TaxTMI 
TaxTMI 
2021 (3) TMI 1148
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....the Act at Rs. 4,26,000/- , addition u/s 68 of the Act on account of bogus cash credit introduced in the books of account at Rs. 2,76,42,000/- and addition of bogus creditors at Rs. 83,05,400/- . Aggrieved assessee preferred appeal before Ld. CIT(A) and succeeded. 3. Now the revenue is in appeal before the Tribunal raising following grounds of appeal:- "On the facts and circumstances of the case, the Ld. CIT(A) has erred in:- 1. Whether on the facts and in the circumstances of the case, Ld. CIT(A) has justified in deleting the addition of Rs. 2,76,42,000/- made by the AO u/s 68 by ignoring the finding of the AO. 2. Whether on the facts and in the circumstances of the case, Ld. CIT(A) has justified in deleting the addition of Rs. 83,04,400/- made by the AO on account of bogus creditors. 3. The appellant craves leave to add to or deduct from or otherwise amend the above grounds of appeal. 4. Ld. Departmental Representative (In short 'Ld. DR') vehemently argued supporting the order of Ld. A.O. With regard to the addition u/s 68 of the Act he further submitted that the claim of the assessee that the advances given in the preceding years were received back in cash is not corre....
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....d balance sheet which formed part of total land purchase advances of Rs. 11,09,88,462. No action by the Ld. AO on these advances in the said assessment. A.Y. 2009-10: i. Section under which assessment completed - 143(3) rws 147 ii. Date of assessment order - 29.12.2016 iii. Addition / disallowance made in the said assessment - Disallowance of Development expenses of Rs. 1,15,87,720 claimed in the return iv. Status of issue of 'land purchase advances' in the instant appeal before your Honors - Balance of land purchase advances in the name of various parties were duly disclosed in the audited balance sheet which formed part of total land purchase advances of Rs. 13,56,80,462. No action by the Ld. AO on these advances in the said assessment. 4. The deal for purchase of land did not materialize. Hence the advances given in the earlier years were refunded by the various parties in cash during the impugned year. 5. Year wise details of advances which were given in the earlier years and are accepted by the Department are as under - Sr. No. Name of party to whom advance was given for purchase of land Amount given as advance (Rs.) Period in which advance was given by ass....
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.... earlier years through banking channel and was reflected in Balance Sheet under the head "Advance for Land Purchase" till the impugned year. b) Origin of credit transaction: The deal for purchase of land did not materialize and hence the advance given was refunded to appellant in cash. Appellant also contends that no fresh credits were availed during the impugned year except for the impugned cash receipt. It is clear from above that origin for credit entry appearing in the books is on account of original debit entry. Source of amount itself originates from debit entry of appellant. Appellant is not required to prove source of return of money given in advance earlier. Hence the provisions of Section 68 are not applicable. Further, the appellant cannot be questioned on receipt of cash as there is no limitation on amount being received in cash on account of return of business advance given earlier. 9. Reliance is placed on following judicial precedence's - a. Hon'ble Hyderabad Bench of ITAT in the case of SB Steel Industries - ITA No. 264 of 2011 dated 13.11.2013 b. Hon'ble Delhi 'A'Bench of ITAT in the case of Rachmann Springs (P) Limited - [1995] 55 ITD 159 dated 02.....
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.... 'advances from customers' in any of the preceding years. These amounts have been received specifically as advances for booking of flats. Thus provisions of section 41(1) are not attracted and no disallowance can be made. These amounts received as flat booking advance always formed part of the Balance Sheet. There is no debit or credit entry appearing in the Profit and Loss Account. It is contended that the year in which the flats got registered these amounts received as advances were also transferred under the head 'Sales' of Profit and Loss account of respective years. Thus, if this amount received as flat booking advance is added it shall amount to double taxation. In respect of the advance received from Maggi Publicity of Rs. 12,45,687 it is specifically submitted that this amount has already been included in income for the return filed for AY 2014-15. Reference may please be made to Note 16 - 'Other Income' for AY 2014-15 wherein the amount received from Maggi Publicity of Rs. 12,45,687 has been specifically mentioned. In respect of the advances received from other two customers namely, Anita Sureshkumar Sharma and Amit Shantilal Jain amounting to Rs. 5,00,000 and Rs. 7,....
