLE data revealed an accounting ledger by the name of "Silver One". This ledger contained details of M/s Enlarge Bildcon LLP payments made by the R K Group for purchase of land situated at 'Sub Plots no. 1 to 5/1 and 1 to 5/2 of F.P. no 31/1 TP Scheme no. 7 of Revenue Survey no. 27, Nanamava, Rajkot on which the project 'R K Supreme' is being developed by the assessee- firm. An image of the extracted data of the Miracle ledger "Silver One" is reproduced in the assessment order.The overall summary of transactions recorded on the seized MIRACLE ledger containing the details of payments for the land is mentioned in the assessment order.The conveyance deed for the above mentioned land has been executed at a rate of Rs. 16,00,00,000/-. The details as per stamp duty certificate are reproduction in the assessment order.The composition of M/s Enlarge Buildcon LLP is such that the members of the RK Group collectively holds 45% and Shri Paresh V. Parekh (non RK Group member) holds 55% in M/s Enlarge Buildcon LLP.The part of R K Group members @ 45% of Rs. 16,94,40,000/- (160000000 Price + 7840000 Stamp + 1600000 Registration charge) comes to Rs. 7,62,48,000/- which is almost equal to the bank payments of Rs. 7,59,50,000 recorded on the seized Miracle ledger. Thus, it can be said that the seized MIRACLE ledger contains share of members of R K Group only which is 45%. Moreover, the bank payments of Stamp Duty and Cheques for the part of R K Group are also mentioned at exactly same values as are recorded on the conveyance deeds which further strengthens the authenticity of the seized Miracle ledger. Overall analysis of the ledger named "Silver One" confirms that the R K Group members have paid Rs. 29,13,56,000 over and above their part as per the deed value for the land on which project R K Supreme is being constructed. At this rate, the total cash payments for this land mentioned in the table reproduced in the assessment order. Thus, assessing officer noticed that payments of Rs. 64,74,57,778/- have been made over and above the registered value of the land by the assessee- firm for acquisition of the land on which its project RK Supreme is being developed. Year bifurcation based on the seized Miracle ledger of the total on money of Rs. 64,74,57,778/- is mentioned in the assessment order. M/s Enlarge Bildcon LLP (ii)On money receipts for - RK Supreme The data of receipt of “on- money” related to project "R K Supreme" is found maintained in Miracle Software. The cash receipts appearing on the Miracle file were not accounted for in the regular books of account of the assessee. The name of every project developed by the Assessee Group is in coded form in the Miracle files. The project "R K Supreme" is mentioned as "SPM" in the seized Miracle file. For better understanding of the ledgers related to R K Supreme, a snap shot of the same from the Miracle file is produced in the assessment order.Perusal of the data seized during the search operation revealed that the receipts against bookings of units of project R K Supreme are spread in FYs 2019-20, 2020-21 & 2021-22 till the date of the search. Separate ledgers for each and every unit that has been booked are also recorded very systematically in the seized Miracle file. For example, the ledger for first booking named 'SPM 0413' is pasted in the assessment order. In this ledger for unit no. 413, Bank receipt of Rs. 10,65,000/- (in coded form 10650.00) and cash receipts of Rs. 16,86,000/- (in coded form 16860.00) are recorded simultaneously on 12/07/2021 (in coded form 12/07/2011). A copy of agreement signed between the assessee and Shri Nareshbhai U Lakkad has been submitted by the assessee during the assessment proceedings. Relevant excerpts of the agreement are reproduced in the assessment order. The assessing officer noticed from the images that the Bank receipts of exact same amount of Rs. 10,65,000/- vide on exact same date 12-07-2021 as per the seized Miracle ledger appear on the agreement for office no. 413 whereas the simultaneously recorded cash receipts of Rs. 16,86,000/- do not appear on the registered agreement for this shop. Therefore, assessing officer noticed that these facts prove beyond doubt the following:

(i) The data recorded on the seized Miracle file is genuine and speaking in nature.

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP (ii) The cash receipts appearing in the Miracle file are not recorded on the conveyance deeds or entries as per books of the assessee. (iii) The amounts in the seized Miracle file are recorded removing two decimals i.e. Rs. 10,65,000/- is recorded as 10650.00 (iv) The dates of transactions are also coded 10 years back i.e. 12-07-2021 is recorded as 12-07-2011.

It can be seen from the above images that the Bank receipts of exact same amount of Rs. 10,65,000/- vide on exact same date 12-07-2021 as per the seized Miracle ledger appear on the agreement for office no. 413 whereas the simultaneously recorded cash receipts of Rs. 16,86,000/- do not appear on the registered agreement for this shop. This proves beyond doubt that following facts –

 The data recorded on the seized Miracle file is genuine and speaking in nature.  The cash receipts appearing in the Miracle file are not recorded on the conveyance deeds or entries as per books of the assessee.  The amounts in the seized Miracle file are recorded removing two decimals i.e. Rs. 10,65,000/- is recorded as 10650.00  The dates of transactions are also coded 10 years back i.e. 12-07-2021 is recorded as 12-07-2011.

Therefore, assessing officer noted that these entries are self-explanatory and the corroboration of these entries can be made independently with factual events that already took place and, therefore, there is no need or necessity for approval or validation from any person directly or indirectly connected with these entries.

(iii)Addition, if any, should be made in the hands of Shri Sarvanand Sonwani. The plea that the unaccounted profit pertain to Shri Sarvanant Sonvani only is not admissible as the corroborative bank transactions appearing from the seized M/s Enlarge Bildcon LLP Miracle Ledgers with code name 'SPM' does not appear on the bank book of Shri Sarvanand Sonvani. Rather, they exactly match with the transactions recorded on the books of the assessee-Firm. The income of the real estate builder is taxable at the time of transfer of title & possession of property in favour of customer and not at the time of booking of unit by customer. Here, the assessee is disputing the point of time for recognizing income of real estate builder contending that it is taxable at the time of transfer of title & possession of property.

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP 10. After considering all the objections of the assessee in its reply to the show cause notice and taking into consideration the facts and material available on records following conclusion has been drawn, by the assessing officer.

11.Rejection of books of accounts by the assessing officer After thorough examination of the response to show cause notice and dismissing various contentions raised by the assessee in its reply, the assessing officer noticed that the seized digital data in the form of accounting entries on Miracle file is accurate, reliable and self-explanatory. Further, there is also no doubt that the accounts of the assessee where all the transactions are not reflected cannot be relied upon as they present incomplete and incorrect state of affairs of business of the assessee and requires to be disregarded invoking the provisions of section 145(3) of the Act. Accordingly, provisions of section 145(3) were invoked by the assessing officer and the assessment of total income of the assessee is being made after taking into account all relevant material gathered during the search and the assessment proceedings. As per the material gathered during the search and submissions available on records the assessee is found to have indulged in the practice of suppressing both receipts (on account of sale) and payments (on account of purchase) made for the projects undertaken / developed during the year. There is no uniform method that can be employed to compute income when part receipts on account of sale are not included on the books. The method differs from case to case depending upon various factors i.e. type of business, modus operandi of the assessee, sufficiency of data available for estimation etc. In a case where the evidence available on record contains details of corresponding unaccounted payments which are also partly included on the books, such partly recorded payments should also be taken into consideration. Taxing the receipts only has never been the motto of the Income-tax Act. In this regard, the observation of the Supreme Court in CIT v. Williamson Financial Services [2007] 165 Taxman 638 (SC) is reproduced below:

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP

"It is important to bear in mind that u/s 4, the levy is on total income of the assessee computed in accordance with and subject to the provisions of the Income Tax Act. What is chargeable to tax under the Income Tax Act is not the gross receipt but the income under the Income Tax Act. The tax is on income but not on gross receipts."

Where suppression of sales receipts is involved, the question is whether the entire sales or only a percentage of profit should be adopted as income. In CIT v. President Industries [2002] 124 Taxman 654 (Gujarat), the Assessing Officer had found evidence of suppression of sales. He adopted the entire receipt (sales) as income but the Hon'ble Jurisdictional High Court has held that the entire undisclosed receipts (sales) cannot constitute income. The sales only represent the price received by the seller of the units for which the seller has already incurred the cost in order to acquire or process the inventory. Therefore, it is the realization of excess consideration over the cost incurred which should be assessed as profit or income. In other words, profit component embedded in the sales could be treated as income.

