D R Corporation Vs ACIT (ITAT Surat)
On-Money Received Today, Taxable When the Sale Takes Place
The Controversy
Does disclosure of on-money during a survey necessarily make the entire amount taxable in the year of disclosure? Or can the developer recognise it in the years in which the corresponding flats are sold and title is transferred?
The Surat Tribunal accepted year-wise taxation linked to the corresponding sales, following Gujarat High Court decisions and the approach already adopted by the lower authorities. However, relief was made subject to verification of subsequent returns and compliance with specific undertakings. The order did not permit indefinite postponement.
Survey Disclosure and Subsequent Recognition
The assessees were sister-concern partnership firms engaged in developing and constructing housing projects. A survey under section 133A was conducted on 4 January 2013.
D R Corporation subsequently disclosed ₹2,53,17,855 as undisclosed income arising from on-money received for its project. However, its return for Assessment Year 2013-14 included only ₹41,45,010 from that disclosure.
The firm explained that the remaining on-money would be recognised in the respective years in which the corresponding flats were sold and title transferred to purchasers.
The Assessing Officer accepted this approach to an extent. Giving credit for ₹69,21,680 offered in Assessment Years 2013-14 to 2015-16, he added the balance ₹1,83,96,175 in Assessment Year 2013-14.
CIT(A) Granted Partial Relief
Before the CIT(A), D R Corporation submitted that it had offered an aggregate ₹1,25,52,210 from the survey disclosure in Assessment Years 2013-14 to 2023-24, corresponding to the area sold in each year.
The CIT(A) directed verification of the amounts disclosed in the subsequent returns and deletion to that extent. Nevertheless, the remaining ₹1,27,65,645 was sustained.
In D R Associates’ case, the survey disclosure was ₹7,62,13,500. The Assessing Officer initially added ₹4,57,15,390 after granting credit for amounts offered up to Assessment Year 2015-16. The CIT(A), considering disclosures up to Assessment Year 2023-24, reduced the surviving addition to ₹1,54,26,375.
The dispute before the Tribunal concerned these remaining additions.
Further Disclosures and Undertakings
D R Corporation submitted that it had subsequently offered ₹16,51,680 in Assessment Year 2024-25 and ₹32,70,345 in Assessment Year 2025-26. It quantified a further ₹41,49,040 for Assessment Year 2026-27.
For the remaining ₹36,94,580, it undertook to offer the amount in Assessment Year 2027-28, irrespective of whether the sale documents were executed or the full consideration received.
D R Associates similarly stated that it had offered ₹1,14,87,205 in Assessment Year 2024-25 and ₹23,17,250 in Assessment Year 2025-26, with the balance ₹16,21,920 to be offered in Assessment Year 2026-27.
Written undertakings were furnished to support these commitments.
Revenue Alleged Postponement of Tax
The Revenue argued that the on-money had already been received by the survey date and was therefore taxable in Assessment Year 2013-14.
It also questioned the delay in registration extending beyond ten years, contending that such prolonged postponement lacked a plausible explanation.
The assessees referred to the long duration of real estate projects, delays attributable to purchasers and the intervening COVID-19 period. Their principal submission, however, was that the subsequent disclosures continued the very approach already accepted by the Assessing Officer and CIT(A).
Gujarat High Court Decisions Applied
The Tribunal relied on CIT v. Ashaland Corporation, (1982) 133 ITR 55 (Guj.), which both lower authorities had already applied regarding accrual on transfer of title, rather than mere receipt of advance consideration.
It also considered CIT v. Happy Home Corporation, (2018) 94 taxmann.com 292 (Guj.). In that case, the developer followed the project completion method, and the disclosed on-money was offered in subsequent years when sale deeds were executed. The High Court upheld the relief.
The Tribunal found that the assessees’ continuing disclosures supported their explanation: the income was being recognised year-wise, rather than permanently withheld from taxation. There was consequently no reason to reject further credit merely because the first appellate proceedings had concluded.
Conditional Relief, with a Final Cut-Off
The Tribunal set aside the findings sustaining the remaining additions and directed limited verification of the subsequent disclosures.
Any portion not found to have been offered in accordance with the undertakings could be taxed in Assessment Year 2013-14. No further deferment could be claimed under this order beyond Assessment Year 2027-28 for D R Corporation and Assessment Year 2026-27 for D R Associates.
D R Associates’ additional ground claiming section 80-IB(10) deduction was dismissed as not pressed. Both appeals were disposed of for statistical purposes, with that appeal partly allowed.
Author’s Comments
A survey disclosure establishes the admitted receipt; its year of taxation still requires examination. This decision supports consistent recognition of on-money alongside the corresponding project sales, within the factual and accounting framework accepted in these cases.
The relief is nevertheless conditional. Practitioners should reconcile the disclosure, flat-wise sales and subsequent returns carefully. The operative verification directions mention Assessment Years 2025-26 onwards, although the reasoning also recognises disclosures in 2024-25; that discrepancy warrants attention during implementation.
The Tribunal accepted deferred recognition, but fixed an end to the deferment.
Cases Discussed
- CIT Vs Ashaland Corporation, (1982) 133 ITR 55 (Gujarat High Court) — followed for the principle that income from sale of immovable property accrues when the sale is completed by transfer of title and not merely when advance consideration or on-money is received.
- CIT (Central), Surat Vs Happy Home Corporation, (2018) 94 taxmann.com 292 (Gujarat High Court) — relied upon where a developer following the project completion method offered survey-disclosed on-money in later years upon execution of sale deeds; the High Court found no error in that treatment.
- M/s. D.R. Construction Vs Income-tax Officer, ITA No. 2735/Ahd/2010 (ITAT Ahmedabad) — cited by the assessee as the decision in another sister concern supporting recognition of income upon the relevant sales/transfers.