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....evendra Kanthed v ITO in ITA No.818/Ind/2014 dated. 15.05.2015 l. Hon'ble High Court of Allahabad in the case of ACIT v ATS Promoters and Builders Pvt. Ltd (2014) 90 CCH 172 m. Hon'ble Indore Bench of I.T.A.T. in the case of Sunderdeep Construction P. Ltd v ACIT in ITA No.505/Ind/2016 dated. 31.10.2019 n. Hon'ble High Court of Calcutta in the case of CIT v Western Estates (1994) 209 ITR 343 Considering the above facts of the case, circumstances, submissions made, documents on record, Ld. CIT(A) has correctly granted relief to assessee on disallowance made by Ld. AO u/s 41(1) of Rs. 83,05,400 6. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred and relied by both the parties. Revenue is aggrieved with the findings of Ld. CIT(A) deleting the addition made by Ld. A.O u/s 68 of the Act at Rs. 2,76,42,000/- and the one made u/s 41(1)(A) of the Act at Rs. 83,05,400/- on account of bogus creditors. 7. We will first take up Ground No.1 relating to deletion of addition u/s 68 of the Act at Rs. 2,76,42,000/-. During the course of assessment proceedings Ld. A.O observed that the assessee received ca....
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....ived could not be treated as cash credit in terms of Section 68 of the Act as it is not in the nature of loan or credit. Actually it is a refund of amount debited to the farmers as advance. However this claim of the assessee was not accepted by the Ld. A.O who taxed the alleged amount as unexplained credit u/s 68 of the Act. Subsequently when the matter came up before Ld. CIT(A), the impugned addition was deleted by him observing as follows:- Ground no.2 5. This ground of appeal is with regard to addition of Rs. 2,76,42,000/- u/s 68 of the Act. 1 have carefully gone through both the assessment order as well as the submissions of the appellant in this regard. The_AO on examination of the cash book had noted that the appellant company had received certain amounts in cash from some persons. The AO did not take into account the submissions by the appellant that these amounts were actually refunds from the persons to whom the such amounts were paid in earlier years as advances for purchase of land. These amounts which were returned by these persons against the advances given to them were treated as unexplained credits u/ s 68 by the AO. The appellant has also submitted that the amou....
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....tries v/s ITO (ITA No 264/Hyd/2011 dated 13/11/2013) Copy Enclosed as Annexure A. 3. ITO v/ s M/ s Decent Foods Pvt. Ltd. (ITA No 2471 /Dell 2010 dated 07/12/2010) Copy Enclosed as Annexure B. Therefore your rumour It is most humbly requested to kindly delete the addition wrongly made by applying section 68 on receipt of advances given in earlier year". 5.2 The Hon'ble lTAT, DELHI 'A' BENCH in the case of RACMANN SPRINGS (P) LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX (1995) 14 CCH 0227, 52 TTJ 0660, 55 ITD 0159 has held as below:- "When such is the factual position, the AO cannot find fault with the figure of sundry debtors as on 30th June, 1980 at Rs. 35,99,534. If at all the AO disbelieved Rs. 35,99,538, he should have enhanced the figure of sundry debtors as on 30th June, 1980 by Rs. 18,00,763 and adopted the same in the late' assessment years. This was not done by the assessing authorities. This blowing of hot and cold by the AO is not permissible in law. Only unsubstantiated cash credits can be added under s. 68. The said section does not permit the AOs to add undisclosed sales under that section Further, the realisations from the sundry debtors cannot ....
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....rs, all incomeOtax Assesees could not be treated as non. genuine when they have confirmed the transactions by filing affidavits and deposing before the AO, and the addition could not be made in respect of cash credits or interest paid thereon". In the present case, the amounts received by Assessee are not cash credits but the same were recovers of the debtor, which are available in the books of account Since Assessee furnished details of debtors and also the entries made in the books of account, we are of the opinion that both the AO and the CIT(A) have erred in considering recoveries from deposits as cash credits, the corresponding sales in earlier years have been accepted, as there is no dispute with reference to the entries in the books of account in any of the earlier years. Therefore we are of the view that the principles' laid down [or invoking provisions of section 68 cannot be applied to the made recoveries made by Assessee during the year." 5.5 The Hon'be ITAT Delhi Bench-B, New Delhi in the case of ITO- 10(1), New Delhi vs. M/s Decent Food Pvt. Ltd, New Delhi in ITA no. 2471/Del/2010 has stated vide para 7 & 8 as below:- "On the other hand, Ld. Counsel for the ass....
