ITO Vs Tractebel Engineering Pvt. Ltd. (ITAT Delhi)
Customer Advances Aren’t Cash Credits: ITAT Upholds Deletion of ₹5.55 Cr Addition under Section 68
The Delhi Bench of the Income Tax Appellate Tribunal dismissed the Revenue’s appeal and upheld deletion of an addition of ₹5.55 crore made under section 68, holding that advances received from customers in the normal course of business cannot be treated as unexplained cash credits when properly substantiated.
In this case, the assessee company, engaged in engineering and infrastructure services, reflected advances from customers in its balance sheet as on 31.03.2017. Since no details were furnished during assessment, the Assessing Officer treated the amount as unexplained credit.
Before the CIT(A), the assessee produced complete documentary evidence, including party-wise details, confirmations and explanations showing that the advances were received for services to be rendered and that income was duly offered in subsequent years. The CIT(A) admitted the additional evidence, called for a remand report, and noted that the Assessing Officer did not point out any defect in the documents, objecting only to their admission.
The Tribunal observed that the advances had a continuing opening balance, reduced during the year, and were integrally linked to business receipts recognised later as income. In the absence of any adverse finding in the remand report and in view of proper documentary support, the addition under section 68 was held to be unsustainable.
Accordingly, the Revenue’s appeal was dismissed, affirming that genuine customer advances do not fall within the mischief of section 68.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No.5337/Del/2024 for AY 2017-18, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2024-25/1070330312(1) dated 13.11.2024 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 31.12.2019 by the Assessing Officer, ITO, Ward-25(2), Delhi (hereinafter referred to as ‘ld. AO’).
