Assistant Commissioner of Income Tax, Central Cir.-4, Surat V. M/s Shree Narayan Corporation, Surat

ITA 107/SRT/2021

AI Insights

The case involves the Income Tax Department's appeal against the CIT(A)'s decision which had significantly reduced the addition made by the Assessing Officer on the grounds of unaccounted on-money receipts from a real estate project developed by M/s Shree Narayan Corporation. The Assessing Officer had made a large addition based on extrapolated on-money receipts across the entire project, while the CIT(A) limited this to 27 flats based on specific evidence, leading to a reduced addition. The Tribunal upheld the CIT(A)'s decision, agreeing that extrapolation to the entire project was unjustified without specific evidence of on-money receipts for all units.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302064 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-10-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 23-06-2021
• Other Referred Cases: CIT Vs. Ashaland Corporation, CIT Vs Motilal C. Patel & Co., CIT Vs. President Industries, CIT Vs. Gurbachhan Singh J Juneja, CIT Vs. Standard Tea Processing Co. Ltd., CIT Vs. B. Nagendra Baliga, ACIT Vs. M/s Savaliya Buildcon, ACIT Vs. Amar Corporation, ACIT Vs. Neptune Realty Pvt. Ltd., ACIT Vs. Surya Enclave Developers, ACIT Vs. Yadav Developers P Ltd., CIT Vs. Happly Home Corporation, CIT Vs. Happy Home Corporation, ACIT Vs. Happy Home Corporation, CIT-IV Vs. Shivalik Buildwell (P) Ltd., ACIT Vs. Kush Corporation, DCIT Vs. Shiv Sai Developers, CIT Vs. Indeo Airways (P) Ltd., M/s S.R. Corporation Vs PCIT, Jay Deepakkumar Rawal Vs ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Loose papers; Document seized; Set aside
• Section: 132; 143(3); 133A; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 107/SRT/2021 (AY: 2014-15) (Physical Hearing) A.C.I.T., Central Circle- 4, Surat. Vs. M/s Shree Narayan Corporation, BL No. 85, Blue Bells, Near Vaishnodevi Township, Adajan, Surat. PAN No. ACCFS 9265 P Appellant/ Respondent Respondent/ Assessee Department represented by Shri Ritesh Mishra, CIT-DR Assessee represented by Shri P.M. Jagasheth, C.A. Date of hearing 06/10/2023 Date of pronouncement 31/10/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the Revenue is directed against the order of learned Commissioner of Income Tax (Appeals)-4, Surat (in short, the ld. CIT(A)) dated 08/04/021 for the Assessment Year (AY) 2014-15. The Revenue has raised following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in restricting the addition of Rs.3,82,25,980/- made on account of unaccounted on money receipt from the real estate project to Rs.27,428/- even though the addition was made on the basis of incriminating documents found and seized during the course of search proceedings under Sec. 132 of the Act and admissions made by the partner of the firm. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in ignoring the fact that the extrapolation of income was made by the Assessing Officer in respect of the units belonging to the same project and there was no dispute regarding the factum of receipt of on money on sale of the units of the said project. ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 2 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the assessee has received on money in respect of sale of 23 Units of a project and the remaining 81 Units of the same projects were sold at a lower rate especially when there was no difference in the prevailing market conditions for such sale of units and all flats have been booked during the A.Y. 2014-15. 4. It is, therefore, prayed that the order the Ld. CIT(A) -4, Surat may be set aside and that of the AO may be restored to the above extent. 5. The appellant craves leave to add, alter, amend and/or withdraw any round(s) of appeal either before or during the course of hearing of the appeal. 2. Brief facts of the case are that the assessee is a firm engaged in the business of builder and developer. A search action under Section 132 of the Income Tax Act, 1961 (in short, the Act) was carried out on Vaisnodevi Group, Surat on 28/11/2013. Partner of assessee was also covered in the said search proceedings. Simultaneously, a survey action under Section 133A of the Act was also carried out at the project site of assessee firm on the same day. The assessee filed its return of income for A.Y. 2014-15 on 30/11/2014 declaring NIL income. The case of assessee was selected for scrutiny. During the assessment proceedings, the Assessing Officer noted that during the relevant period, the assessee firm was engaged in development of residential project in the name of Blue Bells. The assessee’s project consist of two towers i.e. Tower A and Tower B having total flats of 104 admeasuring 2295 