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TMI Blog2021 (3) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... , then the advance given at the time of booking is transferred to sales account. As regards the amount outstanding in the name of Maggy Publicity, no addition can be made u/s 41(1) of the Act since it has offered to tax in the return of income filed for Assessment Year 2014-15. All the remaining 10 parties are not sundry creditors but are the advances for booking of developed plots of which some have already been transferred to the sales account when the registry was completed. These 10 parties cannot be termed as sundry creditors as there is no supply of goods or services by these parties. Ledger account shows that the assessee has received the sum through banking channel from these parties. Such sum received can either be in the form of unsecured or advance for sale/booking of plots. In the instant case out of the 10 parties in two cases the registry have been done and the advances received during the preceding years have been transferred to sales account. This fact asserts that all the sum received from 10 parties is advances for booking of plots and not balance of sundry creditors. As decided in NITIN S. GARG [ 2012 (5) TMI 30 - GUJARAT HIGH COURT] Merely because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 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 correct as there are mismatch in the opening and closing balances of the parties shown in the ledger account. He also pointed out certain discrepancies in the cancellation agreement. In short he stressed upon the possibility of the assessee having r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) rws 147 ii. Date of assessment order 29.12.2016 iii. Addition / disallowance made in the said assessment - Disallowance of Development expenses of ₹ 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 ₹ 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 assessee for purchase of land 1 Chandansingh Kawarji [PB 35] 10,50,000 AY 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. Thus, the advances given in the earlier years stand accepted by the Department. 6. Assessee submits that these are not cash credits but are refund of trade advances in the form of cash. Recovery of advances given cannot be treated as cash credits. Details of the parties to whom advances were given through banking channel along with copy of bank statements were already on record both before Ld. AO and Ld. CIT(A). 7. In the instant case, addition has been made u/s 68 of the Act. Appellant contends that provisions of Section 68 are not applicable because the 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 adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected in the Balance Sheet relates to advances for booking of flats and these parties are not creditors. Ld. AO treated these advances received from various customers for flat booking as trading liability as per the provisions of section 41(1) of the Act and proceeded to make disallowance of ₹ 83,05,400. Provisions of section 41(1) reads Where an allowance or deduction has been made in the assessment for any year in respect of 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 amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Combined Transport Co. (P.) Ltd [1988] 174 ITR 528 14.07.1988 c. Hon ble Indore Bench of ITAT in the case of Manoj Pavecha ITA no. 307/2013 15.05.2015 d. Hon ble Delhi High Court in case of Jain Exports(P.) Ltd. [2013] 35 taxmann.com 540 24.05.2013 e. Hon ble Gujarat High Court in the case of - Nitin S. Garg [2012] 22 taxmann.com 59 11.04.2012 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Darbar Singh 5,00,000 AY 2007-08 3 Mahendra Singh 25,00,000 AY 2007-08 4 Kailash Bai 9,50,000 AY 2007-08 5 Mahesh Chhaganlal 15,00,000 AY 2007-08 6 Kedar Gopilal Choudhary 5,00,000 AY 2008-09 7 Rajendra Singh 13,00,000 AY 2007-08 AY 2009-10 8 Rajesh Agrawal 35,00,000 AY 2007-08 9 Moolchand Ratanji 21,00,000 AY 2007-08 10 Satish Modi 8,00,000 AY 2007-08 11 S D Biotech 19,00,000 AY 2007-08 12 Sourambai Lalsingh 13,42,000 AY 2007-08 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 that the immediately previous year. 5.1 The moot question here is whether refund of any advance given by the appellant company in earlier years which were received during the year can be considered as cash credit. The appellant company has provided the ledger of the parties alongwith the copy of the bank statement of the appellant company to confirm that the amounts were paid by account payee cheques. the appellant has submitted in this regard as below:- provision of section 68 is not applicable in case of appellant company, as appellant company has received the amount debited in the name of the above 16 parties since earlier years the balances were duly accepted by the Income Tax Department in the assessment u/ s 143(3) for A. Y. 2011-12. Further your honour as per submission made document submitted by us earlier with our reply dated 23/ 12/2016, we have proved by providing co pies of our bank statement as evidence that the amounts were paid by account payee cheques to all above parties. For this we rely on the following judgments: 1. INCOME TAX OFFICER vs. ALOK AGRAWAL ITAT, AGRA BENCH (2012) 32 CCH 0361,52 SOT 0125 Income-Unexplai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the sundry debtors appearing on the assets side of the balance sheet. 