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Facts
The assessee, a manufacturer of steering columns, filed its return declaring a loss. The AO made an addition of Rs. 6,28,62,959/- as income from advances received from customers, as these parties did not respond to notices u/s 133(6). The assessee contended that these were advances for procurement of tools and income recognition happens only upon invoicing, and that these advances were offered as income in subsequent years.
Held
The Tribunal found that the assessee consistently offered advances as income in subsequent years, and taxing them in the current year would lead to double taxation. However, an anomaly was noted regarding specific advances. The Tribunal also directed the AO to recompute the loss as income from other sources was set off twice.
Key Issues
Whether advances received from customers should be taxed as income in the current year when parties did not respond to notices, or if it should be treated as income in the year of recognition as per accounting policy. Also, rectifying incorrect set off of income from other sources leading to reduced loss.
Sections Cited
143(3), 144C(13), 144C(1), 92CA(3), 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2021-22 arises out of final assessment order dated 30.10.2014 passed by Assessing Officer (A.O) u/s.143(3) r.w.s 144C(13) of the Income-tax Act, 1961 (hereinafter “the Act”) pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru u/s. 144C(1) r.w.s 92CA(3) of the Act dated 11.09.2024.
supply of steering columns for Indian automobiles and is preferred original equipment partner to major passenger car, commercial vehicle and multi utility vehicle manufacturers. The assessee-company has filed its return of income on 10.03.2022 declaring loss of Rs.51,54,09,429/-. The assessee has shown advance receipt from customers 7,54,08,559/-. The A.O made enquiry from customers, who has made the advance, but only M/s. Daimler India Commercial Vehicles, Force Motors Ltd. and Suzuki Motor Gujarat Pvt. Ltd. had confirmed the advance and the other manufacturers namely AMW Motors Ltd. of Rs. 11,90,000/-, Ashok Leyland Ltd. of Rs.15,25,200/-, Mahindra & Mahindra Ltd. (TD) of Rs. 10,21,759/- & Maruti Suzuki India Ltd. of Rs. 5,91,26,000/-, totaling to Rs. 6,28,62,959/- have not replied to the notices issued u/s. 133(6) of the Act. The assessee also did not submit any confirmation in respect of above parties. The A.O therefore, held that the amount of advance shown is income of the assessee for the year under consideration. The A.O also noted that it is not a question whether the receipt has been accounted for or not, but the question is as to which year it has been recognized as a revenue. The A.O therefore, in the draft assessment order passed u/s. 144C(1) of the Act proposed to make addition on advance of consideration. Aggrieved, the assessee filed objections before the Ld. DRP and submitted that the A.O has not understood the business model of the assessee as it is only on receipt of the advance that the assessee could procure the tools and manufacture and only when entire advance is received invoice is raised on the customer and the advance was recognized as income for sale of tools. However, the Ld. DRP did not find any infirmity in the order of the A.O as the assessee has not reconciled the advance received from various customers with the claim that revenue has been recognized in the subsequent year.
The A.O thereafter, passed assessment order making addition of advance received from customers to the extent of Rs. 6,28,62,959/- as a business income in the year under consideration.
The Ld. Authorized Representative (A.R) of the assessee has submitted that receipt of advance is very common feature in companies forming part of automobile industries and the assessee only on receipt of advance would commence the manufacturing/procurement of specialized tools to manufacture the steering columns. The Ld. AR further stated that the assessee on receipt of advance commences the manufacture which undergoes accounting principles followed is that various tools are held as part of inventories in the balance sheet, until the invoice is raised on the OEM for the sale of these tools. The raising of invoice and the recognition of income would depend upon the nature of the project and the year in which the mass production is declared by the OEM and this timeframe would range anywhere between 12 months to 36 months. The Ld. AR has submitted that the A.O has accepted the advance in the cases where the parties responded to the notices issued u/s. 133(6) of the Act, but has made addition only in the cases for which companies have not responded and it is not within the reach and control of assessee to make the compliance u/s. 133(6) of the Act. The Ld. AR has submitted that the assessee has already offered the advance received as income in the subsequent year and therefore, taxing the advance would amount to double addition. The Ld. AR has submitted that the details of advance received and the income offered in the subsequent year as under:
FY in Amount of Invoice Invoice which Name of the Party PO Date Advance Date Amount Offered to Tax Ashok Leyland 11-Mar-20 12,60,000 19-Mar-21 18,00,000 2020-21 Limited Mahindra and 04-Mar-19 10,21,759 10-Sep-20 10,10,000 2020-21 Mahindra Ltd.
FY in Amount of Invoice Invoice which Name of the Party PO Date Advance Date Amount Offered to Tax Maruti Suzuki India 25-Oct.19 5,21,00,000 25-Aug-20 5,21,00,000 2021-22 Ltd Maruti Suzuki India 25-Nov-20 70,26,000 07-Dec-22 2,34,20,000 2022-23 Ltd. AMW Motors Ltd – 11,90,000 ` 2,65,200 2023-24 Ashok Leyland Ltd – 2,65,200 – – 2023-24 Total 6,28,62,659
On the other hand, the Ld. Departmental Representative (DR) supported the orders of the A.O. and the DRP and submitted that the assessee failed to reconcile and demonstrate before the A.O/DRP that the income was offered in the subsequent years. The Ld DR also pointed out the contradictions in the assessee's claim as advances from Ashok Leyland Ltd. of Rs. 18 lakhs and Mahindra & Mahindra Ltd. of Rs.10,10,000/- were said to be recognized in F.Y. 2020-21, and also shown as advances.
We have heard both sides and perused the materials available on record. The A.O made the addition of Rs.6,28,62,959/- as income received from AMW Motors, Ashok Leyland Ltd., Mahindra & Mahindra Ltd., and Maruti Suzuki India Ltd., as these parties did not respond to the notices u/s 133(6) of the Act. The Ld. AR has submitted that the amounts were shown as advances and recognized income in subsequently after receipt of complete advance and approval by OEM as per accounting policy. The Ld. AR further submitted that the assessee has incurred loss exceeding of Rs.51 crores, and therefore there is no motive to postpone the tax liability to future date. We are in agreement to the Ld AR’s argument that assessee has been following consistent policy and it has offered and taxed the advance received in the subsequent years, therefore taxing the same income as advance would amount to double taxation. However, we find anomaly in Ld AR submission as assessee has shown advance of Rs.12,60,000/- from Ashok Leyland Ltd. and Rs 10,21,759/- from Mahindra & Mahindra Ltd. during the year and the A.O has made addition of Rs.15,25,200/- and Rs 10,21,759/- but assessee has also claimed to have issued invoices of Rs.18,00,000/- and Rs.10,10,100/- during F.Y 2020-21 and recognized as income. We therefore deem it fit to remand the matter back to the file of A.O to verify, whether advance shown has been offered as income in current year or subsequent years and if the advances are found to have been subsequently recognized as income, the addition made on account of advance stands deleted.
Rane NSK Steering Systems Pvt. Ltd. :- 7 -: 6. The assessee has also raised a ground that the A.O. has erroneously set off income from other sources amounting to Rs.30,36,813/- twice in the computation of loss, leading to an incorrect reduction of the assessed loss. We find that neither the A.O. nor the DRP has addressed this issue. Therefore, the A.O. is directed to recompute the loss in accordance with law. Accordingly, the matter is remitted to the file of the A.O for necessary action as per above directions. We also direct the assessee to co-operate with the proceedings and appear before the A.O on the date of hearing without fail. In view of the above, the appeal filed by the is allowed for statistical purposes only.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 04th day of July, 2025 at Chennai.