square feet each. The project was started in previous financial year i.e. F.Y. 2012-13. It was noted by the Assessing Officer that in the course of search proceedings, it was found that the assessee was not properly maintaining its books of account and that was indulged in ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 3 accepting on-money in cash and also incurring expenses therefrom. Such on-money do not form part of regular books of account, thus the assessee was not showing correct profit in its regular books of account. The Assessing Officer was of the view that books of assessee are liable to be rejected for the reasons that evidence found in the search action that on money received by assessee, was categorized in two parts, one part received against a particular flat in the project till date and second receivable in subsequent period. Further, the expenditure were shown out of books pertaining to the project. Such view of the Assessing Officer was based on the file of loose papers found at the residence of Shri Rajeshbhai N. Vaghani which was seized as per Annexure-A3 and Annexure-A4. Page No. 1 of Annexure-A3 was a computerized diary wherein details in respect of booking of flats in B-Tower, was written. Further page No. 99 of Annexure-A4 is also computerized diary wherein remaining portion of page No. 1 of Annexure-A3, has been written. Such details was scanned by the Assessing Officer on page No. 3 and 4 of assessment order. The Assessing Officer further recorded that during post search proceedings, statement of Rajeshbhai N. Vaghani was recorded on 30/01/2014 wherein he was confronted with evidence found during the course of search. On confronting such fact, he stated that page No. 1 and 99 are details of booking in respect of their project Blue Bells, which is being developed by their firm Shree Narayan ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 4 Corporation having two towers of 104 flats, each flat having area of 2295 square feet. The seized evidence contained details of booking of flat in Tower-B. He also stated that 27 flats have already been booked by customers in Tower-B. He admitted that flats are booked at the rate mentioned in column No. 6 of the chart and the total consideration, down payment, instalments and the balance amount is mentioned in the subsequent columns. It was explained that the amount written as 5395.55 is actually Rs. 5395545/- (2295 X 2321). 3. The Assessing Officer further recorded that during the assessment, the assessee was asked to explain the seized paper. The assessee filed their reply. The contents of reply is extracted on page No. 4 to 6 of the assessment order. In reply, while explaining seized material, the assessee in sum and substance submitted that there was total booking of 23 flats till the date of search. The initial bookings were meagre amount was paid as advance for booking of such flats. Subsequent to search due to fear factor and downfall in the rates of real estate, the 15 customers out of 23 cancelled the booking and the amount of booking was refunded to them. Some of those cancelled flats alongwith unsold flat were rebooked @ of Rs. 1550 per square feet. To substantiate the high range of cancellation of boking of flats at the assessee’s site that on the date of search, two diaries of booking of flats were found in the possession of assessee. A normal trend of ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 5 business is that once the diary is returned back to the builder, the purchaser is deemed to have cancelled the booking, the amount is paid back. The assessee has received a meagre amount against 15 flats which was cancelled. On money component, if at all has to be taxed in the year in which sale deed of possession is handed over to the flat owner. To support such ratio of law, the assessee relied upon the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Ashaland Corporation 133 ITR 55 (Guj) and CIT Vs Motilal C. Patel & Co. 173 ITR 666 (Guj). 4. The assessee in his without prejudice submission, submitted that if the list of booked flats, based on the sheet, seized during the course of search, one may find that the total receipt including on money component is Rs. 12.57 crores. The assessee substantiated Rs. 8.53 crore in his books of account based on prevailing Jantri rate as per seized paper. The differential portion is of Rs. 4.04 crore is on money component of 23 flats. The assessee has accepted booking component of only 23 flats as on date of search and due to fear factor most of the bookings were canceled and the assessee has to resort to under cutting (slashed) the price and sold the flat at an amount of Rs. 1550 per square feet. 5. In other without prejudice submission, the assessee submitted that if on money is presumed in respect of 23 flats of Rs. 4.00 crores, it is ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 6 settled position under law that only profit component of such unaccounted sale and not the whole sale to be added as has been held by the Hon'ble Jurisdictional High Court in the case of CIT Vs. President Industries 258 ITR 654 (Guj). The assessee also relied on some other case laws and submitted that in an unreported decision of Tribunal in ITO Vs. Anand Builders, only 8% of gross receipt in case of builder was treated as on money income component. 