On-money income assessable in year in which sale of concerned flat is declared

Magnates Enterprises Vs ACIT (ITAT Mumbai)

ITAT Mumbai held that the income portion of the on-money is assessable in the year in which the sale of concerned flat is declared by the assessee.

Facts- The assessee is engaged in the business of developing building properties. It belongs to Ameya Group. The Department carried out search and seizure operations in the hands of M/s. Ameya Builders & Property Developers and also in the hands of its partners Shri Upesh M. Baria, Shri Uday M. Baria & Shri Moreshwar M. Baria. The search was carried out on 31.7.2014. During the course of search operations, certain documents belonging to the assessee were seized and the said documents were transferred to AO of the assessee. Accordingly, AO initiated assessment proceedings u/s. 153C of the Act.

The seized documents revealed that the assessee has received on-money on sales already executed and also received advances by way of cash in all the three years. The assessee had also not accounted certain expenses. Accordingly, AO deducted those expenses from the aggregate amount of cash receipts and assessed the balance amount as income of the assessee in all the three years.

Notably, AO had assessed the cash receipts as income of the assessee in the year of receipt. The assessee contended before CIT(A) that the taxability of on-money should be on the basis of accounting policy followed by the assessee. CIT(A) did not accept the same and accordingly upheld the assessment of cash receipts in the year of receipt.

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