FULL TEXT OF THE ORDER OF ITAT SURAT
The captioned two appeals have been filed by two different assessees which are sister-concerns and the underlying facts and issues are identical, therefore they were heard together at the request of parties and are being disposed of by this consolidated order, for the sake of convenience, brevity and clarity. During hearing, the learned Representatives selected ITA No. 265/SRT/2024 for arguments and therefore we first take up this appeal.
ITA No. 265/SRT/2024:
2. Feeling aggrieved by order of first-appeal dated 06.02.2024 passed by learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 31.03.2016 passed by learned ACIT, Circle-1(2), Surat [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2013-14, the assessee “D R Corporation” has filed this appeal.
3. The background facts leading to present appeal are such that:
(i) The assessee is a partnership firm engaged in the business of development and construction of housing projects.
(ii) A survey u/s 133A of the Act was conducted on 04.01.2013 at the premises of the assessee-firm and its sister-concern “D R Associates”. During survey proceedings, statement of Shri Ravi Khandelwal, partner of the assessee-firm, was recorded on oath. In post-survey proceedings, vide letter dated 11.01.2013, the assessee offered undisclosed income of Rs. 2,53,17,855/- on account of on-money received in respect of its project.
(iii) Subsequently, the assessee filed its return of income of AY 2013-14 under consideration declaring a total income of Rs. 42,04,650/- inclusive of unaccounted income of Rs. 41,45,010/- out of total disclosure of Rs. 2,53,17,855/- made during survey.
(iv) The case of assessee was selected for scrutiny and, during assessment-proceedings, the Ld. AO issued a show-cause notice asking assessee as to why the addition should not be made for the remaining income not disclosed in return. In response, the assessee submitted that it would recognise ‘on-money receipts’ as income in respective years upon sale/transfer of title of respective flats to the buyers. The assessee mainly relied upon the decisions of (i) Hon’ble jurisdictional High Court in CIT Vs. Ashaland Corporation (1982) 133 ITR 55 (Guj) and (ii) ITAT, Ahmedabad Bench in case of its another sister-concern, M/s. D.R. Construction Vs. Income-tax Officer, ITA No. 2735/Ahd/2010.
(v) The Ld. AO accepted assessee’s explanation and following the decision of Hon’ble jurisdictional High Court in CIT Vs. Ashaland Corporation (supra), allowed credit for undisclosed income offered by assessee in the returns of AYs 2013-14 to 2015-16, aggregating to Rs. 69,21,680/-. Finally, the Ld. AO made an addition of Rs. 1,83,96,175/- [Rs. 2,53,17,855 (-) Rs. 69,21,680/-] and completed assessment u/s 143(3).
(vi) Aggrieved, the assessee carried matter in first-appeal before Ld. CIT(A) and contended that it had, till date, offered a total income of Rs. 1,25,52,210/- out of the disclosure of Rs. 2,53,17,855/- made during survey, on a year-to-year basis in AYs 2013-14 to 2023-24, corresponding to the area of the project actually sold/title transferred to buyers in each year. The details of such year-to-year offering made by assessee is extracted by Ld. CIT(A) in para 4.2 of his order, the same is re-produced in later part of this order.
(vii) The Ld. CIT(A) also, following the decision of Hon’ble jurisdictional High Court in CIT Vs. Ashaland Corporation (supra), accepted the submission of assessee and directed the Ld. AO to verify the assessee’s claim of having shown the undisclosed income in the returns of income filed for AYs 2016-17 to 2023-24 and, if found correct, delete the addition to that extent. At the same time, the Ld. CIT(A) confirmed addition for remaining amount of undisclosed income of Rs. 1,27,65,645/- [Rs. 2,53,17,855 (-) Rs. 1,25,52,210/-]. This way, the Ld. CIT(A) granted part-relief to assessee.
(viii) Still aggrieved, the assessee has come in present appeal before us.
4. The assessee has raised following grounds:
“1. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in partly confirming the action of assessing officer by sustaining the addition of Rs. 1,27,65,645/- out of total addition of Rs. 1,83,96,175/- on account of on money received from the project not declared in the return of income.”
“2. It is therefore prayed that the above addition made by the assessing officer and partly confirmed by the CIT(A) may please be allowed.”
“3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
5. The limited grievance of assessee before us is the confirmation of addition of Rs. 1,27,65,645/- by Ld. CIT(A).
6. At first, we re-produce below the relevant portion of assessment-order passed by the Ld. AO:
“Hon’ble Gujarat High Court in the case of CIT vs Ashaland Corporation (133 ITR 55) has held that income accrues on the sale of land and arises in the year in which the title of the property is transferred and not in the year in which the assessee received part of consideration and earnest money. Above decision of the Hon’ble High Court is applicable in this case as the facts of the cited case are similar to the facts of the case of the assessee. Hence decision of Hon’ble jurisdictional High Court is followed here in the case of assessee.
It has been contended that the assessee has already offered certain amount of the on-money assessable during the F.Y. 2013-14 and 2014-15, relevant to A.Y.s 2014-15 and 2015-16. Hence, the taxation of the entire declared income during the subject assessment year will lead to double taxation of the income which has been offered suo motu by the assessee (Upon sale of the flats and execution of Sale Deeds) during subsequent A.Y.s, A.Y.s 2014-15 and 2015-16. Such claim has been examined and it appears that for the sake of justice and fairness, the on-money which has been offered in A.Y.s 2014-15 and 2015-16 in respective returns of income are to given credit to. Therefore, the assessment of unaccounted income in hands of the assessee on account of on-money detected and admitted during Survey proceedings is restricted to aggregate unaccounted income less the unaccounted income which has already been offered to tax subsequently. Taxation of the full disclosed amount will lead to scenario of the offered amount being taxed twice. Accordingly argument of the assessee is partly accepted and credit of the offered undisclosed income shown in the various assessment years are allowed against the offered undisclosed income admitted by the assessee at the time of post survey proceedings.
