Ekta Housing Pvt. Ltd Vs DCIT (ITAT Mumbai):
Conclusion: Addition as regards the on-money received by assessee was to be made to the extent of the income element embedded in such receipts and the entire amount of on-money could not have been added in the hands of the assessee. No reason or logic had been given by CIT(A) for taking the income element embedded in the on-money receipts@20%. Thus, the net income element embedded in the on-money receipts could safely be taken in the case of the captioned assessee @15% of the amount of the on-money receipts and the same were in the nature of “business receipts” which were inseparable from the assessee’s business of a builder and developer.
Held: Assessee-company had received on-money of Rs. 29 lac w.r.t sale of Flat in its project, viz. “California”. Insofar the quantification of the income assessable as regards the amount of on-money received by assessee was concerned, the same was confined by assessee upto the extent of the income element embedded in the amount of such on-money and was accordingly taken on an ad hoc basis i.e @12% of such receipt at Rs. 3.84 lac. However, AO subjected the entire amount of on-money of Rs. 29 lac to tax in the hands of the assessee in the year of receipt itself i.e A.Y 2013-14 u/s 68. CIT(A) observed that as the on-money received by assessee was for sale of flats, therefore, the same being inseparable from its business was in the nature of a business receipt. Further, CIT(A) observed that as the amount of on-money was not found credited in the books of account of the assessee but was found noted in some loose sheets and in the data retrieved from mobile phones therefore, the same could not have been brought to tax u/s 68. At the same time, CIT(A) observed that the basis for quantification of the net income element embedded in the on-money receipts at 12% of such receipts could not be substantiated by the assessee therefore, he substituted the same by 20% of the gross on-money receipts and directed AO to restrict the disallowance to the said extent. It was held that the addition as regards the on-money received by assessee was to be made to the extent of the income element embedded in such receipts and the entire amount of on-money could not have been added in the hands of the assessee. No reason or logic had been given by CIT(A) for taking the income element embedded in the on-money receipts@20%. Thus, the net income element embedded in the on-money receipts could safely be taken in the case of the captioned assessee @15% of the amount of the on-money receipts. As the receipt of on-money was inextricably interlinked and in fact interwoven with the corresponding sale transaction accounted for by assessee in its books of account, the same, thus, could not be divorced therefrom, and the income element therein embedded would be required to be brought to tax in the same year in which the sale transaction had been accounted for or would be accounted for by the assessee as per its regular method of accounting that had been accepted by the department. When AO had in the assessment order mentioned the flat wise and year wise receipts of on-money thus, the same left no iota of doubt that the same were in the nature of “business receipts” which were inseparable from the assessee’s business of a builder and developer. Accordingly, no infirmity arose from the order of CIT(A) who had rightly concluded that the impugned additions could not have been made u/s 68.
FULL TEXT OF THE ITAT JUDGEMENT
The presentcross-appeals/appeals are directed against the respective orders passed by the CIT(A)-54, Mumbai. As certain common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first take up the appealfiled by the assessee, viz. M/s Ekta Housing Pvt. Ltd for A.Y. 2013-14 in ITA No. 1732/Mum/2019. The assessee has assailed the impugned order on the following grounds of appeal before us:
”1. On the facts and in the circumstances of the case and in law the Ld. Commissioner of Income-tax (Appeals) has erred in confirming the addition @20% of the on-money in this year without considering the fact – that the appellant offered the income of Rs. 3.48 lakhs @ 12% of on-money of Rs. 29 lakhs in A.Y 2016-17 when the project was completed and sale was recognized in P&L A/c.
2. On the facts and circumstances of the case and in law the Ld. Commissioner of Income-tax (Appeals) has erred in estimating profit from on-money received at 20% of Rs. 29 lakhs which is on higher side and should have been estimated @12% of on-money as offered by your appellant.
3. The appellant craves leave to alter, amend, modify or substitute any ground/grounds and to add any new ground or grounds on or before the appeal is disposed off.
2. Briefly stated, the assessee company which is engaged in the business of a builder and developer had filed its original return of income for A.Y. 2013-14 on 30.09.2013, declaring a total income of 16,53,43,100/-. The return of income was thereafter revised on 06.06.2014 at an income of Rs.17,11,54,520/-. Search and seizure action was conducted on 05.10.2015 in the case of the entities belonging to the “Ekta group” and the assessee company was covered in the said proceedings. Incriminating documents revealing receipt of unaccounted amounts by way of on-money by the assessee company and its group concerns against sale of residential and commercial properties had surfaced in the course of the search proceedings. Notice under Sec. 153A was issued and duly served upon the assessee for the year in question i.e A.Y 2013-14. Return of income in compliance to the notice issued u/s 153A was filed by the assessee company on 13.01.2017, declaring a total income of Rs. 17,11,54,520/-. Subsequently, notices under Sec. 143(2) and 142(1) of the Act were issued to the assessee.
3. During the course of the assessment proceedings, it was gathered by the A.O from a perusal of the seized material that the assessee company had inter-alia received on-money on sale of flats w.r.t its projects, viz. Maple Wood/Cornel ANDCalifornia, as under:
