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2019 (8) TMI 644 - AT - Income TaxAddition u/s 68 - advance received from the customers and corresponding deposits in the bank account - assessee started new dealership of Ford car and received amount in cash from the prospective buyers/customers which was adjusted at the time of sales - HELD THAT - We are in agreement with the contention of assessee that at the time of inauguration of new business, some customers shows their intention to buy products, which was car in the present case and prospective buyers give advance to the new entrepreneurs not only for the purpose of purchasing car but also to support in the new venture. The amount so received as advance against sale of car cannot be treated as cash credit in the hands of the assessee and the AO is not empowered and entitled to trigger any action against the assessee with the support of section 68 Assessee has submitted all details regarding advance received from the buyers/customers in the form of receipts, invoices, PAN and other identity proof establishing identity, existence of the advance providers. So far as creditworthiness is concerned, it cannot be accepted from a seller to examine the creditworthiness of the buyers prior to selling any goods to any persons. AO is equipped with the full powers under his command as per provisions of the Act to call respective persons to examine the source of cash deposit by them to the assessee but in such a situation when the advance providers does not turn up and come forward to appear before the AO, then also the assessee cannot be blamed as the AO possesses all the details of customers, who had advanced the month in the form of identity, PAN and other ID proof. Thus the amount treated by the AO as cash credit is nothing but the advance amount given by the customers for purchase of vehicles from the assessee, which has been finally adjusted at the time of delivery of the vehicles. Therefore, this amount cannot be treated as unexplained cash credit in the hands of the assessee u/s 68 - Decided in favour of assessee.
Issues Involved:
Confirmation of addition of advance received from customers and corresponding deposits in bank account by Commissioner of Income Tax(Appeals). Detailed Analysis: 1. The appeal was filed against the order of the Commissioner of Income Tax(Appeals) for the assessment year 2015-16, concerning the addition of ?29,98,647 towards advance received from customers and deposits in the bank account. 2. The Assessing Officer (AO) and the Commissioner of Income Tax(Appeals) confirmed the addition under section 68 of the Act, alleging lack of justification for the source and nature of the cash amount. 3. The appellant contended that the advances were received against sales of vehicles, supported by relevant documents like receipts, invoices, and customer details, establishing the identity, purpose, and creditworthiness of the customers. 4. The Tribunal noted that the appellant started business in March 2015, received advances from customers, and delivered vehicles in April 2015, with all transactions supported by documentation. 5. The Tribunal observed that the AO failed to verify the submitted documents, including receipts, invoices, and customer IDs, indicating the genuine nature of the transactions. 6. It was highlighted that the AO did not consider the explanations and evidence provided by the appellant, leading to an unjustified addition under section 68 of the Act. 7. The Tribunal emphasized that the advance amounts were not unexplained cash credits but legitimate transactions against sales, as evidenced by the documents submitted by the appellant. 8. Ultimately, the Tribunal concluded that the AO's action was unwarranted, deleted the addition made, and allowed the appeal of the assessee, emphasizing the genuine nature of the transactions and the adequacy of documentation provided. This detailed analysis highlights the legal arguments, evidentiary support, and reasoning leading to the Tribunal's decision to overturn the addition of advance amounts received from customers and deposited in the bank account.
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