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Income Tax Appellate Tribunal, MUMBAI BENCHES “E, ‘MUMBAI
Before: SHRI RAJENDRA, HON’BLE & SHRI C.N. PRASAD, HON’BLE
PER C.N. PRASAD, JUDICIAL MEMBER
This appeal is filed by the assessee against the order of the ld.CIT(A)-1, Thane, dated 31/08/2010 for the Assessment Year 2008-09 arising out of the assessment order passed under section 143(3) read with section 153B(b) of the Act.
The only ground raised by the assessee in its appeal is that the ld.CIT(A) erred in confirming the addition of Rs. 95,67,732/- on account of alleged unaccounted income.
Brief facts of the case are that the assessee is engaged in the business of real estate. A search and seizure action in Patel Group of cases was conducted on 17/01/2008 along with survey proceedings under section 133A simultaneously. One of the cases covered in these
Trishul Enterprises. During the course of search and survey action, certain incriminating documents were found and seized/impounded in the form of loose sheets wherein certain entries of receipts of cash and expenses were recorded. The Assessing Officer in the course of assessment proceedings, noticed that the net of unaccounted income and the expenses recorded in the loose sheets is at Rs. 2,45,67,672/- and since the assessee had already admitted undisclosed income on account of unaccounted receipts in the return of income at Rs. 1,50,00,000/-, the Assessing Officer added the balance of Rs.95,67,732/- as unaccounted receipts ignoring the submissions of the assessee that in the course of business, assessee received on money and the entire on money cannot be taxed and only the profit embedded in such on money which was received in the course of business has to be taxed and the assessee contended that the profit margin after incurring of expenditure would be at 8% and, therefore he requested the Assessing Officer to adopt 8% instead of treating the entries on money as unaccounted income of the assessee. However, the Assessing Officer treated the net of receipts of Rs. 95,67,732/- as per loose sheets as unaccounted income of the assessee.
On appeal, ld.CIT(A) sustained the order of the Assessing Officer in treating the entire on money as income of the assessee.
In the course of hearing, Authorized Representative of the assessee submitted that on identical situation in one of the group cases namely M/s. Platinum Properties, this issue has been considered and it has been held that only the reasonable amount of profit which the assessee would have earned should be added as undisclosed income and not the gross receipts. The Authorized Representative of the assessee placed a copy of the order of the Coordinate Bench of this Tribunal in the case of M/s. Platinum Properties vs. DCIT in dated 12/09/2014 and requested to follow the same.
Departmental Representative supported the orders of the authorities below.
We have heard the rival submissions, perused the orders of the authorities below and the decision relied on by the Authorized Representative of the assessee. A perusal of the said decision, we find that almost on an identical facts in one of the assessees group cases i.e. M/s. Platinum Properties (supra), the Coordinate Bench held that what can be taxed is the undisclosed income and not the entire gross receipts i.e., a reasonable amount of profit and not the gross receipts. It is not in dispute that the assessee is engaged in the business of builders and developers and real estate. It is also not in dispute that the assessee is receiving on money in the course of its business. In such circumstances, the Coordinate Bench held that the reasonable profit should be considered at 8% of unaccounted receipts observing as under:- “10. A perusal of these unaccounted entries shows that the assessee was making entries of the on-money received by it during the course of its business. Under section 153A, the Assessing Officer has the power to assess or reassess the total income in respect of each assessment year falling within such assessment year in case of person where a search is initiated under section 132 of the Act. Thus, the Assessing Officer has the power to assess or reassess the total income of the assessee. What can be taxed is the undisclosed income and not the undisclosed receipts, this means that only a reasonable amount of profit which the assessee could have earned can be added. Seized paper indicates assessee was receiving on-money in the ordinary course of its business. Even the unaccounted expenditures are also reflected in the seized papers. 10.1 Considering the facts in totality, in our considered opinion, a reasonable profit should be taxed which is embedded in the total unaccounted gross receipts and therefore 8% should meet the end of justice. We, accordingly, direct the Assessing Officer to re-compute the undisclosed income by taking 8% as net profit ratio on total unaccounted receipts. Since we have directed to estimate the profit at 8%, all the expenditures are deemed to be allowed.”
Facts and circumstances being identical, following the Coordinate Bench decision, we direct the Assessing Officer to re-compute the undisclosed income by taking 8% as net profit on unaccounted receipts of Rs. 95,67,732/- added by the Assessing Officer. As we have directed to estimate the profit at 8% of the net receipts of Rs.95,67,732/-, all the expenditures are deemed to be allowed.
In the result, appeal of the assessee is partly allowed for statistical purpose.
Order Pronounced in the open Court on 24th October, 2016