Offered undisclosed income shown by the assessee in the different assessment years are taken into account and unaccounted income is computed as under:
Offered undisclosed income in the survey Rs. 2,53,17,855/-
Less: undisclosed income offered in the ITR in the AY 2013-14, 2014-15, 2015-16
(41,45,010 + 11,73,505/- +16,03,165/-) Rs. 69,21,680/-
Rs. 1,83,96,175/-“
7. Now, we re-produce the relevant portion of the order passed by Ld. CIT(A):
“4. The grounds of appeal no. 1 & 2 are interlinked, hence dealt together, are against the action of the AO in making addition of Rs. 1,83,96,175/- on account of on money received from the project not declared in the return income.
4.1 I have carefully considered the assessment order and submission filed by the appellant. The brief facts of the case are that a survey proceedings u/s. 133A of the Act was conducted at the premises of the assessee M/s. D. R. Associates & M/s. D. R. Corporation on 04.01.2013. During the course of survey, statement of Shri Ravi Khandelwal, partners of the assessee firm was recorded on oath and in the post survey proceedings, Shri Ravi Khandelwal, partner of the assessee firm had offered undisclosed income of Rs. 10,15,31,355/- for the A.Y. 2013-14 vide his letter dated 11.01.2013 in both the said firms. Details of the offered undisclosed income were as under:-
| Name of the Firm | A.Y. | Offered undisclosed income (in Rs.) | Remarks |
|---|---|---|---|
| D. R. Associates | 2013-14 | 7,62,13,500/- | Undisclosed income was offered @155 per square feet on money received in respect of saleable area of the project 491700 square feet, hence on-money comes to Rs. 7,62,13,500/-. |
| D. R. Corporation | 2013-14 | 2,53,17,855/- | Undisclosed income was offered @155 per square feet on money received in respect of saleable area of the project 163341 square feet, hence on-money comes to Rs. 2,53,17,855/-. |
| Total offered income | 10,15,31,355/- | ||
4.1.1 Further, the assessee firm had filed return of income on 10.10.2013 declaring total income of Rs. 42,04,650/-. The case of the assessee was selected under scrutiny through CASS. During the course of assessment proceedings, the AO had noticed that the assessee firm had only shown a sum of Rs. 41,45,010/- as unaccounted income in place of survey disclosed income of Rs. 2,53,17,855/- in the return of income filed for A.Y. 2013-14. Therefore, the AO had issued show cause notice on 08.03.2016 and requested to the assessee to explain why the difference of survey disclosed income of Rs. 2,53,17,855/- and income shown in the return of income of Rs. 41,45,010/- should not be added to the total income for the year under consideration. In response to the said show cause notice, the assessee had claimed that it had not made any retraction from survey disclosure, but it had been showing on-money as income only when the flats in the project were transferred to buyers. In other words, the on-money detected during the survey remained as part of stock-in-trade (flats) and liabilities till the flats were sold. The assessee had further stated that it had shown undisclosed income in various assessment years on the basis of the documents of sale registered in subsequent years and the details of the undisclosed shown by the assessee in the returns of income in various years were as under:-
| Undisclosed income offered in the returns of income in different assessment years | Area sold for which sale documents were registered (in square feet) | Offered undisclosed income @155 per square feet of the salable area |
|---|---|---|
| A.Y. 2013-14 | 26742 | 41,45,010/- |
| A.Y. 2014-15 | 7571 | 11,73,505/- |
| A.Y. 2015-16 | 10343 | 16,03,165/- |
| Total | 69,21,680/- |
The assessee had also relied on various case laws including the decision of the Hon’ble ITAT, Ahmedabad in the case of its sister concern i.e. M/s. D. R. Construction Vs. Income Tax Officer, ITA No. 2735/Ahd/2010 and the decision of the Hon’ble Jurisdictional High Court of Gujarat in the case of CIT Vs. Ashaland Corporation (1982) 133 ITR 55 (Guj), wherein it was held that income accrues on sale of land and arises in the year in which the title in the property is transferred and not in the year in which assessee received part of consideration and earnest money.
4.1.2 The reply of the assessee was partly accepted by the AO. The AO had held that the decision of the Hon’ble Jurisdictional High Court of Gujarat in the case of CIT Vs. Ashaland Corporation (1982) 133 ITR 55 (Guj) is applicable in the case of the assessee and therefore, the decision of the Hon’ble Jurisdictional High Court was followed in the case of the assessee. Thus, the AO had given the credit of undisclosed income offered in the ITR for A.Y. 2013-14, 2014-15 & 2015-16 while making the addition. The details of addition made by the AO in the assessment order were as under:-
Offered undisclosed income in the survey – Rs. 2,53,17,855/-
Less: Undisclosed income offered in the ITR for A.Y. 2013-14, 2014-15 & 2015-16 (Rs. 41,45,010 + Rs. 11,73,505 + Rs. 16,03,165) – Rs. 69,21,680/-
Rs. 1,83,96,175/-
Since, the assessee had not disclosed the said survey disclosure income in the form of on-money amounting to Rs. 1,83,96,175/- in its return of income, therefore, the AO had made addition of Rs. 1,83,96,175/- on account of undisclosed on-money received while passing the assessment order u/s. 143(3) of the Act dated 31.03.2016.
