Palm View Developers Vs ITO (ITAT Ahmedabad)
Ahmedabad ITAT Taxes Only 20% Profit Element on Unaccounted Cash Receipts of Builder
The Ahmedabad ITAT partly allowed the assessee’s appeal by holding that only the profit element embedded in unaccounted business receipts could be brought to tax and not the entire cash receipts. During a survey, a slip containing details of ₹1 crore of unaccounted cash receipts was found, and one of the partners admitted the receipts and stated that the amount would be offered to tax. Since the assessee failed to honour the disclosure in its return, the Assessing Officer treated the entire ₹1 crore as unaccounted income, which was confirmed by the CIT(A).
The Tribunal first condoned the 596-day delay in filing the appeal, subject to the assessee depositing ₹10,000 in the Prime Minister’s National Relief Fund. On merits, it accepted the assessee’s contention that the amount represented business receipts and not the entire income. It observed that although the assessee was engaged in the business of building and construction, where profit margins are relatively higher, taxing the entire receipts as income would not be justified.
Considering the nature of the business and the overall facts of the case, the Tribunal estimated the profit element at 20% of the unaccounted receipts and sustained the addition only to that extent, deleting the balance 80%. The appeal was partly allowed, subject to verification of compliance with the direction regarding deposit of costs.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad [hereinafter referred to as ‘Ld. CIT(A)’] dated 26/04/2023 passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2014-15.
