AI Drafter 
TaxTMI 
TaxTMI 
2021 (3) TMI 1148
X X X X Extracts X X X X
X X X X Extracts X X X X
....by Ld. A.O. after disallowance u/s 40A(3) of 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase advances' in the instant appeal before your Honors -Balance of land purchase advances in the name of various parties duly disclosed in the audited 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 ea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he credit which is appearing in the impugned year is as a result of debit transaction which originated in F.Y. 2006-07. This indicates that the credit entry in impugned year is a result of debit entry in earlier year which has been accepted. 8. In the facts of the case - a) Origin of debit transaction: Advance given to the various parties as mentioned above were given in 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof.................." Assessee submits that neither any allowance nor any deduction has been claimed in respect of the '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 amo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4.2012 f. Hon'ble Gujarat High Court in the case of Puridevi Mahendrakumar Chaudhary - [2014] 41 taxamann.com 329 - 19.11.2013 g. Hon'ble Bombay High Court in the case of J.K. Chemicals Ltd. - [1966] 62 ITR 34 - 18.02.1966 h. Hon'ble Kolkata Bench of ITAT in the case of Marcopolo Products (P.) Ltd [2016] 70 taxmann.com 320 i. Hon'ble Delhi High Court in the case of CIT V/s Value Capital Services (P) Ltd (2008) 307 ITR 334 j. Hon'ble Indore Bench of I.T.A.T. in the case of ACIT v Dwekam Industries Ltd in ITA No.27/Ind/2012 dated. 18.12.2012 k. Hon'ble Indore Bench of I.T.A.T. in the case of Devendra 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,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....00 AY 2007-08 11 S D Biotech 19,00,000 AY 2007-08 12 Sourambai Lalsingh 13,42,000 AY 2007-08 13 Siddharth Pandya 18,00,000 AY 2011-12 14 Chotelal Sukhramji 30,50,000 AY 2010-11 & AY 2011-12 15 Foolkunwarbai Chotelal 30,50,000 AY 2010-11 & AY 2011-12 16 Parimal Pandya 18,00,000 AY 2011-12 TOTAL 2,76,42,000 9. As claimed by the Ld. Counsel for the assessee that since the amount given as advances in preceding years could not materialize in the shape of purchase of land for some reasons and the assessee tried hard to recover the amount advanced to these farmers. Due to extra efforts assessee to a large extent was able to receive the refund in cash against the advance given in earlier years. It was further claimed that the amount so received 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 matte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee in respect of a loan on account of unexplained cash credit as the audit report was showing fresh loan of Rs. 58,42,320/- including previous loan from Sona Traders-C1T(A) deleted the addition observing that the transaction with the party was on account of sale of ghee and the amount received during the year was against outstanding sale consideration there was a mistake in the reporting in Audit Report-Held, the fact that there was mistake on the part of the Auditor has been recorded by the CIT(A) in his order-The auditor has also furnished certificate to the effect that the amount was received as a repayment of earlier loan balance and hence it was nil dosing balance-Since no contra") material or facts were produced nor revenue pointed out any such contrary material to the finding of the CIT(A), order of the CIT(A) is confirmed-Appeal filed by the assessee is allowed 2. SB Steel Industries 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 ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion. Further, the realisations from the sundry debtors cannot be treated as cash credits. Cash credits always appear as a liability in the balance sheet of the assessee. Realisation from the sundry debtors would reduce the sundry debtors appearing on the "assets" side of the balance sheet." 5.3 Thus, the Hon'ble Tribunal has categorically held that only unexplained cash credit can be added u/ s 68 and the realisations from the sundry debtors cannot be added under section 68 of the Act. 5.4 In the case of SB Steel Industries Hyderabad Vs Income Tax Officer-5(1), Hyderabad,(ITA no.264/Hyd/2011) the Hon'ble ITAT Hyderabad Bench-A Hyderabad stated vide para 7 as below:- "It is an established fact that only cash credits can only be considered u/ s 68, but, not trade receipts. The coordinate bench of ITAT in the case of ITO Vas Rajedra Kumar Taparia, 106 TT J 712 (Jodh.) has heId that "cash credits standing in the names trade creditors, 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 cred....