ACIT 15(2), MUMBAI V. VINAYAK BUILDERS & DEVELOPERS, MUMBAI

ITA 5594/MUM/2010

• Counselvise Citation: 559419914 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 31-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ MISHRA SR
• Assessee Lawyers: K R LAKSHMI NARAYANAN
• Keywords: Rejection of books of accounts; Business income

Judgement Text

M/S. VINAYAK BUILDERS & DEVELOPERS I.T.A. N O. 5594/MUM/2010 PAGE 1 O F 8 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A.NO. 5594/MUM/2010 ASSESSMENT YEAR : 2007-08 ASST. COMMISSIONER OF I.T. 15 (2), MUMBAI. VS. M/S VINAYAK BUILDERS & DEVELOPERS, SHOP NO. 3, SALVADOR NO. 3, SHASTRI NAGAR, ANDHERI (W), MUMBAI 400 056. PAN: AAEFV 4544 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANOJ MISHRA. (SR. A.R.) RESPONDENT BY : SHRI K. R. LAKSHMINARAYANAN. DATE OF HEARING: 31-05-2012. DATE OF PRONOUNCEMENT: 06-06-2012. O R D E R PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE DEPARTMENT AGAINST THE O RDER OF THE CIT(A) 26, MUMBAI, DATED 28-04-2010. 2. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LEARNED CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.41,35,900/-, ON ACCOUNT OF ESTIMATION OF INCOME AT 10% ON THE ADVANCES RECE IVED, IGNORING THE FACT THAT WHILE DOING SO, THE AO HAS TAKEN INTO CONSIDER ATION THE WORK-IN-PROGRESS AT RS.8,58,20, 129/- AND SUBSTANTIAL ADVANCES RECEI VED TO THE TUNE OF RS. 4,13,59,000/-, TOWARDS THE SALE OF FLATS, COUPLED W ITH THE FACT THAT THE ASSESSEE HAS FAILED TO GET THE ACCOUNTS AUDITED, AS PER THE REQUIREMENT U/S.44AB OF THE I. T. ACT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LEARNED CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.41,35,900/- ON THE GROUND THAT ASSESSEE IS FOLLOWING PROJECT-COMPLETIO N METHOD, OVERLOOKING THE FACTS THAT THE ASSESSEE HAS BEEN MAINTAINING MERCAN TILE SYSTEM OF ACCOUNTING AND THE ASSESSEE HAS SHOWN SUBSTANTIAL WORK-IN-PROG RESS AT RS.8.58 CRORES M/S. VINAYAK BUILDERS & DEVELOPERS I.T.A. N O. 5594/MUM/2010 PAGE 2 O F 8 AND SUBSTANTIAL ADVANCES RECEIVED TO THE TUNE OF RS .4,13,59,000/- TOWARDS SALE OF PROJECT WHEREIN INCOME CAN NOT BE AWAITED T O ACCRUE. 3. THE SOLITARY ISSUE INVOLVED IS AGAINST THE DELET ION OF RS. 41,35,900/- BY THE CIT(A). 4. THE FACTS ARE THAT DURING THE YEAR THE ASSESSEE WAS INVOLVED IN TWO PROJECTS AND BOTH OF THEM WERE UNDER CONSTRUCTI ON. THE ASSESSEE DURING THE YEAR HAD SHOWN NET CLOSING BALANCE IN WO RK-IN-PROGRESS AT RS. 8,58,20,129/-. FROM THE DETAILS SUBMITTED, THE AO CAME TO THE CONCLUSION THAT SINCE THE TURNOVER/RECEIPT HAS EXCE EDED RS. 40,00,000/-, THE ASSESSEE WAS SUPPOSED TO GET ITS A CCOUNTS AUDITED WHICH HE HAD FAILED TO DO. THE AO, ON THIS PRETEXT, REJECTED THE CLAIM OF DECLARING THE PROFIT ON PROJECT COMPLETION METHO D AND REJECTED THE BOOKS OF ACCOUNTS UNDER THE PROVISIONS OF SECTION 1 45. THE AO OBSERVED FROM THE BOOKS, THAT THE ASSESSEE HAD RECE IVED ADVANCES FROM CUSTOMERS TO THE TUNE OF RS. 4,13,59,000/- AND SINCE HE HAD REJECTED THE BOOKS OF THE ASSESSEE, HE ESTIMATED TH E PROFIT OF THE ASSESSEE AT 10% OF THE ADVANCES AND MADE AN ADDITIO N OF RS. 4,13,59,000/-. 5. AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE APPROACHED THE CIT(A). 6. BEFORE THE CIT(A), THE ASSESSEE PRIMARILY OBJECT ED TO THE ACTION OF THE AO ON REJECTION OF BOOKS AND MAKING A N ADHOC ADDITION. THE A.R. ARGUED BEFORE THE CIT(A) THAT ADVANCES CANNOT BE EQUATED WITH GROSS RECEIPTS, SALES OR TURNOVER . HE, THEREFORE, ARGUED THAT M/S. VINAYAK BUILDERS & DEVELOPERS I.T.A. N O. 5594/MUM/2010 PAGE 3 O F 8 THERE WAS NO VIOLATION OF SECTION 44AB, AND CONSEQU ENTLY, THE REJECTION OF BOOKS, WHICH WAS SOLELY ON THIS GROUND WAS NOT P ROPER. THE A.R. FURTHER PLEADED THAT THE AO HAD WRONGLY TAKEN AND E QUATED ADVANCES AS SALES. AS REGARDS ESTIMATION OF 10% PROFIT ON S UCH ADVANCES, IT IS CONTENDED THAT AO HAS WRONGLY TAKEN THE ADVANCES AS SALES AND HAS WRONGLY PRESUMED THAT THERE WAS A START OF PROJECT. LD. AO HAS ALSO NOT UNDERSTOOD THE COMPONENTS THE WORK-IN-PROGRESS. IT IS SUBMITTED THAT THE AMOUNT OF RS. 8,58,20,129/-COMPRISES OF CL OSING STOCK OF VINAYAK PROJECT, UNSOLD TWO OFFICES HAVING VALUE OF RS. 55,65,833/- AND WORK-IN-PROGRESS OF EVERSHINE PROJECT OF RS. 8,02,5 4,296/-. THIS WORK OF PRESENT PROJECT DOES NOT REPRESENT COST OF CONST RUCTION OF FLATS BUT IS THE EXPENDITURE INCURRED TOWARDS PURCHASE OF DEVELO PMENT RIGHTS, PURCHASE OF OLD FLATS, PURCHASE OF GARAGES, COMPENS ATION PAID TO THE MEMBERS OF THE SOCIETY WHO WERE ASKED TO VACATE THE IR PREMISES AND ALSO THIS EXPENDITURE COMPRISES ARCHITECTURE FEES, LEGAL COST, INTEREST ON LOAN CAPITALIZATION AND OTHER VARIOUS EXPENSES R ELATED WITH THE PROJECT. THE FULL DETAILS WERE SUBMITTED TO THE LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. THEREFORE, IT IS CONTENDED THAT LD. AO HAS WRONGLY ESTIMATED THE PROFIT @ 10% WITHOUT P ROPERLY APPRECIATING THE FACTS OF THE CASE AND COMPONENTS O F WORK-IN- PROGRESS. THEREFORE, IT IS CONTENDED THAT ADDITION SO MADE MAY BE DELETED. IN SUPPORT OF THE ARGUMENT, LD. AR HAS ALS O REFERRED TO THE ACCOUNTING STANDARD ANNEXED AS AS-7 PRESCRIBED BY C HARTERED M/S. VINAYAK BUILDERS & DEVELOPERS I.T.A. N O. 5594/MUM/2010 PAGE 4 O F 8 ACCOUNTANTS INSTITUTE OF INDIA. FURTHER, APPELLANT HAS PLACED ITS RELIANCE UPON THE CASE OF D.K ENTERPRISES V. ITO 39 LTD 394 (BOM) AND HAS ARGUED THAT THERE IS NO REASON WHATSOEVER TO ES TIMATE SUCH INCOME @ 10% ON ADVANCES. HENCE, REQUESTED THAT ADD ITION SO MADE DESERVES TO BE DELETED . 