"it has been consistently held by this court and some other courts have been following the principle that even upon detection of on-money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. If that were the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation." Even in those cases where no details regarding unexplained payments/investments are available on records, it has been held by the Hon'ble & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP Guj. High Court that while dealing with addition on account of unaccounted sales, in absence of any material on record to show that there was any unexplained investment/expense made by the assessee, there could be a presumption of such expenditure. In such event also it is held that only profit on suppressed sales could be brought to tax (CIT v. Gurubachhan Singh J Juneja [2008] 171 Taxman 406 (Gujarat)].Hence, in such cases, both the Supreme Court and the Jurisdictional High Court have consistently held that where evidences regarding unaccounted receipts are being assessed it is not reasonable to consider the entire unaccounted receipts for taxation. Rather, only profit element lying therein should be estimated keeping in mind the facts and surrounding circumstances of the case at hand. Therefore, respectfully following the ratio laid down by the Apex Court and the Jurisdictional High Court and in view of the facts of the case it would be fair if reasonable rate of profit is adopted to tax the unaccounted income of the assessee.

13.Estimation of rate of profit in Commercial Projects. Details of 8 commercial projects undertaken by the searched group members and their partners have been recovered from the seized Miracle File. Some projects were in completion stage whereas some were just started. Besides, in respect of some projects comprehensive details i.e. Land purchase, Project expenses, On- money receipts have been recovered from the seized data whereas in other projects very limited details i.e. only on-money receipts were recovered. Wherever, details of receipts and payments were recoverable form the seized data, it is noticed that the net surplus funds available with these projects were ranged from -150% to 43%. Reason for this vast gap between the upper and lower ends of this net surplus range was primarily attributable to the stage in which a particular project has reached since its inception. For example, if any project is just launched then its % of net surplus funds would be lower because most of the funds are spent / applied on inventory and the inflow of on-money has not started in full pace. Due to combined effect of these two aspects the availability of M/s Enlarge Bildcon LLP surplus funds remains either on lower side or sometimes in negative state. Thus, it is understood that taking reference from the net surplus / unaccounted profits of such 'just launched' projects would not give true picture of the potential profitability of such projects. In order to estimate a reasonable rate of profit, it is taken that only those projects for which maximum data is available from the seized material should be relied upon. At the same time it is also ensured that the project that almost reached its final stage (with respect to construction activity and receipt of on-money both) should only be taken as reference for adoption of an appropriate rate of profit.

Net receipts of all these 5 projects have been calculated and it is seen that after considering all kind of transactions i.e. Net on-money receipts, Expenses for running the project including the Land purchase there remained average net surplus of 31% in the hands of respective developer/owner. Chart is given below:

The assessing officer, apart from this, noted that there is violation of various other provisions of the law which are in place to discourage the practice of indulging M/s Enlarge Bildcon LLP in such unaccounted transactions. Considering the facts of the present case and binding judicial precedents as discussed earlier, if all the expenses / payments are disallowed then the ratio laid down by the Hon'ble High Court with regard to not taxing all the receipts would remain on papers only. Thus, with a view to strike a proper balance between the factual vis-à-vis the legal aspects, it was decided by the assessing officer to further enhance the aforementioned average net profit rate from 31% to 35%. Accordingly, 35% has been set as benchmark rate for the projects where details of unaccounted receipts as well as unaccounted expenses have been recovered from same set of the seized material. Accordingly, the net unaccounted profit was estimated by the assessing officer at the rate of 35% for R K Supreme project developed by the assessee-firm. As far as the profit for the year under consideration is concerned, the same is computed as under- Thus, addition of Rs. 2,53,84,380/- being unaccounted profit embedded in the gross unaccounted receipts is made over and above the regular business income reported by the assessee in the Income-tax Return filed for the year under consideration invoking provisions of section 145(3) of the Act and after considering all the facts and submissions of the assessee.

