On-Money Taxable Only on Profit Basis; IDS Telescoping Allowed- ITAT Barred Reopening by Limitation

A survey under Section 133A in the Hindva Builders group revealed diaries showing receipt of unaccounted on-money in real estate projects for AYs 2015–16 to 2017–18. The AO reopened assessments and taxed the entire on-money under Sections 69A/115BBE, denying telescoping of IDS-2016 disclosures.

The CIT(A) restricted taxation to 17% profit embedded in on-money, allowed telescoping of IDS income, and deleted additions on unsecured loans and cash deposits. The Revenue appealed.

Issues Before Court:  (i) Whether reassessment for AY 2015–16 initiated after 01.04.2021 was barred by limitation in view of Union of India v. Rajeev Bansal;

(ii) Whether entire on-money receipts could be taxed or only the profit element;

(iii) Whether IDS-2016 disclosures were eligible for telescoping; and

(iv) Whether additions on unsecured loans and the questioned unexplained cash deposits were sustainable.

ITAT’s Decision: The ITAT held that the reassessment for AY 2015-16 was invalid and time-barred, following the Supreme Court’s ruling in Rajeev Bansal, and quashed the reopening without examining merits.

For AYs 2016-17 and 2017-18, the Tribunal upheld the CIT(A)’s approach of taxing only the profit in on-money receipts, confirming a 17% estimation as reasonable in the real estate context where unaccounted expenses are inherent. The Tribunal also confirmed the grant of telescoping against income disclosed under IDS-2016, noting absence of evidence that demonetised currency was accepted post-declaration.

The unexplained cash deposits were also deleted after verification of the opening cash balance and cash books. All four Revenue appeals were dismissed.

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