7. CONSIDERING THE ARGUMENTS OF THE ASSESSEE, THE CIT(A) HELD AS UNDER (EXTRACTED PORTION) : .I FIND NO GENUINE REASON WHATSOEVER WITH ADVAN CES RECEIVED BY THE APPELLANT AGAINST THE PROSPECTIVE HOUSING PROJECT K NOWN AS EVERSHINE PROJECT RELATED TO REDEVELOPMENT OF HOUSING PROJEC T WHICH WERE IN EXISTENCE IN DILAPIDATED CONDITION. IT IS VERY APPARENT THAT INITIALLY REDEVELOPMENT AGREEMENT WAS EXECUTED WITH 16 MEMBERS ON 14.7.2006 AND NEGOTIATION WITH OTHER 5 MEMBERS WAS NOT MATERIALIZED ON THIS DATE. OUT OF 5 REMAINING MEMBERS, 4 HAVE AGREED FOR REDEVELOPMENT IN SUBSEQU ENT YEAR RELEVANT TO A.Y. 2008-09. FURTHER, IT IS A MATTER OF RECORD THA T REDEVELOPMENT PERMISSION WAS NOT RECEIVED BY THE APPELLANT FOR START OF ANY SUCH PROJECT, THEREFORE, ADVANCE SO RECEIVED FROM PROSPECTIVE BUYERS CANNOT BE PRESUMED TO BE SALE FOR ESTIMATION OF PROFIT 10%. THE FINDING OF THE LD . AO REGARDING APPLICABILITY OF PROVISIONS OF LAW US. 145 IS ALSO NOT ON SOUND FOOTING. MERELY ON THE BASIS OF NON-AUDIT OF BOOKS OF ACCOUNT, PROV ISIONS OF SECTION 145 CAN NOT BE INVOKED UNLESS SUBSTANTIAL DEFECT WAS UNEART HED FROM THE BOOKED OF ACCOUNT. HERE IN THIS CASE, LD. AO HAS NOT POINTED OUT ANY DEFECT OF BOOKS OF ACCOUNT OR IN CORRECTNESS OF ANY OF THE ENTRIES OR ANY OTHER DEFECTS WHICH CAN QUALIFY FOR PRESUMPTION OF DEFECTIVE BOOKS OF ACCOU NT NOT CAPABLE OF DISCLOSING TRUE AND FULL REVENUE OR BUSINESS TRANSA CTIONS. HERE IS NOT THE CASE ALIKE. CONTRARY TO THE PRESUMPTION OF THE AO, CLAIM OF THE APPELLANT IS FOUND GENUINE AND CONVINCING ONE THAT REGULAR BOOKS OF AC COUNT MAINTAINED ARE DISCLOSING FULL ENTRIES OF ALL THE BUSINESS TRANSAC TIONS. THEREFORE, I DO NOT SEE ANY REASON TO APPROVE THIS BASELESS FINDING OF THE AO FOR REJECTING THE VERACITY OF BOOKS OF ACCOUNT. FURTHER, AS REGARDS E STIMATION OF 10% PROFIT ON ADVANCES FROM THE CUSTOMERS, IT IS PERTINENT TO MEN TION THE LD. AO HAS MADE THIS ADDITION FOR THE SAKE OF ADDITION WITHOUT PROP ERLY APPRECIATING THE CORRECTNESS OF ADVANCE. LD. AO HAS ACCEPTED THE GEN UINENESS OF ADVANCES FROM THE CUSTOMERS, THEREFORE, THERE IS NO POINT FO R ESTIMATING ANY INCOME ON SUCH ADVANCE. IT IS RELEVANT TO REMIND THAT PARA 17 OF PAGE 9 OF REDEVELOPMENT AGREEMENT DATED 14-7-2006 REVEALS THA T UNLESS ALL THE MEMBERS GIVEN THEIR CONSENT/APPROVAL OF SUCH REDEVE LOPMENT, DEVELOPER CANNOT ENJOY ANY RIGHT TO PROCEED WITH REDEVELOPMEN T. IT IS MATTER RECORD THAT ALL THE MEMBERS WERE NOT GIVEN THEIR CONSENT B EFORE 31-3-2007. 