S.K. Builders and Developers LLP Vs ITO (ITAT Kolkata)
Advances received from customers in the ordinary course of a real-estate business, which are consistently adjusted against sales under the project completion method, cannot be treated as unexplained cash credits under section 68.
The ITAT Kolkata in S.K. Builders and Developers LLP vs ITO held that advances received from customers and flat purchasers in the ordinary course of a real-estate business cannot be treated as unexplained cash credits under Section 68 when such amounts are duly recorded in audited books and consistently adjusted against sales under the project completion method. The assessee, a real-estate developer, regularly received booking advances from customers which were either adjusted against sales during the year or carried forward as liabilities until project completion. The Assessing Officer treated the closing balance of customer advances amounting to ₹17.94 crore as unexplained cash credits despite accepting the books of account and disclosed sales. The Tribunal observed that the same accounting treatment had been consistently accepted in earlier years and that taxing the advances separately would result in impermissible double taxation once corresponding sales were offered to tax. It further held that selective rejection of one liability item without rejecting the books was arbitrary and unsustainable in law.
