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The captioned appeal by the Revenue is directed against the order of CIT(A)-29, Mumbai dated 30.11.2011, pertaining to the Assessment Year 2006-07, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 30.12.2010 under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (in short 'the Act').

2. In this appeal, Revenue has raised the following two Grounds of appeal :-

2 M/s. Arsh Constructions "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying upon incorrect facts that there cannot be adhoc estimate of profit at 8% in the A Y 2006-07.

The project comprised of two wings, namely 'A' wing, wherein the existing tenants had to be rehabilitated and the development of which was undertaken free of cost. The construction of this wing commenced in the year 2002. The other wing comprised of 'B' & 'C' which was constructed by the assessee for sale and such construction commenced during the Assessment Year 2004-05. For Assessment Year 2006-07, assessee had originally filed a return of income on 30.10.2006 declaring NIL income from such project on the ground that it was following the 'project completion method' and during the year under consideration the construction of such project was not completed. An assessment, based on such return of income, was finalised u/s 143(3) of the Act on 29.12.2008 whereby the returned income was accepted. It transpires 3 M/s. Arsh Constructions that subsequently the assessment was set-aside by the Commissioner by invoking Sec. 263 of the Act with direction to redo the same. In the ensuing assessment, which is the subject matter of dispute before us, the Assessing Officer gave a go-by to the 'project completion method' adopted by the assessee for deducing the income from the construction of the project in question. Instead, the Assessing Officer estimated the profits for the year by applying a rate of 8% on the advances of Rs.4,71,33,974/- received by the assessee upto the year under consideration, thereby resulting in an addition of Rs.37,70,718/- to the returned income. Such an action of the Assessing Officer was carried in appeal before the CIT(A), raising contentions on facts and in law.

5. In appeal before the CIT(A), assessee pointed out that in the earlier two Assessment Years of 2004-05 and 2005-06 the 'project completion method' adopted by the assessee was accepted by the Department and it was also pointed out that so far as assessment for Assessment Year 2005-06 is concerned, same was also a scrutiny assessment made u/s 143(3) of the Act. Assessee also explained the factual matrix that so far as construction of 'A' wing was concerned, it was commenced in 2002 and the construction of the other saleable wing was commenced only in Assessment Year 2004-05. It was also pointed out that the aggregate of loans and advances were utilized in construction of 'A' wing meant for the old tenants, which was given free of cost and only thereafter the construction of the saleable wings, i.e, 'B' & 'C' was started. Assessee also asserted that certain disputes had arisen amongst the partners and various cases were filed in court which brought the work to a standstill and even the bank account was frozen 4 M/s. Arsh Constructions for a certain period of time. It was also pointed out that due to the aforesaid disputes and delay in the construction, the possession of the flats in the case of saleable wings, i.e., 'B' & 'C' was not given to the buyers. Before the CIT(A), it was also pointed out that the methodology adopted by the Assessing Officer was fallacious inasmuch as the rate of 8% has been applied on the total advances received since inception of the project and not merely with respect to the advances received during the year under consideration. It was also pointed out that in the subsequent Assessment Year of 2007-08 assessee received advances of a lesser amount than the amount of refunds paid to the prospective buyers who had cancelled their bookings. It was, thus, explained that the methodology adopted by the Assessing Officer was incorrect. With regard to the reliance placed by the Assessing Officer on the decision of the Mumbai Bench of the Tribunal in the case of Champion Construction Co., 5 ITD 494, assessee pointed out that the said decision was inapplicable inasmuch as in the present case neither 80% of the projected receipts of the project were received and nor 80% of the work was completed during the year under consideration; and, thus the criteria laid down in Champion Construction Co. (supra) was not applicable. Considering the factual and other submissions put forth by the assessee, CIT(A) called for a remand report from the Assessing Officer on certain points which he has tabulated in para 7 of his order. After considering the reply of the Assessing Officer and the submissions of the assessee, CIT(A) concluded that ad-hoc estimation of profit @ 8% made by the Assessing Officer was untenable. The major points noted by him in this regard have been summarized by him in para 9 of his order, which are reproduced hereinbelow :-

5 M/s. Arsh Constructions "9. I have carefully considered the facts of the case, arguments of the Assessing Officer and the written submissions of the Authorised Representative of the appellant. I find that during the year under consideration the project was completed only about 50%. The total sale consideration upto AY 2006-07 was only Rs.471,33,924/- as against the cumulative sale figure of Rs.7,68,91,449/- in AY 2010-11. Therefore it cannot be said that there was substantial completion of the project. Profit can be estimated only when the project is substantially completed usually at about 80%. There is no evidence that there was substantial completion of the project.