22. The reconciliation statement of debtors from 1st July, 1979 to 30th June, 1985 is given at pages 136 and 137 of poper book No. 1. The sundry debtor as on 30th June, 1981, 30th June, 1982, 30th June, 1983, 30th June, 1984 and 30th June, 1985 were given in the balance sheets filed in the later assessment years. They were all accepted by the AO. 'When such is the factual position, the AO cannot find fault with the figure of sundry debtors as on 30th June, 1980 at ₹ 35,99,538 If at all the AO disbelieved ₹ 35, 99,538, he should have enhanced the figure of sundry debtors as on 30th June, 1980 by ₹ 18,00,763 and adopted the same in the late' assessment year, This was not done by the assessing authorities. This blowing of hot and cold by the AO is not permissible in law. 23. The AO held in the assessment order dt 13th Jan., 1992, that the drafts deposited in the Bank of Tokyo as per List-1 are actually undisclosed sales and treated the same as income of the assessee under s. 68 of the IT Act, 1961. This is really strange. Only unsubstantiated cash credits can be added under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces made over to the parties for purchase of goods which purchase could not materialize, since the parties could not supply the goods in time; as such these amounts cannot be termed as unexplained income of the assessee; that neither of the parties were creditor of the assessee and so, section 68 of the I. T. Act is not applicable; that rather, it was the assessee who was the creditor in the books of account of the two parties; that further, the assessee duly discharged its onus; that therefore, Ld. CIT(A) cannot at all to have erred in deleting the addition. We have heard the parties and perused the material on record. It remains irrefuted that the assessee company did. no take any loan from the two concerns, these concerns were also not creditors of the assessee company. The amount of ₹ 8,25, 000 had been advanced by the assessee to the said supplier parties and when they jailed to make supply in time, these amounts were refunded to the assessee. It was this refund which represented the credit entries of 78,25,000. The assessment order does not show any investigation have been carried out or any information collected by the department to conclude that the payment rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds of the loan so given is received in cash during the year under appeal, whereas the revenue s contention is that there is no nexus of the cash received for the advances so given. 14. However revenue has not placed any material to support its contention. The fact that advances were given to various parties through account payee cheque in preceding assessment years for purchase of land has not been disputed by the Revenue. Most of the advances were given in Assessment Year 2007-08 which is almost 5 years old. Copies of bank statement asserts this fact and Names and address of all such parties is available. Cancellation agreements have been entered into. No independent enquiry was made by the Ld. A.O with the parties from whom the assessee claimed to have received the cash which are mostly farmers. Under these given facts the claim of the assessee that the alleged sum received in cash is refund of loans and advances given in preceding years cannot be doubted. The amounts so received is actually not a credit in the form of loans or credit or in the form of sundry creditors or any other liability, it is actually the refund of amount advanced in preceding years. It is merely a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handra Bajaj 1105000 3 Sri K. Bawa 700000 4 Anand Kumar Jain 526000 5 Shri S.AP. Joshi 600000 6 Smt. Alka Rajendra Chaturvedi 501000 7 S. Wadhwani 1002713 8 Jagdish Chand Narayan Prasad 800000 9 Anita W/o Suresh Kumar Sharma 500000 10 Amit Kumar Shantilal Jain 775000 11 Maggy Publicity 1245687 Total 83,05,400/- 19. Notices u/s 133(6) of the Act given to the above mentioned parties were returned unserved. Before the Ld. A.O assessee submitted that it is engaged in the business of development of land and developed plots are sold to its customers except the party namely Maggy Publicity which is a sundry credtor. All other parties h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing 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 ₹ 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 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 of cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant, the assessment order and the documents so produced before me it is clear that as far as the amount of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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