Telescoping of Unaccounted Payments against Unaccounted Receipts is valid when they are Business-Related: ITAT [Read Order]
The Tribunal ruled that telescoping unaccounted payments against unaccounted receipts is permissible when both are related to the assessee’s business activities, restricting additions to the profit element of such transactions.
![Telescoping of Unaccounted Payments against Unaccounted Receipts is valid when they are Business-Related: ITAT [Read Order]](https://images.taxscan.in/h-upload/2025/07/02/2057957-unaccounted-receipt.webp "Telescoping of Unaccounted Payments against Unaccounted Receipts is valid when they are Business-Related: ITAT [Read Order]")
The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) held that unaccounted payments can be telescoped against unaccounted receipts to determine the real income of an assessee, provided both are linked to the assessee’s business operations. Robin Ramavtar Goenka, (assessee) engaged in the real estate business as part of the Sankalp Group, faced assessments for the...
The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) held that unaccounted payments can be telescoped against unaccounted receipts to determine the real income of an assessee, provided both are linked to the assessee’s business operations.
Robin Ramavtar Goenka, (assessee) engaged in the real estate business as part of the Sankalp Group, faced assessments for the assessment years 2018-19 and 2019-20. A search conducted on 30.10.2018 uncovered incriminating materials, including handwritten diaries and loose papers, revealing unaccounted cash receipts and payments related to real estate projects.
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The Assessing Officer (AO) treated the unaccounted receipts as undisclosed income and the unaccounted payments as unexplained expenditure under Section 69C, proposing significant additions.
The AO’s additions included unaccounted cash receipts of Rs. 24,74,37,451 and payments of Rs. 6,30,00,729, totaling Rs. 31,04,38,180. The assessee argued that both receipts and payments were part of normal business activities.
Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) partly allowed the assessee’s appeal, telescoping the unaccounted payments against receipts and estimating a profit margin of 14%, resulting in a confirmed addition of Rs. 3,46,50,000 as business income.
Aggrieved by the CIT(A)’s order, both the assessee and the Revenue appealed to the ITAT. The assessee contended that the 14% profit rate was excessive and that only the real income should be taxed, citing precedents like CIT vs. President Industries and Godhra Electricity Co. Ltd. vs. CIT.
On the other hand, the Revenue argued that telescoping was inappropriate and that the entire unaccounted receipts should be taxed.
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The two-member bench comprising T.R. Senthil Kumar (Judicial Member) and Makarand Vasant Mahadeokar (Accountant Member) observed that the seized materials clearly indicated that both unaccounted receipts and payments were generated and incurred in the course of the assessee’s real estate business.
The bench further held that since unaccounted payments exceeded unaccounted receipts, the CIT(A) correctly applied a 14% profit rate to the total payments to compute the taxable income at Rs. 4,34,84,000.
However, the Tribunal found the 14% rate reasonable given the nature of the real estate business and the evidence presented. The Tribunal found no basis to tax the entire receipts separately when both receipts and payments were business-related.
The Tribunal concluded that telescoping unaccounted payments against unaccounted receipts is valid when they pertain to the same business activity, ensuring that only the real income is taxed. The appeals of the Revenue were dismissed.
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