Padmavati Housing Corporation Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that addition on account of on-money received @50% is on a palpably very high side. Accordingly, the same is restricted to Gross Profit percentage i.e. 15%.
Facts-
The assessee at the outset stated that the sole challenge to the order of the ld.CIT(A) in the present appeals was against confirmation of addition made to the income of the assessee on account of alleged on-money received by the assessee from its business of real estate development.
Conclusion-
Held that we agree that it is highly improbable in this line of business to make profits upto the extent of 50% or more of the turnover that too on sale of such small sized properties. Even the Ld.DR was unable to enlighten us with statistics showing otherwise. We therefore agree with the ld.counsel for the assessee that making addition of the entire on-money received by the assessee would not be justified. Though we are of the view that the onus is on the assessee to show what expenses have been incurred by it in cash, which have also remained unexplained, but at the same time noting the fact that bungalows sold by the assessee were not hi-end properties, but small sized bungalows the component of the on-money received on the same @ 50% of the booked price is on a palpably very high side. We are of the view that in the light of the facts and circumstances, as noted above by us, it would be just and reasonable to restrict the addition to the extent of profit element embedded in this transaction only. The AO is directed to restrict the addition by estimating GP on the on money receipts, at the higher of the rate in this line of business or as agreed to by him before us @ 15% thereof.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Present three appeals have been filed by the assessee against common order passed by the ld. Commissioner of IncomeTax(Appeals)-12, Ahmedabad [hereinafter referred to as “Ld.CIT(A)”]under section 250(6) of the Income Tax Act, 1961 (“the Act” for short) dated 10.12.2018 pertaining to the above three assessment years.
2. It was common ground that the issue involved in all the appeals was similar, arising in identical backdrop of facts. Therefore, all three appeals were taken up together for hearing and are being disposed by a common consolidated order.
3. Ld.counsel for the assessee at the outset stated that the sole challenge to the order of the ld.CIT(A) in the present appeals was against confirmation of addition made to the income of the assessee on account of alleged on-money received by the assessee from its business of real estate development. He drew our attention to the grounds raised by the assessee in all three appeals as under:
