Prime Developers Vs DCIT (ITAT Mumbai)
The appeals before the ITAT Mumbai arose from cross appeals filed by both the assessee and the Revenue for Assessment Years (AYs) 2004-05 to 2007-08 concerning the taxation of profits from the “Prime Mall” project. The principal dispute related to the determination of taxable profits, alleged receipt of unaccounted “on-money” from sale of commercial units, the accounting method adopted by the assessee, additions relating to car parking sales, unexplained cash credits under Section 68, and other consequential issues.
The assessee, a construction firm, followed the Project Completion Method of accounting and recognized project profits in AY 2006-07, when the project was completed. A search under Section 132 resulted in seizure of numerous documents, including Annexures A to L, which the Assessing Officer (AO) relied upon to conclude that the assessee received substantial sale consideration in cash outside the books. According to the AO, only about 35% of the actual sale consideration was recorded in the books, while the remaining 65% represented unaccounted “on-money.” On this basis, the AO estimated total unaccounted receipts of ₹108.70 crore across the relevant assessment years, rejected the Project Completion Method, applied the Percentage Completion Method, and made corresponding additions. Separate additions were also made towards alleged sale of car parking and unexplained cash credits under Section 68.