6. The Assessing officer not accepted the reply furnished by assessee. The Assessing Officer held that the contention of assessee regarding the cancellation of booking of flats in only an afterthought, when the evidence in respect of receipt of on money was found and seized during the search proceedings. The Assessing Officer compiled certain details of various annexures i.e. A-24, A-09, A-29, A-30, A-34 on page No. 6 and 7 of assessment order. After referring his observation in respect of various papers of seized material, the Assessing Officer held that on verification of such evidence seized during the search proceedings, confirmed the factum of receipt of unaccounted income and the contention of assessee about the cancellation is nothing but an afterthought. Mere submission without corroborative evidence is not admissible, whereas the seized document is contrary to such fact. The Assessing Officer made reference of one Satakat in respect of flat No. B-1203 executed between the buyer and the assessee firm. As per ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 7 Satakat, the buyer has made payment of Rs. 2.00 lacs through cheques on 03/08/20123. Further as per details available on page No. 99 of Annexure-A-4, it shows that such buyer has made payment of Rs. 13.00 lacs in cash. Details of this payment is clearly mentioned on page No. 4 and 5 of Annexure-A-29. Such facts were admitted by Shri Rajesh Vaghani that all payments were received in cash in 2012-13. The Satakat executed on later date found and impounded as per Annexure- 1 from the site office of Vaisnodevi and the receipt of payment through cheque in subsequent year 2013-14, which clearly proved that booking by the customer was alive and no cancellation of booking was made. The contention of assessee about the cancellation of booking subsequently is only an effort to cover up the evidences found and seized during the search. The Assessing Officer further recorded that on enquiry made from the office of Sub-Registrar, the assessee sold 51 flats from 27/08/2014 to 28/01/2016, details of sales by assessee on the basis of information from Sub-Registrar was compiled and mentioned at page No. 8, 9 and 10 of assessment order. The Assessing Officer in respect of 51 flats recorded that each flat was having area of 2295 square feet and the rate of flats were Rs. 1550/- per square feet thereby amount of consideration of Rs. 33,57,250/- against each of the flat. The Assessing Officer on comparison of list of 51 flats and list of booking of 27 flats found and seized during the search, held that out ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 8 of list of 51 flats, three persons namely Nimesh A. Solanki, Kirit Mehta and Malaben Shah have purchased flats, whose names were mentioned in the seized papers, thus the assessee’s plea regrading cancellation of booking made @ Rs.2351/- per square feet was rejected. The Assessing Officer on the basis of such observation, held that the assessee has booked flat @ Rs. 2351/- per square feet as on the seized material and sold five flats @ Rs. 1400/- per square feet and 46 flats @ Rs. 1550/- per square feet as evident from the sale deeds. The difference amount was worked out by Assessing Officer in the following manner: Total Saleable Area Rate per Sq. Ft. Total amount involved Document price/Jantri Rate per Sq. Ft. Total amount of sale consideration to be shown in sale deed. Total on money involved in the project. 2,38,680 2351 56,11,36,680 1.(5 flats @ Rs. 1400/-) 2. Rest @ Rs. 1550/- 1,60,65,000/- 35,21,67,750/- 36,82,32,750/- 19,29,03,930/- 7. The Assessing Officer on the basis of such observation, rejected the books of account of assessee and estimated net taxable profit of assessee by considering various decisions in taxing 25% of net profit from unaccounted/on money of Rs. 19,29,03,930/- thereby worked out addition of Rs. 4,82,25,982/- as estimated on money. The assessee firm has made disclosure/admitted unaccounted income of Rs. 1.00 crore during search, thereby granting set off such disclosure. Income of assessee was estimated at Rs. 3,82,25,982/- and made addition in ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 9 the assessment order dated 