15.Deficit of funds for making unaccounted payments for the project R K Supreme As highlighted by the assessee-firm, before the assessing officer, in its response to the show cause notice, that there was a net shortage of funds for the project during the year under consideration. The same paragraph from the response of the assessee-firm is reproduced hereunder for quick reference – & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP "19. Without prejudice, though, none of the allegations and figures in the show-cause notice as well as previous notices issued has been accepted as correct, if we simply put such allegations and figures in one table then following result would emerge:

19.1 Here, what we would like to convey is that the addition proposed in the show- cause notice in respect of gross receipts i.e., Rs. 27,77,15,770/- is more than the simple mathematical result arrived from the notices itself. Hence, on this ground also, addition proposed in high-pitched manner is strongly objected. 19.2 Without prejudice, on verification of the impugned Miracle data it is seen that all the credits and debits under the coded name of ledgers are made and maintained by Shri Sarvanand Sonvani and there was no control of any the other partners regarding entries made therein. No one knows anything about the impugned data. No partners have ever made any transactions in cash, no one has paid or received any amount in cash. It is also not known, as to how the purported cash received was utilised for alleged expenses and/or purchase of assets/land. Though, sources of investment/expense are in the same set of impugned cashbooks, partners cannot be made liable to explain the transaction perse. Thus, as there was no involvement in any of the activities related to purported cash transactions, be it credit or debit, one cannot presume any unaccounted investment or receipt in the hands of the partners particularly in absence of any independent evidence of investment by partners/firm. It is also not known how the rotation of funds were made by him. Therefore, we request not to take any adverse inference in the hands of the partners so far as receipts and investments are concerned. 19.3 It may not be out of place to mention that there are common partners in many of the projects, therefore, if the entries are interpreted illogically without allowing set off/rotation of funds/telescoping benefit, it will lead to multiple addition particularly when there was no noting or introduction of funds by partners."

17. Aggrieved by the various additions made by the assessing officer, the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) dismissed the technical grounds raised by the assessee, challenging reopening of assessment under section 147/148 of the Act. On merit, learned CIT(A), estimated the profit element on the “on money”, at the rate of 8%, 12%, 16% etc, in a different assessment years. Therefore, assessee, as well as, revenue, both are in appeal before us. The main contention of the revenue in these appeals, are that the addition made by the assessing officer should be confirmed. Whereas, main contention in the assessee’s appeals is that the profit estimation on “on -money”, is on higher side, therefore, it should be reduced to a reasonable extent, by following the Hon’ble Jurisdictional High Court of Gujarat in various cases such as, in the case of Ms. Jay Kesar Bhavani Developers Pvt. Ltd. in Tax Appeal no. 267 of 2022, wherein 6% addition on “on money, was upheld. In various judgements of jurisdictional ITAT Ahmedabad, (cited by assessee in legal compilation) held that the addition on “on money” at the rate of 8% is sufficient to plug the leakage of the revenue. Therefore, the solitary grievance of the assessee in assessee’s appeals are that reasonable estimation may be made in the hands of the assessee. The findings of the learned CIT(A) would be discussed while adjudicating the relevant issue involved in concise and summarised grounds noted above.

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP 19. Summarized and concise ground No.(i), is reproduced below for ready reference: (i) The ld. Commissioner of Income-tax(Appeals)-11, Ahmedabad erred on facts as also in law in dismissing ground of appeal related to validity of notice issued u/s 148 of the Income tax Act, 1961. That on facts as also in law, the proceedings-initiated u/s 147 of the Act is invalid and assessment finalized on such invalid initiation deserves to be quashed and may kindly be quashed.

( This is assessee's ground No. 2 in for AY 2020-21)

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP

23.Summarized and concise ground No.(ii), is reproduced below for ready reference: (ii).The ld. CIT(A)erred on facts as also in law in retaining addition of Rs. 1,16,04,288/- by estimating profit at the 16% of so called on money receipt. The addition made and retained is bad in law as also on facts therefore the same may kindly be deleted. Without prejudice, the addition made by estimating rate of profit is very much on higher side and therefore the same may kindly be directed to be reduced and oblige. ( This is assessee's ground No. 3 & 4 in for AY 2020-21, Ground no. 2 & 3 in for AY 2021-22 and AY 2022-23). ( This is also revenue's ground no. 1 in for AY 2020-21 and Ground No.1 in for AY 2022-23.)

