DCIT Vs Horizon Projects Private Limited (ITAT Mumbai)
In a detailed and landmark ruling, the ITAT Mumbai dealt with multiple additions arising from a search in a real estate group, including on-money receipts, cash expenditure (Section 69C), and subcontracting expenses.
On the issue of on-money receipts, the Tribunal held that entire gross receipts cannot be taxed. Following settled jurisprudence, it ruled that only the profit element embedded in such receipts is taxable, considering that such receipts are business in nature and involve corresponding outflows. While the CIT(A) had estimated profit at 15%, the Tribunal found it excessive and reduced it to 8%, aligning with industry realities and judicial precedents.
Regarding alleged unaccounted cash expenditure u/s 69C, the Tribunal upheld the principle of telescoping, holding that once on-money receipts are taxed (even on estimated basis), separate addition of related expenditure would lead to double taxation and is not permissible.
On the issue of subcontracting expenses (Senghani Creators Pvt. Ltd.), the Tribunal gave strong relief to the assessee:
- Held that no disallowance can be made merely on third-party search findings
- Noted that assessee had furnished complete documentary evidence (invoices, work orders, bank payments, measurement sheets, etc.)
- Observed that no direct defect or bogusness was established by AO
Accordingly, even the ad-hoc 5% disallowance by CIT(A) was deleted in full.
The Tribunal also extended the same logic to scrap sale receipts, holding that only profit element (8%) is taxable, not the gross receipts.
Final Outcome:
