The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the decision of the Commissioner of Income Tax(Appeals)[CIT(A)], rejecting the Revenue’s claim of Rs. 8.77 Crore income understatement. It confirmed that the amount in question represented booking advances for flat sales, not income from consultancy services.
The Revenue-appellant has filed this appeal against the National Faceless Appeal Centre (NFAC) order dated 14.05.2024 in the case of Aman Enterprise, respondent-assessee, for assessment year(AY) 2018-19. The assessee, engaged in construction, had filed a Nil income return, but scrutiny under Computer Assisted Scrutiny Selection(CASS) flagged issues in income accounting for high closing stock.
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The assessment, completed under Section 143(3) on 04.02.2021, determined total income at Rs.10,22,11,440/- with additions for understated receipts (Rs.8,77,60,800/-), overstated purchases (Rs.39,52,298/-), and unaccounted expenditure (Rs.1,04,98,344/-).
Dissatisfied with the Assessing Officer(AO)’s order, the assessee appealed to the First Appellate Authority(FAA), which decided in favor of the assessee through the impugned order. The revenue appealed before the tribunal aggrieved by the order of the CIT(A).
The first ground is about the addition of Rs.8,77,60,800/- for understated revenue. The Commissioner of Income Tax(Departmental Representative)[CIT(DR)], noted that the Goods and Service Tax(GST) return showed this receipt, but the assessee did not report it in the Profit and Loss (P&L) account. The assessee cited the project completion method but failed to explain why the receipt was not included in the Profit and Loss(P&L). As a result, the AO added the amount to the income.
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The assessee’s counsel,stated that the Rs.8,77,60,800/- was received for flat bookings, not services rendered, and was reported in the GST return. He argued that the AO had mistakenly treated it as income from services. The counsel submitted that the CIT(A) had correctly considered the facts and granted relief to the assessee
The two member bench comprising T.R Senthil Kumar(Judicial Member) and Narendra Prasad Sinha(Accountant Member) considered the rival submissions and found that the AO had wrongly treated the Rs.8,77,60,800/- as income from consultancy services. The assessee clarified that the amount was an advance for flat bookings, shown as current liabilities in the balance sheet.
Since the assessee followed the project completion method, the advance was not booked as revenue in the current year. The CIT(A) correctly concluded that the amount was a booking advance, not income, and noted that no Tax Deducted at Source(TDS) was deducted, disproving the consultancy service assumption.
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The GST was reported correctly, but this did not make the amount taxable under the Income Tax Act. The AO’s treatment of the amount as income was incorrect. As the Revenue did not challenge the CIT(A)’s findings, the order was upheld, and the Revenue’s ground was dismissed.
Ultimately,the appeal filed by the revenue was dismissed.
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