ACIT Vs Sunderdeep Construction Pvt. Ltd (ITAT Indore)
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 at the time of booking is transferred to sales account.
We therefore are of the view that as regards the amount outstanding at Rs.12,45,687/- 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. Further we find that 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.
Hon’ble Gujarat High Court in the case of Nitin S Gar (supra) (2012) 22 taxmann.com 59 has held that “Merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have seized to exist. The Appellate Tribunal has rightly observed that the Assessing Officer shall have to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation”.
We therefore in the given facts and circumstances of the case and respectfully following the judgments referred and relied herein above find no reason to interfere in the finding of Ld. CIT(A) and thus are of the considered view that out of the alleged sum of Rs.12,45,687/- outstanding in the name of Maggi Publicity has been offered to income for Assessment Year 2014-15 and all the remaining amount of Rs.70,59,713/- received from 10 parties are not sundry creditors as they have advances for booking of plot of lands of which few have been transferred to sales account as and when the registry of plot of land is completed. Provision of Section 41(1) are not applicable on this case as the assessee has not claimed the alleged amount of advances from customers as an allowance or deduction in any assessment year in respect of loss, expenditure or trading liability. We thus confirm the finding of Ld. CIT(A) and dismiss Revenue’s Ground No.2.
FULL TEXT OF THE ORDER OF ITAT INDORE
The above captioned appeals filed at the instance of the Revenue pertaining to Assessment Year 2012-13 is directed against the orders of Ld. Commissioner of Income Tax(Appeals)-II (in short ‘Ld. CIT], Bhopal dated 28.02.2017 which is arising out of the order u/s 143(3)/147 of the Income Tax Act 1961(In short the ‘Act’) dated 26.03.2015 framed by ACIT-5(1) Indore.
2. Brief facts of the case as culled out from the records are that the assessee is engaged in the business of development of land. Assessee filed e-return declaring total income of Rs.33,83,540/- on 29.09.2012. Case selected for scrutiny followed by serving of notice u/s 143(2) of the Act. Assessment u/s 143(3) was completed at Rs.3,63,73,400/- by Ld. A.O. after disallowance u/s 40A(3) of the Act at Rs.4,26,000/- , addition u/s 68 of the Act on account of bogus cash credit introduced in the books of account at Rs.2,76,42,000/- and addition of bogus creditors at Rs.83,05,400/-. Aggrieved assessee preferred appeal before Ld. CIT(A) and succeeded.
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 Rs.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 Rs.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. 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 routed unaccounted cash in the books of accounts against the doubtful debits having rare possibility of recovery. As regards the addition made u/s 41(1)(a) of the Act for unexplained bogus creditors, Ld. DR submitted that assessee failed to prove the existence of these liabilities in the nature of creditors with evidence. Ld. DR placed reliance on the judgment of Hon’ble Apex Court in the case of PCIT V/s NRA Iron & Steel Pvt. Ltd Civil Petition No.29855 of 2018 dated 5.3.2019.
5. Ld. Counsel for the assessee supported the finding of Ld. CIT(A) and also placed reliance on the following written submissions filed before us (Only relevant matter is extracted below):-
(i) Ground No.1 regarding addition made u/s 68 of the Act at Rs.2,76,42,000/-
1. Prior to the impugned year, assessee had given advances through banking channel to various parties for purchase of land. Assessee submits that as the advances were given through banking channel this itself proves the genuineness of the initiation of transaction.
2. Assessee contends that the funds transferred or given at the time of initiation of transaction were out of its own funds which were given through banking channel. The initiation of the transaction is not under dispute nor is questioned by the concerned authorities below. When the initiation of any transaction is not under dispute, no question of raising a doubt on the later part of the transaction arises.
3. These advances given for purchase of land were accepted by the Department in the earlier years and stand accepted. Assessment completed u/s 143(3) and no addition made against these advances given. The status of assessment done in the preceding years is as under –
a. A.Y. 2010-11:
i. Section under which assessment completed – 143(3) rws 147
ii. Date of assessment order – 29.12.2016
iii. Addition/disallowance made in said assessment – Disallowance of development expenses of Rs. 2,97,47,218 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 duly disclosed in the audited balance sheet which formed part of total land purchase advances of Rs. 11,09,88,462. No action by the Ld. AO on these advances in the said assessment.
A.Y. 2009-10:
i. Section under which assessment completed – 143(3) rws 147
ii. Date of assessment order – 29.12.2016
iii. Addition / disallowance made in the said assessment – Disallowance of Development expenses of Rs. 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 Rs. 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 –