6.3 FURTHER, IN RESPECT OF ESTIMATION OF PROFIT, HONBL E ITAT, MUMBAI HAS GIVEN A PROPOSITION IN THE CASE OF CHAMPION CON STRUCTION COMPANY 5 ITD 495, WHICH IS AS UNDER :- THE PROPOSITION THAT PROFITS OF THE ASSESSEE FROM A SINGLE VENTURE/PROJECT IN THE NATURE OF TRADE CANNOT BE AS CERTAINED UNTIL THE M/S. VINAYAK BUILDERS & DEVELOPERS I.T.A. N O. 5594/MUM/2010 PAGE 5 O F 8 VENTURE/PROJECT HAS COME TO AN END IS NOT ABSOLUTE. UNDER THE ACT, EACH YEAR IS A SELF-CONTAINED UNIT AND UNLESS IT WA S IMPOSSIBLE TO COMPUTE THE PROFITS OR LOSSES OF EACH YEAR REASONAB LY THE PROFITS SHOULD BE COMPUTED YEAR-WISE AND TAXED. FOR THE SECOND ASPECT, AS TO AT WHICH OF THE YEAR, THE PROFIT IS TAXABLE, THE TRIBUNAL LAID DOWN THE YARDSTICK AS UNDER. DURING THE ASSESSMENT YEAR 1977-78 NEITHER THE CON STRUCTION WAS COMPLETE NOT EVEN HALF PORTION OF THE BUILDING WAS SOLD. THE NET SALE PROCEEDS RECEIVED WERE MUCH LESS THAN THE TOTAL EXPENDITURE/COST INCU RRED BY THE ASSESSEE UP TO THAT DATE. THEREFORE, IT WOULD BE CORRECT F NO PROF ITS OR LOSSES WERE ESTIMATED DURING THE YEAR. HOWEVER FOR THE ASSESSMENT YEAR 19 78-79, THE CONSTRUCTION OF THE BUILDING BEEN COMPLETED AND 80 PER CENT OF T HE AREA WAS SOLD AND, THEREFORE, IT IS POSSIBLE TO ESTIMATE THE INCOME OF THE ASSESSEE FROM THE PROJECT. 6.4 IN THE CASE OF D.K. ENTERPRISES V. ITO 39 ITD 394 (BORN), HONBLE TRIBUNAL HAS NOT REGARDED SUCH ADVANCE FROM THE PRO SPECTIVE BUYERS AS SALES. HEAD NOTES OF THE REPORTED DECISION IS AS UN DER :- IN THE INSTANT CASE, FOR THE ASSESSMENT YEAR 1985- 86, THE ITO HAD ACCEPTED THE BUSINESS INCOME AT NIL ALMOST ON THE S AME SET OF FACTS AND ALTHOUGH SOME INCOME WAS BROUGHT TO TAX, IT WAS INCOME FROM OTHER SOURCES BEING UNEXPLAINED LOANS ETC. BUT NO E STIMATE OF PROFIT ON THE FIGURE OF WORK-IN-PROGRESS WAS MADE. FROM TH E SCRUTINY OF ACCOUNTS FOR THE ASSESSMENT YEAR IN QUESTION, IT WA S FOUND THAT THE BALANCE BROUGHT FORWARD FROM EARLIER YEAR OF THE EX PENSES INCURRED AMOUNTED TO RS. 2,59,32,292/-. OUT OF THE EXPENSES INCURRED FOR THE CALENDAR YEAR, THE MAJOR EXPENDITURE WAS RS. 90 LAK HS TOWARDS PLOT PURCHASED AND AN AMOUNT OF INTEREST PAID TO THE VEN DOR OF RS.10 LAKHS FOR LATE PAYMENTS. THERE WAS NO EVIDENCE OF A NY CONSTRUCTION ACTIVITY HAVING BEEN STARTED NOT OF ANY AMOUNTS REC EIVED FROM THE PROSPECTIVE BUYERS. AN AMOUNT OF RS. 2,90,15,882/-, WHICH HAD BEEN RECEIVED FROM TILE PROSPECTIVE BUYERS. AN AMOUNT OF RS. 2,90,15,882/- WHICH HAD BEEN RECEIVED FROM THE VARIOUS PARTIES, W AS IN THE FORM OF UNSECURED LOAN FOR RAISING FINANCES AND THE DETAILS OF SUCH UNSECURED LOAN WERE GIVEN IN THE SCHEDULE ATTACHED TO THE BAL ANCE SHEET. AS REGARDS THE ARGUMENT THAT ADVANCES RECEIVED FROM THE PROSPECTIVE BUYERS REPRESENTED RECEIPTS IN RESPECT OF THE CONTR ACTS UNDERTAKEN. IT WAS FOUND THAT THIS WAS NOT SUPPORTED BY FACTS AND FIGURES. THEREFORE, THE CONTENTION THAT THE AMOUNTS RECEIVED FROM PROSPECTIVE BUYERS SHOULD BE TREATED AS SALES WAS FALLACIOUS. THE FACTS IN THE INSTANT CASE SHOWED THAT THERE WAS NO WORK DONE DUR ING THE YEAR AND NO AMOUNT WAS RECEIVED TOWARDS FLATS. WHAT WAS RECE IVED FROM PROSPECTIVE BUYERS WAS ONLY IN THE NATURE