Dharam Buildcon, Ahmedabad V. The DCIT, Central Circle-1(3), Ahmedabad

ITA 16/AHD/2023

AI Insights

The case involves Dharam Buildcon, a firm engaged in the construction of residential houses and commercial shops, which faced scrutiny under the Income Tax Act, 1961 for the Assessment Year 2020-21. Following a survey, the firm admitted to receiving undisclosed income from on-money transactions related to their construction projects. The initial assessment added the entire undisclosed income to the firm's taxable income, which was later reduced to 20% of the net profit by the CIT(A). The firm contested this reduction, arguing for a lower addition rate of 10% to 15%, citing similar cases. The Tribunal, referencing a decision by the Hon'ble Jurisdictional High Court, agreed with the firm's contention and directed the AO to limit the addition to 15% of the on-money receipts.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125043 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 02-07-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 08-01-2023
• Other Referred Cases: Jay Builder vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Section: 143(3); 142(1); 133A; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ I. T. A. No . 16/Ahd/202 3 ( नधा रण वष / A ss es sment Year : 2020-21) D h ar am B ui ld co n 8- B , J a y Vij a y So ci e ty, N ar an pu r a V is ta r S . O., A h me da ba d - 38 0 0 1 3 बनाम/ Vs . DC I T C e ntr al 1 ( 3) , A h me da b a d थायी लेखा सं./जीआइआर सं./P A N/ G I R N o . : A A P FD 1 2 7 7 K (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Biren Shah, AR यथ क ओर से/Respondent by : Shri Praveen Verma, Sr. D.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 03/07/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 12/07/2023 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed at the behest of the assessee is directed against the order dated 30.12.2022 passed by the Ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad (in short ‘CIT(A)’) arising out of the order dated 27.12.2021 passed by the DCIT, Central Circle-1(3), Ahmedabad under Section 143(3) of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) for Assessment Year 2020-21. ITA No. 16/Ahd/2023 (Dharam Buildcon vs. DCIT) A.Y.– 2020-21 - 2 - 2. The brief facts leading to the case is this that the assessee, a firm maintaining mercantile system of accounting filed its return of income on 23.12.2020 declaring total loss at Rs.7,45,401/- which was processed under section 143(3) of the Act. Upon selection of scrutiny assessment notice under Section 143(2) of the Act was issued on 26.06.2021 followed by a questionnaire under section 142(1) of the Act on 03.11.2021. In fact a survey under section 133A of the Act was conducted at the business premises of the assessee on 13.0.2020 and statement of the partner namely Sri Dharmendra G. Gajjar was recorded. It is relevant to mention that the assessee firm was in the business of construction of residential houses and commercial shops in the project namely ‘Madhuban’. 3. During the course of survey proceeding, expected estimate expenses for 2BHK and 3 BHK were found from the business premises of the appellant. In fact, the appellant received cash of Rs.3,35,000/- for 2BHK and Rs.3,85,000/- for 3BHK as extra charges and on the basis of such fact, the appellant admitted on-money receipt of Rs.98,80,000/-. From the documents impounded during survey proceeding, it was found that the appellant received Rs.33,92,000/- in cash towards extra work and therefore, admitted on-money receipt of Rs.1,32,70,000/- (Rs.98,80,000 + Rs.33,92,000). It was further observed during course of survey proceeding, which is reflecting from the impugned documents, that the assessee made cash payment of Rs.1,30,00,000/- to one Tripur Builders for labour payment and Rs.1 Lakh to Divyesh Desai. Thus, admitted undisclosed expenditure was of Rs.1,31,00,000/- against receipt of Rs.1,32,70,000/-. The Ld. AO made addition to the entire amount of undisclosed income of Rs.1,32,70,000/-, which was, in appeal, restricted to Rs.26,54,000/- being 20% of the net profit ITA No. 16/Ahd/2023 (Dharam Buildcon vs. DCIT) A.Y.– 2020-21 - 3 - of undisclosed receipt of Rs.1,32,70,000/-. The case of the assessee is this that instead of taking 20% of the undisclosed receipt of the assessee which seems to be higher rate, 10% to 15% of the on-money received by the appellant can be added. On this count, on identical fact, the Ld. DR has relied upon the judgment passed by the Hon’ble Jurisdictional High Court in the case of Jay Builder vs. ACIT, reported in [2013] 33 taxmann.com 62 (Guj.), a copy whereof has also been submitted before us. On the other hand, Ld. DR relied upon the orders passed by the authorities below. 4. We have heard the rival submissions made by the respective parties and perused the orders passed by the authorities below and order passed by the Hon’ble Jurisdictional High Court. 5. We find that in the identical issue Hon’ble Jurisdictional High court was pleased to observe as follows: “2. Though multiple questions have been framed, the centre issue pertains to additions sustained by the Tribuna1 at the rate of 15% of the 'on money' received by the assessee. The learned counsel for the appellant pointed out that before the Tribunal the assessee had canvassed that not the entire 'on money' received but only the profit element could be taxed in the hands of the assessee. The contention of the assessee was substantially accepted by the Tribunal. The additions were limited to 15% of the 'on money' receipts. 3. From the impugned orders, we notice that before the Tribunal at the time of hearing of the appeal, the assessee had confined the contentions to one noted above and had not raised any other substantives grounds. That being the position, when the Tribunal accepted the contention of the Tribunal to a larger extent and limited the additions to 15% of the 'on money’ receipts, in our opinion, no further examination at the end of the assessee is called for. It is, of course, true that the assessee had suggested addition of 10%. However, not accepting such suggestion would hardly give any rise to a question of law. We are also conscious that the decision of the Tribunal is called in question by the Revenue and the Tax Appeal is admitted. However, when the assessee's sole contention before the Tribunal was ITA No. 16/Ahd/2023 (Dharam Buildcon vs. DCIT) A.Y.– 2020-21 - 4 - substantially accepted, we do not see any purpose for surviving this appeal. The appeal is dismissed.” In the above matter, The Hon’ble Jurisdictional High Court restricted the addition of 15% of the on-money receipts on the identical fact. Respectfully relying upon the same, we decide the issue directing the Ld. AO to estimate the addition to 15% of on-money receipt of Rs.1,32,70,000/- upon quashing the order passed by the Ld. CIT(A). 6. In the result, the appeal of the assessee is partly allowed. This Order pronounced on 12/07/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 12/07/2023 True Copy S. K. SINHA आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad