Recd cash advance from party

Tax queries 720 views 2 replies

sharma

Self Employed

74 Points Joined July 2011

Dear Sir,

My Client Problem is as follows :

I am having a Travel Agency Business.I generally receive cash advance from party for Group Tour booking both Tour/Tickets.I deposit the same in my bank account.Sometimes advance is refunded due to cancellation of program by the party.I withdraw cash from bank refund the same.

The basic question is if I receive advance in cash from the Group Head in excess of Rs. 20000/- per head and then I return to the same person on cancellation of tour.Does I have to give the names of all the group people.Since Some Hotel Passengers give us advance it is not practical to have all the names of the group passengers.

Now I have received a notice from Income Tax where it asks that you have deposited cash in excess f Rs. 10lacs in your bank account.Actually it is advance from party and refund to party in cash.

How should I explain the same and Will Income Tax Officer get Convinced ?

Pls advise

Thanks

Sharma

Replies (2)

Ashish Kulkarni

Article Trainee

44 Points Joined January 2010

I do not know whether the answer to ur problem is correct or not..but kindly take opinions of others as well..

Now a plain reading of Sec.40A(3) states that "Where an assessee incurs any expenditure"....and so on and so forth.

Since u are a travel agent, the tickets/tour charges are not your expenditure..You only receive money to arrange tickets on behalf of your clients. I think u get a commission since it is a commission based business.So it just might be that it is not your expenditure.

Besides the IT dept. may argue that u also incur your own office expenditure..But if u have sufficient records to prove that the expenditure was made in accordance with Sec.40A(3)..then u can convince the IT guys..

But have a reading of the section and also take the opinion of others...

Dhanabal Ramasamy

CHARTERED ACCOUNTANT

105 Points Joined July 2008

Its nothing to do with cash deposit of above 20000/- but the total deposit of 10 lakhs in your account. IT department feels that you have income receipt and has not offered it to tax. If it is advance receipts (as claimed by you), then you should have to produce the details of tour details and for which advance was collected and how it was refunded. The refunded should have strong proof otherwise i m afraid it will be taken as income and taxed with interest and penalty.