Advance returned back to customer not expenditure: Disallowance u/s 40(A)(3) not applicable

Advance returned back to customer not expenditure: Disallowance u/s 40(A)(3) not applicable

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follow : 7. We note that this is a case where the assessee is running a show room in the name and style of M/s Ashok Motors. M/s Ashok Motors is a partnership firm which was constituted on 01.04.2014 and it is a Dealer of Mahindra car, Motor Parts and Accessories and it sells the automobiles/ spare parts of the Mahindra & Mahindra. According to the assessee, modus operandi of its business is that when the customer places order with the assessee, then in order to know that customer is bona fide, the assessee takes some cash / cheque in advance from such customer and thereafter the assessee, in turn places order with Mahindra & Mahindra for vehicle / spare parts for the said customer and when the vehicle/parts is delivered to the customer, then the advance / or security deposit so taken by the assessee is returned back in cash to the customer and therefore according to ld.

Counsel, the Assessing Officer has erred in treating the advance / security deposit which is returned back to the customer as expenditure.

We note that before the Assessing Officer/ ld. CIT(A) the assessee has not been able to adduce any evidences which action of the assessee is not acceptable to us. Be that as it may be, in the interest of justice and fair play. we set aside the order of the ld. CIT(A) and remit the matter back to the file of the Assessing Officer. with a direction to examine the veracity of the contention/modus operandi, as narrated above, which is made by the assessee before this Tribunal, and adjudicate the issue on merits in accordance with law. For statistical purposes, the appeal of the assessee is treated to be allowed.