Refund of Advances made in preceding years can’t be Deemed as Credit to attract Unexplained Cash Credit: ITAT [Read Order]

Refund - preceding years - deemed as credit - S.68 IT Act - ITAT - Taxscan

The Indore Bench of the Income Tax Appellate Tribunal (ITAT) held that the refund of amounts given as advance in the previous year is not credit and hence addition under Sec.68 of Income Tax Act with respect to the same is invalid.

The issue was raised in appeal by the Revenue challenging the order of CIT(A) deleting the addition made by Assessing Officer under Sec. 68 of the Income Tax Act at Rs.2,76,42,000/- and the one made under Sec. 41(1)(A) of the Income Tax Act at Rs.83,05,400/- on account of bogus creditors. As regards, the addition made under Sec.68 of the Income Tax Act, the CIT(A) had held that the same was not valid. The Finding was based on the contention of the assessee, an individual engaged in the business of development of land, that the amount so added by AO was not credits but a mere refund of the amount advanced in preceding years.

The said finding of the CIT(A) was upheld by the Tribunal and had held that “…..the alleged amount of Rs.2,76,42,000/- is actually the refund of the advances given by the assessee to various parties for the purchase of land in preceding years which were given through banking channel and duly disclosed in the audited financial statements placed before the revenue authorities in the preceding years and no addition/discrepancy have been noticed. We, therefore, find no reason to interfere in the finding of Ld. CIT(A) and the same stands confirmed.”

Further, the Tribunal held that the quashing of the addition of Rs.83,04,400/- made by the A.O under Sec. 41(1) of the Income Tax Act for bogus creditors by CIT(A) was proper, as, from the facts and documentary evidence, it is predominantly clear that the alleged amount of bogus creditors are not in the form of sundry creditors as there is no supply of goods or services by these parties and the amounts noted are advanced against booking of plots. The Tribunal further held that “Provision of Section 41(1) is 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.”

In the light of the above findings, the Appeal of the Revenue was dismissed.

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