AO held nt justified in confirming addit'ns made by AO due to excess profit.

Facts in Brief:

1. Assessee is engaged in the business of construction and development in the field of real estate.

2. The assessee has developed a housing project named "Greenwood" in the city of Baroda.

3. The said project comprises of 26 Bungalows and the entire project consists of high end residential units.

4. A search u/s 132 (of Income Tax Act, 1961) was carried out in the Amod Group of cases.

5. Since the assessee has already disclosed an amount of Rs.300 lakhs on account of on- money receipts in respect of Greenwood Project, a net addition of Rs.20,33,000/- was made by the Assessing Officer to the total income of the assessee.

6. On appeal CIT (A) confirmed it.

On appeal ITAT held,

7. Thus, the Assessing Officer worked out the amount of cash received @ 52% of total receipts. During the course of assessment proceedings, the assessee made submissions for establishing that no cash was received on either of these papers/customers and further, no cash was received or receivable in respect of other customers.

8. The stand of the assessee has been that no cash was received but the amounts against alphabet 'c' represented the amount to be received subjected to the confirmation for extra work.

9. The assessee also mentioned that the disclosure of Rs.300 lakhs made during the course of search was sufficient to cover the unaccounted money received from the project. In this background, the Assessing Officer rejected the plea of the assessee and proceeded to estimate the amount of on- money received by applying the extrapolation method.

10. We find that there is nothing on record to suggest that any material was found during the course of search evidencing on-money received for other bungalows. In such situation, the extrapolation method cannot be applied to the receipts of other bungalows. Further, the Assessing Officer was not justified in estimating the profit on "on money" receipts @ 25 %.

11. This 25% estimation of profit on on-money receipts is purely on the basis of assumptions, surmises and conjectures. Thus, in our opinion, the CIT(A) was not justified in confirming the addition made by the Assessing Officer by estimating the profit on "on money" ITA No. 2918/Ahd/2011 M/s. Neptune Realty Pvt Ltd vs. DCIT AY : 2009-10 receipts @ 25% while the assessee has already offered tax on the admitted unaccounted receipts from its Greenwood Project amounting to Rs.300 lakhs.

12. Under these facts and circumstances of the case, the authorities below are not justified in making the addition in question and confirming the same; and therefore, the addition in question is directed to be deleted.

13. In the result, the appeal filed by the assessee is allowed. 

Case Reference - Income Tax Appellate Tribunal - Ahmedabad Neptune Realty Pvt.Ltd., Baroda vs Assessee.