ITAT Ahmedabad Judgments — June 2023

The Tribunal held that the addition on account of 'on-money' receipts should not be made under Section 68 of the Income Tax Act, 1961. It reasoned that once the nature and source of the credit, being 'on-money' from the sale of flats, were duly established and accepted by the Revenue (as indicated by the AO's remand report accepting 'on-money' receipts), it should be treated as business income. The Tribunal noted that the CIT(A) had correctly rejected the applicability of Section 68 and proceeded to estimate the profit element. Following its own prior decisions and the precedent in Padmavati Housing Corporation, the Tribunal directed the Assessing Officer to add only 12% of the 'on-money' receipts as undisclosed income, representing the profit element. The Revenue's grounds of appeal regarding the addition under Section 68 were dismissed, and the assessee's grounds were partly allowed. The issue of unsecured loans from BVPL was not explicitly detailed in the provided excerpt, but the outcome suggests it was resolved in favor of the assessee or not pressed.

The Tribunal held that the addition on account of 'on-money' receipts should not be made under Section 68 of the Income Tax Act, 1961. It reasoned that once the nature and source of the credit, being 'on-money' from the sale of flats, were duly established and accepted by the Revenue (as indicated by the AO's remand report accepting 'on-money' receipts), it should be treated as business income. The Tribunal noted that the CIT(A) had correctly rejected the applicability of Section 68 and proceeded to estimate the profit element. Following its own prior decisions and the precedent in Padmavati Housing Corporation, the Tribunal directed the Assessing Officer to add only 12% of the 'on-money' receipts as undisclosed income, representing the profit element. The Revenue's grounds of appeal regarding the addition under Section 68 were dismissed, and the assessee's grounds were partly allowed. The issue of unsecured loans from BVPL was not explicitly detailed in the provided excerpt, but the outcome suggests it was resolved in favor of the assessee or not pressed.

The Tribunal held that the addition on account of 'on-money' receipts should not be made under Section 68 of the Income Tax Act, 1961. It reasoned that once the nature and source of the credit, being 'on-money' from the sale of flats, were duly established and accepted by the Revenue (as indicated by the AO's remand report accepting 'on-money' receipts), it should be treated as business income. The Tribunal noted that the CIT(A) had correctly rejected the applicability of Section 68 and proceeded to estimate the profit element. Following its own prior decisions and the precedent in Padmavati Housing Corporation, the Tribunal directed the Assessing Officer to add only 12% of the 'on-money' receipts as undisclosed income, representing the profit element. The Revenue's grounds of appeal regarding the addition under Section 68 were dismissed, and the assessee's grounds were partly allowed. The issue of unsecured loans from BVPL was not explicitly detailed in the provided excerpt, but the outcome suggests it was resolved in favor of the assessee or not pressed.

The Tribunal held that the assessment framed by the Assessing Officer (AO) was not maintainable and sustainable. The core of the dispute was the jurisdictional authority for framing the assessment. While the revenue contended that the ACIT, Circle-1, Bhavnagar, had jurisdiction based on the CIT-VI's order dated June 8, 2009, which in turn relied on the section 120 order dated August 1, 2001, the Tribunal perused the section 120 order itself. The Tribunal found that this order clearly indicated that jurisdiction lay with the Additional/Joint Commissioner of Income Tax, Range-1. Therefore, the assessment framed by the ACIT, Circle-1, who did not have valid jurisdiction, was quashed. Consequently, the ground of appeal concerning jurisdiction was allowed. As the assessee succeeded on this technical issue, other contentions challenging the assessment's validity and merits were not adjudicated and were dismissed as infructuous. The operative direction was to quash the assessment.

The Tribunal upheld the CIT(A)'s decision to restrict the addition to Gross Profit (GP) at 2% of sales. The Tribunal noted that the CIT(A) had considered the order in the case of a sister concern, Kedarnath Agri Tradelink Pvt. Ltd., where the AO had estimated GP at 2% based on an order from the Settlement Commission. The CIT(A) also observed that the Karta of the assessee HUF had offered 2% GP in his individual case before the Settlement Commission, which was accepted. Furthermore, the AO in the assessee's own case for AY 2014-15 had considered 2% GP as reasonable. The Tribunal found no ambiguity in the CIT(A)'s reasoning for restricting the addition to 2% and therefore upheld this decision. Consequently, the Revenue's appeals for both Assessment Years 2012-13 and 2013-14 were dismissed.

The Tribunal upheld the CIT(A)'s decision to restrict the addition to Gross Profit (GP) at 2% of sales. The Tribunal noted that the CIT(A) had considered the order in the case of a sister concern, Kedarnath Agri Tradelink Pvt. Ltd., where the AO had estimated GP at 2% based on an order from the Settlement Commission. The CIT(A) also observed that the Karta of the assessee HUF had offered 2% GP in his individual case before the Settlement Commission, which was accepted. Furthermore, the AO in the assessee's own case for AY 2014-15 had considered 2% GP as reasonable. The Tribunal found no ambiguity in the CIT(A)'s reasoning for restricting the addition to 2% and therefore upheld this decision. Consequently, the Revenue's appeals for both Assessment Years 2012-13 and 2013-14 were dismissed.

The Tribunal held that the Assessing Officer had not brought any concrete evidence, such as receipts, vouchers, or unregistered agreements, to support the receipt of on-money from purchasers. The sole reliance was on a PDF file from Ms. Kalindi S. Shah's computer, who was not an employee of the assessee. Furthermore, Ms. Shah stated the papers were given to her by Shri Jatin Gupta, also not an employee of the assessee, and neither was involved in the assessee's business. The Assessing Officer neither made inquiries with Shri Jatin Gupta nor with the purchasers but based the addition solely on Ms. Shah's statement, which was contrary to law. The Tribunal upheld the CIT(A)'s decision to estimate the net income at 8% of the on-money receipts, following the jurisdictional High Court's judgment in CIT vs. President Industries and the co-ordinate bench's decision in ITO Vs. Anand Builders, which was upheld by the Gujarat High Court and had its SLP dismissed by the Supreme Court. The Tribunal found no infirmity in the CIT(A)'s order and dismissed both the assessee's and the Revenue's appeals, as well as the assessee's cross-objection.

The Tribunal held that the Assessing Officer had not brought any concrete evidence, such as receipts, vouchers, or unregistered agreements, to support the receipt of on-money from purchasers. The sole reliance was on a PDF file from Ms. Kalindi S. Shah's computer, who was not an employee of the assessee. Furthermore, Ms. Shah stated the papers were given to her by Shri Jatin Gupta, also not an employee of the assessee, and neither was involved in the assessee's business. The Assessing Officer neither made inquiries with Shri Jatin Gupta nor with the purchasers but based the addition solely on Ms. Shah's statement, which was contrary to law. The Tribunal upheld the CIT(A)'s decision to estimate the net income at 8% of the on-money receipts, following the jurisdictional High Court's judgment in CIT vs. President Industries and the co-ordinate bench's decision in ITO Vs. Anand Builders, which was upheld by the Gujarat High Court and had its SLP dismissed by the Supreme Court. The Tribunal found no infirmity in the CIT(A)'s order and dismissed both the assessee's and the Revenue's appeals, as well as the assessee's cross-objection.