4.2 During the course of appellate proceedings, the appellant has filed written submission, which is reproduced supra. The appellant has stated that it has executed agreement and gave possession in respect of 80,982 square fts. out of total saleable area of 1,63,341 square fts. against which the consideration was received. Accordingly, the assessee has offered/accounted the total amount of Rs. 1,25,52,210/- out of total disclosure of Rs. 2,53,17,855/- till date as per the following details:-
| A.Y. | Area sold during the year | Total undisclosed income shown in the return of income (In Rs.) |
|---|---|---|
| 2013-14 | 26742 | 41,45,010/- |
| 2014-15 | 7571 | 11,73,505/- |
| 2015-16 | 10343 | 16,03,165/- |
| 2016-17 | 10199 | 15,80,845/- |
| 2017-18 | 6848 | 10,61,440/- |
| 2018-19 | 17715 | 27,45,825/- |
| 2019-20 | 0 | 0 |
| 2020-21 | 0 | 0 |
| 2021-22 | 987 | 1,52,985/- |
| 2022-23 | 0 | 0 |
| 2023-24 | 577 | 89,435/- |
| Total | 80,982 | 1,25,52,210/- |
4.3.1 The receipt of on-money was part and parcel of money received on sale of flats by cheque. The amount received by cheque before actually transferring the flats to the purchasers will be in the nature of advance and cannot be said to have accrued to the assessee. The appellant has further stated that it had incurred expenditure/investment in the project in various assessment years but income to it will accrue only when flats are sold to the buyers, therefore, advance money received from customers can never to its income. It would only be a liability shown in the balance sheet as advances from the customers and will be adjusted against the sale proceeds of the flats when flats are transferred to the purchasers. Therefore, accrual of income to the assessee will not arise on the date when it receives cheque or cash against sale on flats but will arise when flats are transferred to the buyers and relied on the decision of the Hon’ble Jurisdictional High Court of Gujarat in the case of CIT Vs. Ashaland Corporation (1982) 133 ITR 55 (Guj). In view of these, the appellant has requested to delete the addition made.
4.4 In this case, it is undisputed facts that the appellant had allegedly received on-money amounting to Rs. 2,53,17,855/- and disclosed the same as undisclosed income during the course of survey proceedings. It is also a fact that the AO had held that the decision of the Hon’ble Jurisdictional High Court of Gujarat in the case of CIT Vs. Ashaland Corporation (1982) 133 ITR 55 (Guj) is applicable in the case of the appellant as the facts involved in relied cases are similar to the facts of the appellant. Therefore, the AO had given the credit of undisclosed income in the form of on-money shown by the appellant in various assessment years i.e. A.Y. 2013-14, A.Y. 2014-15 & A.Y. 2015-16 while making the addition in the assessment order. It is observed from the submission that the appellant has claimed that it had shown undisclosed income of Rs. 1,25,52,210/- out of total disclosure of Rs. 2,53,17,855/- till date as discussed supra. Since, the AO had already given the credit of undisclosed income of Rs. 69,21,680/- show in the return of income for A.Y. 2013-14, 2014-15 & 2015-16, therefore, the AO is directed to verify the claim of the appellant regarding showing the undisclosed income in the form of on-money in the return of income filed for A.Y. 2016-17 to A.Y. 2023-24 and if found correct, delete the addition made accordingly.
4.5 With regards to the remaining undisclosed income of Rs. 1,27,65,645/- (Rs. 2,53,17,855 – Rs. 1,25,52,210) which is not shown in the return of income till the A.Y. 2023-24 by the appellant, it is stated that the said alleged on-money of Rs. 1,27,65,645/- was received by the appellant in the A.Y. 2013-14 and which was accepted by the partners of the appellant firm in the statement recorded during the course of survey proceedings but not shown the said alleged on-money in its return of income till date. It clearly shows that neither the appellant has shown the said admitted allegedly on-money in the return of income nor furnished any details which suggest that the said alleged on-money was returned back to the customers. The appellant has also failed to furnish the complete details of customers like Name, PAN, address, amount of on-money, date of payment, details of property for which on-money was paid etc. from whom the said on-money was received. The appellant has also not furnished the reason for not making the sale deed of the property till date for which on-money was received almost 10 years back in the assessment year 2013-14. It is very unusual that even after the lapse of 10 years any prudent man will not get the property registered in his/her name. It is also important to mention here that on perusal of details of selling of property as provided by the appellant (as supra), it is seen that there was no major sale deed executed during the last five assessment year i.e. A.Y. 2019-20 to A.Y. 2023-24 except sale of Rs. 1,52,985/- in A.Y. 2021-22 & Rs. 89,435/- in A.Y. 2023-24, in the cases wherein the on money was allegedly received in A.Y. 2013-14. It is surprising that the appellant has sold only 1564 square feet of the property out of remaining of 84013 Sq feet (1,63,341 – 79,328) in last five years. It is therefore clear that such balance amount of Rs. 1,27,65,645/- which is disclosed as part of on-money against the sale of flat, actually represent unaccounted income of the appellant and sources of such income has been camouflaged as on-money so as avoid taxation of such income on the ground that sale deed was not executed. It is a matter of fact that no prudent person would keep on-money payment with the builder without executing the sale deed even after the lapse of 10 years. The provision of section 69A of the Act clearly states that when assessee is found to be owner of any money, bullion, jewellery etc. and if such money is not recorded in its books of accounts and an assessee offers no explanation regarding source of such money or explanation provided by the assessee is not satisfactorily explain (which is the case of appellant), such amount is required to be taxed as unaccounted income u/s. 69A of the Act.
4.6 In view of the above factual discussion, the addition to the extent of Rs. 1,27,65,645/- (Rs. 2,53,17,855 – Rs. 1,25,52,210) is confirmed in A.Y. 2013-14. Thus, the grounds of appeal no. 1 & 2 are partly allowed.