28/03/2016 passed under Section 143(3) of the Act. 8. Being aggrieved by the addition made in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee challenged the rejection of books of account as well as addition on merit. Before the ld. CIT(A), the assessee filed detailed written submission, which is recorded in para 4 of order of ld. CIT(A). In the submission, the assessee in sum and substance, submitted that a survey and search was carried out at the business and residential premises of assessee. Residence of Rajesh Vaghani, one of the partner was also searched, wherein loose papers were seized as Annexure-A3 and A4. Page No. 1 of Annexure-A3 and page No. 99 of Annexure-A4 are computerized diary wherein details in respect of flats in assessee’s project namely “Blue Bells” were seized. The assessee declared Rs. 1.00 crores for A.Y. 2013-14 to cover up the document seized during the course of search action. The total booking as on the date of search was 23 flats. Subsequent to the search, 19 customers out of 23 customers, cancelled their booking. Thereafter the cancelled flats and other remaining flats were booked @ Rs. 1550 per square feet. The Assessing Officer during the assessment, rejected the books of account by making extrapolation, made addition of Rs. 3.82 crores on the basis of estimation and guess work. The assessee in further details, ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 10 submitted that page No. 1 of Annexure-A3 and page No. 99 of Annexure-A4 contained total details of booking of 24 flats which was the ignition booking. Due to huge cancellation of flats, the assessee reduced/slashed the rate of remaining flats. The booking shown in the diary were cancelled. In without prejudice submission, the assessee submitted that on the basis of seized material during the course of search, the total receipt of on money component is Rs. 12.05 crores and the assessee accounted Rs. 8.04 crores in his books of account on the basis of prevailing Jantri price. The assessee on the basis of seized material prepaid summary of all 23 bookings at different rates in respect of all the flats and in such summary, has shown total alleged on money of Rs. 4.01 crores and submitted that once booking were cancelled and assessee has to resort for booking at reduced rate and reselling the same flat @ Rs. 1550/- per square feet, the estimation of on money for whole of the project is baseless and unlawful. To support such view, the assessee relied on decisions of Tribunal in M/s Savaliya Buildcon in ITA No. 401/Ahd/2014 and 3188/Ahd/2015, Amar Corporation in ITA No. 2036 to 2041/Ahd/2007, Neptune Realty Pvt. Ltd. in ITA No. 2981/Ahd/2011, Surya Enclave Developers in ITA No. 707/Ahd/2011 and Yadav Developers P ltd. in ITA No. 3674, 3675 and 3676/Ahd/2018. ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 11 9. In their without prejudice submission, the assessee further submitted that even if 23 flats are presumed to be booked by the assessee. On money component is only of Rs. 4.00 crores. It is settled law that whenever unaccounted sales are found in the form of on money, the only profit component to such unaccounted sales and not the whole sale is to be added. To support such contention, the assessee relied on the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs President Industries (2002) 124 Taxman 654, CIT Vs Gurbachhan Singh J Juneja 215 ITR 509 (Guj), decision of Tribunal in M/s Shhlok Enterprise ITA No. 2018/Ahd/2016, Abhishek Corporation (1999) 63 TTJ 651 (Ahd.), Kishor Mohanlal Telwala (1999) 107 Taxman 86 (Ahd.), CIT Vs Ashalald Corporation (1991) 7 Taxman 393 (Guj) and CIT Vs Motilal C. Patel & Co. (1988) 40 Taxman 336 (Guj). 10. The ld. CIT(A) after considering the submission of assessee and the contents of assessment order, rejected the grounds of appeal with regard to rejection of books of account. However, on the addition of Rs. 3.82 crores, the ld. CIT(A) granted substantial relief and sustained the addition to the extent of Rs. 27,428/-. The ld. CIT(A) while granting substantial relief to the assessee, noted that the assessee was developing project namely Blue Bells consisting of two towers A & B having total 104 flats having area of 2295 square feet each. The evidence seized during the search contains the details of booking of flat ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 12 in B-Tower only. The ld. CIT(A) noted that total 27 flats were booked in this tower (Assessing Officer’s case is with regard to 23 flats). The assessee took his stand that booking recorded on those pages were cancelled after search action, and so no on money was received. Such explanation of assessee was not accepted by Assessing officer on the basis of Satakat in respect of flat No. B-1203 executed by buyer