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TMI Blog2014 (12) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same should be treated as business income - the addition made by the AO for an amount of ₹ 3,87,27,750/- as unexplained credit cannot be sustained u/s 68 and has been rightly deleted by the learned CIT(A) – Decided against revenue. Accrual of income – Advances received - Professional income or not – Held that:- The assessee stated that the nature of the assessee’s business is such that until the services so provided by them are completed to the satisfaction of the client, the amount of professional fees received is shown as advance against assignment because as per agreement/understanding with the customer, the fee received in advance is liable to be refunded in case the assignment is not completed to the satisfaction of the customer - assessee has explained with reference to the subsequent years account about each and every advance from customers - most of the amounts have been recognized as income in the subsequent year and some amount was refunded say the sum of ₹ 6 lakhs was refunded to Rathi Rajasthan Steel Mills Ltd. on 14.5.2008, the sum of ₹ 50 lakhs was refunded to Ahluwalia Contracts (India) Ltd. on 16.7.2008, and the remaining amount was bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- From the fact noted above it is clear that the amount shown as advance is not appearing as advance in the balance sheet companies concerned. This amount was paid as business expenses and TDS was also detected. In view of all these facts it is clearly proved that the advance of Simplex Infrastructure Limited ₹ 1,00,00,000/-, Subhash Projects Marketing Limited ₹ 2,00,000/-, Shri Laxmi Cotsyan Limited ₹ 2,80,27,750/- Dolphin Developers Limited ₹ 5,00,000/- is actually income of the assessee company but the same was shown as advance. The assessee company claimed various expenses in the P L account and expenses regarding this work are also included in those expenses. Therefore, the total amount shown as advance at ₹ 3,87,27,750/- is clearly receipts in the hands of the company. In the nut shell the amount shown as advances is taxable business income. 5. Thus, in the remand report, the Assessing Officer changed the stand of the Revenue than what was taken during assessment proceedings. During assessment proceedings, the Assessing Officer treated the credit as unexplained credit. However, when during remand proceedings, all the persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the outstanding balance. The chart given at page 3 of the CIT(A) s order is reproduced herein below for ready reference:- S. No. Name Amount received during financial 2007-08 (in Rs) relevant to asstt. Year 2008- 09 Amount outstanding as on 31.03.2008 (in Rs) 1 M/s Simplex Infrastructure Ltd. Nil 1,00,00,000/- 2 M/s Subhash Projects 2,00,000/- 2,00,000/- Marketing Ltd. 3 M/s Shri Laxmi Cotsyan Ltd. 1,05,00,000/- 2,80,27,750/- 4 M/s Dolphin Developer Ltd. 5,00,000/- 5,00,000/- Total 1,12,00,000/- 3,87,27,750/- 7. From the above, it is evident that the amount received during the financial year 2007-08 which can be considered for AY 2008-09 is only ₹ 1,12,00,000/- and not ₹ 3,87,27,750/-. All the four parties appeared before the Assessing Officer during the remand proceedings and have explained that they have paid the money for the financial consultancy to be provided by the assessee. They have also produced the necessary evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions made by the ld.AR and have gone through the assessment order. It is observed that the AO has estimated the net profit ratio at the rate of 26.44% on the total amount of advance received from the following seven parties of ₹ 1,35,25,000/-. Name of Party Advance received from customers Kesar Hospital Ltd. 500000 Rathi Udyog Ltd. 1000000 Alok Industries Ltd. 3225000 Chiripal Industries Ltd. 700000 Rathi Rajasthan Steel Mills Ltd. 600000 Ahluwalia Contracts (I) Ltd. 5000000 Indian Vidyut Ispat Ltd. 2500000 Total 1,32,25,000 Out of these seven parties, the appellant company has already credited the amount of ₹ 7,00,000/- in its P L A/c during the relevant A.Y. 2008-09. Hence, this amount is not liable to be taxed again. It is further observed that the amount of advance received from Ahluwalia Contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The learned counsel for the assessee stated that the nature of the assessee s business is such that until the services so provided by them are completed to the satisfaction of the client, the amount of professional fees received is shown as advance against assignment because as per agreement/understanding with the customer, the fee received in advance is liable to be refunded in case the assignment is not completed to the satisfaction of the customer. This is also a trade practice. The assessee transfers such advance amount to the income head in the profit loss account when work gets fully executed to the satisfaction of the customer. In case, work does not get executed to their satisfaction, then the entire amount has to be refunded. He further submitted that the assessee is following the same method of accounting since past many years and it has always been accepted by the Revenue in the order passed under Section 143(3) also. He further stated that in several cases, if the services could not be rendered to the satisfaction of the customers, the fees has actually been refunded and the details have been furnished by the assessee before the CIT(A) and which is also discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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