5. The ground of appeal no. 3 is general in nature, hence dismissed.”
8. Before us, the Ld. AR for assessee made following submissions:
(i) That, the Hon’ble jurisdictional High Court of Gujarat, in CIT Vs. Ashaland Corporation (1982) 133 ITR 55 (Guj), has held that the income on sale of land/flats arises only in the year in which title in the property is transferred to buyers and not in the year in which the advance consideration/on-money is received.
(ii) That, both of the lower authorities have applied the aforesaid ratio of Hon’ble High Court and, following the same, given credit for the income offered by assessee in the returns of income filed on year-to-year basis, as and when the flats were actually sold. The Ld. AO has allowed credit for the disclosure made by the assessee in the returns of AYs 2013-14 to 2015-16, aggregating to Rs. 69,21,680/-, till completion of assessment. Thereafter, the Ld. CIT(A) has given credit for AYs 2013-14 to 2023-24, aggregating to Rs. 1,25,52,210/-, till passing of the first-appeal order. Thus, the lower authorities are not against the claim of assessee.
(iii) That, the assessee has, subsequently after passing of order by Ld. CIT(A), further offered income of Rs. 16,51,680/- in AY 2024-25 and Rs. 32,70,345/- in AY 2025-26 corresponding to the area of flats sold in those years. Further, the assessee has quantified the disclosable income of Rs. 41,49,040/- in AY 2026-27 based on area of flats sold in that year and going to offer the same in the return of income of AY 2026-27 yet to be filed. Furthermore, the assessee undertakes to offer the balance income of Rs. 36,94,580/- in AY 2027-28 irrespective of whether or not the documents passing title upon the buyers are executed and whether or not the full consideration is received from buyers. Thus, the disclosure upto AY 2027-28 would complete the entire on-money receipts of Rs. 2,53,17,855/- surrendered during the survey. During hearing, the Ld. AR asserted to file an undertaking-letter in this behalf and subsequently filed the same. For an immediate reference, we re-produce below the letter filed by Ld. AR:
Rasesh Shah & Co.
Chartered Accountants
4th Floor, Titanium Business Hub,
Surat-Khajod Road, Nr. Sarsana,
Bhimrad, Surat-395007.
Phone: 2297007, 2297006, 3532258
E-mail: [email protected]
Before Income Tax Appellate Tribunal Bench “DB”, Surat
In the case of D R Corporation
ITA No. 265/SRT/2024 for A.Y. 2013-14
Sub: Written Submission for A.Y. 2013-14
Date of Hearing: 06.07.2026
May it Please To Your Honour
1. The appeal is directed against the order of the CIT(A) sustaining the addition of Rs. 1,27,65,645/- out of the total addition of Rs. 1,83,96,175/- on account of on money received from the project but not declared in the return of income.
2. Assessee declared Rs. 2,53,17,855/- consequent to the survey conducted on 04.01.2013 on account of the on money for the total project of 163340 square feet. The assessee credited the Booking Advance (Disclosure) A/c by the sum of Rs. 2,53,17,855/- disclosed consequent to the survey in the cash book. During the year under consideration, assessee adjusted Rs. 41,45,010/- as sales reflected in schedule -11 of the audited financial statements for which the flats aggregating to 26742 square feet were sold. The remaining amount of Rs. 2,11,72,845/- in respect of 136598 square feet is appearing as liability in the schedule -3 of the audited financial statements. The part of the remaining flats admeasuring to 136598 square feet were sold in the succeeding years as per the chart filed before the Honourable Tribunal. The assessee credited the respective amounts under the sales by transferring from Booking Advance (Disclosure) A/c in the audited / unaudited financial statements of the succeeding years.
3. The assessing officer has given the credit of Rs. 69,21,680/- pertaining to 44656 square feet in the respect of the sales made till A.Y. 2015-16 as per the data available at the time of passing assessment order. The ld. CIT(A) gave the further relief of Rs. 56,30,530/- pertaining to 36326 square feet for the income shown in the year relevant to A.Y. 2016-17 to 2023-24 as per the data available at the time of passing the appellate order. Accordingly, the addition of Rs. 1,27,65,645/- was sustained. Assessee has pleaded before the ITAT that after passing of the appellate order by CIT(A), assessee has offered Rs. 49,22,025/- in the return of income filed for A.Y. 2024-25 & A.Y. 2025-26 where the amount of Rs. 16,51,680/- pertaining to 10656 square feet and Rs. 32,70,345/- pertaining to 21099 square feet were disclosed respectively. The return of income for A.Y. 2026-27 has not become due but the assessee has already considered Rs. 41,49,040/- in respect of 26768 square feet which will be duly disclosed in the return of income to be filed. The details of the flats sold during the year relevant to AY 2026-27 is enclosed herewith along with the index copy reflecting the details of the sale deed. The balance amount of Rs. 36,94,580/- pertaining to 23835 square feet will be disclosed in the current year i.e. year ending on 31.03.2027 i.e. A.Y. 2027-28 even if the documents are not executed or the full consideration is not received. This statement is made by way of undertaking made by the assessee and therefore this submission is counter signed by the partner of the assessee firm. Accordingly, the addition sustained by the CIT(A) is reflected as income in succeeding years as income as per the following table:
| Sr. No. | A.Y. | Area (Sq. Ft.) | Amount |
|---|---|---|---|
| 1. | 2024-25 | 10656 | Rs. 16,51,680/- |
| 2. | 2025-26 | 21099 | Rs. 32,70,345/- |
| 3. | 2026-27 | 26768 | Rs. 41,49,040/- |
| 4. | 2027-28 | 23835 | Rs. 36,94,580/- |
| Total | Rs. 1,27,65,645/- | ||
4. It is therefore prayed that the addition confirmed by the Ld. CIT(A) may please be deleted in view of the detailed written submission filed before CIT(A) relying on various case laws coupled with the above facts of the case.