OF LOANS, A GOOD PORTION OF WHICH WAS REPAID BETWEEN 1985 AND 1986 AND THEREFOR E, COULD NOT BE CONSIDERED AS AMOUNTS RECEIVED TOWARDS PRICE OF THE FLATS INTENDED TO BE SOLD. 6.5 AS REGARDS DOUBT ABOUT THE AUTHENTICITY OF THE ADVANCES ON THE GROUND THAT WHEN CONSTRUCTION WORK WAS NOT STARTED HOW APPELLANT COULD GET SUCH ADVANCES FROM THE CUSTOMERS, IT IS WORTHWHILE TO MENTION THAT SUCH ADVANCES MAY BE OBTAINED BY ANY SUCH BUILDER ON ACC OUNT OF REPUTATION, ADVERTISEMENT & PERSONAL RAPPORT. IT IS VERY OBVIOU S THAT IN THE PAST, APPELLANT HAD COMPLETED A BUILDING KNOWN AS VINAYA K CHAMBERS WHICH M/S. VINAYAK BUILDERS & DEVELOPERS I.T.A. N O. 5594/MUM/2010 PAGE 6 O F 8 MAY MAINTAIN THE REPUTATION OF THE APPELLANT FOR EN SUING CONSTRUCTION OF NEW PROJECT. FURTHER IN BANDRA AREA THERE IS QUITE SHOR TAGE OF GOOD FLATS AND IF ANY SUCH PROJECT IS ADVERTISED, BUYERS MAY LEND ADV ANCES FOR BOOKING OF FLATS. THUS, SUCH DOUBT OF THE LD. AO IS HAVING NO FOUNDAT ION. THEREFORE, IN THE BACKGROUND OF ALL THE ABOVE FACTS, FINDINGS AND DEC ISION OF HONBLE ITAT, I REACH TO THE CONCLUSION THAT NOTIONAL INCOME ESTIMA TED BY LD. AO @ 10% ON ADVANCES AGAINST FUTURE PROJECT IS NOT GENUINE, THU S, AO IS DIRECTED TO DELETE SUCH ADDITION OF RS. 41,35,900/ FROM THE ASSESSMENT . THE CIT(A), THUS OVER RULED THE OBSERVATIONS OF THE AO AND DELETED THE ADDITION OF RS. 41,35,900. 8. IT IS AGAINST THIS FINDING OF THE CIT(A), THE DE PARTMENT IS IN APPEAL BEFORE THE ITAT. 9. BEFORE US, THE DR RELIED AND SUPPORTED THE OBSER VATIONS AND THE ORDER OF THE AO. 10. THE A.R. ON THE OTHER HAND REITERATED THE ARGUM ENTS MADE BEFORE THE REVENUE AUTHORITIES AND STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). 11. WE HAVE HEARD THE ARGUMENTS OF EITHER SIDES AND HAVE ALSO GONE INTO THE ORDERS PASSED BY THE TWO REVENUE AUTH ORITIES AND THE PROVISIONS OF SECTION 44AB. WE DO NOT FIND ANY EQUA TION BETWEEN ADVANCES AND TURNOVER/RECEIPTS. THE MISCHIEF OF SEC TION 44AB SHALL ONLY BECOME OPERATIVE IF THE TURNOVER OR BUSINESS RECEIPTS EXCEED RS. 40,00,000/-. THE SECTION DOES NOT MENTION ANYTHING WITH REGARD TO ADVANCES RECEIVED FROM ITS CUSTOMERS AND THAT TOO C ONDITIONAL [AS PER CLAUSE 17 OF THE AGREEMENT (EXTRACTED BY THE CIT(A) IN HIS ORDER)]. WE, THEREFORE, HOLD THAT THE CIT(A) HAD CORRECTLY I NTERPRETED THE PROVISIONS OF SECTION 44AB AND ALSO REVERSED THE DE CISION OF THE AO FOR M/S. VINAYAK BUILDERS & DEVELOPERS I.T.A. N O. 5594/MUM/2010 PAGE 7 O F 8 REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE, SO LELY ON THE GROUND THAT THE BOOKS HAD NOT BEEN AUDITED BY THE C.A. 12. COMING TO THE DELETION OF ADHOC ADDITION, WE FI ND THAT THE CIT(A) HAS NOT ONLY ACCEPTED THE SYSTEM OF ACCOUNTI NG FOLLOWED BY THE ASSESSEE, BUT HAS ALSO RELIED UPON DECISIONS OF THE