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to how the two parties concerned were not creditors to the assessee. Once they are not established to be creditors, operation of section 68 of the I.T. Act does not come into play. No material was brought by the AO to prove that the money was the assessee's own undisclosed income. It was merely that the inf0mlation received from. the Inv Wing of the department was relied on, without verification of the facts qua-the-asseseee. The assessee successfully explained the entries". 5.6 In the light of the above judgment it is clear that the refund of advances so given cannot be added u/s 68 especially when the appellant has explained these entries and also when the advances so made In the earlier years were accepted by the department. Accordingly, the addition so made is hereby deleted and this ground of appeal is allowed. 11. From perusal of the finding of Ld. CIT(A) as well as the submission made before us by the Ld. Counsel for the assessee, we find that assessee who is in the business of 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 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....debit balance of cash in hand. There is as such no fresh credit. 15. Similar type of issue came up before the Co-ordinate Bench of Delhi in the case of Decent Foods Private Limited (supra) ITA No.264 of 2011 dated 13.11.2013 wherein the amount advanced by the assessee to the supplier parties was refunded as the supplier failed to supply the goods and the Co-ordinate Bench held that "Once they are not established to be creditors, operation of section 68 of the I.T. Act does not come into play. No material was brought by the Ld. A.O to prove that the money was the assessee's own undisclosed income" (emphasis supplied). 16. As regards the judgment of Hon'ble Apex Court in the case of NRA Iron & Steel Pvt. Ltd (supra) relied by Ld. DR, we find that in this judgment the issue was with regard to the share capital and share premium credited in the books and there was an independent enquiry conducted by Ld. A.O. Both these facts are absent in the instant case therefore the judgment relied by Ld. DR is not applicable 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(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his plea of the assessee was not accepted and the Ld. A.O made the addition for bogus creditors u/s 41(1)(a) of the Act. 20. However before Ld. CIT(A) assessee succeeded in convincing the Ld. CIT(A) that the alleged amount are not sundry creditors but they are advance of booking of plots. It was also submitted that out of 11 parties in the case of two parties namely Shri Amit Kumar Shantilal Jain and Anita W/o Suresh Kumar Sharma the amount appearing is advance of booking of plots was subsequently transferred to revenue account as sales as the registry of plot of land was done in the favour of two parties. Ld. CIT(A) after examining the facts of the case deleted the addition made by Ld. A.O u/s 41(1)(a) of the Act observing as follows:- Ground no,3 6. This ground of appeal is with regard to treating Rs. 83,05,400/- as Bogus creditors and adding the same by wrongly applying the provisions of section 41(I)(a), of the Income Tax Act. I have carefully gone through both the assessment order as well as the submissions of the appellant in this regard. 6.1 The Learned A 0 during assessment proceedings has added an amount of Rs. 83,05,400/- (although in expl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....00000 10 Amit Kumar Shantilal Jain 775000 11 Maggy Publicity 1245687 Total 83,05,400/- In addition to this, we would like to bring to your kind notice that in 2 cases namely Amit Kumar Shantilal Jairi and Anita W/o Suresh Kumar Sharma, the sale deed has been executed after passing of the assessee officer and till date. These amounts very duly transferred to our revenue account as per the date of sale deed. Copy of sale deed and copy of respective ledgers are enclosed. (Ends 111 to 138) In case of Item no 11 in the above Chart in the name of Maggi Publicity, the same has not been actually added in the body of the order but same was wrongly considered in the total of addition. This amount of Rs. 12,45,687/- of Maggi Publicity has already offered as Income in the A Y_2014-15 as not payable. Copy of the Note No,.15 of the profit and loss account for the year ended on 31/03/2014 is enclosed for your honour ready reference (Ends 139) Therefore your honour the addition was made by wrongly applying the provision of section 41 (l)(a), may please be deleted." 6.3 After going through the submissions of the....