and partner of the firm. As per Satakat, payment of Rs. 2.00 lacs was made through cheque, as per details available on page No. 99 of Annexure- A-4 and buyer has also made payment of Rs. 13.00 lacs in cash which is mentioned at page No. 4 and 9 of Annexure-A-29. On the basis of such evidence, the Assessing Officer concluded that theory of cancellation of booking is an afterthought. The Assessing Officer also enquired from Sub-Registrar office from where it was disclosed/found that the assessee sold total 51 flats in between 27/08/2014 to 28/01/2016. The Assessing Officer on comparison of list of 51 flats and the list of booking of flats found and seized from the residential premises, also noticed that Nimesh A. Solanki, Kirit Mehta ad Malaben Shah have purchased flats in Blue Bells. On the basis of such fact, the Assessing Officer also strengthen his view that theory of cancellation of booking is wrong. The Assessing Officer worked out total saleable area of 236680 square feet which was sold @ Rs 2351/- per square feet and thus total sale consideration was worked out at Rs. 56,11,36,680/-. The ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 13 assessee has shown sale of five flats @ of Rs. 1400/- per square feet and remaining flats @ of Rs. 1500/- per square feet. On the basis of such consideration, total booking amount was worked out total on money at Rs. 19,29,03930/- (Rs. 56,11,36,680 – 36,82,32,750). The Assessing Officer considered 25% income of total on money and arrived at a figure of Rs. 4,82,25,982/- which is estimated profit of on money. The assessee has already declared disclosure of Rs. 1.00 crore thereby addition of Rs. 3,82,25,982/- was added as profit of on money. 11. The ld. CIT(A) on considering the plea of assessee that Assessing Officer made extrapolation of respect on sale of all the flats of the project, which is not justified at all and that profit rate adopted by Assessing Officer @ 25% of total estimated on money is of highest rate and it should be at 8%. The ld. CIT(A) on considering such plea, noted that the Assessing Officer estimated on money receipt by taking highest selling price per square feet for whole of the saleable area which cannot be justified. At the time of search and survey, there was booking of only 23 flats. The ld. CIT(A) by referring various decisions of the Tribunal as relied by assessee in Surya Enclave Developers (supra) and M/s Savaliya Buildcon (supra) wherein it was held that estimated ratio receipt of on money of sale of all the flats merely on the basis of statement of two purchasers, without any tangible corroboration clearly falls in the realm of conjectures and surmises. The ld. CIT(A) also ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 14 referred the decision of various other Tribunals and noted that the documents at the residence of partner containing the details of gross receipt were only in respect of 23 flats, therefore on money must be determined in respect of 23 flats and not for whole of the sealable area. 12. The ld. CIT(A) by extracting the details of all 23 flats with their area, rate mentioned at seized material, gross amount, documentation rate and documentation amount, prepared total on money of Rs. 4.01 crores and held that estimation by Assessing Officer of Rs. 19.29 crores, is not justifiable at all. The ld. CIT(A) thereafter while taking on money component of all 23 flats which is Rs. 4.01 crores as per documents found during the search and estimated 25% thereof as profit which is worked out at Rs. 1,00,27,428/-. As the assessee has already made a disclosure for the project for A.Y. 2013-14 and granted credit thereof sustained the addition to the extent of Rs. 27,428/- (Rs. 1,00,27,428 – 1,00,00,000). Aggrieved by the order of ld. CIT(A), the revenue has filed present appeal before this Tribunal. 13. We have heard the rival contentions of the learned Commissioner of Income Tax-Departmental Representative (ld. CIT-DR) for the revenue and the learned Authorised Representative (ld. AR) of the assessee and have perused the orders of the lower authorities carefully. The ld CIT- DR for the revenue submits that during the course of search action, evidence was found that assessee was making booking of flat @ Rs. ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 15 2351 per square feet for flat of 2295 square feet. The total booking of 23 flats were found. The assessee was not showing actual boking in their books of account. When such evidence was confronted with the assessee, the assessee declared Rs. 1.00 crore as additional income. During the course of assessment, the assessee took its stand that so many buyers has cancelled the booking, after search action, such fact was found to be incorrect on verification and investigation by Assessing Officer, therefore, the Assessing officer was justified in considering the price of all the saleable area at the rate mentioned in the seized material. The Assessing Officer after working out of on money, reasonably estimated only 25% and further granted set off of income already declared in the search action. The ld. CIT(A) granted relief to the assessee by taking a view that no extrapolation in respect of whole of the project is permissible rather the evidence was in respect of 23 flats and he estimated 25% of on money in respect of 23 flats only. The ld. CIT-DR for the revenue submits that the decision of ld. CIT(A) is not acceptable as there was sufficient evidence found and seized during the course of search action on the basis of which it was clearly established that the assesse has earned/received on money of Rs. 19.29 crores. The ld. CIT-DR for the revenue submits that he fully supports the order of Assessing Officer and prayed for restoring the order of Assessing Officer by reversing the order of ld. CIT(A). ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 16 14. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee reiterated his submission as per his stand taken before the Assessing Officer as well as before the ld. CIT(A). The ld. AR of the assessee submits that after search action, the reputation of assessee was badly affected and for the fear factor, out of 23 buyers, 19 persons cancelled their booking. Ultimately the assessee has no option except to reduce the rate and to recover the investment and to declare the rate @ of Rs. 1550 per square feet. The assessee sold the flat only @ 1550/- per square feet, which was above the prevailing jantri rate determined by the State Government. The ld. AR of the assessee submits that at the best, only addition could be in respect of four units only about the receipt of on money. 15. The ld. AR of the assessee in his without prejudice submission, submitted that the Assessing Officer made extrapolation in respect of whole of the saleable area without bringing any adverse material or evidence on record. Such extrapolation is not permissible in absence of any evidence. The ld. CIT(A) on considering the alternative plea of assessee, estimated/worked out on money in respect of 23 flats which was found in the seized material and estimated 25% profit of such estimation. As the assessee has already declared Rs. 1.00 crore as additional income for A.Y. 2013-14. The ld. CIT(A) after granting set off of such income, upheld the addition to the extent of Rs. 27,428/-. ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 17 16. The ld. AR of the assessee submits that in case of a builder, the income is to be taxed when the sale deed of the saleable unit is executed or possession is handed over. The ld. AR of the assessee submits that no extrapolation in absence of rate in absence of any incriminating evidence is permissible with regard to whole of the project. The ld. AR of the assessee further submits that only profit of alleged on money is brought on record and not the entire alleged receipt. The ld. AR of the assessee further submits that even if extrapolation is permissible in respect of incriminating material qua the booking, they should be given credit of declaration already made. To support his various submissions, the ld. AR of the assessee relied upon the following case laws: (A) on the issue of year of taxation relied on these decisions, (1) CIT(Central) Vs Happly Home Corporation (2019) 103 Taxmann.com 22 (SC) (2) CIT(Central) Vs Happy Home Corporation (2018) 94 Taxmann.com 292 (Guj) (3) ACIT Vs happy Home Corporation ITA No. 2720/Ahd/2014 (4) CIT-IV Vs Shivalik Buildwell (P) Ltd. (2013) 40 Taxmann.com 2019 (Guj) (5) CIT Vs Ashaland Corporation (1981) 7 Taxman 393 (Guj) (6) CIT Vs Motilal C Patel & Co. (1988) 40 Taxman 336 (Guj) (7) ACIT Vs Kush Corporation ITA No. 93 & 94/Srt/2022, ITA No. 357/Srt/2022 (8) DCIT Vs Shiv Sai Developers (2011) 16 Taxmann.com 256 (Mum) (B) on the issue expoliation relied on these decisions ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 18 (9) CIT Vs Standard Tea Processing Co. Ltd. (2013) 34 Taxmann.com 31 (Guj) (10) CIT Vs B. Nagendra Baliga (2014) 47 taxmann.com 331 (Kar) (11) ACIT Vs M/s Amar Corporation ITA No. 2036/Ahd/2007 (12) Sayan Textile Park Ltd. Vs ACIT ITA No. 360/Ahd/2014 (13) M/s Savaliya Buildcon Vs DCIT ITA No. 401/Ahd/2014 and 3188/Ahd/2015 (14) M/s Neptune Reality Pvt. Ltd. Vs DCIT ITA No. 2918/Ahd/2011 (15) DCIT Vs M/s Surya Enclave Developers ITA No. 707/Ahd/2011 (16) Yadav Developers Pvt. Ltd. Vs DCIT ITA No. 3674/Ahd/2018 (17) Mani Square Ltd. Vs ACIT (2020) 118 Taxmann.com 452 (18) Fort Projects (P) Ltd. Vs DCIT (2013) 29 Taxmann.com 84 (19) CIT Vs President Industries (2002) 124 Taxman 654 (Guj) (C) on the issue of estimation of profit on on money relied on these decisions (20) CIT Vs Gurubachhan Singh J Juneja (2008) 215 CTR 509 (Guj) (21) DCIT Vs Panna Corporation Tax Appeal No. 323 of 2000 (Gujarat High Court) (22) DCIT Vs M/s Shhlok Enterprise ITA No. 2018/Ahd/2016 (23) DCIT Vs Brijwasi Developers P Ltd. ITA No. 290/Ahd/2013 (24) Kishor Mohanlal Telwala Vs ACIT (1999) 107 Taxman 86 (Ahd. Trib) (D) on the issue if during the search the entries of expenditure is found, it should be believed (25) CIT Vs Indeo Airways (P) Ltd. (2012) 26 Taxmann.com 244 (Delhi) (26) M/s S.R. Corporation Vs PCIT ITA No. 289/Srt/2018 (27) Jay Deepakkumar Rawal Vs ACIT IT(SS)A No. 77/Srt/2022. 17. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We have ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 19 also deliberated on various case laws relied upon by the lower authorities as well as by the ld. AR of the assessee. We find that the Assessing Officer made addition of Rs. 3.82 crores by making extrapolation of on money in respect of whole of the saleable area and worked out component of ‘on money’ of Rs. 19,29,03,930/-. The Assessing Officer brought 25% of estimated on money thereby worked out the addition of on money at Rs. 4.82 crores. As the assessee has already declared additional income of Rs. 1.00 crore thereby after granting set off of Rs. 1.00 crore, the Assessing Officer added Rs. 3.82 crores as income of assessee. We find that before the ld. CIT(A), the assessee reiterated the similar submission as submitted while filing reply to show cause notice. The ld. CIT(A) on considering the one of alternative submission of assessee sustained the addition to the extent of Rs. 27,428/- by holding that the assessee was developing project namely Blue Bells consisting of two towers A & B having total 104 flats having area of 2295 square feet each. The ld. CIT(A) held that total 27 flats were booked in this tower. The assessee took his stand that booking recorded on those pages were cancelled and so no on money was received. Such explanation of assessee was not accepted by Assessing officer on the basis of Satakat in respect of flat No. B-1203 executed by buyer and partner of the firm. As per Satakat, payment of Rs. 2.00 lacs was made through cheque, as per details available on ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 20 page No. 99 of Annexure-A-4 and buyer has also made payment of Rs. 13.00 lacs in cash which is mentioned at page No. 4 and 9 of Annexure- A-29. On the basis of such evidence, the Assessing Officer concluded that theory of cancellation of booking is an afterthought. The Assessing Officer also strengthen his view by making enquiry from Sub-Registrar office and find the assessee sold total 51 flats in between 27/08/2014 to 28/01/2016. On comparison of list of 51 flats and the list of booking of flats found and seized from the residential premises, find that one Nimesh A. Solanki, Kirit Mehta ad Malaben Shah have purchased flats in Blue Bells, who were seen in the seized evidences. On the basis of such facts, the Assessing Officer was of the view that theory of cancellation of booking is wrong. The Assessing Officer on the basis of saleable area of 236680 square feet, was sold @ Rs 2351/- per square feet worked out total revenue at Rs. 56,11,36,680/-. The assessee has shown sale of five flats @ of Rs. 1400/- per square feet and remaining flats @ of Rs. 1500/- per square feet. On the basis of such consideration, total booking amount was worked out at Rs. 36,82,32,750/- (Rs. 56,11,36,680 – 36,82,32,750). The Assessing Officer considered 25% income of total on money and arrived at a figure of Rs. 4,82,25,982/- which is estimated profit of on money and allowed set off of disclosure of Rs. 1.00 crore and made addition of Rs. 3,82,25,982/- of on money. The ld. CIT(A) by referring various ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 21 decisions of the Tribunal as relied by assessee wherein it was held that estimated ratio receipt of on money of sale of all the flats merely on the basis of statement of two purchasers without any tangible corroboration clearly falls in the realm of conjectures and surmises. The ld. CIT(A) also referred the decision of various other Tribunals and held that the documents at the residence of partner containing the details of gross receipt were only in respect of 23 flats, thus, on money must be determined in respect of 23 flats and not for whole of the sealable area. 18. We find that ld. CIT(A) by extracting the details of all 23 flats with their area, rate mentioned at seized material, gross amount, documentation rate and documentation amount, prepared total on money of Rs. 4.01 crores and held that estimation by Assessing Officer of Rs. 19.29 crores is not justifiable at all. The ld. CIT(A) thereafter while taking on money component of all 23 flats which is Rs. 4.01 crores, which was as per seized material, estimated 25% thereof as profit, which is worked out at Rs. 1,00,27,428/-. As the assessee has already made a disclosure for the project for A.Y. 2013-14 and granted credit thereof sustained the addition to the extent of Rs. 27,428/-. We find that the Hon'ble Jurisdictional High Court in CIT Vs Standard Tea Processing Co. Ltd. (supra) held that addition for undisclosed income on account of inflated purchase price can be made only for the period to which document ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 22 found during the search and not the entire block period. Further the Hon'ble Karnataka High Court in CIT Vs B. Nagendra Baliga (supra) also held that the Assessing Officer is not entitled to extrapolate undisclosed income detected in the course of search for a particular period to entire block period on estimate basis. Further the Coordinate Bench of Ahmedabad Tribunal in ACIT Vs Amar Corporation (Supra) also held that the question of extrapolation can only arise only in a situation when the document give an intimation that it was a regular occurrence in a systematic manner, only in that situation, this possibility of extrapolation otherwise not. We find that the ld. CIT(A) by following the judicial precedent, considered the extrapolation in respect of 23 flats, details of which was seized in the search action and worked out on money on his detailed analysis. The ld. CIT(A) find that Rs. 4.01 crores was the alleged on money receipt by assessee. The ld. CIT(A) estimated 25% of such on money as the income component and found that 25% of such on money is only Rs. 1,00,27,428/-. The assessee has already declared Rs. 1.00 crore thereby the addition of Rs. 27,428/- was restricted. Being a search case, we have independently examined the facts of the present case and find that there was no incriminating material qua the entire saleable area. Though the assessee raised a plea before the Assessing Officer that 19 persons have cancelled their bookings after a search action due to fear of interrogation and ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 23 investigation by the search team. No proof of refund of their deposits or bookings is either shown to the Assessing officer while filing reply to the show cause notice except assertion that liability of bookings were refunded. In such situation, we find that the ld. CIT(A) was justified in considering the on money component in respect of such 23 persons. For other remaining buyers, the Assessing Officer has not brought any evidence except assuming and presuming and making extrapolation that assessee has received on money from each and every buyer. Thus, we find that the ld. CIT(A) was quite right and justified in considering the on money in respect of the persons whose details were found during the search action. 19. Being a search case, we independently examined the facts of the present case and find that neither the search party nor the Assessing Officer made any investigation from the purchasers or the other person whose names were found in the seized material about the payment of additional on money. The Assessing officer estimated on money after rejecting books of account by considering whole saleable area by multiplying figure of rate found in the seized material. Such application of formula of on money with regard to entire saleable are is not justified, particularly when there is no independent or corroborate evidence to support such action. Further, the assessing officer being investigator and adjudicator was under obligation to consider the entire ITA No. 107/Srt/2021 ACIT Vs M/s Shree Narayan Corporation 24 seized material. The assessing officer in para-6 of his order has clearly recorded that the assessee receiving on money in cash and was incurring expenditure therefrom. No such fact was taken into consideration by assessing officer while estimating income from on money component. We find that Hon’ble Delhi High Court in CIT Vs Indeo Airway (P) ltd held that where receipt recorded in the searched documents are believed to be income, entries of expenditure recorded therein are also to be believed without asking for more evidence for such expenditure. Thus, with our aforesaid additional observation, we uphold the order of ld. CIT(A). In the result, grounds of appeal raised by the revenue are dismissed. 20. In the result, this appeal of revenue is dismissed. Order announced in open court on 31 st October, 2023. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 31/10/2023 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR 5. Guard File By order Sr. Private Secretary, ITAT, Surat