Date:
Place: Surat
(Partner of Assessee Firm)
(CA Rasesh Shah)
9. Finally, Ld. AR submitted that the assessee’s claim in present appeal is very limited i.e. to give further credit of the disclosure made or to be made in AYs 2024-25 to 2027-28. He submitted that the assessee’s claim is based on the binding decision of Hon’ble Jurisdictional High Court and ITAT, Ahmedabad in sister concern’s case. Those decisions have already been applied by both of the lower-authorities and the present claim of assessee is a continuation thereof; the assessee is not making any new or different claim. Accordingly, Ld. AR requested that the undisclosed income of Rs. 41,45,010/- offered by assessee in AY 2013-14 under consideration ought to be accepted and no further addition is required to be made. Ld. AR requested to delete the addition confirmed by Ld. CIT(A).
10. During hearing, Ld. AR also invited attention of the Bench to a decision of Hon’ble jurisdictional High Court of Gujarat in Commissioner of Income-tax (Central), Surat Vs. Happy Home Corporation (2018) 94 taxmann.com 292 (Guj), the relevant paras are re-produced below:
“Akil Kureshi, J. – Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 01-06-2017 raising following question for our consideration:
“Whether on the facts and the circumstances of the case and in law, the Appellate Tribunal was justified in confirming the findings of the CIT(A) in respect of deleting the addition made by the Assessing Officer on account of undisclosed income to the tune of Rs. 26,05,00,000/- disclosed during the course of survey u/s. 133A of the I.T. Act, 1961 ?”
2. Broadly stated, the facts are that the respondent assessee is engaged in construction business. The respondent was subjected to a survey action which was conducted on the business premises on 18-10-2010. During such survey, incriminating documents were impounded. Statement of Shri Mukesh Patel, the partner of the respondent firm was recorded. In such statement, he admitted the firm having received a sum of Rs. 26,05,00,000/- which was not disclosed in the account or to the income tax department. He agreed that the said was firm’s unaccounted income and also agreed to pay tax on the same. He also stated that the same pertained to the income of the current year. While doing so, he added that however, the same would be subject to the registration of the sale deeds.
3. When the assessment was undertaken, the assessee contended that the firm is following Project Completion Method of accounting and the income would be offered to tax as and when the final sale deeds are registered. He offered only a sum of Rs.1 crore during the year under consideration. The Assessing Officer rejected the stand and pinned down the assessee to the statement of the partner, contents of which we have noted above. He added the entire amount of Rs. 26.05 crores as the income of the assessee during the current year.
4. Commissioner of Income Tax (Appeals) deleted such addition which was confirmed by the Tribunal. The Tribunal accepted the assessee’s contention that since the firm was following Project Completion Method for offering the income to tax, the same would be subjected to tax upon completion of sale, though the amount may have been received earlier from the buyer. We notice that Commissioner of Income Tax (Appeals) made a specific mention of the fact that the assessee in fact, had offered such income to tax in the later years as and when the sale deeds were executed. The Tribunal thus confirmed this view of the Commissioner of Income Tax (Appeals).
5. The Revenue does not object to the assessee’s following Project Completion Method of accounting. The Revenue also does not dispute the findings of the Commissioner of Income Tax (Appeals) that the same income was offered to tax in the later years as and when the sale deeds were executed. The Revenue only objects to the stand of the assessee on the ground that in his statement, the partner of the firm had disclosed the entire amount as the income of the current year. We have noticed that the contents of the statement, in which, while agreeing that the said sum of Rs. 26.05 crores was the undisclosed income of the assessee for the current year, he added a clarification that the same would be subject to execution of the sale deeds. We therefore find no error in the view of the Tribunal.
6. Tax Appeal is dismissed.”
According to Ld. AR, this decision of Hon’ble Jurisdictional High Court directly addresses an identical issue as involved in present appeal.
11. Per contra, Ld. DR for revenue submitted as under:
(i) That, survey u/s 133A of the Act was conducted on 04.01.2013 and the assessee had already received on-money by that time, i.e., in previous year 2012-13 relevant to AY 2013-14 under consideration. Therefore, the on-money receipt was taxable in AY 2013-14 itself. According to Ld. DR, it is a clear case of postponement of tax by assessee to different assessment-years. That, although the revenue is not against the relief already granted by the Ld. CIT(A), the remaining addition of Rs. 1,27,65,645/- sustained by the Ld. CIT(A) should not be disturbed.
(ii) That, the Ld. CIT(A) has, in Para 4.5 of the impugned order, categorically and rightly observed that a period of 10 years is a long time. According to Ld. DR, the property itself gets dilapidated in such a long period, therefore, there is no plausible explanation as to how registration of the remaining area could be postponed for such a long period.
Ld. DR accordingly supported the impugned order of first-appeal passed by Ld. CIT(A) and requested to uphold the same.
12. In re-joinder, Ld. AR submitted that the real estate business has its own peculiarities. The projects undertaken are long-term in nature and take considerable time to complete. The buyers also make delay in payments and taking possession for reasons attributable to them. Further, there was Covid-19 situation also during intervening period. Hence, there is no valid reason to adversely view the time taken in executing the sale-deeds and passing title upon the buyers.
13. We have heard rival submissions of both sides and perused the orders of lower authorities as well as the material held on record to which our attention has been drawn. We have also considered the facts of the issue in the light of judicial decisions cited before us.
