ITAT Deletes Rs. 10.20 Crore Addition on Mobilisation Advance, Grants TDS Relief

ITAT Deletes Rs. 10.20 Crore Addition on Mobilisation Advance, Grants TDS Relief

The assessee, Apace Developers Pvt. Ltd., engaged in civil contract work, filed its return for AY 2016–17 declaring income of Rs. 12.73 lakh. The case was selected for scrutiny, and the AO made substantial additions, assessing income at over Rs. 15.05 crore. One of the key additions was Rs. 10.20 crore treated as unexplained cash credit under Section 68, being mobilisation advance received from M/s Boulevard Projects Pvt. Ltd. The AO doubted the transaction mainly because the funds were immediately transferred to a group concern of the principal. Additionally, expenses of Rs. 1.32 crore were disallowed and not permitted to be carried forward as Work-in-Progress (WIP), and TDS credit on mobilisation advance was denied. The CIT(A) partly upheld the additions, leading to cross appeals before the Tribunal.

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Issue Raised: Whether mobilisation advances received in the course of business can be treated as unexplained cash credits under Section 68 despite substantiation of identity, creditworthiness, and genuineness and whether related expenses and TDS credit are allowable.

Tribunal Held: The Tribunal partly allowed the assessee’s appeal and dismissed the Revenue’s appeal. On the addition of Rs. 10.20 crore, the Tribunal held that the assessee discharged its onus under Section 68 by furnishing confirmations, bank statements, financials, and agreements. Once identity, creditworthiness, and genuineness are established, the AO cannot question the utilization of funds. The transfer to a group concern did not make the transaction bogus; therefore, the addition was deleted.

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On WIP expenses of Rs. 1.32 crore, due to lack of supporting bills and vouchers, the issue was remanded to the AO for verification, with a direction to allow the expenses as WIP if found genuine. Regarding TDS credit on mobilisation advance, the Tribunal held that credit should be allowed in the year in which the income is recognized. On Revenue’s appeal, the Tribunal upheld deletion of additions relating to turnover mismatch and advances, as these were properly explained and adjusted in subsequent years, with no evidence of undisclosed income.

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