CO-ORDINATE BENCHES AT MUMBAI, IN THE CASE OF D. K. ENTERPRISES V/S ITO , REPORTED IN 39 ITD 394, WHEREIN THE BOMBAY TRIBUNAL HAD HELD AS UNDER: IN THE INSTANT CASE, FOR THE ASSESSMENT YEAR 1985- 86, THE ITO HAD ACCEPTED THE BUSINESS INCOME AT NIL ALMOST ON THE SAME SET O F FACTS AND ALTHOUGH SOME INCOME WAS BROUGHT TO TAX, IT WAS INCOME FROM OTHER SOURCES BEING UNEXPLAINED LOANS ETC. BUT NO ESTIMATE OF PROFIT ON THE FIGURE OF WORK-IN- PROGRESS WAS MADE. FROM THE SCRUTINY OF ACCOUNTS FO R THE ASSESSMENT YEAR IN QUESTION, IT WAS FOUND THAT THE BALANCE BROUGHT FOR WARD FROM EARLIER YEAR OF THE EXPENSES INCURRED AMOUNTED TO RS. 2,59,32,292/- . OUT OF THE EXPENSES INCURRED FOR THE CALENDAR YEAR, THE MAJOR EXPENDITU RE WAS RS. 90 LAKHS TOWARDS PLOT PURCHASED AND AN AMOUNT OF INTEREST PA ID TO THE VENDOR OF RS.10 LAKHS FOR LATE PAYMENTS. THERE WAS NO EVIDENCE OF A NY CONSTRUCTION ACTIVITY HAVING BEEN STARTED NOT OF ANY AMOUNTS RECEIVED FRO M THE PROSPECTIVE BUYERS. AN AMOUNT OF RS. 2,90,15,882/-, WHICH HAD BEEN RECE IVED FROM TILE PROSPECTIVE BUYERS. AN AMOUNT OF RS. 2,90,15,882/- WHICH HAD BEEN RECEIVED FROM THE VARIOUS PARTIES, WAS IN THE FORM OF UNSECU RED LOAN FOR RAISING FINANCES AND THE DETAILS OF SUCH UNSECURED LOAN WER E GIVEN IN THE SCHEDULE ATTACHED TO THE BALANCE SHEET. AS REGARDS THE ARGUMENT THAT ADVANCES RECEIVED FROM THE PROSPECTIVE BUYERS REPRESENTED RECEIPTS IN RESPECT OF THE CONTRACTS UN DERTAKEN. IT WAS FOUND THAT THIS WAS NOT SUPPORTED BY FACTS AND FIGURES. THEREF ORE, THE CONTENTION THAT THE AMOUNTS RECEIVED FROM PROSPECTIVE BUYERS SHOULD BE TREATED AS SALES WAS FALLACIOUS. THE FACTS IN THE INSTANT CASE SHOWED TH AT THERE WAS NO WORK DONE DURING THE YEAR AND NO AMOUNT WAS RECEIVED TOWARDS FLATS. WHAT WAS RECEIVED FROM PROSPECTIVE BUYERS WAS ONLY IN THE NA TURE OF LOANS, A GOOD PORTION OF WHICH WAS REPAID BETWEEN 1985 AND 1986 A ND THEREFORE, COULD NOT BE CONSIDERED AS AMOUNTS RECEIVED TOWARDS PRICE OF THE FLATS INTENDED TO BE SOLD. 13. THE CIT(A), THEN CAME TO THE CONCLUSION THAT TH E AO WAS WRONG TO TREAT THE ADVANCES RECEIVED AS SALES. THE CIT(A) , THEREFORE, HELD THAT THE AO WAS WRONG TO ADD BACK ADHOC NOTIONAL INCOME @ 10% OF THE ADVANCES AND DELETED THE SAME. M/S. VINAYAK BUILDERS & DEVELOPERS I.T.A. N O. 5594/MUM/2010 PAGE 8 O F 8 14. WE, DO NOT FIND ANY INFIRMITY IN THIS ORDER, NEITHER THE DR WAS ABLE TO POINT OUT ANYTHING, WHICH COULD BE CONSIDER ED AS INCORRECT IN THE IMPUGNED ORDER. 15. WE, THEREFORE, DO NOT FIND ANY REASON TO DISTUR B THE FACTUAL FINDINGS OF THE CIT(A). WE SUSTAIN THE SAME AND REJ ECT THE APPEAL FILED BY THE DEPARTMENT. 16. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 0 6/06/2012. SD/- SD/- (R.S.SYAL) ( VIVEK VARMA ) ACCOUNTNAT MEMBER JUDIC IAL MEMBER MUMBAI: 06/06/2012. P/-*