14. It is not in dispute that both the Ld. AO and the Ld. CIT(A) have applied the ratio of Hon’ble jurisdictional High Court in CIT Vs. Ashaland Corporation (supra) holding that the income from sale of immovable property/flats accrues only in the year in which the sale-deed is executed and title is transferred and not on mere receipt of advance/on-money. On this very basis, the Ld. AO has himself given credit for the income offered by assessee in AYs 2013-14 to 2015-16 till completion of assessment. Following the very same approach, the Ld. CIT(A) has given further credit of the incomes offered by assessee in AYs 2016-17 to 2023-24 till completion of first-appellate proceedings. The very same principle has further been reiterated and accepted by Hon’ble jurisdictional High Court in Happy Home Corporation (supra) wherein an assessee following the project-completion method was held taxable only in the year of registration of sale-deeds, notwithstanding the disclosure of on-money during survey. Therefore, we find no reason to deny credit for the incomes offered by assessee in AYs 2024-25 onwards, subsequent to the completion of first appellate proceedings. In fact, giving credit for the income offered by assessee in AYs 2024-25 onwards is a continuation of the view/approach already adopted by both of the lower authorities i.e. the Ld. AO as well as Ld. CIT(A) in their respective orders. Needless to mention that the assessee has not remained stationary; it has continued to offer the on-money to tax in the respective years of registration of sale-deeds, including Rs. 16,51,680/- in AY 2024-25 and Rs. 32,70,345/- in AY 2025-26, and has undertaken to offer the remaining amount in AY 2026-27 & 2027-28. This continuing and consistent conduct supports the assessee’s stand that the disclosed on-money is being offered strictly on a year-wise basis as and when the corresponding sale-deeds are registered and is not being permanently withheld or escaped from taxation.
15. Therefore, we are of the considered view that the balance sum of Rs. 1,27,65,645/- ought to be dealt with on the same footing as the rest of the disclosure already dealt by the lower authorities. Accordingly, we set aside the finding of Ld. CIT(A) confirming the addition of Rs. 1,27,65,645/- and direct the Ld. AO to verify, on the very same terms as directed by the Ld. CIT(A) in respect of AYs 2016-17 to 2023-24. Accordingly, the Ld. AO is directed to make a limited verification as to the claim of assessee of offering the undisclosed income of on-money in the returns of AYs 2025-26 to 2027-28 and if found correct, delete the addition accordingly. The Ld. AO shall, after verification, be at liberty to bring to tax in AY 2013-14 such portion of the disclosed on-money as is not found to have been offered to tax in those years in accordance with the aforesaid principle and undertaking-letter filed by Ld. AR. It is further made clear that the aforesaid direction is confined to the assessment years covered by the undertaking filed before us, i.e. up to AY 2027-28, and no further deferment shall be claimed on the basis of the present order. The assessee’s grounds are accordingly allowed in these terms.
16. Resultantly, this appeal is allowed for statistical purposes.
ITA No. 264/SRT/2024:
17. Feeling aggrieved by order of first-appeal dated 06.02.2024 passed by learned Commissioner of Income-tax (Appeals)-11, Ahmedabad [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 31.03.2016 passed by learned ACIT, Circle-1(2), Surat [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2013-14, the assessee “D R Associates” has filed this appeal.
18. The following grounds have been raised in this appeal:
“1. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in partly confirming the action of assessing officer by sustaining the addition of 1,54,26,375/- out of total addition of Rs. 4,57,15,390/- on account of on money received from the project not declared in the return of income.
“2. It is therefore, prayed that the above addition made by the assessing officer and party confirmed by the CIT(A) may please be allowed.
“3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.
19. The issue and underlying facts involved in present appeal are identical to those in ITA No. 265/SRT/2024 of D R Corporation, which has been adjudicated by us in foregoing part of this order. Therefore, the discussions and adjudication made therein, shall apply mutatis mutandis to this appeal also, subject to the difference in figures. In present matter, the partner of assessee-firm Shri Ravi Khandelwal declared undisclosed on-money receipts of Rs. 7,62,13,500/-. The assessee offered income of Rs. 1,35,65,290/- in AY 2013-14 under consideration, Rs. 86,74,265/- in AY 2014-15 and Rs. 82,58,555/- in AY 2015-16, aggregating to Rs. 3,04,98,110/-, till completion of assessment by AO. Accordingly, the Ld. AO allowed credit of Rs. 3,04,98,110/- and made addition for remaining undisclosed income of Rs. 4,57,15,390/-. During first-appeal, the Ld. CIT(A) allowed credit of income of Rs. 6,07,87,125/- offered by assessee in AYs 2013-14 to 2023-24, till completion of first-appeal proceeding, and confirmed the remaining addition of Rs. 1,54,26,375/-. The year-wise break up of the disclosure for AYs 2013-14 to 2023-24 accepted by Ld. CIT(A), as per details noted in Para 4.2 of his order, is given below for an immediate reference:
| A.Y. | Area sold during the year | Total undisclosed income shown in the return of income (In Rs.) |
|---|---|---|
| 2013-14 | 87,518 | 1,35,65,290/- |
| 2014-15 | 55,963 | 86,74,265/- |
| 2015-16 | 53,281 | 82,58,555/- |
| 2016-17 | 16,310 | 25,28,050/- |
| 2017-18 | 26,638 | 41,28,890/- |
| 2018-19 | 86,464 | 1,34,01,920/- |
| 2019-20 | 31,812 | 49,30,860/- |
| 2020-21 | 34,189 | 52,99,295/- |
| 2021-22 | 0 | 0 |
| 2022-23 | 0 | 0 |
| 2023-24 | 0 | 0 |
| Total | 3,92,175 | 6,08,87,125/- |
20. Now, it is submission of assessee that the assessee has subsequently offered further income of Rs. 1,14,87,205/- in AY 2024-25 and Rs. 23,17,250/- in AY 2025-26 corresponding to the area of flats sold in those respective years. Further, the assessee has quantified the disclosable income of Rs. 16,21,920/- in AY 2026-27 and going to offer the same in the return of income of AY 2026-27 yet to be filed. Thus, the disclosures upto AY 2026-27 would complete the entire on-money receipts of Rs. 7,62,13,500/- surrendered during the survey. During hearing, the Ld. AR asserted to file an undertaking-letter in this behalf and subsequently filed the same. For an immediate reference, we re-produce below the letter filed by Ld. AR:
Rasesh Shah & Co.
