2024 (7) TMI 647 - AT - Income Tax

Revenue's Section 68 appeal dismissed as cash advances from plot customers remanded for fresh examination

The ITAT Delhi dismissed the Revenue's appeal regarding additions under Section 68 for cash advances from customers towards plots and housing. The AO had ... Addition u/s 68 - cash advances from customers towards plots and land and low cost housing - AO not having been convinced with the genuineness of the cash components comprising of small sums of advances received from several persons, particularly the creditworthiness of the persons made the advances mainly the lenders and farmers of remote areas, thus added it to the total income of the assessee as unsecured cash u/s 68 - CIT(A) deleted the addition - HELD THAT:- As relying on own case [2024 (7) TMI 534 - ITAT DELHI] for A.Ys. 2006-07 & 2007-08 set aside the issue of the file of the Learned AO to examine and verify the genuineness of the transaction in regard to the cash advances made by the customers, upon granting an opportunity of being heard to the assessee and upon considering the evidence on record or any other evidence which the assessee may choose to file at the time of hearing of the matter and to pass a reasoned order strictly in accordance with law. Appeal filed by the Revenue is dismissed. Issues Involved:1. Genuineness of cash advances received by the assessee.2. Application of Section 68 of the Income Tax Act, 1961.3. Verification of depositors' details and creditworthiness.4. Accounting treatment and revenue recognition.Detailed Analysis:1. Genuineness of Cash Advances Received by the Assessee:The primary issue is the genuineness of the cash advances amounting to Rs. 7,09,87,186 received by the assessee from various customers. The Assessing Officer (AO) questioned the creditworthiness of these advances, particularly as they were received in cash from individuals in remote areas. The assessee argued that these advances were genuine and provided supporting affidavits and documents from depositors.2. Application of Section 68 of the Income Tax Act, 1961:The AO added the cash advances to the total income of the assessee as unsecured cash credits under Section 68 of the Act, which deals with unexplained cash credits. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, finding that the assessee had provided sufficient evidence to support the genuineness of these transactions.3. Verification of Depositors' Details and Creditworthiness:The CIT(A) noted that the AO had conducted an enquiry from 50 depositors chosen randomly and found no adverse observations, except for doubts about why the deposits were in cash. The AO did not conduct further enquiries or confront the assessee with the results of these enquiries. The CIT(A) concluded that the assessee had discharged its onus by providing affidavits and other supporting documents from the depositors, thereby shifting the onus back to the AO. The AO's failure to gather further evidence to substantiate the allegation of doubtful creditworthiness was highlighted.4. Accounting Treatment and Revenue Recognition:The CIT(A) examined the accounting treatment and revenue recognition policies of the assessee, noting that the revenue from the sale of plots was recognized upon the transfer of legal title, in accordance with Accounting Standard 9 (AS 9) issued by the Institute of Chartered Accountants of India (ICAI). For group housing flats, the assessee followed the percentage of completion method per Accounting Standard 7 (AS 7). The CIT(A) found no inconsistency in the assessee's accounting policies and noted that the deposits were in the nature of 'Advances against purchases.'Conclusion:The Tribunal, after considering the submissions and the order passed by the Co-ordinate Bench in the assessee's own case, decided to set aside the issue to the file of the AO. The AO was directed to re-examine and verify the genuineness of the transactions related to the cash advances, providing the assessee an opportunity to present further evidence. The Tribunal emphasized that the AO should pass a reasoned order strictly in accordance with the law.Final Judgment:The appeal filed by the Revenue was dismissed. The AO was instructed to re-examine the issue, considering the evidence on record and any additional evidence the assessee might present.This Order was pronounced in Open Court on 08/07/2024.