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....real estate and developer gave advance for purchase of land to farmers in the preceding years of which mostly are during assessment year 2007-08 and remaining during Assessment Year 2008-09 to 2001-12. All these advances were given by account payee cheque which is verifiable from the copies of bank statement placed on record. Ledger account of each of the parties to which advances were given have been reflected in the audited balance sheet forming part of Income Tax returns. No such addition regarding unexplained investment or unexplained loans and advances given have been made by the revenue authorities in the preceding years. Thus the genuineness of advances given to farmers for purchase of land appears to be correct. 12. Now the assessee is claiming that it has received the refund of the advances given for land purchase. Copy of cancellation agreement for the advances given to various parties namely Chandansingh Kawarji, Darbad Singh, Mahendra Singh, Kailash Bai, Maahesh Chaganlal, Sidharth Pandya, Chotelal, Foolkunwarvai and Parinal Pandya. Address of each of these parties are available in these cancellation agreements. 13. To summarise we find that the assessee claim is that....
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....cable on the instant appeals. 17. We therefore in the given facts and circumstances of the case and respectfully following the judgment referred and relied by Ld. CIT(A) as well as the one referred by us are of the considered view that the alleged amount of Rs. 2,76,42,000/- is actually the refund of the advances given by the assessee to various parties for purchase of land in preceding years which were given through banking channel and duly disclosed in the audited financial statements placed before the revenue authorities in the preceding years and no addition/discrepancy have been noticed. We therefore find no reason to interfere in the finding of Ld. CIT(A) and the same stands confirmed. In the result Ground No.1 raised by the revenue is dismissed. 18. Now we take up Ground No.2 regarding the addition of Rs. 83,04,400/- made by the Ld. A.O u/s 41(1) of the Act for bogus creditors which was deleted by Ld. CIT(A). Brief facts relating to this issue are that on the liability side of balance sheet assessee had shown following creditors:- Sl.No. Name of the Creditors Amount outstanding (In Rs.) 1. Sunil Jain 550000 2 Hemchandra Bajaj 1105000 3 Sri K. Bawa 700000 4 An....
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....gs has added an amount of Rs. 83,05,400/- (although in explanation para he has added Rs. 70,59,713/- only but while computing he has considered Rs. 83,05,400/-, by applying provision of section 41(1)(a). 6.2 The appellant has submitted that the appellant company being in the business of development of land, all these amounts were received as advance against the booking of plots in earlier years and were shown as advance against booking in the balance-sheet. It would be proper to reproduce the submissions of the appellant in this regard:- "As and when the respective plot is being registered and sale deed will be executed, these amount will be transferred to revenue. Kindly refer Note 8 to Balance- Sheet, wherein these amount were appearing in aggregate under "Advances From customers" of Rs. 3,81,37,651/-. Kindly refer page 19 of our submission. Your honour, these amounts are not appearing as any credit, for which the respective debit had been charged to profit and loss account. We would like to draw your kind attention to section 41 (l)(a), which is reproduced below: Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure ....
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.... amount of Rs. 12,45,687/- is considered, I am inclined to agree with the appellant submissions as the same has already been offered as income u/s 41(1) by the appellant itself in A.Y.2014-1S as not payable, and hence the addition of this amount tantamount to double addition. Further, it is also clear that these amounts represent the advances so received from the customers and the same gets realized to revenues / sales as and when the sale deeds are executed. Hence, the AO has not correctly applied the provision of section 41 (1 )(a) in this case. Thus, the additions so made are held to be not proper and are accordingly deleted. This ground of appeal is allowed. 21. On perusal of the finding of Ld. CIT(A) as well as the facts narrated before us along with the documentary evidences it is predominantly clear that the alleged amount of bogus creditors are not in the form of sundry creditors. These amounts are advances against booking of plots. When the plots are developed and the parties who have booked the plots give the remaining amount if any, then the advance given at the time of booking is transferred to sales account. 22. We therefore are of the view that as regards the amount....