Chartered Accountants
4th Floor, Titanium Business Hub,
Surat-Khajod Road, Nr. Sarsana,
Bhimrad, Surat-395007.
Phone: 2297007, 2297006, 3532258
E-mail: [email protected]
Before Income Tax Appellate Tribunal Bench “DB”, Surat
In the case of
D R Associates
ITA No. 264/SRT/2024 for A.Y. 2013-14
Sub: Written Submission for A.Y. 2013-14
Date of Hearing: 06.07.2026
May it Please To Your Honour
1. The appeal is directed against the order of the CIT(A) sustaining the addition of Rs. 1,54,26,375/- out of the total addition of Rs. 4,57,15,390/- on account of on money received from the project but not declared in the return of income.
2. Assessee declared Rs. 7,62,13,500/- consequent to the survey conducted on 04.01.2013 on account of the on money for the total project of 491700 square feet. The assessee credited the Booking Advance (Disclosure) A/c by the sum of Rs. 7,62,13,500/- disclosed consequent to the survey in the cash book. During the year under consideration, assessee adjusted Rs. 1,35,65,290/- as sales reflected in schedule -11 of the audited financial statements for which the flats aggregating to 87518 square feet were sold. The remaining amount of Rs. 6,26,48,210/- in respect of 404182 square feet is appearing as liability in the schedule -3 of the audited financial statements. The part of the remaining flats admeasuring to 404182 square feet were sold in the succeeding years as per the chart filed before the Honourable Tribunal. The assessee credited respective amounts under the sales by transferring from Booking Advance (Disclosure) A/c in the audited / unaudited financial statements of the succeeding years.
3. The assessing officer has given the credit of Rs. 3,04,98,110/- pertaining to 196762 square feet in respect of the sales made till A.Y. 2015-16 as per the data available at the time of passing assessment order. The ld. CIT(A) gave the further relief of Rs. 3,02,89,015/- pertaining to 195413 square feet for the income shown in the year relevant to A.Y. 2016-17 to 2023-24 as per the data available at the time of passing the appellate order. Accordingly, the addition of Rs. 1,54,26,375/- was sustained. Assessee has pleaded before the ITAT that after passing of the appellate order by CIT(A), assessee has offered Rs. 1,38,04,455/- in the return of income filed for A.Y. 2024-25 & A.Y. 2025-26 where the amount of Rs. 1,14,87,205/- pertaining to 74111 square feet and Rs. 23,17,250/- pertaining to 14950 square feet were disclosed respectively.
The return of income for A.Y. 2026-27 has not become due but the assessee has already considered Rs. 16,21,920/- in respect of 10464 square feet which will be duly disclosed in the return of income to be filed. The details of the flats sold during the year relevant to A.Y. 2026-27 is enclosed herewith along with the index copy reflecting the details of the sale deed. Accordingly, the addition sustained by the CIT(A) is reflected as income in succeeding years as income as per the following table:
| Sr. No. | A.Y. | Area (Sq. Ft.) | Amount |
|---|---|---|---|
| 1. | 2024-25 | 74111 | Rs. 1,14,87,205/- |
| 2. | 2025-26 | 14950 | Rs. 23,17,250/- |
| 3. | 2026-27 | 10464 | Rs. 16,21,920/- |
| Total | Rs. 1,54,26,375/- |
4. It is therefore prayed that the addition confirmed by the Ld. CIT(A) may please be deleted in view of the detailed written submission filed before CIT(A) relying on various case laws coupled with the above facts of the case.
Date:
Place: Surat
(Partner of Assessee Firm)
(CA Rasesh Shah)
21. Therefore, applying the view taken by us in ITA No. 265/SRT/2024 adjudicated in foregoing part of this order, we set aside the finding of Ld. CIT(A) confirming the addition of Rs. 1,54,26,375/- and direct the Ld. AO to verify, on the very same terms as directed by the Ld. CIT(A) in respect of AYs 2016-17 to 2023-24. Accordingly, the Ld. AO is directed to make a limited verification as to the claim of assessee of offering the undisclosed income of on-money in the returns of AYs 2025-26 to 2026-27 and if found correct, delete the addition accordingly. The Ld. AO shall, after verification, be at liberty to bring to tax in AY 2013-14 such portion of the disclosed on-money as is not found to have been offered to tax in those years in accordance with the aforesaid principle and undertaking-letter filed by Ld. AR. It is further made clear that the aforesaid direction is confined to the assessment years covered by the undertaking filed before us, i.e. up to AY 2026-27, and no further deferment shall be claimed on the basis of the present order. The assessee’s grounds are accordingly allowed in these terms.
22. In this appeal, the assessee has also filed an additional ground as under:
“On the facts and circumstances of the case as well as law on the subject, the claim of deduction u/s 80-IB(10) made for the first time before Honourable Tribunal may please be allowed as all the conditions for claim of deduction u/s 80-IB(10) are complied by the assessee and the same was allowed in the scrutiny assessment for A.Y. 2018-19 and succeeding years.”
23. During hearing, Ld. DR for revenue made a strong submission against admissibility as well as merits of ground. After some discussions, the Ld. AR for assessee was satisfied and asserted for not pressing this ground. Accordingly, this ground is dismissed.
24. Resultantly, this appeal is partly allowed for statistical purposes.
25. In result, ITA No. 265/SRT/2024 is allowed for statistical purposes and ITA No. 264/SRT/2024 is partly allowed for statistical purposes.
Order pronounced in open court on 01/10/2026
