What did the Tribunal hold?

The Tribunal held that the issues raised by the Revenue were covered by the ITAT's previous order in the assessee's own case. The trade deposits were considered security deposits and not revenue receipts, and the advance receipts were accounted for as sales in the subsequent financial year.

The Revenue appealed against the CIT(A)'s deletion of additions made on account of trade deposits and advance received by the assessee. The CIT(A) had deleted these additions, relying on a previous ITAT order for the assessee's own case for AY 2010-11.

What were the issues?

Whether trade deposits received by the assessee are to be treated as revenue receipts and whether advance receipts from customers, accounted for as sales in the next year, warrant addition.

DCIT vs Smt. Neetaben Seth | ITAT Ahmedabad 2019

Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘C’

Before: SHRI RAJPAL YADAV & SHRI RIFAUR RAHMAN

Hearing: 28/06/2019Pronounced: 15/07/2019

Revenue by : Shri L.P. Jain, Sr.DR Assessee by : Ms.Urvashi Shodhan, AR सुनवाई क� तार�ख/Date of Hearing : 28/06/2019 घोषणा क� तार�ख /Date of Pronouncement: 15/07/2019 आदेश/O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER:

Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-10, Ahmedabad dated 9.8.2017 passed for the Asstt.Year 2013-14.

Revenue has taken three grounds of appeal, out of that Ground no.1 and 2 are substantial grounds of appeal. They read as under:

2 i) That the ld.CIT(A) has erred in law and on facts in deleting the addition made by the AO on account of Trade deposit of Rs.96,21,107/- ii) That the ld.CIT(A) has erred in law and on facts in deleting the addition made by the AO on account of advance received by the assessee of Rs.58,121/-“

It has been brought to our notice that both the issues are covered in favour of the assessee by the order of the ITAT passed in the Asstt.Year 2010-11. The ld.CIT(A) has considered both these issues elaborately. Before adverting to the issue, we would like to note of the finding recorded by the CIT(A), which reads as under:

1. The submissions made by the appellant, the material available on record as well as the assessment order passed by the AO were perused and considered. The first effective ground of appeal is against the additions of Rs. 96.21.107/- made by the Assessing Officer considering the trade deposits as revenue receipts. The appellant contended that this issue has been decided by the Hon'ble IT AT, B" Bench, Ahmedabad, vide order dated 09/08/2016 in the appellant's own case for A.Y. 2010-11 in her favour. The operative para of the Hon'ble ITAT's order is reproduced as under:-

"5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to the considering the trade deposits received by the assesses as the income of assesses. We find that the Id. CIT(A) while deleting the addition has noted that assesses is carrying on the business sales through Authorised Representative Dealers (ARDs) appointed by the assessee and Sales Service Providers (SSPs) appointed by Hero Motors Ltd. Since assessee's vehicles are kept with ARDs and SSPs for display, test drive, etc., trade deposits are received from them by the assessee by way of security deposits. The Id. CIT(A) while deleting the addition has given a finding , that as and when the sales take place through

3 ARDs and SSPs, the sale proceeds a/e accounted as income by the assessee and this method of accounting has been consistently followed by the assessee and has also been accepted by the Revenue in the i scrutiny proceedings. He has further- noted that during the year under consideration assessee had received trade deposits of Rs. 35.5 lacs and has repaid Rs. 26 lacs out of it and in effect the net trade received by the assessee during the year was only to the tune of Rs. 9.5 lacs. Under these circumstances, Id. CIT(A) had deleted the addition. Before us, Revenue has not placed any material to controvert the findings of Id. CIT(A). In view of the aforesaid facts, we see no reason to interfere with the order of Id. CIT(A) and this ground of Revenue is dismissed."

4.1 I As mentioned above, the issue has been decided in favour of the appellant in her own case for A.Y. 2010-11 by the Hon'ble jurisdictional ITAT, Ahmedabad. Therefore, the additions made by the A.O are deleted. This ground of appeal is allowed.

5. The second ground of appeal is against the addition of Rs. 58,121/- made by the A.O by considering the advance receipts from customers and sales and worked out GP @ 5.43% on the sales. The appellant contended that this advance receipts have been shown as sales in the next financial year. Therefore, the additions made by the A.O are not justified. On going through the facts of the case, the contention of the appellant is found factually correct. Hence addition of Rs. 58,121/- made by the Assessing Officer is deleted. This ground of appeal is allowed.”

With the assistance of the ld.representatives, we have gone through the record carefully. As far as first issue is concerned, we find that it is squarely covered in favour of the assessee by the order of the ITAT passed in her own case for the Asstt.Year 2010- 11. Copy of that order has been placed on record as discernible from the discussion extracted (supra). The assessee has been carrying on the business through authorized representative

4 dealers. In order to provide them vehicles for display and test driving, it used to take security deposits. Whether those trade deposits are to be considered as part of sale or not and ought to be brought to tax, was the issue involved in earlier year, wherein it has been held that advance taken in the shape of trade deposits was not to be treated as revenue receipts. Similarly, with regard to second issue, the ld.CIT(A) has observed that these advance receipts from customers have been recognized as sale by the assessee, hence, no addition would justify on that count. After going through well reasoned order of the ld.CIT(A) we do not find any merit in this appeal of the Revenue. It is dismissed.

In the result, appeal of the Revenue is dismissed.

Order pronounced in the Court on 15th July, 2019.

THE DCIT, CIRCLE-1(3), AHMEDABAD vs. SMT. NEETABEN SETH, AHMEDABAD

What did the Tribunal hold?

What were the facts?

What were the issues?

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