- (1.)Heard the learned counsel for the appellant.
(2.)The Revenue has preferred this Income Tax Appeal under Section 260A of the Income Tax Act challenging the order dated 22nd January, 2010 passed by Income Tax Appellate Tribunal (ITAT) Jaipur Bench 'B', Jaipur affirming the order of the Commissioner of Income Tax (Appeals)-II, Jaipur.
(3.)The Assessing Officer while going through the accounts of the assessee noticed that a sum of Rs.16,00,900/- is credited in capital account. Explanation was sought in this regard and reply of assessee was that it was an advance payment remitted by M/s India Gems and Beads, USA for supply of goods, but due to inadvertence the said amount was credited to the accounts of the assessee in the balance-sheet. However, the Assessing Officer was not satisfied and he added the said amount of Rs.16,00,900/- in the income of the assessee and directed to initiate penalty proceedings also. The assessee preferred an appeal. The appellate authority i.e. Commissioner of Income Tax (Appeals)-II, Jaipur vide its order dated 28th April, 2009 was satisfied with the explanation/reply furnished by assessee and deleted the said addition of Rs.16,00,000/-. The matter was discussed in detail by the appellate authority in Para 1.3 of the order, which is reproduced as under:-
"I have considered facts of the case and arguments taken by Sh.Mundra quite carefully. It is a clear fact that the appellant was making regular exports to M/s India Gems and Beads since last many years who was remitting lumpsum payment in advance against such export sales and such advance payment received were adjusted against such export sales from time to time. In this process on perusal of copy of account for F.Y.2002-03 of the aforesaid party was examined it was found that during the year the appellant has received 403215 US$ equivalent to Rs.1,94,96,560/- as against which the export sales shown to the said party was 3,80,916 US$ equivalent to Rs.1,84,05,397/- and it was also included the export sales of 35000 US$ in respect of Invoice No.12 dated 26.8.2002. Similarly, in F.Y.2003-04 the appellant has received 394779.72 US$ from the said party against which the export sales to the said party was of 352134.42 US$. However, the banker could not connect the advance amount received against the export sale through invoice No.12 for 35000 US$ and informed the appellant the implication of FEMA provisions. In order to avoid proceedings in FEMA the appellant has again requested the said party to send 35000 US$ pending reconciliation at the level of bank to close FEMA proceedings and obviously in the account books it shall be an advance payment. The nature of any payment received cannot be decided with the accounting treatment given and therefore, in my considered view even if due to mistake or misunderstanding if the accountant has credited the said money into the capital account of the appellant it cannot become the part of capital and then obviously it shall be in the nature of advance payment which certainly cannot be part of revenue receipts because looking to the nature of business the revenue receipt shall be the export proceeds only and not the advance amount received. Even in the past when the advance amount received was more or less but they did not assume the character of revenue receipt and in fact actual export proceeds were only the revenue receipts irrespective of advance amount received against the export sale. With this discussion and considering the accounting of the appellant for the present A.Y. and for earlier A.Y. factually the said receipt of 35000 US$ is only the advance amount which cannot be treated as part of revenue receipts and with this discussion the said addition made by AO in my considered view was not in accordance with accounting principles and therefore, was not chargeable to tax. AO is therefore, directed to delete the said addition of Rs.16,00,900/-."