The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) has granted relief to the builder observing that the on-money received on sale of property at 50% booked price was on a “Palpably very high Side”.
The appellant, Padmavati Housing Corporation is a partnership firm engaged in the business of construction and development of housing projects. During the course of search certain incriminating documents were found and seized from the premises of Shri Mukesh J Shah. Accordingly, proceedings under Section 153C were initiated in the case of the appellant and appellant explained that during the period of search the appellant had undertaken a housing project called “New Mont Villawhich was a scheme of 20 luxurious bungalows.
During the survey proceedings, some registers were found and impounded which pertained to the bookings of bungalows made in the New Mont Villa project. On the verification of the same, the AO found that the contents of the page had very clearly shown that on-money had been received by the firm in the project and there was a difference between the amount, and AO made an addition.
The assessee had not challenged the addition made on account of on-money received on sale of property in the course of business carried on by the assessee and his only plea was restricting the addition to the profit element embedded in the same
K.P. Singh on behalf of the appellant submitted that, the on-money received was a substantial percentage of the total sale proceeds booked by the assessee of the properties sold, being up to 50% of the same, and if the on-money was treated entirely as income of the assessee, GP/NP of the assessee would be 50% and more of the turnover of the assessee, which was highly improbable in this line of business. PoojaParekh, appeared for the revenue.
Annapurna Gupta (Accountant Member) and Suchitra Kamble (Judicial Member) allowed this ground of appeal and granted relief to the appellant.
“We agree that it is highly improbable in this line of business to make profits up to the extent of 50% or more of the turnover that too on sale of such small sized properties. Even the Ld.DR was unable to enlighten us with statistics showing otherwise. We therefore agree with the ld.counsel for the assessee that making addition of the entire on-money received by the assessee would not be justified”, the Bench observed.
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