Greenfield Reality P. Ltd. Vs ACIT (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) of Ahmedabad has ruled that only the profit element embedded in unaccounted “on-money” receipts can be taxed, and pegged the rate at 8% in a case involving a real estate developer. In the matter of Greenfield Reality P. Ltd. vs. ACIT, the tribunal set aside a higher profit estimation by tax authorities and quashed separate additions made for unexplained expenditure and cash credits, providing significant relief to the company.
The case emerged from a search operation where tax officials found documents detailing unaccounted cash received by Greenfield Reality as “on-money” for booking flats and shops in its “Vesu Project.” The seized papers also revealed certain cash expenditures, including payments for land purchase, that were not recorded in the official books of accounts.
Following the search, the Assessing Officer (AO) initiated assessment proceedings. The primary dispute revolved around how to treat the on-money receipts. The Commissioner of Income-tax (Appeals) [CIT(A)] had observed that the entire gross receipts could not be taxed as income, since unrecorded expenditures were evidently incurred from these funds. However, the CIT(A) estimated the income component at 20% of the on-money receipts. The company, on the other hand, had offered to tax at 8%.
