The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the income portion of on-money could be assessable in the year in which the sale of flats has been declared.
The assessee, Magnates Enterprises, was engaged in the business of developing building properties. It belonged to Ameya Group. The Department carried out search and seizure operations in the hands of Ameya Builders & Property Developers and also in the hands of its partners.
During the course of search operations, certain documents belonging to the assessee were seized and the said documents were transferred to the Assessing Officer of the assessee. Accordingly, the Assessing Officer initiated assessment proceedings under section 153C of the Income Tax Act.
The seized documents revealed that the assessee had received on money on sales already executed and also received advances by way of cash in all the three years. The assessee also not accounted certain expenses. Accordingly, the Assessing Officer 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.
Subodh Ratnaparkhi, on behalf of the assessee submitted that the taxability of on-money should be on the basis of accounting policy followed by the assessee.
Riddhi Mishra, appeared on behalf of the revenue.
The Bench observed that, in the instant case, the on-money was received towards sale consideration only, i.e., it is the part of sale consideration only and hence the same could not be taxed in the year in which sale of flats was declared, i.e., taxability of cash component (on-money) and cheque component would go-together.
The two-member Bench of B.R. Baskaran (Accountant Member) and Kavitha Rajagopal (Judicial Member) set aside the impugned order holding that, the income portion of the on-money was assessable in the year in which the sale of the concerned flat is declared by the assessee.
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