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP “Estimation of Income on-money received by the assessee on booking of flats and shops in "VesuProject"Income offered by the assessee at 8% of the alleged gross receipts source of payment of cash for purchase of the land-HELD THAT:- On an analysis of the record, it would reveal that during the course of search not only details of on-money received by the assessee on booking of flats and shops in "Vesu Project" was found, but details of certain expenditure, which are not recorded in the books were also found. This included cash payment for purchase of land.CIT(A) has rightly observed that the gross on-money noticed on the seized paper cannot be considered as income of the assessee. There are certain expenditures which were not recorded in the books. Those expenditure must have been made from this on-money.After going through the well-reasoned order of the Id.CIT(A), and in the light of judgment of Hon'ble jurisdictional High Court in the case of Panna Corporation [2014 (11) TMI 797 GUJARAT HIGH COURT as well as Koshor Mohanlal Telwala [1998 (9) TMI 106-ITAT AHMEDABAD- AI we are of the view that only element of income embedded in the on-money received by the assessee for booking of flats/shops in "Vesu Project" is required to be assessed in its hand in all these years.Element of income involved in this on-money assessee is showing income at 8%, AND CIT(A) is estimating it at 20% HELD THAT:- CIT(A) has also not mentioned any attending circumstances for harbouring a belief that 20% could have been earned from this activity. Thus after taking guidance from the judgment of Kishor Mohanlal Telwala [1998 (9) TMI 106-ITAT AHMEDABAD-Al we deem it proper that the assessee has rightly disclosed the profit element embedded in the gross profit at 8%. Accordingly, we allow the ground of appeal raised by the assessee, and hold that profit which has been directed to be adopted by the Ld.CIT(A) at 20% of the alleged turnover should be taken at 8%. (ii)Tax appeal No.267 of 2022 dated 07.07.2022 M/S. JAY KESAR BHAVANI DEVELOPERS PVT. LTD.( Guj-HC) “Rejection of books of accounts u/s 145(3) On money receipt estimation of income addition on account of entire construction receipts as alleged unrecorded receipts - HELD THAT: CIT (A) was not justified in confirming the addition of entire on-money receipts amounting to 4,72,02,368. Therefore, only estimated net profit is required to be taxed. We find that the assessee has shown net profit at 4.55.% for the assessment year under consideration and 4.59% for A.Y. 2010-11. Further, the Hon'ble High Court in the case of CIT V. Abhishek Corporation [1998 (8) TIMI 110 ITAT AHMEDABAD-C) has upheld the net profit at 1.31% as declared by the assessee in that case. The net profit rate disclosed at 4,55% during the assessment year under consideration by the assessee in books of accounts and considering the facts that the project undertaken by the assessee comes under deduction of section 801B(10) hence, there may not be any intention to disclose the lower rate of profit. Considering these facts, and taking into account net profit in construction business, it would be reasonable to estimate 6% of net profit on total on-money. (iii)The Commissioner of Income Tax vs. Shri Hariram Bhambhani INCOME TAX APPEAL NO.313 OF 2013 (BOM)(HC): "In any view of the matter, the CIT(A) and Tribunal have come to the concurrent finding that the purchases have been recorded and only some of the sales are unaccounted. Thus, in the above view, both the authorities held that it is not the entire sales consideration which is to be brought to tax but only the profit attributable on the total unrecorded sales consideration which alone can be subject to income tax. The view taken by the authorities is a reasonable and a possible view. Thus, no substantial question of law arises for our consideration.” (iv) The ACIT Central Circle - 3, Jaipur Vs Shri Nawal Kishore Soni :

1257, & 1258/JP/2019 [ITAT] [Jaipur]:

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP "23.4 It is settled law that not only from the illegal business but also the unaccounted transaction of purchase and sale only profit/ income on sales could be assessed as undisclosed income and could be subjected to tax. Case laws to the point are as under: 1. Dr. T.A. Quereshi (157 taxmann.com 514) (Supreme Court) 2. Piara Singh (124 ITR 40) (Supreme Court) 3. S.C. Kothari (82 ITR 794 (Supreme Court) 23.5 The assessee admitted such profit at Rs. 45,00,000/- and disclosed that on said transactions income in PMGKY, 2016 and paid due tax thereon. The copy of certificate issued by PCIT is placed on record. Thus when that transactions are of unrecorded purchase and sale of gold, which Ld. assessing officer also admits in assessment order, then simply that name & address of purchasers are not provided the entire amount of sale cannot in law be treated as undisclosed income, only profit earned from said transactions which has been admitted by assessee at Rs. 45,00,000/- can only be assessed to tax more so when the assessee has disclosed in PMGKY the said undisclosed income of Rs.45,00,000/- and paid tax in accordance with scheme and received certificate there for from Pr. Commissioner of Income Tax, hence the same disclosed income cannot be included as income is assessment as per Section 199-l of PMKGY. However Ld. A.O. has allowed credit of amount of disclosed income in PMKGY from total income as so the addition on this account is restricted to Rs.45,00,000/- and balance is deleted. The assessee thus gets relief of Rs.3,02,00,000-45,00,000 = Rs. 2,57,00,000/-." (v) Greenfield Reality P. Ltd IT(SS) A No. 320,321 and 322/Ahd/2018 & 329/Ahd/2018: "16. We have duly considered rival submissions and gone through the record carefully. On an analysis of the record, it would reveal that during the course of search not only details of on-money received by the assessee on booking of flats and shops in "Vesu Project" was found, but details of certain expenditure, which are not recorded in the books were also found. This included cash payment for purchase of land. Therefore, the Ld.CIT(A) has rightly observed that the gross on-money noticed on the seized paper cannot be considered as income of the assessee. There are certain expenditures which were not recorded in the books. Those expenditure must have been made from this on- money. Therefore, after going through the well-reasoned order of the Ld.CIT(A), IT(SS)A No.289/Ahd/2018 (7 Others) Greenfield Reality P. Ld. Vs. DCIT and in the light of judgment of Hon'ble jurisdictional High Court in the case of Panna Corporation (supra) as well as Koshor Mohanlal Telwala (supra), we are of the view that only element of income embedded in the on-money received by the assessee for booking of flats/shops in "Vesu Project" is required to be assessed in its hand in all these years.

16. We note that the average profit of the assessee as per audited books of accounts is 7%, therefore, profit estimation done by the learned CIT(A) at the rate of 16% on the “on-money” is higher side. Considering the nature of business and voluminous ‘on-money’ and taking into account, the fact that there is expenditure made by the assessee to develop the project out of the “on-money”, therefore, profit margin in this type of business normally is 10% on “on- money”. We proceed to work out the estimation of profit keeping in mind the following facts: (i)The estimate is not opened up to be framed in an arbitrary manner. (ii) The estimate by rule of thumb is absolutely infirm. (iii)The estimation of rate of profit return must necessarily vary with the nature of the business. (iv)There cannot be any uniform yardstick. (v)An assessment to be best of judgement can only be based on the material available on record and past records and considering the totality of the facts. (vi) Only real income and neither notional income nor astronomical income, can be taxed under the I.T. Act, 1961. Accordingly, we note that estimation the profit element on ‘on-money’ at the rate of 10%, should be fair, keeping in mind the principle laid down by Hon'ble Supreme Court in the case of H. M. Esufali Abdulali that the method to be adopted must be which is approximately nearer to the truth.

17. Considering the facts and circumstances, narrated above, we find that the estimation done by the assessing officer, and re-estimated addition, sustained by the Ld. CIT(A) @ 16% is very higher side. Therefore, we are of the view that the estimated addition on “on-money” should be @ 10%, which will take care of inconsistency in the undisclosed income of the assessee. Therefore, the assessing officer, is directed to make the addition in the hands of assessee, at the rate of 10%, on “on-money”. Hence, we allow above appeals of these assessee partly and dismiss all the appeals of the revenue.”

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP 25. Therefore, respectfully following the binding judgement of the Co-ordinate Bench of ITAT Rajkot in assessee’s own case (Supra) we partly allow the following appeals of the assessee: i. Ground No. 3 & 4 in for AY 2020-21 ii. Ground no. 2 & 3 in for AY 2021-22 iii. Ground No. 2 & 3 in AY 2022-23 Whereas, following grounds raised by the revenue are dismissed: iv. Ground no. 1 in for AY 2020-21 v. Ground No.1 in for AY 2022-23

26. Summarised and concise ground number No.(iii) is reproduced below for ready reference, as follows: (iii) The Ld CIT(A) has erred in directing, the AO, to tax the unaccounted profit, in the year in which sale deed is executed instead of the year in which the on-money has been received, ignoring that the same is not in accordance with Accounting principles as per ICDS-3 applicable to Real Estate Developers and also not appreciating that the income on account of undisclosed on-money receipt was required to be assessed in the year of receipt. (This is, revenue's ground no. 2 in for AY 2020-21 and Ground No.2 in for AY 2021-22)

22. On the other hand, learned Counsel for the assessee submitted that assessee has been following the accrual basis of accounting and percentage of completion method. Therefore, revenue should be recognised in the year in which the transaction got materialised, that is, in assessee`s case, when the document is registered and executed, then only the revenue is recognised, with certainty. Hence, learned CIT(A) has rightly directed the assessing officer to recognise the revenue in the year in which the transaction/sale of flat is registered.

24. We note that even if the addition on account of estimated profit on alleged “on- money” cash receipts is made, the same should be made in the year of actual sale when the conveyance deed is executed in the favour of buyer when the significant risk and rewards are transferred. It is observed that the assessee has consistently followed revenue recognition method whereby sale is offered to tax when registered sale deed of particular unit is executed, that is, date on which significant risk and reward has been transferred to buyer. This method of accounting has been followed consistently by assessee on year to year basis and assessing officer has not disturbed such methodology. This method of accounting of recognizing revenue has been accepted by Hon'ble Gujarat High court in the case of Shivalik Buildwell Pvt Ltd. [2013] 40 taxmann.com 219 wherein it is held as under: "Section 5 of the Income-tax Act, 1961 Income Accrual of [Booking amount received by builder] - Assessee was a builder and developer - He received certain amount as advance from different parties Assessing Officer added said amount to assessee's taxable income Tribunal set aside addition made by Assessing Officer holding that assessee being a developer of project, profit in its case would arise only on transfer of title of property and, therefore, receipt of any advance or booking amount could not be treated as trading receipt of year under consideration Whether on facts, impugned order passed by Tribunal deleting addition was to be upheld - Held, yes [Para 4] [In favour of assessee]" M/s Enlarge Bildcon LLP

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP

27. In the light of the above judgement of the Hon’ble Supreme Court, in the case of Happy Home Corporation (supra), and Hon’ble jurisdictional High Court of Gujarat in the case of Shivalik Buildwell Pvt Ltd(supra) and decision of Ahmedabad Tribunal, in the case of M/s D R. Construction, we find that unaccounted profit estimated on ‘on- money’ receipt is required to be taxed in the year in which sale deed is executed by assessee or significant risk and rewards is transferred to buyer. As in case in hand, the assessee has been following revenue recognition method on execution of sale deed, only on-money receipt as computed in present case would be taxable in the year in which sale deed is executed and not when ‘on-money’ was received. Besides, we find that ICDS-III is not applicable to the assessee under consideration, therefore, we dismiss the ground raised by the revenue.”

(This is revenue's ground no. 3 in for AY 2020-2 and Ground No.3 in for AY 2021-22)

31. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the learned CIT(A), who has deleted the addition made by the assessing officer by giving telescoping benefit to the assessee. Dissatisfied with the order of the learned CIT (A), the revenue is in appeal before us.

32. Learned DR for the revenue argued that Ld.CIT(A) ought not to have deleted the addition which pertains to loan given by the assessee to others, as the assessee is not entitled for telescoping benefit. On the other hand, learned Counsel for the assessee, defended the order passed by the learned CIT (A).

-625 & 650-651/Rjt/2024 M/s Enlarge Bildcon LLP

Order is pronounced in the open court on 26/02/2026.